CRM as a Business Process

In a business-to-business environment, customer relationship management is the business process that provides the structure for how relationships with customers are developed and maintained. Increasingly, customer relationship management (CRM) is being viewed as strategic, process-oriented, cross-functional, value-creating for buyer and seller, and a means of achieving superior financial performance.  Management identifies key customers and customer groups to be targeted as part of the firm's business mission.  The decision regarding who represents key customers includes evaluation of the profitability and potential profitability of individual customers.  Often it is assumed that the marketing function is responsible for creating, maintaining and strengthening relationships with business-to-business customers because it does this with consumers. However, for two large organizations to be able to coordinate their complex operations, all corporate functions must be involved and actively participate in the relationship in order to align corporate resources with the profit potential of each relationship. 

For example, in complex business relationships such as the one between The Coca-Cola Company and Cargill, Incorporated there is broad cross-functional representation and CEO-to-CEO involvement. The collaborative activities worked on by the teams have included: joint research and development on a new, natural, zero-calorie sweetener; logistics managers from the two companies working to reduce global transportation footprints; and, joint communication and cooperation on sustainability issues.  The benefits for each company are substantial. For example, in the case of the new sweetener; “The Coca-Cola Company has exclusive rights to develop and market the partnership's product in beverages, and Cargill has exclusive rights to develop and market it in foods”.

Typically, large sums of money are spent to attract new customers; yet management is often complacent when it comes to nurturing existing customers to build and strengthen relationships with them.  However, for most companies, existing customers represent the best opportunities for profitable growth. There are direct and strong relationships between profit growth; customer loyalty; customer satisfaction; and, the value of goods delivered to customers.  Relationship marketing concerns attracting, developing, and retaining customer relationships.  CRM has become a critical business process as a result of: competitive pressures; the need to achieve cost efficiency in order to be a low-cost, high-quality supplier; a recognition of the fact that customers are not equal in terms of their profitability; and, knowledge that customer retention can significantly affect profitability. CRM and supplier relationship management provide the critical linkages throughout the supply chain. 

For each supplier in the supply chain, the ultimate measure of success for the CRM process is the growth in profitability of an individual customer or segment of customers over time. In addition to trends in past profitability, “current and projected profits of customers (existing and potential) need to be analyzed and forecast”.  For each customer, the most comprehensive measure of success for the supplier relationship management process is the impact that a supplier or supplier segment has on the firm's profitability. The goal is to increase the joint profitability through the co-production of value.  A potential roadblock is failure to reach agreement on how to split the gains that are made through joint process improvement efforts. The overall performance of the supply chain is determined by the combined improvement in profitability of all of its members from one year to the next. 

While there are a great number of software products that are being marketed as CRM, these technology tools should not be confused with the relationship-focused, macro-business, CRM process.  CRM software has the potential to enable management to gather customer data quickly, identify the most valuable customers over time, and provide the customized products and services that should increase customer loyalty.  When it works, the costs to serve customers can be reduced making it easier to acquire more, similar customers. However, according to Gartner Group, 55 per cent of all CRM (software solutions) projects do not produce results.  In a Bain Survey of 451 senior executives, 25 per cent reported that these software tools had failed to deliver profitable growth and in many cases had damaged long-standing customer relationships. One firm spent over $30 million only to scrap the entire project.  There are four major reasons for the failure of CRM software projects:

1. implementing software before creating a customer strategy;

2. rolling out software before changing the organization;

3. assuming that more technology is better; and

4. trying to build relationships with the wrong customers

To be successful, management must place its primary focus on the CRM process and the people and the procedures that make the technology effective. The technology is simply a tool. Relying on the technology by itself will most often lead to failure. 

Source: Lambert, Douglas M. (2010) "Customer relationship management as a business process", Journal of Business & Industrial Marketing, Vol. 25 Iss: 1, pp.4 - 17