Interview: Professor Adrian Payne on The Strategic CRM Frameworkby
Professor Adrian Payne of Cranfield School of Management is a leading authority on CRM and strategic marketing. In 2006 he published The Handbook of CRM – Achieving Excellence in Customer Management. We are also providing a free download of Chapter 1, A strategic Framework for CRM, which is the subject of the first of six interviews with contributing editor Jeremy Cox over the coming months.
JC: Adrian there are so many books published on CRM, what is different about yours?
AP: There is a huge amount written about CRM and the starting point for me is that there is considerable confusion around exactly what CRM is. To some people it means a data-warehouse, to others it’s about data mining or web-enabled personalisation, and for others its direct mail. Everybody takes a particular stance from their area of interest. So in summary the books that are out there are often focused on a particular aspect of CRM or they are quite tactical in nature. I saw the need for a book that was much more focused on strategy and that linked together all the different components of CRM and put them together as an integrated whole.
Also my observation was that some organisations are taking a strategic view but there was a need to help them with the implementation aspects, once they’d thought their strategy through.
JC: In the first chapter of the book, Adrian, you introduce a Strategic Framework for CRM and introduce 5 generic processes:
- strategy development
- value creation
- multi-channel integration
- information management and
- performance assessment.
We will come back to these in a moment, but first would you explain how the strategic framework works?
AP: As you pointed out it consists of five key elements and I think it might be useful if we walk through these. First of all we have a strategy development process which is concerned with integrating the business strategy, the overall strategy for the organisation, and the customer strategy how we interact with and choose our customers.
Secondly there is a value creation process which consists of identifying the value we can create for the customer and the value we can create for our own organisations. It’s a value interchange process.
The third process is around multi-channel integration which consists of looking at all the virtual and physical channels which an organisation may care to interact with - perhaps a dozen or so of these, and identifying how to touch customers with one voice. So regardless of the channel they are dealing with, they have a uniform and common experience.
The fourth is the information management process which consists of many different aspects but particularly a data repository IT systems, analytical tools and front and back office applications.
And finally the performance assessment process is concerned at a strategic level about what drives shareholder results and perhaps at a more tactical level the performance monitoring in terms of customer satisfaction and standards.
What the framework helps organisations to do is to design and manage these processes so that they deliver the business results that are dictated by the strategy.
JC: Many people still view CRM as a front office set of activities – sales, marketing, service, but in looking at your CRM audit and framework, it is clear that you take a much broader view, can you explain why?
AP: Yes, there are three broad perspectives of how people tend to view CRM. First of all there are those who see it very much from a 'tool' basis, i.e. it's a tool to do a task such a s sales force automation system. A second view is that it consists of a set of different technology tools that are used throughout the business. The third view is an integrated holistic process which has the objective of building enduring relationships with the customer, and that is very much the view that we are taking here.
It's our view that if you are going to be successful in business you’ve got to take the holistic view that integrates both the back office and the front office. We sometimes use the term demand chain management to recognise that we need to link up the suppliers, the organisation and the customers. A number of people refer to this as the 'buy-side-inside-customer-side' that we need to focus on.
JC: Many firms in all sectors have been grappling with CRM initiatives over the years, with varying degrees of success or failure. Given where they are on their journey, what value is there in the strategic framework you recommend?
AP: It provides them with an opportunity regardless of where they are. Whether they are in a start up situation or they are quite advanced along the CRM journey, to stand back and asking 'where are we at present?' Making sure that they have covered all the bases. Have they thought through the strategy? Have they thought through the customer segmentation? Have they thought through the options in terms of different segment alternatives - be it macro segmentation, or micro segmentation or even taking a one-to-one approach.
It is really an opportunity to take a look at their CRM progress in its entirety from soup to nuts and identify how complete their total CRM strategy is.
JC: Adrian, In my own discussions with firms that seem to be getting CRM right, a clear message that comes out is the high level of motivation and satisfaction of their employees, as a major contributory factor to their success. Where is this covered within the framework?
AP: The books is very much about CRM strategy development but in the latter part we switch to the talking about the issues of implementation and you will notice in the final chapter of the book, there is a modified framework that takes into account the issues around implementation. The employee side is examined in quite some detail.
Essentially we see this as consisting of two broad components. One is a strategic change management level approach to make sure we have the infrastructure and thinking in place in terms of what we want to do, and the second part is employee engagement. Making sure they are motivated, developed and directed to achieve a support for the service or product they are offering.
JC: That must be a significant challenge as a lot of firms seem to be struggling in doing anything more than piecemeal approaches with CRM?
AP: I think it is a challenge and the very best companies out there do this very well whilst many other companies perhaps despite having the right architecture and technology investment have not put into change management and employee engagement and that’s why we get some of the failures that are heavily reported in the press and elsewhere about CRM.
JC: You remind us in the first chapter of the key principles of CRM such as the emphasis on customer retention and the relationship with stakeholders, but you also mention relationships with market domains. What do you mean by ‘market domains’?
AP: The term ‘market domains’ was coined by us in one of the early books on relationship marketing. The thinking behind this is that we are not going to be successful with our customer relationships unless we take a number of other market s into consideration.
In fact we identify six key market domains that are important. We’ve just mentioned one of those, the internal customer domain. We talked about the importance of motivating employees.
Firstly we need to think about the supplier or alliance partners that we have. One of my colleagues David Blenkhorn calls this reverse marketing - marketing back into the supply chain. So it is essential if we are to have an effective organisation and be able to deal with the customer successfully that we have our supply chain relationships working properly.
Another market domain we call 'referral markets'. And this consists of people who can generate business for us through word of mouth and advocacy. So trying to get your customers to do the marketing for you is becoming a fundamental element of CRM. The very best companies manage to do this extremely well.
Then we have the 'Influencer market domain'. There are a whole range of influencers who impact on our business and create success. The press, the government, the media shareholders, a whole range of people. We have only got to think about the adverse affect that the press can create such as the Ratners fiasco several years ago to realise what an important influencer market this can be.
Finally we have recruitment markets where we need to make sure we attract the very best quality people to the organisation.
So in addition to the customer market we have five other market domains - the supplier and alliance markets, the referrals market, the influencer market and the recruitment markets to consider.
JC: I know from my days at IBM what a huge challenge that was - how do you manage all those domains and is there any company that has mastered it yet?
AP: Virgin Atlantic is a very good example of this Jeremy. I think right across all the market domains it has really created an outstanding impact. If you think about the staff when you meet them aboard a Virgin Atlantic flight you get turned on switched on employees. It’s quite clear that they are motivated and enjoying their job. I’ve had people recommend Virgin Atlantic who’ve never flown with them, so they have certainly got the referral market working for them.
Richard Branson in particular is very astute at managing the influencer markets. He gets an incredible amount of publicity and exposure in the press. In part through being the underdog and in part through being very amusing about the way he interacts with people and also his various exploits.
The recruitment market is something perhaps I know a little bit less about but they obviously place emphasis on that otherwise they wouldn't get the quality and calibre of people that they have got.
(Editor’s note: the interview with Lyell Strambi COO of Virgin Atlantic shows that Professor Payne is correct in his assumptions.)
So right across all the domains, without going into each one in great depth, I think that Virgin Atlantic is a great example of a firm that is managing these domains to great effect.
JC: What are the implications of not managing all these domains well?
AP: I think we have got a number of examples, I mentioned Ratners Jewellery briefly , but there are also other examples. Fisons a few years ago seemed to upset about every stakeholder or market domain that you could mention. There are plenty of examples almost weekly in the press of people who upset one or more of these market domains to their detriment. Some of the oil companies and Greenpeace spring to mind.
JC: Adrian in quite a lot of companies I have worked with, there is a frantic atmosphere of fire-fighting which seems to prevent a more thoughtful approach to CRM that your strategic framework would support. What do you say to the MD who asks you: 'how do I change the wheels on the train when it is running?'
AP: I think the audit that we referred to earlier is a really good starting point to try and identify what the priorities are.
When people sit down to see what they would like to do with CRM, they come up with a very long list. We need to separate that list in terms of what is realistic and affordable, and going to create competitive advantage or minimise competitive disadvantage and what are the purely nice-to-haves? So The starting point is to identify what the roadmap is for the things we want to do and should do and get going with those. This is especially important where we are not in a start-up situation and the wheels are already rolling.
JC: Adrian in the first chapter you describe a CRM continuum. At one end you have people involved in tactical CRM projects like SFA, in the middle you have firms which have moved on from there and are trying to integrate a patchwork of CRM technologies, and then the final expression are those who are taking this holistic approach that you are recommending. What would you recommend people do? Continue with what they are doing or try to jump to the end of the continuum?
AP: I don’t think it has to be 'either-or'. What you need to do is take the strategic view and understand where your various pieces of CRM activity fit within that overall view. I’d certainly advocate that everyone should take that strategic view to start off with, but there is a tendency for some companies to try to do everything. It is very important to identify what you can do and should do and what is affordable and try to develop a roadmap taking each of those elements and putting them together.
JC: So look at where they are now and try to figure out which big levers to pull that are going to move them towards that vision.
AP: Absolutely. What should be driving all this is the fundamental philosophy of CRM which is about how do we create shareholder value for the company through development of better relationships with customers. So it should be very much structured around building these better relationships with customers over time. The results that will come from that will be better retention rates, better profitability etc.
JC: And have you come across firms that have been struggling with their patchwork of CRM initiatives and then having looked at the strategic framework said, 'hang on a minute, let’s hold fire on what we are doing and take a fresh look before we move forward'?
AP: Yes there is one European financial services organisation that I’ve been working with which took this step back. They hired a leading US strategy consultant to apply my model to their organisation. They went through a large benchmarking exercise against a lot of leading firms in the USA. Organisations like American Express, USAA which is one of the most successful insurance companies on the planet and so on. That enabled them to in a sense re-galvanise quite good CRM initiatives and focus them in a much clearer direction to emulate best practice on a global basis.
JC: So it’s worth taking a fresh approach even if you are in the middle of lots of initiatives and have been at it for some years then?
In our next interview we will focus on the first of the five processes - the strategy development process where we will take a look at synchronising business and customer strategy. Until then, don’t forget your free download of chapter one.
- Chapter 2 - A Strategic Framework for CRM
- Marketing with eyes wide shut - Interview with Professor Adrian Payne of Cranfield School of Management
- Interview: Lyell Strambi, Chief Operating Officer at Virgin Atlantic
- CRM in Practice: Virgin Megastores
- The Multi-Channel Integration Process in CRM by Adrian Payne