Integrating customer relationship management and supply chain management 497
fewer stock-outs and higher stock-turns, which
has encouraged them to devote more shelf
space to those products. In the first year of this
partnership between Wal-Mart and Procter &
Gamble, it was reported that Procter & Gam-
ble’s business with Wal-Mart grew by $200
million, or 40 per cent.
The integration of logistics and the related
CRM information flows both upstream and
downstream in the marketing channel has
come to be known as supply chain manage-
ment. It reflects an understanding that manag-
ing the interfaces between organizations is just
as important as managing processes within the
organizations themselves. It is at the interfaces
that inventories are created, delays occur and
service failures are most typically encountered.
In many markets there is an observable correla-
tion between successful companies and the
extent to which they seek to manage the supply
chain as an ‘end-to-end’ system. These com-
panies understand that supply chains compete
- not individual companies.
CRM and SCM: their role in improving customer service
Much of the recent focus on customer service has
been towards what might be termed ‘the people
dimension’. It is often not difficult for com-
petitors to imitate technologies, product fea-
tures, emotional appeals and conventional
marketing strategies. What they cannot imitate is
the inherent corporate culture, shared values
and knowledge management which distinguish
the customer service-oriented business. Thus, a
crucial element of the new paradigm of market-
ing is the focus upon developing attitudes and
beliefs within the company that create a ‘climate’
in which customer satisfaction is the raison d’ˆetre
of the organization. However, whilst it is clearly
paramount that every business has motivated
employees who share common values about the
importance of customer satisfaction, it is also
essential to have in place the systems that can
ensure the consistent reliable ‘delivery’ of the
service package. Thus, both CRM and SCM
systems must themselves be capable of provid-
ing the flexible response that individual custom-
ers require if they are to be a true source of
differentiation. The idea is to create enduring
relationships with customers not just through
superior products, but also through superior
service. This twin focus on total quality and
service as a source of customer satisfaction has
come to be called ‘relationship marketing’
(Christopheret al., 2002).
The impact of customer service and total
quality improvement can be enduring, leading
to longer-term relationships with customers,
improved retention rates and, hence, greater
profitability. The connection between SCM per-
formance, CRM and profitability is summ-
arized in Figure 19.7.
The proposition, and one that is supported
by a growing body of evidence, is that superior
service helps build relationships with custom-
ers, which then leads to improved rates of
customer retention. The work of Reichheld and
Sasser (1990) and others has highlighted the
impact that customer retention has on profita-
bility. The first critical finding emerging from
these studies is that the longer customers stay
with us, the more profitable they become.
When this relationship is linked to the customer
retention rate, a powerful profit multiplier
emerges. The logic is quite simple: Customer retention relates directly to the
average ‘life’ of a customer, e.g. a 90 per centFigure 19.7 SCM and CRM: the linkages