Models of CRM

We will discuss the following models of CRM in this section:

1. The IDIC Model
2. The Value Discipline Model
3. The Gartner Competency Model
4. The QCi Model
5. Payne’s Five-Process Model
6. The Francis Buttle Model

1. The Identify, Differentiate, Interact, Customize (IDIC) Model

The IDIC model was developed by Peppers and Rogers. The model suggests that companies should take four actions in order to build closer one-to-one relationships with customers—Identify, Differentiate, Interact and Customize. Peppers and Rogers, the pro­ponents of one-to-one marketing, proposed the IDIC framework to explain the process of converting existing customers into loyal customers. IDIC represents the following four key steps in the relationship building process.

Identify: This step requires the company to locate and contact a large number of its cus­tomers directly and know as much detail about them as possible. This includes their names, addresses, phone numbers, account details (wherever relevant), habits, preferences, etc.

Differentiate: Customers can be differentiated on the basis of the value they represent and also on their needs. The value represented is an indication of the customer’s worth to the company—the more valuable they are, the more the company should be interested in retaining them. Although the easiest measure of value is the revenue contribution of the customer, this can become tricky if the cost to serve is high for the high revenue customers. Thus, the ideal measure of customer value is the profit contribution, which in many cases is difficult to measure as the cost to customers is difficult to isolate due to sharing of overheads and lots of common services. Some customers need very standard products and services while others have very specialized needs. Customers with specialized needs create opportu­nities for customization. Customization helps meet these needs. Differentiation should help the company tailor its offerings to each customer to reflect their values and needs.

i The purpose of interaction is to learn more about the customers starting with the more valuable customers. These interactions can happen when the customer is making a purchase, using a service or even while the customer is making a complaint. It can be done through formal surveys, telephone interactions or self-service channels like the web, call centres or ATMs in banking services. They should add on to the existing knowledge about the customer and this should be done in a cost-effective manner by using the lowest cost electronic channels. The learning relationship gets smarter with each interaction.

Customize: The last step is the most critical as it builds upon all the learning about the customers to offer real value to them by tailoring some aspects of the service related to a product or even mass customizing the product. When the customization is done on the basis of what the customer has indicated during his interactions, it improves the ability to fit the product and service to this customer’s exact needs. This helps the customer enjoy a high level of convenience, which cannot be easily duplicated by a competitor without the customer having to put in the time and effort to teach the competitor the lessons already learned by his existing company.

2. The Value Discipline Model

There are different ways in which companies build relationships with their customers. What is the focus area of an organization and what has to be kept at an acceptable level has to be determined by the organization at the beginning based on the strengths of product and competition. Increasingly, as products become commoditized and margins shrink, with customers unwilling to pay for features, customer intimacy starts to play a critical role that competitors find difficult to replicate. Total customer experience becomes the key. Three major factors that influence the total customer experience are—external marketplace, com­pany’s brand image and the different ways in which the company touches a customer.

Most large international corporations are working out of this discipline. The value disci­pline model of Michael and Fred Wiersema describes three generic value disciplines. They are:

• Operational excellence: The focus is on development, innovation, design, time-to-market and high margins in a short time frame.
• Product leadership: The focus is on development, innovation, design, time-to-market, high margins in a short timeframe. Very strong in innovation and brand marketing and operating in dynamic markets.
• Customer intimacy: Excel in customer attention and customer service. Tailor products and services to individual or almost individual customers. The focus is on CRM, delivering products and services on time and above customer expectations, lifetime value concepts, reliability and being close to the customer.

A CRM strategy has to be evolved to enable an organization to gain a quick, accurate knowl­edge about customers and use it to increase the value of current customers, keeping them for longer periods and acquiring new customers more effectively. A CRM strategy takes direc­tion and financial goals from the business strategy and aligns with the marketing strategy.

3. The Gartner Competency Model

This CRM model was developed by Gartner Inc., a leading IT research and advisory company and has a significance place in CRM research. Gartner defines CRM as a business strategy that maximizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering behaviour that satisfies customers and implementing customer-centric processes. To achieve the long-term value of CRM, enterprises must understand that it is a strategy involving the whole business, and thus should be approached at an enterprise level.

CRM initiatives need a framework to ensure that programmes are approached on a strategic, balanced and integrated basis. The framework, called the eight building blocks of CRM, helps organizations see the big picture, make their business case and plan their implementation. The eight building blocks of CRM are given below:

1. CRM vision: Creating a picture of what the customer-centric enterprise will look like in order to build a competitive position based on value propositions that are defined, com­municated and personified by the enterprise brand. The CRM vision mainly addresses leadership, market position and value proposition.
2. CRM strategy: Developing a strategy to turn the customer base into an asset by delivering customer value propositions. This includes setting objectives and determining how resources will be used to interact with customers. It addresses objectives, segments and effective interactions.
3. Valued customer experience: Ensuring that the enterprise’s offering and interactions deliver ongoing value to customers and achieve the desired market position. It focuses on understanding requirements, monitoring expectations, satisfaction versus competition and customer communication.
4. Organizational collaboration: Changing cultures, organizational structures and behav­iours to ensure that employees, partners and suppliers work together to deliver customer value. It deals with culture and structure, customer understanding, people skills and competencies, incentives and compensation, employee communication and partners and suppliers.
5. CRM processes: Effectively managing not only customer lifecycle processes (for example, welcoming new customers, handling inquiries and complaints and winning back lost customers), but also analytical and planning processes that build knowledge of the cus­tomer. The main CRM processes are customer lifecycle and knowledge management.
6. CRM information: Collecting the right data and routing it to the right place. It mainly deals with data analysis.
7. CRM technology: Managing data and information, customer-facing applications, IT infra­structure and architecture. It deals with applications, architecture and infrastructure.
8. CRM metrics: Measuring internal and external indications of CRM success and failure. The parameters for measurement are value, retention, satisfaction, loyalty, cost to serve and social costs.

4. The QCi Model

The QCi model is the product of a consultancy firm. The model’s authors describe this model as a customer management model. The heart of this model depicts a series of activities that companies need to perform in order to acquire and retain customers. The model features people performing processes and using technology to assist in those activities.

5. Payne’s Five-process Model

This model was developed by Adrian Payne. The model clearly identifies five core processes in CRM—the strategy development process, the value creation process, the multi-channel integration process, the performance assessment process and the information management process. The first two represent strategic CRM; the multi-channel integration process repre­sents operational CRM; the information management process is analytical CRM.

6. The Francis Buttle Model (CRM Value Chain)

The CRM value chain is represented by Francis Buttle’s model. The model consists of five primary stages and four supporting conditions leading towards the end goal of enhanced customer profitability. The primary stages of customer portfolio analysis, customer inti­macy, network development, value proposition development and managing the customer lifecycle are sequenced to ensure that a company with the support of its network of suppli­ers, partners and employees, creates and delivers value propositions that acquire and retain profitable customers. The supporting conditions of leadership and culture, data and IT, people and processes enable the CRM strategy to function effectively and efficiently.

7. Implementation of CRM

The following factors need to be given due consideration to implement CRM:

• Easy interaction between customers and company, enhancing quick response to cus­tomer request and suggestions.
• Easy access to information about the company such as content of customization, advan­tages of the company, benefits doled out to the customers. This establishes profitable rela­tionships with the customers based on mutual trust and respect.
• Abundant supply of customer information accumulated and integrated from different channels.
• Grow with customers, i.e. customer information should be updated along with the pas­sage of time.
• Have a cordial relationship with other companies targeting the same customer segment.
• Customer information must be segmented to provide support for customization based on personalized information, i.e. tailoring the company’s products and services accordingly.

Improvement in customer relationships increases customer loyalty, decreases customer turnover, increases sales revenue, and decreases marketing costs, thus increasing profit margins.

The implementation of CRM across the organization is a long journey. Enhancing loyalty and profitability of existing customers and developing customized solutions for each cus­tomer is a capability that gets built over time. Box 15.3 discusses how multinational corpora­tion Nokia has been highly successful in building a strong customer base.

Box 15.3 Art of Building Customer Loyalty at Nokia

Nokia ventured into telecom in 1961, produced their first GSM mobile phone in 1991 and in 1998, became the world’s number one mobile phone manufacturer.

Nokia has demonstrated its strong innovative streak in not just introducing phones and features like local language SMS, but also in marketing and distribution strategies. In order to fulfill its vision of continuous customer satisfaction, the company has introduced a wide range of phones with distinct features that meet the demands of most niche customer segments.

They have transformed the mobile telecom industry by spearheading the evolution of GSM, the world’s most popular mobile telephony standard, and by extending the reach of mobile telephony far and wide across the globe. Nokia has tied up with HCL to distribute its phones in India. HCL has been able to use its strong distribution network and after-sales support to Nokia’s benefit.

Nokia has been consistently focusing on building customer loyalty by focusing on the unique needs of its customers. An example is Nokia 1100, a low-cost and sturdy phone, designed exclu­sively for India, which went on to achieve iconic international success with over 200 million phones sold worldwide.

Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.