Customer Relationship Management 

Table of Content:-



Customer Relationship Management Meaning (CRM) 

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. 

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.


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.

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 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.



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.

Role of Customer Relationship Management

Customer Relationship Management Process (CRM)


The customer relationship management process can be divided into the following areas in form of the 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 Customer Relationship Management (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 the 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.

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