tiểu luận working assignment 1 course customer relationship management topic crm models

Customization helps create unique value and enhance customer satisfaction, thereby creating a competitive and exclusive advantage for businesses.. The process of the CRM Value Chain - Cu

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TRƯỜ NG ĐẠI HỌ C KINH TẾ ĐẠI HỌC ĐÀ NẴNG

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WORKING ASSIGNMENT 1 COURSE: CUSTOMER RELATIONSHIP MANAGEMENT

TOPIC: CRM MODELS

Nguyễn Thị Như Trúc 47K22.1 Phạm Hoàn Vĩnh Liêm 47K22.1

Đà Nẵng, tháng 1 năm 2024

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DUTY CHART

Phạm Hoàn Vĩnh Liêm Member The Five-Process Model of PAYNE and FROW

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TABLE OF CONTENTS

LIST OF FIGURES 3

LIST OF TABLES 3

1 The IDIC Model 4

1.1 Introduction 4

1.2 Applying IDIC Model to CRM 4

1.3 Benefits of IDIC in CRM 5

2 The CRM Value Chain 6

2.1 Introduction 6

2.2 The process of the CRM Value Chain 7

2.3 Benefits of using the CRM Value Chain Model 8

3 The SCHEMA Model 9

3.1 Introduction 9

3.2 Four key foundations: 10

3.3 Five enablers of good customer management: 10

4 The Five-Process Model of PAYNE and FROW 10

4.1 Introduction 10

4.2 The process 10

4.3 Application of Payne’s Five Process model of CRM in an e-commerce business 13

SOURCES 15

LIST OF FIGURES

Figure 1: The IDIC Model 4

Figure 2 The CRM Value Chain: 6

Figure 3: The SCHEMA model of customer management 9

Figure 4: The Five-Process Model of PAYNE and FROW 13

LIST OF TABLES Table 1: Tools and processes in each stages 8

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1 The IDIC Model

1.1 Introduction

The IDIC model is a customer thinking framework developed by Don Peppers and Martha Rogers in 1995 This CRM model helps businesses reach customers in a more personalized way, meet customer needs, create Create long-term relationships to create more profits The IDIC model in CRM includes 4 stages:

- Specify (Identify): Identify customer characteristics and actions

- Differentiate: Classify customers into different groups Each group shares common characteristics based on identified factors

- Interact: Interact with each customer group appropriately and effectively

- Customize: Offer products, services and experiences suitable for each customer group

Figure 1: The IDIC Model

1.2 Applying IDIC Model to CRM

- Identify who the business's customers are?

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Collect all data from users to analyze and identify action characteristics As customers continue to stress with businesses, some information can be collected such as demographics, purchase history, habits, reviews, etc

⇒ The purpose of determining customer actions is created, the customer database is completed Know who the customers are, what they want

- How are customers different?

Based on the collected data, identify differences between multiple customer groups What characteristics will make the difference? Different needs, habits and other demographic factors influence purchasing decisions

⇒ The goals of different business enterprises customize sales and marketing strategies based on the characteristics of each customer group

- How should businesses interact with customers?

There are many communication channels that businesses can use to interact with customers such as via email, phone, fake advertising, electronic advertising The goal of interacting with customers is to create an environment Be proactive and professional to make customers feel cared for and satisfied, creating a connection between customers and the business

- Personalize products and services suitable for customers

The goal of customization is to create a personalized product and experience that feels responsive to customers To some extent, personalization will increase a business's customer loyalty rate Ultimately helps increase sales and profits of sustainable businesses

1.3 Benefits of IDIC in CRM

- Identify and recognize the group's customer criteria Through the process of analyzing and collecting data, businesses can better understand the characteristics and needs of customers, thereby classifying and grouping into similar objects

- Help businesses create positive interactions with customers to build good relationships and increase customer satisfaction

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- Provide customized solutions to meet customer feedback and expectations Customization helps create unique value and enhance customer satisfaction, thereby creating a competitive and exclusive advantage for businesses

2 The CRM Value Chain

2.1 Introduction

The CRM Value Chain depicts our contemporary understanding of CRM as a set of strategic management practices that aim to drive profit performance The focus of the CRM Value Chain is on the profitability of customers, not the performance of brands or gross margins CRM offers a customer-focussed way of doing business and is based on the notion that the primary purpose of a business is to create and keep profitable customers

The purpose of the CRM value chain: The ultimate purpose of the CRM value chain process

is to ensure that the company builds long-term mutually-beneficial relationships with it’s strategically - significant customers Not all customers are strategically significant The CRM Value Chain includes steps: 5

- Customer portfolio analysis (CPA)

- Customer intimacy

- Network development

- Value proposition development

- Managing the relationship

Figure 2 The CRM Value Chain:

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2.2 The process of the CRM Value Chain

- Customer portfolio analysis (CPA)

The CPA approach involves examining the customer base to pinpoint specific customers who can be approached with diverse value propositions This process utilizes data about customers and the market to make informed decisions about which customers to focus on Companies seek to categorize their customer base into segments, aiming to identify the most lucrative groups They analyze which customers are spending significantly on their products and services The ultimate objective for these companies is to establish their ideal target customer group By assessing and categorizing their clients, they aim to identify those groups that are most appealing for business transactions, based on their set criteria for a desirable customer

- Customer intimacy

The subsequent phase requires the business to familiarize itself with the chosen customer groups or individuals, constructing a customer database that is readily available to all stakeholders influencing customer perceptions and actions This step focuses on understanding each customer individually After identifying the target segments, companies aim to gain deep insights into the individuals within these segments, striving to understand them more thoroughly than their competitors do Achieving customer intimacy entails a comprehensive understanding of the customers and their specific needs

- Network development

The third step in this process entails establishing a robust network of relationships with employees, suppliers, partners, and investors, all of whom are aligned with the needs of the selected customer groups

- Value proposition development

In the fourth step, this network collaboratively develops value propositions that benefit both the customer and the company This involves either building or acquiring resources necessary to create and deliver value to customers

- Managing the relationship

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The fifth and final step focuses on managing the customer relationship This management includes implementing Customer Relationship Management (CRM) strategies for acquiring and retaining customers and enhancing their value to the company

➔ These steps are not static but iterative and reflexive This means that the five-step process is ongoing and repetitive, rather than a one-off procedure leading to a permanently effective strategy

➔ Data plays a crucial role across all five stages of the CRM Value Chain

At each stage of the value chain there are concepts, tools and processes to help create and implement successful strategy:

Customer

Portfolio

Analysis

Customer Intimacy

Network Development

Value Proposition Development

Manage The Relationship

- Market

segmentation

- Sales

forecasting

- ABC

- Life-time

value

- Customer

analysis

toolkit

- Customer

database

development

- Internal data

- Data

enhancement

- Data

warehousing

- Data mining

- Benchmarking

- Privacy

- Database

technology and

software

- Network management

- Internal buy

-in

- External network

- Network position

- E-commerce

- EDI/

Extranets/

Portals

- Sources of customer value

- Customer experience

- Process reengineering

- People issues

- Technology enablement

- Customer acquisition

- Customer retention

- Customer development

- Organisation design

- Metrics

Table 1 Tools and processes in each stages:

2.3 Benefits of using the CRM Value Chain Model

- Optimize Customer Relationship Management: This helps create strong relationships with customers and increase their loyalty Customers feel cared for and valued

- Create an Outstanding Customer Experience: Customers will feel more satisfied with your services and products, which helps create loyalty and retention

- Boost Marketing Performance: By optimizing marketing and customer engagement, businesses can achieve better performance in attracting and retaining customers

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- Building Long-Term Relationships: The CRM value chain helps build long-term and honest relationships with customers This can lead to loyalty and long-term growth, helping businesses maintain and expand their market

3 The SCHEMA Model

3.1 Introduction

The SCHEMA model is a commercial property developed as a benchmarking tool by TCF The model, as shown in the following figure, aims to help companies strike an optimal balance between customer engagement and profitability The model proposes a key financial goal for customer management – the achievement of sustainable incremental profitability This goal is achieved when the identified foundations enable the successful execution of strategies designed to win, keep and develop customers cost-effectively

Figure 3: The SCHEMA model of customer management

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3.2 Four key foundations:

The model identifies four key foundations that underpin successful customer engagement:

- Direction and leadership (e.g clarity of strategy, cross-functional ownership, budgets, measurement)

- IT and data management capabilities

- Organizational culture (ways of working)

- Competencies of people

3.3 Five enablers of good customer management:

The model identifies five enablers of good customer management:

- The deep customer insight that is necessary for well-targeted marketing, selling and service

- The alignment of brand positioning with customer experience

- The integration of channels and media and the way content is created and used

- The agility and workflow required to support real-time engagement (including compliance and decision-making)

- The activities that get measured will drive action by management and front-line staff

4 The Five -Process Model of PAYNE and FROW

4.1 Introduction

Adrian Payne and Pennie Frow introduced the Five Processes Model, aiming to enhance Customer Relationship Management (CRM) by prioritizing customer acquisition and retention This model delineates key processes essential for building and sustaining strong relationships with customers.The model discusses the relevance of various processes

4.2 The process

Strategy development in Payne’s Five Processes model

The process of strategy development is divided into two distinct components: business strategy and customer strategy

In the realm of business strategy, an organization must develop a vision related to its offerings, with the aim of establishing itself as a pivotal player within the industry This model posits that:

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- Business strategy serves as a foundation for comprehending,

- How customer strategy should be formulated, and

- How it ought to evolve over time in conjuction with shifting customer needs

In the realm of customer strategy, this approach entails a comprehensive understanding of customer preferences and characteristics to develop impactful products and services According to the framework proposed by Payne and Frow, a thorough examination of both the existing and potential customer base is integral to effective customer strategy This examination facilitates precise segmentation and the identification of future measures to address diverse customer requirements

Value creation process

The value creation process of Payne’s Five Processes model involves identifying the value

of a customer to the business and the value of a business to the customer The business needs to understand which customers are valuable through the process of value proposition and value assessment The business can receive value from retention economics (Reduced Churn, Personalized Incentives, Predictive Analytics) and acquisition economics (Targeted Value Propositions, Reduced Acquisition Cost, Brand Advocates)

The value creation process in Payne's Five Processes model isn't just about identifying existing value Rather, it's a dynamic transformation, fueled by insights from the strategy development stage This transformation extracts raw value and refines it into compelling propositions that resonate with customers and drive mutually beneficial results

Payne’s Five Processes model explains that there are 3 aspects of effective value creation Firstly, the organization needs to determine which processes can create value for the customer Secondly, identify customers who can add value to the organization Thirdly, identify how to maximize value in desirable customer segments for a successful exchange

of values

* Value Co-creation:

+ Joint Problem Solving: This involves collaborating with customers to identify and solve problems together This might involve product customization, feedback incorporation, or personalized service offerings

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+ Partnership and Alliance: Building strategic partnerships with other organizations can enhance the value proposition for both the company and its customers This can involve co-branded products, shared services, or loyalty programs

Customer segmentation can have a significant impact on CLV because it allows company

to identify and target high-value customers more effectively By dividing customer base into smaller groups based on shared characteristics, business can gain a deeper understanding of what motivates each segment to make purchases and what their specific needs and preferences are

Multichannel integration process

Payne and Frow consider the multichannel integration process as an important process as

it works on inputs from value creation processes and business strategy It involves converting the insights from these processes to outputs in value-adding activities The multi-channel intergration processes are sales force, outlets, direct markeitng, call center/telephone, electronic/mobile commerce, social media) This process suggests the business conduct tasks to engage customers, understand their perspective and retain them for a longer duration It helps businesses to focus on making decisions that integrate all channels and ensure the customer experience is positive, called intergrated channel managemant Moreover, feedback from this process needs to be taken into account to further evaluate both strategy and value proposition This helps in better CRM implementation for a greater success of the organization

Performance assessment process

Performance assessment is very important to understand how well the value proposition of the business is and whether the customer’s interest is leading to better business performance Payne and Frow suggest an understanding of the performance through shareholder value, customer engagement scenario, profit margins, and returns through dividends According to Payne’s Five Processes model, performance assessment of business should also include monitoring of customer satisfaction, standard assessment and analysis of Key Performance Indicators (KPIs) Assessing performance includes employee, customer, shareholder and cost reduction