CRM Theory
“The customer is always right” is a phrase often heard but not fully understood. CRM, or customer relationship management, is that branch of management that centers on elaborating the term and putting its associated principles to work. CRM allows an organization to forge new relationships, and better manage existing relationships, with customers, dealers, distributors, suppliers and others. According to Roger Joseph Baran and Daniel P. Strunk in the book “Principles of Customer Relationship Management,” CRM is about effectively managing the customer experience.
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Principles
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CRM theory recognizes the economics of customers and the benefits gained by increasing their contact with businesses. Acquiring new customers is expensive and typically results in huge losses for a company. CRM theory, therefore, focuses on honing its existing relationships and improving retention rates for long-term profitability. According to Paul R. Gamble, Alan Tapp, Anthony Marsella and Merlin Stone in the book “Marketing Revolution,” it is cheaper to service existing customers than focus on acquiring new ones. CRM theory focuses its profitability strategy on customers, not product.
Objectives
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The objectives of CRM include identifying customer needs (latent and current), increasing satisfaction and value, increasing usage of current services and products, increasing campaign management and referrals and retaining customers or winning back lost customers.
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Purpose
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CRM is a management tool that allows businesses to segment customers, target appropriate segments and determine where to deploy their efforts in relationship-based marketing and selling. CRM is also a way to help customers gain maximum advantage from an organization.
Steps
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According to D. Peppers and M. Rogers in an article titled “Is Your Company Ready for One-to-One Marketing?” there are four basic steps in CRM: identification, differentiation, interaction and customization:
Identification requires companies to identify their customers, increase their knowledge base on them with details on demographics, preferences, habits and psychographics.
Differentiation allows companies to distinguish between individual customers or groups of customers (for example, least and most profitable).
Interaction includes process and system automations that enable company representatives to interact with their customers in cost-effective ways.
Customization is the tailoring of company's offerings based on individual customer needs.
Benefits
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According to CRM theory, the benefits gained from CRM include improving the satisfaction and retention level of customers, improving customer insight and improving revenue growth. CRM systems allow organizations to reduce waste in their marketing and communication efforts. It allows them to focus their profit-making strategies on the most profitable segments of customers and eliminate or reduce expenditures on unprofitable segments or customers.
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References
- Photo Credit customer service image by Kurhan from Fotolia.com
