Businesses can benefit from understanding the value chain model of CRM, which is a model that provides insights into how to design and implement CRM strategies. Francis Buttle created value modelling in the year 2004 and it is still in use today (Buttle 2004). The primary goal of this model is to connect an organisation’s internal and external processes in order to generate value for customers while making a profit.
CRM Value Chain Model
Aside from that, the model is suitable to firms of all sizes, including those that are primarily focused on business-to-business (B2B) and business-to-customer (B2C) transactions (Gummesson 2015).
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According to this approach, the first step towards successful CRM is the evaluation of the customer portfolio in order to do the following:
- Recognise their potential for a long-term partnership
- Determine the degree to which a consumer feels connected to the firm
- Work on establishing a network
- A value proposition should be developed
- Maintain control over the customer management cycle (Chen & Myagmarsuren 2011).
In addition, the model also emphasises on creating long-term associations through a culture that recognises 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 CRM value chain model is divided into two stages: the primary stage and the secondary stage. The secondary stage serves as a backup system for the primary stage, and both of these stages are made up of a number of different processes.
Primary Stage of Value Chain Model
The main stage of the value chain is made up of a number of different processes. Each of them has its own set of concepts and tools that make it possible to use the model effectively. The primary stage is beneficial in the following ways:
- Find out where the customer is
- Learn about their habits
- Interact with one another in order to create a bond
- They are responsible for providing client service (Kapooria 2017)
Furthermore, this approach assists the firm in maintaining a relationship with its clients by fulfilling the goal of the customers to establish a long-term relationship.
The primary stage has five main processes:
Customer portfolio Analysis
It is the primary obligation of an organisation to identify a client because it assists in the identification of a target audience and the development of products and services. Customers who can provide value to a business and who are the most desirable for a firm to prosper are those who should be targeted for identification.
The analysis aids in the creation of a profile of clients and their requirements. Furthermore, it assists the company in strategising for effective connection as well as identifying highly valuable clients for a long-term partnership (Buttle 2004).
Customer Intimacy
The next stage is to engage with the consumer and continue to build on the information collected in the first place. Companies should be collecting data on their customers’ interactions at every touchpoint in order to better understand and serve them.
Network Development
A company’s network is comprised of everyone and everything involved in the value chain, such as partners and suppliers, as well as customer service and financial investors and others. The idea is to use consumer data to inform the operations at each level of the network, ensuring that the entire system works together to improve customers’ experience as a result of their purchase.
Value Proposition Development
It is possible to add value to the target customers’ lives when companies have access to their information and interaction data. The objective is to move the attention away from the product and toward the service, while simultaneously lowering process expenses in order to provide greater value to the consumer.
Manage the Customer Lifecycle
Customers may or may not remain loyal to a business indefinitely, depending on the circumstances. It is possible that the customer’s lifetime includes the period of time from when the individual is a prospect to the period of time when the individual has become a customer and has departed the company.
On the other side, in some instances, a client may express an interest in recommending the company’s services and products to their social network as a result of their experience. Aside from that, the company is constantly interested in turning a customer into an ambassador for the company, so assisting in increasing the lifetime of a customer.
Supporting Conditions/stages of the Value Chain Model
CRM value chain model’s secondary stage is a supportive stage that offers structure and assists the organisation in performing its primary functions.
The following are some of the numerous elements of this stage, according to Kapooria (2017):
Leadership and Culture
Effective leadership contributes to the development of a strong company value proposition in the area of CRM. It places a high value on processes related to CRM.
Data and Information Technology
Today’s CRM operations are heavily based on information technology and data. The information obtained from the data assists in the acquisition of information about the needs of customers. Information technology aids in the analysis of large amounts of data in order to build value propositions for customers. Additionally, customer information drives CRM and aids in the development of new procedures that may be beneficial in meeting the needs of customers.
People
The people, or employees, of a company are the most critical support structure since they engage with customers and understand how CRM should work. They could include sales representatives, customer service representatives, production personnel, or delivery personnel.
Processes
They contain the tasks that a corporation must complete in order to manufacture a product or service, as identified by customer profiling and network analysis, among other methods. Whenever a corporation requests a generic product or service, a mechanism is put in place to make this happen. If, on the other side, the clients are more concerned with individualised offerings, the procedures can assist the business in delivering those offerings.
CRM tactics must be supportive in order to secure the success of a firm. Buttle’s CRM value chain model serves as a thorough guide for organisations seeking to develop a comprehensive CRM strategy that is inclusive of all departments.
An important drawback of this model, on the other hand, is that it does not include a competition analysis as a part of its overall process. Furthermore, as marketplaces become increasingly concentrated and dynamic, rivals have a significant impact on the firm in terms of sales, revenues, and brand presence, among other things.
