BUSI 442 Week 2 Topical Paper 1 Example

Customer Relationship Management as a System: Strategy, Process and Technology in Direct Response Marketing

Introduction

Many businesses buy customer relationship management software expecting it to produce loyal customers. Many are disappointed. Roberts and Zahay (2018) describe customer relationship management as an approach to marketing that uses data about each customer to build profitable, lasting relationships, an approach in which technology is a tool rather than the goal. This paper argues that customer relationship management succeeds only when it is built as a system that links strategy, processes, data and measurement, and that direct response principles, especially knowing which customers to serve and measuring every contact, hold the system together. The argument is illustrated with Northfield Garden Supply, a composite online retailer of seeds, plants and tools with about 85,000 customers, most of whom buy only in spring.

A Strategic Framework

Payne and Frow (2005) proposed a strategic framework for customer relationship management built around five cross-functional processes: strategy development, which defines the business and customer strategy; value creation, which determines the value the company gives customers and receives from them; multichannel integration, which coordinates the channels through which customers interact; information management, which collects and uses customer data; and performance assessment, which measures results. Their central point is that these processes must work together. A company that buys software for information management but has no customer strategy or performance measures has not built a relationship system at all.

For Northfield, the framework turns a vague goal, "use our customer data better," into five questions. Which customers does the company most want to keep? What value can it offer them beyond products? How will email, the website and customer service share information? What data will be collected and how will it be used? How will success be measured?

Value for the Customer, Not Only the Company

The value creation process asks what customers gain from the relationship, a question many retailers skip. For Northfield's customers, the most valuable things the company knows are not discounts but timing and advice: when to start seeds indoors in each region, when to plant out, how to protect seedlings from a late frost and which varieties suit a small yard. A relationship system that delivers this knowledge at the right moment, based on each customer's location and past purchases, gives customers a reason to open every email. Value for the company follows, since customers who succeed with their gardens come back for more.

Why Relationship Programs Fail

Boulding et al. (2005) reviewed what was known about customer relationship management and described several pitfalls. Among them were treating it as a technology project, failing to integrate it across the organization, and pursuing relationships that create value for the firm without creating value for customers. They also noted the dual creation of value: relationships last when both parties benefit.

These pitfalls are familiar to small retailers. Northfield's previous effort consisted of an email platform that sent the same weekly sale message to every subscriber. It had technology but no strategy, and it created value only for the company by pushing discounts. Customers responded by ignoring the emails, and many bought from Northfield only when a sale coincided with their planting season.

Which Processes Matter

Reinartz et al. (2004) measured how firms carried out customer relationship management across three stages of a relationship, initiation, maintenance and termination, and examined how these activities related to performance. They found that the implementation of relationship management processes was associated with better company performance, particularly through the maintenance stage, and that technology support helped mainly when it supported these processes rather than standing on its own.

The finding points Northfield toward the maintenance stage. The company acquires many new customers each spring through search and social media but does little to keep them through summer and into the next year. Maintenance activities, such as planting reminders, seasonal care advice and timely offers for fall bulbs, are where the system should begin.

Coordinating the Channels

Northfield's customers reach it through the website, email, a customer service phone line, social media and an annual printed catalog. At present, each channel works alone: a customer who calls about a failed plant order receives a cheerful promotional email the next day, and catalog recipients are not matched with their online purchases. Multichannel integration in the framework means that every channel draws on the same customer record. When a service representative records a problem, promotional emails to that customer should pause until it is resolved, and the catalog should go first to customers whose purchases suggest they will use it. Coordination of this kind prevents the contradictions that make customers feel unknown.

Loyalty Programs and Direct Mail

Verhoef (2003) studied an insurance company's customers to see how relationship marketing efforts affected two outcomes: whether customers stayed and how much of their business the company captured. He found that customers' affective commitment and a loyalty program offering economic incentives were positively associated with retention and with growth in customer share, and that direct mailings were associated with growth in customer share. Relationship efforts, in other words, do more than keep customers; they can deepen what customers buy.

Northfield can apply this in two ways. A simple rewards program, offering points on each purchase redeemable for seeds or tools, gives customers an economic reason to buy from Northfield rather than from a home improvement store. Targeted direct contacts, by email and a printed fall catalog to its best customers, can encourage those customers to buy categories they currently purchase elsewhere, such as bulbs, soil and tools.

Choosing Customers by Lifetime Value

A relationship system cannot treat every customer equally, because customers differ greatly in value. Venkatesan and Kumar (2004) developed a framework for measuring customer lifetime value and showed that selecting customers by lifetime value produced better results than selecting them by traditional measures such as past spending, and that lifetime value could guide how much marketing contact each customer should receive across channels.

For Northfield, this means estimating each customer's lifetime value from purchase history and allocating effort accordingly. A customer who buys vegetables, flowers and tools every year and has done so for five years deserves a phone call when a problem arises and early access to rare varieties. A one-time buyer of a houseplant deserves a friendly welcome series and a chance to become more valuable, but not the same investment. This is the direct response discipline of selecting whom to contact, applied to entire relationships.

The Role of Technology

Technology still matters; it simply comes last. Once Northfield has defined its strategy, the value it will offer, its channel coordination, its data needs and its measures, it can choose software that serves those decisions: an email platform that segments by purchase history, a customer database shared with customer service, and dashboards that track retention and lifetime value. Buying in this order avoids the most common pitfall the research describes. It also keeps costs in proportion: a retailer of Northfield's size does not need an enterprise platform, only tools that segment, automate a few key messages and report results clearly. As the system matures and the measures show which programs pay, the company can add capabilities with evidence that they will be used.

Data Quality and Information Management

Every targeting idea in this paper depends on records that are complete and connected. Northfield's records contain duplicate customers created when shoppers checked out as guests, missing ZIP codes that prevent regional advice, and no record of which emails each customer opened. Before launching new programs, the company should merge duplicate records, ask for a ZIP code at signup in exchange for planting calendars, and connect email engagement to the customer database. These unglamorous tasks determine whether the targeting described above is possible at all.

Measuring the System

A relationship system must prove its worth. Northfield will track how many first-year buyers order again within a year, how many product categories the average customer buys, revenue per customer in each lifetime value tier and the response to each automated message, with a control group withheld from each program. These measures follow from the performance assessment process in the strategic framework and from the direct response habit of counting every result.

A Biblical Perspective: Stewardship of What Is Entrusted

Jesus described a man who, before traveling, gave sums of money to three servants; when he came back he praised the two who had put the money to work and rebuked the one who had buried his share (English Standard Version Bible, 2001/2016, Matthew 25:14-30). Customer information is a trust as well. Customers give a business their names, addresses and purchase histories expecting it to be used to serve them. A business that buries that information in unused software wastes it, and one that exploits it betrays the trust. Faithful stewardship uses customer data carefully and productively for the customer's good, which is also, as the research suggests, the path to lasting relationships.

Conclusion

Customer relationship management is a system, not a product. The research shows that it begins with strategy and value for both parties, works through processes, especially the maintenance of existing relationships, uses loyalty incentives and direct contacts to deepen relationships, and allocates effort by customer lifetime value. For Northfield Garden Supply, five steps follow: define which customers matter most, decide what value to offer them, focus first on keeping first-year customers, launch a simple rewards program with targeted contacts, and measure every program against a control group. Technology then serves the system rather than substituting for it.

References

Boulding, W., Staelin, R., Ehret, M., & Johnston, W. J. (2005). A customer relationship management roadmap: What is known, potential pitfalls, and where to go. Journal of Marketing, 69(4), 155-166. https://doi.org/10.1509/jmkg.2005.69.4.155

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Payne, A., & Frow, P. (2005). A strategic framework for customer relationship management. Journal of Marketing, 69(4), 167-176. https://doi.org/10.1509/jmkg.2005.69.4.167

Reinartz, W., Krafft, M., & Hoyer, W. D. (2004). The customer relationship management process: Its measurement and impact on performance. Journal of Marketing Research, 41(3), 293-305. https://doi.org/10.1509/jmkr.41.3.293.35991

Roberts, M. L., & Zahay, D. (2018). Internet marketing: Integrating online and offline strategies (4th ed.). Cengage Learning.

Venkatesan, R., & Kumar, V. (2004). A customer lifetime value framework for customer selection and resource allocation strategy. Journal of Marketing, 68(4), 106-125. https://doi.org/10.1509/jmkg.68.4.106.42728

Verhoef, P. C. (2003). Understanding the effect of customer relationship management efforts on customer retention and customer share development. Journal of Marketing, 67(4), 30-45. https://doi.org/10.1509/jmkg.67.4.30.18685