Customer Relationship Management: An Introduction

SCM - Customer Relationship Management

The Customer Relationship Management process provides the structure for how the relationships with customers will be developed and maintained. Management identifies key customers and customer groups to be targeted as part of the firm’s business mission. These deductions are made by the leadership team of the enterprise and the owner of the strategic process is the CEO. The goal is to segment customers based on their value over time and increase customer loyalty of target customers by providing customized products and services. Cross-functional customer teams tailor Product and Service Agreements (PSAs) to meet the needs of key accounts and for segments of other customers. The PSAs specify levels of performance. The teamwork with key customers to improve processes and reduce demand variability and non-value-aided activities.

Customer Relationship management and supplier relationship management provide critical linkages throughout supply chain. For each supplier in the supply chain, the ultimate measure of success of the customer relationship management process is the change in profitability of an individual customer or segment of customers. 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 by developing the relationship. The biggest 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 customer relationship management, these technology tools should not be confused with the relationship-focused supply chain management process. Customer relationship 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% of all customer relationship management projects do not produce results.

There is a wide range of view as to what comprises customer relationship management. At one extreme, it is about the implementation of a specific technology solution and at the other, it is a holistic approach to selectively managing relationships to create shareholder value. It is the former perspective that results in so many failures. In order to develop mutually beneficial business relationships, customer relationship management should be positioned in a broad strategic context and be consistently implemented throughout the organization.

Customer relationship management process has both strategic and operational elements. For this reason, the process has been divided into two parts, the strategic process in which management establishes and strategically manages the process and the operational process in which implementation takes place. Implementation of the strategic process within the firm is a necessary step in integrating the firm with other members of the supply chain and it is at the operational level that the day-to-day activities takes place.

The strategic process is led by a management team that is comprised of executives from several functions: marketing, sales, finance, production, purchasing, logistics and research and development. The team is responsible for making decisions about how relationships with customers will be developed and maintained. At the operational level, there will be a customer team for each key account and for each segment of other customers.

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