Conceptual Foundations of Customer Relationship Management

24/09/2022 1 By indiafreenotes

Customer relationship management (CRM) is a process in which a business or other organization administers its interactions with customers, typically using data analysis to study large amounts of information.

CRM systems compile data from a range of different communication channels, including a company’s website, telephone, email, live chat, marketing materials and more recently, social media. They allow businesses to learn more about their target audiences and how to best cater for their needs, thus retaining customers and driving sales growth. CRM may be used with past, present or potential customers. The concepts, procedures, and rules that a corporation follows when communicating with its consumers are referred to as CRM. This complete connection covers direct contact with customers, such as sales and service-related operations, forecasting, and the analysis of consumer patterns and behaviors, from the perspective of the company.

Theory by Industrial Marketing and Purchasing Group (IMP Group)

This Europe-based research initiative in Industrial Marketing focuses on B2B relationships and states the following characteristics:

  • Buyers and sellers both actively participate in the transaction to find solutions to their respective challenges.
  • Buyer-seller relationships are normally long-term and close.
  • Relationships are composed of interpersonal bond, connections among businesses, and strengths or weaknesses of the business.
  • The transactions often occur with respect to relationship’s history.
  • The businesses chose the mode and the manner of interaction with the entities at various levels of importance.

Theory by Nordic School

A Scandinavian services marketing group, named The Nordic School, emphasizes on supplier-customer relationship. It identifies the triplet of relationship marketing as:

  • Interaction: As customers and suppliers interact, each one provides a service to another. Customer provides information and supplier provides solution.
  • Dialogue: Communication is bilateral and is essential for the survival of the relationship.
  • Value: The business needs to generate something that is perceived as value to the customer.

Theory by Anglo-Australian School

It states that relationships are important not only from the viewpoint of customers but also from the angle of stakeholders of the business such as employees, suppliers, and government. It also found out that customer’s satisfaction and customer retention are value drivers of any business.

Theory by North American School

According to this theory, good relationships reduce costs significantly. Trust and commitment are vital attributes of a successful relationship. By connecting the trust to the commitment, this theory states that trust created on the basis of minimal functional conflicts, communication, non-opportunistic behavior, and cooperation. Commitment is linked to high relationship termination cost and relationship benefits.

Theory by (Guanxi) Asian School

This theory is based upon the teachings of Lord Buddha regarding social conducts and acts of reciprocation. This theory states that people from a family, friendship, same-clan fellowship are connected to each other due to informal social relationships which impose them to follow reciprocal obligations to acquire the resources by exchanging favors and cooperation.

Customer benefits

With Customer relationship management systems, customers are served better on the day-to-day process. With more reliable information, their demand for self-service from companies will decrease. If there is less need to interact with the company for different problems, customer satisfaction level increases. These central benefits of CRM will be connected hypothetically to the three kinds of equity that are relationship, value, and brand, and in the end to customer equity. Eight benefits were recognized to provide value drivers.

  • Enhanced ability to target profitable customers.
  • Integrated assistance across channels.
  • Enhanced sales force efficiency and effectiveness.
  • Improved pricing.
  • Customized products and services.
  • Improved customer service efficiency and effectiveness.
  • Individualized marketing messages are also called campaigns.
  • Connect customers and all channels on a single platform.


The main components of CRM are building and managing customer relationships through marketing, observing relationships as they mature through distinct phases, managing these relationships at each stage and recognizing that the distribution of the value of a relationship to the firm is not homogeneous. When building and managing customer relationships through marketing, firms might benefit from using a variety of tools to help organizational design, incentive schemes, customer structures, and more to optimize the reach of their marketing campaigns. Through the acknowledgment of the distinct phases of CRM, businesses will be able to benefit from seeing the interaction of multiple relationships as connected transactions. The final factor of CRM highlights the importance of CRM through accounting for the profitability of customer relationships. Through studying the particular spending habits of customers, a firm may be able to dedicate different resources and amounts of attention to different types of consumers.

Relational Intelligence, which is the awareness of the variety of relationships a customer can have with a firm and the ability of the firm to reinforce or change those connections, is an important component to the main phases of CRM. Companies may be good at capturing demographic data, such as gender, age, income, and education, and connecting them with purchasing information to categorize customers into profitability tiers, but this is only a firm’s industrial view of customer relationships. A lack in relational intelligence is a sign that firms still see customers as resources that can be used for up-sell or cross-sell opportunities, rather than people looking for interesting and personalized interactions.

CRM systems include:

  • Data warehouse technology, used to aggregate transaction information, to merge the information with CRM products, and to provide key performance indicators.
  • Opportunity management which helps the company to manage unpredictable growth and demand, and implement a good forecasting model to integrate sales history with sales projections.
  • CRM systems that track and measure marketing campaigns over multiple networks, tracking customer analysis by customer clicks and sales.
  • Some CRM software is available as a software as a service (SaaS), delivered via the internet and accessed via a web browser instead of being installed on a local computer. Businesses using the software do not purchase it, but typically pay a recurring subscription fee to the software vendor.
  • For small businesses a CRM system may consist of a contact management system that integrates emails, documents, jobs, faxes, and scheduling for individual accounts. CRM systems available for specific markets (legal, finance) frequently focus on event management and relationship tracking as opposed to financial return on investment (ROI).
  • CRM systems for eCommerce, focused on marketing automation tasks, like cart rescue, re-engage users with email, personalization.
  • Customer-centric relationship management (CCRM) is a nascent sub-discipline that focuses on customer preferences instead of customer leverage. CCRM aims to add value by engaging customers in individual, interactive relationships.
  • Systems for non-profit and membership-based organizations help track constituents, fundraising, sponsors’ demographics, membership levels, membership directories, volunteering and communication with individuals.
  • CRM not only indicates to technology and strategy but also indicates to an integrated approach which includes employees knowledge, organizational culture to embrace the CRM philosophy.