CRM Value Chain

CRM value chain identifies five key steps in the development and implementation of a CRM strategy :customer portfolio analysis, customer intimacy, network development, value proposition development, and manage customer life cycle. In brief, the five steps are as follows.1. Customer portfolio analysis: this involves an analysis of the actual and potential customer base to identify which customers you want to serve in the future. Top of the list will be strategically significant customers, including those that will generate profit (value) in the future.

2. Customer intimacy: you will get to know the identity, profile, history, requirements, expectations and preferences of the customers that you have chosen to serve

3. Network development: you will identify, brief and manage relationships with your company’s network members. These are the organizations and people that contribute to the creation and delivery of the value proposition(s) for the chosen customers. The network can include external members such as suppliers, partners and owners/investors, as well as one important internal party, employees.

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4. Value proposition development: this involves identifying sources of value for customers and creating a proposition and experience that meet their requirements, expectations and preferences.

5. Manage the customer lifecycle: the customer lifecycle is the customer’s journey from ‘suspect’ towards ‘advocate status’. Managing the lifecycle requires attention to both process and structure:
– process: how will the company go about the important processes of customer acquisition, customer retention and customer development, and how will it measure the performance of its CRM strategy?
– structure: how will the company organize itself to manage customer relationships?

These five primary stages of the CRM value chain represent three main sequential phases of CRM strategy: analysis, resource development and implementation.

Customer portfolio analysis (CPA) and customer intimacy (CI) are primarily analytical activities. CPA involves using customer and market data to decide which customers to serve; CI involves getting to understand customers and their requirements. Network development and value proposition development are focused on building or acquiring resources to create and deliver value to customers. Managing the customer lifecycle is about implementing CRM by acquiring and retaining customers, and developing their value.

These steps are iterative and reflexive. They are iterative in the sense that the five-step process is repetitive and continuous. It is not a one-time process that leads to a strategy that is serviceable for ever. For example, in a dynamic environment in which competitors keep improving their value proposition it is important to review periodically which customers to serve, what to serve them and how to deliver the value.

The process is reflexive in the sense that there is backwards and forwards interdependence between the five stages. For example, analysis at stage 1 (customer portfolio analysis) leads to a decision about which customers the company will serve. This decision determines the composition of the value proposition (stage 4). If the company does not have the competencies to deliver, either alone or in partnership with other organizations, the proposition that customers want, then the company will need to review its target market decision.

Sources of Reference:
Farncis Buttle, Customer Relationship Management, Butterworth-Heinemann Publishing. You can obtain this excellent book

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