Customer Relationship Management (CRM)

CRM can be defined as a frame work to identify, attract, satisfy and retain profitable customers by managing effective relationships  in order to achieve increased and guaranteed profitability. This is where the company focuses on building long lasting relationship only with profitable customers by giving financial and social benefits. And also CRM advises firms to ignore unprofitable/less profitable customers and focus only on high profitable customer who will have long term relationship with customers.

Role of the marketing has changed during the past decade and marketers focus on CRM rather than individual transaction oriented customers due to many reason such as globalization, increased competition, short product life cycle. (Please refer the article “Why has the role of marketing changed?“)

There are 04 aims of CRM

  • Focus on long term profits- CRM focuses on long term profits and it ignores the view of acquiring customers for single transaction to earn a little profit at present. Company should spend for the profitable customers and serve them better at the expense of present profits to earn long term profits in the future.
  • Retention of customers- It is proved that the retention of existing customers is cheaper than attracting new customers. Attracting new customers involve high cost such as advertising but retention cost such as serving the customer is considered to be less. But many firms fail to recognize this and refrain from retention strategies.
  • Customer welfare at profit- CRM says that the chosen profitable customers should be served at the expense of present profits which will bring better profits in the future through a loyal customer base who will not switch to competitors. Company should provide welfare/services to customers and build long lasting relationships with customers and loyalty should be built from basic level to a partnership level.
  • Developing the strategy- CRM should be incorporated in to business and marketing strategies to yield better results and entire organization should be dedicated to serve profitable customers at the expense of profits today to earn better profits tomorrow.

Point to note is that CRM is not a new concept to the business world but use of CRM has increased during past decade.

CRM process can be visually represented as follow:

CRM does not focus on profit from a single transaction rather it focuses on achieving better profits in long term by understanding chosen customers and creating value for them. Through CRM customers gets satisfied and will be bound to retain with the organization leading to better organization process and value creation process is a crucial element in creating loyalty.

Features of CRM

  • Focus on customer rather than revenue from single transaction.
  • Creating customer value rather than just adding features to the product.
  • Long term focused
  • High customer service
  • High customer commitment through loyalty
  • High customer contacts to identify customer needs and serve them better

Advantages of CRM over Mass Media Marketing

  • Reduce Advertising- Since CRM focuses on rentention of customers rather than attraction of new customers forms do not have advertise heavily and the strong loyalty built through CRM will make the customer purchase the product with less advertising effort.
  • CRM let the firm identify the profitable customers and this will prevent the firm over spending on unprofitable customers and underspending on profitable customers
  • CRM will provide an competitive edge to the organization based on the service offered rather than competing based on price.

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5 thoughts on “Customer Relationship Management (CRM)”

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  2. tax calc says:

    nice article… keep writing.. all the best…

  3. pntmarketing says:

    Great post. Customer retention can be the key to gaining a strong foundation as a business. Thanks for the great tips on marketing.

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