Customer Relationship Management Essay

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Customer  relationship  management (CRM) is a customer-centric business philosophy,  policy, and strategy that focuses on processes and systems that organizations  undertake   to  enhance  their  relationships with customers.  Customer  relationship  management is based on the premise that a stable customer  base is a core business asset, and further,  that  knowledge of customer behavior and attitudes coupled with effective service delivery at every point of interaction  with customers  enhances  business  performance.  CRM takes a long-term  perspective, focused on customer  retention, and the building of multiple levels of relationships between buyer and seller, in pursuit  of enhanced  levels of customer  commitment. Goals of CRM typically include providing better customer service; making call centers more efficient; cross-selling products more effectively; helping staff close deals faster; simplification of marketing and sales processes; discovery of new customers; and increasing customer revenues.

Successful CRM is dependent on the coordination of different players within  the organization  responsible for  delivering  customer  value (in  accordance with Porter’s value chain). These include (1) customer facing operations: the people and technologies  that interact  directly with and deliver service to the customer; (2) internal  functional operations: the people and technologies  in the back office that support  the activities of the customer  facing operations; (3) supplier and partner  organizations: the people and technologies  that  support  organizational  processes; (4) impression  management  operations: the people and technologies  that  have responsibility  for  managing the impression  of the brand,  brand  reputation,  and brand experience.

Types Of Relationships

Businesses can seek to create different types of customer  relationships.  These might  include  (1) basic: where the organization sells the product; (2) reactive: where the organization sells the product and encourages the customer to call with questions or problems; (3)  accountable:   where  the  organization   contacts the customer  a short time after the sale, to check on product  performance;  (4) proactive: where the organization  contacts  the customer  with suggestions for use improvements,  and with details of new products; and  (5) partnership:  where  the  organization  works continuously  with the customer  to drive innovation and improved customer value.

The appropriateness of CRM, and more  specifically, the choice of relationship  type depends  upon the product (e.g., level of complexity and uncertainty in purchase, margins); the customers (e.g., tendency to shop around,  consumers  or businesses); and, the marketing  organization  (e.g., structure,  business process, and core values). In addition, relationships may vary on another dimension—the stage of the life cycle that they have reached with a specific business. The  customer   development   process  is  concerned with moving customers  through  this life cycle: suspects (consumers  and businesses with a profile that suggests they might become customers); prospects (consumers and businesses who have indicated potential  interest  in  the  organization’s  products); first time customers; repeat customers; clients (who are in a dialogue with the business); members  (who have signed up to a contractual  membership  engagement); advocates (who actively promote  the organization); and, partners  (who work with the  organization  to enhance  its products  and services to the mutual benefit of both parties).

CRM is designed to reduce customer turnover, or churn.  Customer  switching  is determined by relationship strength  (the nature and depth of the bond with the organization),  perceived alternatives  (e.g., competitors offerings), and  critical  episodes  (such as an unsatisfactory  experience). Relationships may terminate  if the customer no longer has need for the organization’s  products  or  services;  more  suitable providers  enter  the  marketplace;  the  relationship strength   has  weakened;  the  organization   handles a critical episode poorly; and/or there  are changes in  the  organization’s offering (such  as changes  in brand  reputation or price) that  cause the customer to reconsider their behavior.

Types Of CRM

There are two main types of CRM. The first is operational CRM, which supports  customer  facing operations, including sales, marketing,  and customer  service. Service agents record details of each interaction into  a  customer  contact  history,  so  that  staff can retrieve  information   on  customers  from  the  database to support  subsequent  interactions.  Such data is useful in call centers, but also for managing campaigns, and marketing and sales automation.  The second type is analytical CRM, which includes applications that analyze customer  data generated  by CRM applications to provide information  to improve business performance.  Analytical CRM applications  are based on data warehouses that consolidate data from operational  CRM systems and mine the data, to, for example,  identify buying patterns,  create  segments for marketing, and identify profitable and less profitable customers.

Businesses need to be able to identify more profitable customers  and focus relationship  building on those  customers.  In seeking to  optimize  their  customer portfolio, businesses seek measures of customer worth.  A key measure  is customer  lifetime  value, based on consideration of customer  interactions  in terms of regency x frequency x value. Other measures may be based on estimates of “relationship costs” versus “relationship revenue” for specific customers,  or on the balance between the value of a customer  and the risk associated with their likelihood of switching. Such analysis complements the effect of the segmenting and targeting undertaken by the organization  on the customer portfolio.

 

Bibliography:    

  1. Buttle, Relationship  Marketing (Chapman, 1996);
  2. Christopher, A. Payne, and A. Ballantyne, Relationship Marketing: Creating Customer Value (Butterworth-Heinemann, 2002);
  3. Egan, Relationship Marketing, 2nd ed. ( FT Prentice-Hall, 2004);
  4. Foss and M. Stone, Successful Customer Relationship Marketing (Kogan Page, 2001);
  5. Mae Y. Keary, “Electronic Customer Relationship Management,” Online Information  Review (v.31/5, 2007);
  6. Stephen King, “Understanding  Success and  Failure in Customer   Relationship   Management,”  Industrial   Marketing Management  (v.37/4, 2008);
  7. Ant Ozok, Kristen Denburger, and Gavriel Salvendy, “Impact of Consistency in Customer  Relationship  Management  on E-Commerce Shopper Preferences,” Journal of Organizational Computing and  Electronic Commerce  (v.17/4, 2007);
  8. Peppers and M. Rogers, Managing Customer Relationships: A Strategic Framework (Wiley, 2004);
  9. Keith A. Richards, “Customer Relationship Management: Finding Value Drivers,” Industrial  Marketing  Management  (v.37/2,  2008);
  10. Keith A. Richards and Ell Jones, “Customer Relationship Management: Finding Value Drivers,” International  Marketing Management (v.37/2, 2008);
  11. Rigby, F. F. Reichheld, and P. Schefter, “Avoid the Four Perils of CRM,” Harvard Business Review (v.80/2,  2002);
  12. Rima Tamosiuniene,   “Consumer Relationship   Management   as  Business  Strategy  Appliance: Theoretical  and Practical,” Journal of Business Economics and Management  (v.8/1, 2007);
  13. Julian Villanueva, Pradeep  Bhardwaj, Sridhar  Balasubramanian,  and  Yuxin Chen, “Customer Relationship Management  in Competitive Environments: The Positive Implications  of a Short-Term Focus,” QME-Quantitative Marketing and Economics (v.5/2, 2007).

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