Customer Relationship Management

Customer Relationship Management CRM Meaning, Definition, Roles, Process

Table of Content:-

  1. Customer Relationship Management Meaning 
  2. Customer Relationship Management Definition 
  3. CRM Definition 
  4. Components of Customer Relationship Management
  5. Advantages of Customer Relationship Management
  6. Disadvantages of Customer Relationship Management 
  7. Customer Relationship Management Roles 
  8. Customer Relationship Management Process

Customer Relationship Management (CRM) is a multifaceted process, mediated by a set of information technologies that focuses on creating two-way exchanges with customers so that companies have an intimate knowledge of their needs, wants, and buying patterns. 

Customer Relationship Management Meaning (CRM) 

CRM Meaning: Customer Relationship Management can be defined as a business philosophy and set of strategies, programs, and systems that focus on identifying and building loyalty with a marketer’s profitable customers. 

It is based on the business philosophy that all customers are not profitable in the same way and marketers can boost their profitability by building relationships with their customers. The purpose is to develop a base of loyal customers who patronise the retailer frequently.

Customer Relationship Management Definition 

According to Gartner, “CRM is a business strategy designed to optimise profitability, revenue, and customer satisfaction“.

According to PWC Consulting, “CRM is a business strategy that aims to understand/appreciate, manage and personalise the needs of an organisation’s current and potential customers”.

CRM Definition 

According to Parvatiyar and Sheth, “CRM is a competitive strategy and process of acquiring, reacting and partnering with selective customers to create superior value for the company and the customer”.

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Components of Customer Relationship Management

CRM consists of three different definitional components in its architectural structure and these components are given below: 

1) Customer: The customer is the only source of the company’s present profit and future growth. Information. technologies can provide the ability to distinguish and manage customers.

2) Relationship: The relationship between an organisation and its customers involves continuous bi-directional communication and interaction. The relationship can be short-term/long-term, continuous/discrete, and repeating or one-time.

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3) Management: CRM is not only activity within a marketing department rather it involves continuous adaptation to corporate culture and processes. CRM required a comprehensive change in the functioning of the organisation and the attitude of its people.

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CRM is quite a new phenomenon in the marketing industry. The philosophy of Information Technology enabled Relationship Marketing forms the basis of Customer relationship management and accelerates its need in the current marketing world as it uses a variety of tools like MIS, Data warehouses, Spreadsheets, MS access, Telephones, E-mail, Mail, SMS, Fax, Loyalty Cards, ATM’s, etc. To compile and process the mountains of customer data to facilitate analysis and refine customer service practices to increase customer brand loyalty and ensure a prosperous business.

Process of Relationship Management + IT=CRM

Thus we can obviously say that CRM in itself is the use of IT techniques in managing relationships with customers.

Advantages of Customer Relationship Management (CRM)

The key benefits of CRM processes in marketing practices are given below:

Advantages of CRM

  1. Increase In Sales Revenues and Reduced Sales Cost 
  2. Lower Costs of Recruiting Customers
  3. Evaluation of Customer Profitability
  4. Customer Knowledge
  5. Positive Referral Creation
  6. Opportunity to Cross-Sell and Up-Sell
  7. Increased Customer Satisfaction
  8. Increased Customer Retention and Brand Loyalty
  9. Excellent Customer Service
  10. Customisation
  11. Reduced Costs through Customer Self-Service
  12. Decreased General Sales and Marketing Administrative Costs
Advantages of CRM

1) Increased Sales Revenues and reduced Cost of Sales: Increased sales result from spending more time with buyers, which results from spending less time chasing needed information. Reduced costs, because the correct things are being done. A strong point in customer relationship management is that it is making customers a partner in the business, not only a subject. 

2) Increased Customer Satisfaction: CRM Increases customer satisfaction because they are getting exactly what they want. The customer feels that he is more “part of the team” rather than just a subject for sales and customer service is better, his needs are anticipated. There is no doubt that customer satisfaction will grow. 

3) Lower Costs of Recruiting Employees: CRM ensures savings on marketing,  contact, mailing, fulfilment, services, follow-up, and so on. In the presence of CRM, there is no need to recruit so many employees to maintain a steady volume of business (especially in business-to-business marketing environments). 

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4) Increased Customer Retention and Loyalty: Customers stay longer, buy more, contact for their requirements (which increases the bonding relationship), and customers buy more often. CRM, therefore, increases the accomplishment and opportunity of real lifetime value. A better-served and delighted customer slowly becomes loyal.

5) Evaluation of Customer Profitability: Knowing which customers are truly profitable, which customers should be changed from no/low profit through up-selling/cross-selling; which customers may not ever become profitable; which customers should be managed by external factors; and which customers drive forthcoming business. 

6) Excellent Customer Service: CRM manages to drive customer interaction onward. CRM is an approach to customers that looks at primarily strengthening the relationship. Customer loyalty is a natural by-product as CRM provides better fidelity with customers. It helps them to create and retain faithful customers. CRM gives the consumer an incentive to remain loyal and increase his purchases over a lifetime.

7) Customer Knowledge: It makes possible a shared knowledge base that is readily accessible to all employees within the organization. It enables a company to primarily look into the stored data and provide accurate information to employees about customers. It helps the organisation to make informed and right decisions.

8) Customisation: CRM delivers customised solutions that are specifically built for the small and medium industry market and that are not complex. Ease of integration with other business procedures is the keyword of CRM. 

CRM provide for customisation and the capability to change to business needs. Configuration with ease using interfaces and workflow procedures becomes possible contributing to increased ease in customisation.

9) Positive Referral Creation: A satisfied customer continually spreads positive things about the company. Such a positive opinion proves to be more reliable and authentic than companies’ propaganda, including advertisement and hence brings in more customers.

10) Reduced Costs through Customer Self-Service: The majority of calls placed to customer service representatives are made to ask a short and predictable list of questions. User profiles let companies anticipate customer support needs and prepare answers automatically. 

11) Opportunity to Cross-Sell and Up-Sell: A satisfied customer is expected to come back to the same organisation to repeat the purchase. In case of any cross-sell and up-sell, he comes back to the same organisation and with no extra expenditure, the company can get him more products.

12) Decreased General Sales and Marketing Administrative Costs: This decrease occurs since the company has specified its target segment customers, it knows their needs better, and thus it is not wasting time and money, for example, on mailing information to all customers in all existing and potential target segments.

Disadvantages of Customer Relationship Management (CRM)

Like all other things, CRM also has a few flaws that they need to overcome. The major disadvantages that stop CRM from becoming a perfect tool for any business are given below:

Disadvantages of CRM

  1. Requires Top-Management Support
  2. Confusion in Attributes
  3. Building Relationship
  4. Problem in Implementation
  5. Not Functionally Organised
  6. Customer Dissatisfaction
  7. Front Line Staff
Disadvantages of CRM

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1) Requires Top-Management Support: If top management still needs convincing that (the honest) CRM is necessary to make the life of both the company and the customer more accessible, then no amount of lobbying will do. Without the support of top management, CRM can not be successfully deployed.

2) Confusion in Attributes: Generally, the reason for the barrier is because, most organisations that employ CRM, experience a lot of confusion about its attributes and what it is. Some people would define it as a business strategy while other people view it as something to do with technology. 

3) Problem in Implementation: There is a significant problem in Implementation. One of the actual purposes of CRM (customer relationship management) has always been to develop a technique that will help organisations improve customer satisfaction, customer retention and customer loyalty.

4) Building Relationships: The other major barrier is building relationships. When a marketer fails to contact its customers repeatedly, no relationship is built. As a result, the customer has no reason to be loyal to the company. 

Most companies are unintentionally committing the above mistakes, but in this day and age when the customers have many options, it is a violation of all ten commandments of business, not to mention CRM, to ignore customers and not try to show appreciation and care to keep customers loyal.

5) Not Functionally Organised: Many organisations are still not functionally organised.

6) Customer Dissatisfaction: Although many businesses have implemented CRM to focus on customers, several clients are still dissatisfied with its execution.

7) Front Line Staff: Training to the front line support staff is still not customer-centric. It is still a major challenge for many firms to train their frontline staff well enough so that they can implement CRM in the same way as it is desired. 

Customer Relationship Management Roles (CRM)

1) Handling the Customer Issue: It helps the management and customer service staff to deal with customer concerns and issues. CRM involves collecting a lot of data about the customer. The data is then used to facilitate customer service transactions by making the information readily available to those dealing with the customers. This results in a more profitable business, more satisfied customers, and more resources available to the support staff.

2) Knowing the Future Course of Action: Customer relationship management systems are a great help to the management in deciding on the future course of the company. CRM provides various types of data including the customer name, address, date of transactions, pending and finished transactions, issues and complaints, the status of an order, shipping and fulfilment dates, account information, demographic data and many more. This information helps the company to decide the future course of action.

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3) Helping Top Management in Decision-Making: CRM systems are also important to the top management because it provides crucial data like customer satisfaction and efficiency of service by the frontline crews. A piece of customer relationship management software will also be able to generate the required reports for product development or new concepts. Furthermore, this system will also be helpful for the top management in deciding the company’s future course of action, whether it involves phasing out one of the products on the shelves or making product modifications.

4) Helping in the Expansion of Business: A CRM system will also help an organisation in expanding its business. As CRM systems are capable of handling enormous amounts of data, they help them in handling increased numbers of customers and data. With the CRM system and its proper utilisation, one can be sure that all data is available and used to run the business successfully.

5) Helping Companies in Attracting and Retaining Customers: A CRM system is not only used to deal with existing customers but is also useful in acquiring new customers. The process starts firstly with identifying the customers and maintaining all the corresponding details in the CRM system which is also called an ‘opportunity of business.’ CRM helps an organisation connect and build relationships with the customer. With the help of this relationship, they attract new customers and try to create loyalty in existing customers which could, in turn, provide a broad customer base, which ultimately helps in profit maximisation.

6) Helping in Reducing Cost: The strongest aspect of customer relationship management is that it is very cost-effective. The benefit of a decently implemented CRM system is that there is very less need for paper and manual work which needs lesser resources to deal with and lesser staff to manage. The technologies used in implementing a CRM system are also very inexpensive and smooth as compared to the traditional way of business.

7) Providing Feedback and New Information on Competitors: For any profitable organisation, it is very much compulsory to have feedback, to know how well they are performing in the market and CRM helps an organisation in getting feedback from their customers. Simultaneously it also provides new and vital information about the competitors which helps a company to compete in the market.

Customer Relationship Management

Customer Relationship Management Process (CRM)

The customer relationship management process can be divided into the following areas in the form of a cycle as shown in the figure. The entire CRM cycle of customers is exhibited in the figure which accounts for retaining profitable customers for the business firm.

Process of CRM
Figure: Process of customer relationship management – CRM

1) Acquisition: Customer acquisition is a vital stage in building customer relationships. For this purpose, an organisation should focus on the following as its major sources for providing input for customer acquisition. The acquisition process comprises five stages enquiry, interaction, exchange, coordination, and adoption.

Each one of the above stages assumes an important role in the acquisition process. In the enquiry stage, the prospective buyer undertakes a detailed enquiry about several aspects of the organisation, product, nature of the transaction and all other related aspects. 

The terms of exchange, mode of delivery and other things related to the exchange are settled at the exchange stage. A further coordinated effort on either side would lead the customers to move towards the adoption of the product or service concerned, and that completes the acquisition process.

2) Customer Interaction Management (CIM): Interaction plays a leading role in building customer relationships. CIM comprises customer relationship technologies with additions of technology-based interactive solutions. The interactive channels that are presently available enable very effective customer interactive communications, which lead to CIM, which further leads to relationship building.

Given technology growth, interaction management is facilitated by communication in terms of media, message, speed, accuracy, distance, content, reach, repetition, etc.

CIM can assume the following routes:

i) Online Routes: E-mails, web communities, chat rooms. 

ii) Offline Routes: Telephone, fax, mail, interactive television network.

iii) Outsourcing: It can also be got done by a third party that specialises in CIM.

Customer Interaction Management/Customer Development helps organisations execute effective and efficient interactions with their customers and prospects. These interactions must be tailored and consistent to the customer needs, based on the segment of the customer, the service required and the used channel.

3) Customer Retention: The focus of the organisation is more on customer retention than simply on customer acquisition. Customer retention is the process of keeping customers in the customer inventory for an unending time by meeting their needs and exceeding their expectations of the customers. It is an approach to converting a casual customer into a loyal and committed customer.

Customer retention is imperative in modern business – a strategy whose purpose is to keep the customers of the company and to retain their revenue contribution. Customer Retention is the activity that a selling organisation undertakes to reduce customer defections. Successful customer retention starts with the first contact an organisation has with a customer and continues throughout the complete lifetime of a relationship. 

Customer retention is more than giving the customer what they expect; it’s about exceeding their expectations so that they become loyal advocates for the brands. Creating customer loyalty puts “customer value rather than maximising profits and shareholder value at the centre of business strategy

4) Attrition: It is a process of gradually weaving down. At this stage, customers question the benefits they would accrue from this continued relationship with the company in question. Attrition may lead to defection if not arrested at an earlier stage. Therefore, the company must carefully observe attrition signals and implement preventive measures. The attrition signals include the following:

i) Increase in the number of complaints.

ii) Decrease in the frequency of contacts.

iii) Decrease in enquiries.

iv) Decrease in volume of business.

v) Decrease in the number of active buyers. 

vi) Decrease in the flow of communication.

5) Defection: Customer defection means losing a business. It occurs when an unhappy customer decides to stop hiring or purchasing the services or products and decides to find some other suitable alternative that satisfies its needs which the organisation failed to deliver. Therefore, customer defection is a threat. On the other hand, retaining a customer is a great opportunity. 

For a product manufacturing company a customer defect may occur due to poor quality of the product or poor after-sales services, whereas in the case of the service sector, it is plainly based on the quality of service itself. If the attrition signals are not recognised, the customers gradually become more dissatisfied with the product or service. 

Eventually, they switch their loyalty to other brands, products or services, and organisations available in the market. At this stage, a company must put in its best effort to regain the lost customer loyalty through re-acquisition.

Related Questions:-

  1. What is customer relationship management? Answer
  2. What is a function of customer relationship management? Answer
  3. What are the five key phases of customer relationship management? Answer
  4. What are the 7 C’s of CRM? Answer
  5. What are the 10 rules of CRM success? Answer

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