Payne’s Five Processes Model helps to improve Customer Relationship Management (CRM) which makes acquisition and retention of customers a priority. It includes processes that can help to build and maintain relationships with customers. The model was established by Adrian Payne and Pennie Frow in 2005 to identify and assess processes relevant to CRM.
The model discusses the relevance of various processes, namely (Payne & Frow, 2006):
- strategy development process
- value creation process
- multichannel integration process
- performance assessment process, and
- information management or analytical process in CRM.
Each of the above is a cross-sectional, process-oriented approach and are interlinked. They have their own role and function for increased success with CRM implementation. Payne and Frow extensively reviewed literature, along with field-based interactions, to develop a comprehensive process that would aid in developing a sound CRM strategy. Through their research, Payne and Frow stressed the importance of having CRM at strategic level.
Strategy development and value creation process are a part of strategic CRM. The multichannel integration process is a part of operational CRM. I
Strategy development in Payne’s Five Processes model
The strategy development process is further divided into two parts; business strategy and customer strategy. For business strategy, a business needs to develop a vision in relation to its offerings. The purpose is to create a goal to establish itself as a key player in the industry (Starkey & Woodcock, 2002). This model suggests that invariably:
- business strategy paves the way for understanding,
- how customer strategy needs to be shaped and,
- how it should change over time in conjunction with the changing needs of the customers.
It involves understanding the choice of customers and their characteristics for developing effective products and services. According to Payne and Frow, it is important to examine both current and potential customer base as a part of customer strategy. It helps with appropriate segmentation and identifying future actions to tackle different customer needs.
Value creation process
The value creation process of Payne’s Five Processes model involves identifying the value of a customer to the business and vice-versa. The business needs to understand which customers are valuable through the process of value proposition and value assessment. This process, as per the model, needs to be transformative as per the results received from the strategy development so that value is extracted and transformed into meaningful propositions. 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 (Abdul-Muhmin, 2012).
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. This process suggests the business conduct tasks to engage customers, understand their perspective and retain them for a longer duration (Labus & Stone, 2010). It helps businesses to focus on making decisions that integrate all channels and ensure the customer experience is positive. 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 (Debnath, Datta, & Mukhopadhyay, 2016).
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 (Pinnington & Jones, 2015). According to Payne’s Five Processes model, performance assessment of business should also include monitoring of customer satisfaction and analysis of Key Performance Indicators (KPIs). Doing so shall help to assess the extent of success of the implementation of the CRM processes.
Information management or analytical process
Information management is the analytical part of the model. It is a support to the other processes. Payne’s Five Process model suggests collecting, organizing, and using information related to customers helps with insights on consumer behaviour. It helps businesses to create appropriate marketing responses and improve value propositions. To manage such activities, businesses should develop a data repository system with data analysis tools (Pinnington & Jones, 2015). These applications can help keep the CRM process a comprehensive one for quantitative and qualitative measurement of market competitiveness (Xu & Walton, 2005).
Application of Payne’s Five Process model of CRM in an e-commerce business
E-retailers have majorly benefitted from this model. Integrating Payne’s Five Process model is very important to provide a customer-based value proposition. E-retailers work to build CRM strategy by engaging customers, offering value propositions such as discounts, loyalty privileges and priority shipping. Multi-channel integration can also be included from customer reviews, customer service, e-mail support as well as return policies. Performance of the CRM process can also be assessed from the online traffic, time spent on browsing and surfing habits. Assessing what factors trigger purchase intention can help create better value propositions.
Payne’s Five Process model evaluated the correlation between business processes, prospects and customers. The various processes encompass the spectrum of CRM, right from the strategic point of view to assessing the performance of customer engagement. Every process supports itself and other processes, with each task being interdependent for success.
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