Customer retention has always been a high priority in business-to-business markets, and it is now at the center of the strategy dialogue in most markets. Customer relationships are seen as among the most valuable and durable of all advantages. Most firms have started, or will start, a major customer relationship management initiative to achieve:
However, for many firms, this initiative will be purely defensive, and will not result in advantages. In addition, as firms diffuse best practices, and vendors make relevant software widely available and economical, all competitors will be equally equipped. Most importantly, the organizational capability to provide a personalized experience for each customer is more difficult to achieve than a transactional or product-focused approach. In fact, few firms will master it.
What factors distinguish firms that are more capable than their rivals? How do firms achieve an alignment that enables them to successfully execute customer relationship management? What actions can strengthen the customer-relating capability?
Achieving a Relationship Advantage
In this paper, author Day provides a framework for addressing these issues. He uses a resource-based view that differences in firm performance are attributable to differences in assets and capabilities. Like all capabilities, he suggests, the customer-relating capability is embedded in a web of other capabilities and resources, and exercised through a complex knowledge acquisition, sharing, and application process.
These include three closely coupled components:
Each of these components plays an essential role—but none is a sufficient condition for success. To gain an advantage a firm must be as good or better than the best of the rivals on each component, and there has to be a positive interaction among the components.
Implications for Action
This model of a superior customer-relating capability raises a series of questions for managers:
George S. Day is Geoffrey T. Boisi Professor, Professor of Marketing, and Director of the Huntsman Center for Global Competition and Innovation at the Wharton School, University of Pennsylvania.Featured in Insights from MSI.
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