The value chain model of Customer Relationship Management (CRM) is a model that provides insights to businesses on how to develop and implement CRM strategies. It was developed by Francis Buttle in the year 2004 (Buttle 2004). The main aim of this model is to integrate an organisation’s internal and external processes to create value for the customer at a profit. Furthermore, the model is applicable in both business-to-business (B2B) and business-to-customer (B2C) types of businesses of all sizes (Gummesson 2015).
According to this model, the primary stage towards good CRM is an assessment of customers’ portfolios to:
- understand their long-term association chances
- assess a customer’s level of connection with the organization
- work to develop a network
- create a value proposition and
- manage the cycle of customer management (Chen & Myagmarsuren 2011).
In addition, the model also emphasizes creating long-term associations through a culture that recognizes customers and their needs, document data and work through IT processes to keep track of customers’ needs and maintain positive relations with people (Ernst et al. 2011).
The value chain model for customer relationship management is staged into primary and secondary stages. The secondary stage is a support system for the primary stage and both of these stages consist of various processes.
The primary stage of the value chain model
The primary stage of the value chain consists of different processes. Each of these has its own concepts and tools which help enable the use of the model. The primary stage helps to:
- locate the customer,
- understand their habits,
- interact to develop a relationship and,
- them to provide customer service (Kapooria 2017).
Furthermore, this process helps the business to maintain a relationship with their customers by serving customers’ desire to build a lasting relationship.
Customer portfolio analysis
The identification of a customer is the prime responsibility of an organization as it helps establish the target audience and develop products and services. The customers to be identified are the ones who can add value to the business and are the most desirable for a business to succeed. The analysis helps to create a profile of customers, and their needs. Furthermore, it helps the business to strategize for effective interaction and helps discover highly valued customers for a long-term relationship (Buttle 2004).
The process of network development is slow and steady as it requires extensive interaction between the organization and the customers, at every step of the relationship. Moreover, the customer needs to be engaged in the pre-sales, sales and post-sales stages.
Value proposition development
The proposition of value in relation to a product or service comes when the organization has an overall idea of what the customer needs, and how the company can strategize to provide to the customers. The process
- identification of resources,
- development of sources and,
- development of products and services to address the value-based needs of customers.
Manage customer lifecycle
Customers may not remain indefinitely loyal to a business. The lifecycle of a customer may include the time from which an individual is a prospect to the time when the individual has become a customer and left it. On the other hand, in some cases, the customer might become interested in advocating the services and products of the company to their peer network. Furthermore, the company is always interested to convert the customer into its advocate, thus, helping in extending the lifecycle of a customer.
The secondary stage of the value chain model
The secondary stage of the CRM value chain model is a supportive stage that provides structure and helps the business to perform its primary functions. The various aspects of this stage (Kapooria 2017):
- Leadership and culture: Effective leadership helps to create a good business value proposition towards customer management. It prioritizes customer relationship management processes.
- Data and information technology: Today’s CRM processes are quite reliant on Information Technology and Data. The data helps in acquiring information related to customers’ needs. Information technology helps in analyzing a vast amount of data to develop value propositions. Also, customer information drives CRM and helps in strategizing new processes that might help to address the customers’ needs.
- People or employees: They are the most important support structure of a business, as they interact with customers to understand the way CRM needs to work. They may include the sales staff, customer service staff, production staff or delivery staff.
- Processes: They include the tasks that the company needs to follow to produce a product or service as understood through customer profiling and network analysis. If the company requires a generic product or service, the process works to make it possible. On the other hand, if the customers are more centric towards personalized offerings, the processes help deliver the same on behalf of the organization.
Customer relationship management (CRM) strategies need to be supportive to ensure organizational success. Buttle’s CRM Value chain model offers a comprehensive guide for organisations looking to frame an inclusive CRM strategy. However, a critical shortcoming of this model is that it fails to consider competitor analysis as a part of its process. Furthermore, with the markets becoming increasingly clustered and dynamic, competitors affect business greatly in terms of sales, revenues and brand presence.
- Buttle, F., 2009. Customer Relationship Management: Concepts and Technologies, Oxford: Elsevier.
- Buttle, F., 2004. Customer Relationship Management: Concepts and Tools, Oxford: Elsevier.
- Chen, C.-F. & Myagmarsuren, O., 2011. Brand equity, relationship quality, relationship value, and customer loyalty: Evidence from the telecommunications services. Total Quality Management & Business Excellence, 22(9), pp.957–974.
- Ernst, H. et al., 2011. Customer relationship management and company performance—the mediating role of new product performance. Journal of the Academy of Marketing Science, 39(2), pp.290–306.
- Gummesson, E., 2015. Return on Relationships (Ror): Financial Aspects of Relationship Marketing and Crm in a Business-To-Business Context. In Creating and Delivering Value in Marketing. Springer, Cham, pp. 43–47.
- Kapooria, P., 2017. Customer Relationship Management: Key to Customer Sovereignty, New Delhi: Idea Publishing.