Customer Relationship Management (CRM) is a model for managing a company’s interactions with current and future customers. It involves using technology to organize, automate, and synchronize sales, marketing, customer service, and technical support. CRM can be defined in a number of ways. Some people stress the significance of information technology in CRM, some argue it means a customer-centric organization, some believe CRM is a functional (marketing) strategy, others emphasize that CRM is primarily a business strategy. We agree with Peelen (Customer Relationship Management, 2006) that the definition by Gartner Group (2004) is attractive: CRM is an IT-enabled business strategy, the outcomes of which optimize profitability, revenue and customer satisfaction by organizing around customer segments, fostering customer-satisfying behaviors and implementing customer-centric processes.
CRM is a business strategy and is more than a functional strategy. It touches the organization as a whole: marketing, sales, IT, logistics, finance, production, R&D, HR, management, etcetera. If we thus define CRM, it is immediately clear that implementing full-size CRM is a daunting challenge.
Creating profitable and very efficient (client-facing) processes is not enough. For true Customer Relationship Management a customer intimacy strategy, a relation marketing philosophy rather than a transaction marketing philosophy, as well as a client-orientation of the whole organization are required.
Origin of Customer Relationship Management
The 1980s saw the emergence of Direct Marketing, heavily relying on client databases. Christan GrÃ¶nroos and Evert Gummesson of the ‘Nordic School’ and Theodore Levitt deserve a special mentioning in this article. They were the first to describe Relation Marketing versus transaction marketing. Also they defined the characteristics of relation-centric organizations and they provided the corresponding marketing tools. In 1995, Treacy and Wiersema (1995) described their three Value Disciplines. Customer Intimacy was one of them. As a result, CRM transformed in the 1990s from a web based contact management and information tool, to a customer oriented strategy.
Usage of Customer Relationship Management
- Companies that want to realize a customer intimacy strategy.
- Companies that want to accomplish a customer friendly image.
Steps in Customer Relationship Management
The following things make up the main elements to create a customer relation oriented organization:
- Strong customer-oriented leadership.
- The mission to be a relation-oriented organization aimed at long-term interaction.
- The corporate purpose is aimed at the customer.
- The main strategy is to win by customer intimacy.
- Company values and employee values focus on caring for customers.
- Behavioral standards reflect customer empathy and the wish to build long-term relationships and commitment.
- A relation-oriented organizational culture.
- An organization that is putting customer contacts in the center. Compare: Co-Creation, Business Process Reengineering.
- People: empathic communication skills, caring for customers.
- Systems that can help to connect and manage hard values with soft values, such as the Value Profit Chain and the Balanced Scorecard.
Strengths of Customer Relationship Management
- Strong relations with clients offer a degree of protection against actions of competitors.
- Loyal customers can be more profitable. Winning new customers is expensive, satisfied customers may buy more, happy customers can bring additional customers, etc.
Limitations of Customer Relationship Management
- Implementing CRM in a holistic way is no sinecure.
- Making large CRM investments profitable is difficult.
- Achieving a Sustainable Competitive Advantage with CRM is even more difficult.
Assumptions of Customer Relationship Management
- If we are good to customers, they will be good to us.
- Changing from the current strategic discipline towards a customer intimate discipline is possible.
Assessing client satisfaction levels
Two techniques to assess the actual level of customer happiness are the Customer Satisfaction Model and SERVQUAL for services companies.
Source: Ed Peelen – Customer Relationship Management
Source: Heskett, Sasser and Schlesinger – The Service Profit ChainBusiness frameworks like Customer Relationship Management (CRM) are invaluable to evaluating and analyzing various business problems. You can download business frameworks developed by management consultants and other business professionals at Flevy here.