Customer Relationship Management

CUSTOMER RELATIONSHIP MANAGEMENT
In todays highly dynamic business environment, marketers can rely on outdated marketing
concepts. The focus is on relationship building which enables the company to create, deliver
and sustain value to both the organisations and customers.
CRM is a practice that encompasses all marketing activities directed toward establishing,
developing, and maintaining successful customer relationships. The focus of relationship
marketing is on developing long-term relationships and improving corporate performance
through customer loyalty and customer retention.
Marketing is the management process responsible for identifying anticipating and satisfying
customer requirements profitably. (CIM, 2001)
Marketing is the process of planning and executing the conception, pricing, promotion and
distribution of ideas, goods and services to create exchange and satisfy individual and
organisational objectives. (AMA, 1985)
MARKETING IN CRISIS - Companies were beginning to question the large expenditure on

marketing without a measurable Return on Investment (ROI). The last decade of the 20th
century was also to see the marketing function being marginalized in many organisations.
Marketing was being openly criticised for lack of innovation and for largely adopting
defensive strategies to cope. Marketers have indeed committed the mistake of seeing
marketing as a functional discipline rather than an integrated business process. Main reasons
why the marketing concept did not deliver all it promised are:
Too many companies were putting the focus on the marketing department rather than on the
customer. The traditional role of marketing has concentrated more on customer acquisition
than customer retention. The marketing concept usually did not include any requirements for
systematic, continuous and objective. tracking that would monitor the satisfaction of existing
customers in terms of how well their various needs were being met.
THE SHIFT FROM TRANSACTION-BASED MARKETING TO RELATIONSHIP
MARKETING
(TBM) - Buyer and Seller exchanges characterized by limited communications and little or
no ongoing relationship between the parties.
(RM) - Development and maintenance of long-term, cost-effective relationships with
individual customers, suppliers, employees, and other partners for mutual benefi
COMPARING TBM AND RM STRATEGIES
THE NEW MARKETING CHALLENGE: RELATIONSHIP MARKETING

Relationship Marketing as: "... the ongoing process of engaging in cooperative and
collaborative activities and programs with immediate end-user customers to create or enhance
mutual economic value at a reduced cost". (Parvatiyar and Sheth, 2000).
RM is not just another layer on the marketing onion; it is a brand new discipline that offers
marketers new opportunities to achieve breakthroughs and to create new business value for
their customers and shareholders (Gordon, 2003). Therefore, with RM, the emphasis is
moving from a transaction focus to a relationship focus, where the aim is to build and
manage profitable relationships with key customers.
UNDERLYING REASONS FOR THE GROWTH OF RM

The increasing global and intense nature of competition
More demanding and sophisticated customers
Increased fragmentation of consumer markets
Rapidly changing customer-buying patterns
Continuously increasing standards in quality
The inadequacy of quality in itself to create sustainable competitive advantages
The influence of technology in almost all products and services
The unreliability of traditional marketing
CRM: THE NEW BUSINESS PARADIGM
Companies are searching for ways to differentiate themselves in today’s cluttered marketing
environment. These companies are embracing CRM, which will help to increase customer
loyalty and target most profitable customers. It can be said that companies want to accelerate
customer relations in order to gain competitive edge. Varey (2002) quoted Don Peppers who
spoke at the CRM focus conference, Boston 2001 and stated that: “A mass marketer is a
hunter - a relationship marketer is a farmer”
DEFINITION OF CRM - Customer relationship management is defined as a management
approach that enables organisations to identify, attract and increase retention of profitable
customers, by managing relationships with them. CRM is an integration framework or a
business strategy, not a product. Putting the CRM business strategy into practice requires
developing a set of integrated applications that address all aspects of front office needs, such
as the need to automate customer service, field service, sales and marketing.
CRM is about the management of technology, processes, information resources and people
needed to create an environment that allows a business to take a 360-degree view of the
customer. CRM begins and ends with customers and thus, helps to achieve a business
purpose, which is, according to Levitt (1983) “to create and keep a customer”. Indeed, CRM
is the latest relational concept to receive ‘top billing’. CRM has become a global mega-
business in this volatile business environment. CRM is concerned with the creation,
development and enhancement of individualised customer relationships with carefully
targeted customers and customer groups resulting in maximizing their total customer life-
time value.
WHY IS CRM AN ISSUE?

Intensifying global competition.
The transition from a manufacturing economy to a service economy
Shorter product cycles and saturated markets
Less opportunity for product differentiation
An increasing sensitivity toward service on the part of the consumer
Emphasis on Value Creation and Delivery
Customers are very demanding and sophisticated in their requirements
Greater Focus on Customer Retention
WHY CRM IS REGARDED AS A MEGA BUSINESS ISSUE?
It costs six times more to sell to new customer than to sell to an existing one.
A typical dissatisfied customer will tell 8-10 people.
By increasing the customer retention rate by 5%, profits could increase by 85%.
70% of the complaining customers will remain loyal if problem is solved
What does CRM involve?

Organisations must become customer focused
Organisations must be prepared to adapt so that it take customer needs into account and
delivers them
Market research must be undertaken to assess customer needs and satisfaction
CUSTOMER LOYALTY - regarded as the recipe for increasing revenue in organisations. It

is important to note that management of relationship encourages loyalty.
Hart and Johnson (1999), "... customers are loyal when they have been consistently satisfied
over time". 5 percent increase in customer loyalty can produce profit increases from 25
percent to 85 percent.
Primary Measurements of Customer Loyalty include:
The stream of Revenues and profits from retention of loyal customers; Repeat sales; and
Referrals (commonly known as the three Rs).
Customer Retention and Word-of mouth communications

It takes time and money to attract each and every new customer.
Retaining a customer to the profit segment of a relationship is a custom for organisations in
this hyper competitive era.
If customers stay longer, they are likely to create an emotional bond, recommend friends and
remain loyal for some considerable time. Therefore, customer loyalty equals to profitability
for the organisation. In fact, 80 % of company sales comes from 20 % of existing customers.
EMPLOYEE BEHAVIOR, INTERNAL MARKETING & CRM
Internal Marketing is “…the means of applying the philosophy and practices of marketing to
people who serve to external customers so that (i) the best possible people can be employed
and retained and (ii) they will do the best possible work.” (Berry, 1980) All employees are
either full time or part-time marketers, capable of influencing customer relationships that
ultimately determine how successful the organisation is in the long term. HRM is not
something that should be considered as separate from marketing management. There is a high
level of contact between employees and customers in the services industry like financial
companies.
Information Technology and CRM - Technological approaches involving the use of
databases, data mining and one-to-one marketing can assist organisations to increase
customer value and their own profitability. This type of technology can be used to keep a
record of customers names and contact details in addition to their history of buying products
or using services. This information can be used to target customers in a personalised way and
offer them services to meet their specific needs. This personalised communication provides
value for the customer and increases customers loyalty to the provider
Message to Company Executives:
Evolve all your strategies around customers.
Focus on building brands to reap the fruits in future.
Keep growing.
“Customers are the King of Past and they are now regarded as the Emperors of the Future.”
Message to Customers: “Enjoy the Kingdom”

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CUSTOMER RELATIONSHIP MANAGEMENT

MARKETING IN CRISIS - Companies were beginning to question the large expenditure on

THE NEW MARKETING CHALLENGE: RELATIONSHIP MARKETING

UNDERLYING REASONS FOR THE GROWTH OF RM

WHY IS CRM AN ISSUE?

What does CRM involve?

CUSTOMER LOYALTY - regarded as the recipe for increasing revenue in organisations. It

Customer Retention and Word-of mouth communications

Message to Customers: “Enjoy the Kingdom”

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