Ryals (2005) Making CRM work - Lynette Ryals Making...

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Lynette Ryals Making Customer Relationship Management Work:The Measurement and Profitable Management of Customer Relationships Customer relationship management (CRM) is perceived to be failing, and there is an urgent need for some practi- cal ways to address this issue. The research presented in this article demonstrates that the implementation of CRM activities delivers greater profits. Using calculations of the lifetime value of customers in two longitudinal case studies, the research finds that customer management strategies change as more is discovered about the value of the customer. These changes lead to better firm performance. The contribution of this article is to show that CRM works and that a relatively straightforward analysis of the value of the customer can make a real difference. Lynette Ryals is Senior Lecturer in Marketing, Cranfield School of Man- agement, Cranfield University (e-mail: lynette.ryals@cranfield.ac.uk). This article is based on the author’s dissertation work conducted at Cranfield School of Management.The author gratefully acknowledges the data sup- port of a major U.K. bank and of a European financial services company. The author appreciates the comments of the three anonymous JM reviewers and the guidance of the consulting editors on the work. The author also acknowledges the research support of her dissertation super- visor, Simon Knox, and she thanks John Towriss and Sam Dias for their help with the analysis. C ustomer relationship management (CRM) is part of marketing’s new dominant logic (Day 2004), but it is more likely to fail than to deliver any business results (Zablah, Bellenger, and Johnston 2004). Still worse, failed implementation may actually damage customer rela- tionships (Rigby, Reichheld, and Schefter 2002). This research demonstrates that the implementation of CRM activities generates better firm performance when managers focus on maximizing the value of the customer (Gupta and Lehmann 2003; Gupta, Lehmann, and Stuart 2004; Reich- held 1996; Verhoef and Langerak 2002). Previous researchers have suggested that a better understanding of the value of the customer should lead to changes in the way these customers are managed (Mulhern 1999; Niraj, Gupta, and Narasimhan 2001; Reinartz, Thomas, and Kumar 2005). Through two case studies that develop detailed data about lifetime revenues and customer-specific costs, these predictions are borne out. Moreover, information about both revenues and costs enables the exploration of whether larger customers, on average, provide the firms studied with more value than smaller customers (Dowling 2002; Kalwani and Narayandas 1995). Research Methodology This section describes the operationalization of the lifetime value of the customer. The method I chose was two collab- orative longitudinal case studies, one to explore individual customers and the other to explore a customer base. Both case studies were with companies that had not previously calculated the value of their customers; thus, in both cases, managers were receiving new information.
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This note was uploaded on 03/06/2012 for the course ECONOMIC 203 taught by Professor Veiga during the Spring '12 term at Universidad Complutense de Madrid.

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Ryals (2005) Making CRM work - Lynette Ryals Making...

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