Customer Relationship Management17/12/2022
Customer satisfaction has always been a key element in the pursuit of corporate goals and objectives. However, the current competitive environment fostered by liberalization and globalization of the economy and the rising customer expectations for quality, service and value have promoted many companies to organize their business around the customers they serve, rather than around the product lines or geographic business units.
Customer relationship management (CRM) first gained prominence in the early 1990s. It refers to the holistic approach that organizations can take to manage their relationships with their customers, including policies related to contact with customers, collecting, storing, analysing customer information, and the technology needed to perform these tasks.
According to Philip Kotler and Gary Armstrong, ‘CRM is concerned with managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty. It can also be defined as, ‘an alignment of strategy, processes and technology to manage customers, and all customer-facing departments and partners’. In short, CRM is about effectively and profitably managing customer relationships through the entire life cycle.
CRM helps in providing better service to the customers and developing effective customer relationships. CRM integrates everything that a company’s sales, services and marketing teams know about the individual customers to get a 360-degree view of the customer relationship.
The aim of CRM is to build customer equity; customer equity is the sum of lifetime values of all the customers. CRM analysts develop data warehouses and use data-mining techniques to develop and maintain long-lasting relationships with the valuable customers.
A data warehouse is a company-wide electronic database of detailed customer information. The purpose of data warehouse is not just to gather information but also to place it into a central location for easy access. Once the data warehouse locates the data at a central place, the data analysts use the data-mining techniques to examine the mounds of data to find out interesting facts about the customers.
Need and Importance of CRM
Better service to customers
CRM provides more avenues for customers to communicate and explain their needs to the organization through numerous contact points. Customers get increased satisfaction and a feeling of being special and important because of the increased personalization of services and customization of goods offered to them.
For example, ICICI Bank maintains a list of priority customers and provides them with additional facilities and special offers such as free tickets to concerts, movies, and so on. Some banks, such as Syrian Catholic Bank provide personalized services to their important customers.
Customization of market offerings
Companies can customize a product or service depending on the data available with the firm. The firm can facilitate customer-company interaction through the company contact centre and web site. Such interactions help develop customized products.
Reduction in the customer defection rate
CRM emphasizes on training and development of the employees to become more customer oriented. Due to CRM training and development, employees show care and concern towards the valuable customers; therefore, the customer defection rate may be reduced to a great extent.
Increase and improvement in long-term relationships
Some firms treat their customers as partners. Firms solicit the help of the customers to design new products or to improve their services. If the customer gets involved with the firm, they are more likely to remain with the firm.
Increase in customer equity
CRM increases customer equity. Firms focus the marketing efforts more on the most valuable customers (MVCs). The main aim of CRM is to produce high customer equity. Customer equity is the sum of lifetime values of all customers. More focus on MVCs will enable a firm to increase the customer equity.
The firms that adopt CRM get competitive advantage in the market. They can face the competition with much ease. Competitive advantage helps in generating higher returns on investment.
Building and maintaining corporate image
The image of the firm also gets enhanced. Loyal customers become evangelists. The evangelists spread a good word about the company and its products. This enables a firm to get additional customers to its fold.
Higher return on investment
Due to CRM, a company gains a position to generate higher returns on investment. This is because of the repeat purchases on the part of the loyal customers. The company also makes money through cross selling. The higher return on investment increases the shareholders’ value.
Techniques of Building CRM
Firms use a number of techniques to build, maintain and enhance CRM. The techniques include the software programmes, promotional techniques, pricing strategies, MVC programmes, and so on. Some of the techniques have been discussed in detail.
Data Warehousing and Data Mining
CRM analysts develop data warehouses and use data-mining techniques to develop and maintain long- lasting relationships with the valuable customers.
(i) A data warehouse is a company-wide electronic database of detailed customer information. The purpose of data warehouse is not just to gather information, but to place it into a central location for easy access.
(ii) Once the data warehouse locates the data at a central place, the data analysts use data mining techniques to examine the mounds of data to find out interesting facts of the customers.
The mined data can be utilized for various marketing decisions such as the following:
- Product design and modification
- Product pricing
- Promotion mix
- Selection of channels of distribution
- Maintaining dealer relationships
Some firms adopt one-to-one marketing strategy. Such firms treat their customers as partners, especially in the case of B2B markets firms solicit the help of customers to design new products or to improve their services. If the customer gets involved with the firm, then they are more likely to remain with the firm.
Firms may use variety of loyalty programmes to retain customers. For example, airlines may offer special discount for frequent fliers. Firms may also provide gifts and other benefits to the loyal customers. But it is to be noted that all loyal customers need not be profitable, and all profitable customers need not be loyal.
Therefore, the firm must be selective. In order to enhance marketing efficiency, a firm has to find out which of its customers are worth retaining and which are not, and which customers should be given extra care and attention. In other words, the firm has to determine the value of its customers, and focus on MVCs accordingly.
Priority Customer Programmes
Some firms introduce priority customer programmes. The priority customers are the MVCs. They are given priority in after-sales service, delivery and resolving complaints. The priority customer programmes are followed by several organizations, especially in the banking industry.
For example, Citibank maintains a list of priority customers and provides them with additional facilities special offers such as free ticket to concerts, movies, and so on. Some banks, such as Syrian Catholic Hank provide personalized services to the important customers.
Evolution panned out in the last few decades: