Customer Relationship Management (CRM)

Customer Relationship management (CRM) is a term that refers to practices, strategies and technologies that companies use to manage and analyze customer interactions and data throughout the customer lifecycle, with the goal of improving business relationships with customers, assisting in customer retention and driving sales growth. CRM systems are designed to compile information on customers across different channels - or points of contact between the customer and the company - which could include the company's website, telephone, live chat, direct mail, marketing materials and social media. CRM systems can also give customer-facing staff detailed information on customers' personal information, purchase history, buying preferences and concerns.[1]

Phases of Customer Relationship Management[2]
Efficient Customer Relationship Management consists of four different phases. First is about the identification of profitable and unprofitable groups through customer value analysis. Second it involves winning a target customer who has been identified through the analysis. Third, it involves developing ties with the target customer. Fourth, a relationship developed with profitable target customers and efforts made to expand consumer spending. In the established consumer goods market, customer retention is regarded as the core of customer relationship management.

Customer Relationship Management
source: Kracklauer, Alexander H., Mills, D. Quinn, Seifert, Dirk (Eds.)

Types of Customer Relationship Management (CRM)[3]

  • Operational CRM: The primary goal of customer relationship management systems is to integrate and automate sales, marketing, and customer support. Therefore, these systems typically have a dashboard that gives an overall view of the three functions on a single page for each customer that a company may have. The dashboard may provide client information, past sales, previous marketing efforts, and more, summarizing all of the relationships between the customer and the firm. Operational CRM is made up of 3 main components: sales force automation, marketing automation, and service automation.
  • Analytical CRM: The role of analytical CRM systems is to analyze customer data collected through multiple sources, and present it so that business managers can make more informed decisions. Analytical CRM systems use techniques such as data mining, correlation, and pattern recognition to analyze the customer data. These analytics help improve customer service by finding small problems which can be solved, perhaps, by marketing to different parts of a consumer audience differently.For example, through the analysis of a customer base's buying behavior, a company might see that this customer base has not been buying a lot of products recently. After scanning through this data, the company might think to market to this subset of consumers differently, in order to best communicate how this company's products might benefit this group specifically.
  • Collaborative CRM: The third primary aim of CRM systems is to incorporate external stakeholders such as suppliers, vendors, and distributors, and share customer information across organizations. For example, feedback can be collected from technical support call, which could help provide direction for marketing products and services to that particular customer in the future.

Customer Relationship Management (CRM) Models[4]
There are number of CRM models that have been developed to learn how to manage customers. CRM models are helpful to understand and regulate the modern concept of CRM.

  • IDIC Model: The IDIC model was developed by Peppers and Rogers. This model suggests that companies should take four actions in order to building, keeping and retaining the long term one-to-one relationships with customers.
    • Identify
    • Differentiate (value, need)
    • Interaction
    • Customize
  • QCI Model: The QCI model is also a product of a consultancy firm. The model’s authors prefer to describe their model as a customer management model, omitting the word ‘relationship’. At the heart of the model they depict a series of activities that companies need to perform in order to acquire and retain customers. The model features people performing processes and using technology to assist in those activities. This model includes the series of activities related with employees, people and organization and technology as well. According to this model, relationships process with external environment. Because when customer wants to start selling process or wants to interact with organization, external environment directly affects the customer experience. External environment also affects the planning process of the organizations.
  • CRM Value Chain Model: The CRM value chain is a established model which businesses can easily follow when they developing and implementing their CRM strategies. It has been five years in development and has been piloted in a number of business-to-business and business-to-consumer settings, with both large companies and SMEs: IT, software, telecoms, financial services, retail, media, manufacturing, and construction. The model is based on strong theoretical principles and the practical requirements of business. The ultimate purpose of the CRM value chain process is to ensure that the company builds long-term mutually-valued relationships with its strategically-significant customers. Not all customers are strategically significant. Indeed some customers are simply too expensive to acquire and service. They buy little and infrequently; they pay late or default; they make extraordinary demands on customer service and sales resources; they demand expensive, short-run, customized output; and then they defect to competitors. These are called strategically-insignificant customers.

Benefits of Customer Relationship Management (CRM)[5]

  • Efficiency: A well-implemented CRM system can replace manual processes that create significant organizational inefficiencies. But CRM systems don't just create efficiency by reducing the use of inefficient processes.Thanks to the ability of popular CRM platforms to integrate with other systems, such as marketing automation tools, the efficiencies of CRM can enable companies to interact with customers in ways that they wouldn't have the resources to otherwise.
  • Collaboration: CRM systems give companies the ability to move away from tools, like spreadsheets, that appear to be entirely functional but fall short in a variety of areas.One of the biggest: collaboration. In even small organizations, the entire customer lifecyle is typically too complex to be managed effectively by one person. The use of cloud-based CRM platforms allows for employees in multiple departments to more effectively manage their customer relationships and to see the big picture at any time.
  • Data, data, data: For many organizations, data is one of the most valuable strategic assets, and CRM systems house some of the most valuable data. Of course, data in and of itself is often of limited practical use; its real value comes from data analysis and visualization tools. Here, popular CRM platforms typically offer a variety of homegrown and third party tools that enable companies to understand their CRM data and learn things about their customers that wouldn't be possible otherwise.
  • Increased accountability: When companies lack the tools to manage their customer relationships, customers are bound to fall through the cracks. CRM systems can help ensure that this doesn't happen by adding a layer of accountability to the customer relationship management process. A well-implemented CRM system helps employees across departments understand their responsibilities to customers throughout the customer lifecycle and when those responsibilities aren't met, it's easy to identify what went wrong, where, who fell short and how to make sure it doesn't happen again.
  • Improved customer experience: Ultimately, for all of the benefits CRM systems provide to the companies that use them, the biggest benefit of CRM systems is that their use leads to a better overall customer experience. Customers are more easily and accurately segmented, their needs identified, and because the status of a company's relationship with them is accurately tracked, companies can interact with them meaningfully at the right times, leading to more sales, faster sales and higher customer retention and satisfaction.

CRM Paradox[6]
Part of the paradox with CRM stems from the challenge of determining exactly what CRM is and what it can do for a company. The CRM Paradox, also referred to as the "Dark side of CRM," may entail favoritism and differential treatment of some customers. This may cause perceptions of unfairness among other customers' buyers. They may opt out of relationships, spread negative information, or engage in misbehavior that may damage the firm and its reputation. Such perceived inequality may cause dissatisfaction, mistrust and result in unfair practices. A customer shows trust when he or she engages in a relationship with a firm under the idea that the firm is acting fairly and adding value to his or her life somehow. However, customers may not trust that firms will be fair in splitting the value of their products or services. For example, Amazon's test use of dynamic pricing (different prices for different customers) ended with very poor public relations for the company. As seen in the Amazon example, although firms use both human and technological factors to assess a proper CRM process, experts suggest that focusing on the human factors, like management, increases the potential of successful CRM, since managers can make a coordinated effort on organizational changes within a company, which often affects customer satisfaction. CRM technologies can easily become ineffective if there is no proper management, and they are not implemented correctly. The data sets must also be connected, distributed, and organized properly, so that the users can access the information that they need quickly and easily. Research studies also show that customers are increasingly becoming dissatisfied with contact center experiences due to lags and wait times. They also request and demand multiple channels of communications with a company, and these channels must transfer information seamlessly. Therefore, it is increasingly important for companies to deliver a cross-channel customer experience that can be both consistent as well as reliable.

In Customer Relationship Management (CRM), IT-enabled customer support services can transform how businesses interact with their customers. Information Technology Enabled Services (ITeS) solutions offer advanced tools for managing customer interactions, providing analytics, personalizing customer service, and enhancing customer satisfaction and loyalty.

See Also

Customer Relationship Management (CRM) is a strategy for managing an organization's relationships and interactions with current and potential customers. It uses data analysis about customers' history with a company to improve business relationships, specifically focusing on customer retention and ultimately driving sales growth. A CRM system helps companies stay connected to customers, streamline processes, and improve profitability. By integrating technology to organize, automate, and synchronize sales, marketing, customer service, and technical support, CRM systems provide comprehensive insights into customer interactions, preferences, and feedback.

  • Sales Force Automation (SFA): Discussing technologies that automate business tasks such as inventory control, sales processing, and tracking of customer interactions, as well as analyzing sales forecasts and performance.
  • Marketing Automation: Covering the software platforms and technologies designed for marketing departments and organizations to more effectively market on multiple channels online (such as email, social media, websites, etc.) and automate repetitive tasks.
  • Customer Data Platform (CDP): Explaining a marketer-based management system that creates a persistent, unified customer database accessible to other systems. Data is pulled from multiple sources, cleaned, and combined to create a single customer profile.
  • Customer Experience (CX): Discussing the product of an interaction between an organization and a customer over the duration of their relationship. This includes the customer’s attraction, awareness, discovery, cultivation, advocacy, purchases, and service.
  • Customer Support: Covering the range of services provided by a business to assist customers in making cost-effective and correct use of a product, including assistance in planning, installation, training, troubleshooting, maintenance, upgrading, and disposal of a product.
  • Social CRM: Explaining the integration of social media channels into CRM platforms. This strategy combines the engagement of customers through social media with the efficiencies of CRM tools.
  • Customer Segmentation: Discussing the process of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests, spending habits, and so on.
  • Big Data and Analytics in CRM: Covering how CRM systems leverage big data and analytics to provide insights into customer behavior, improving decision-making in marketing, sales, and service strategies.
  • Cloud Computing in CRM: Discussing the delivery of CRM services over the internet. Cloud-based CRM often offers cost-efficiency, scalability, and accessibility advantages over on-premises solutions.
  • Omnichannel Strategy: Explaining a multi-channel approach to sales that seeks to provide customers with a seamless shopping experience, whether they are shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.
  • Lead Management: Covering the process of acquiring and managing leads (potential customers) until the point where they make a purchase. This process includes capturing the lead, tracking their activities and behavior, qualifying them, giving them constant attention to make them sales-ready, and then passing them on to the sales team.
  • Loyalty Management: Discussing strategies, processes, and technologies that companies use to identify, reward, and retain their most loyal and profitable customers.
  • Five Forces CRM Model
  • Strategic CRM


Further Reading