 What
is Customer Relationship Management? Description
Customer Relationship Management 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. History
The 1980s saw the emergence of
Direct Marketing, heavily relying on client databases. Christan Grönroos
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. Applications
- Companies that want to realize a customer intimacy strategy.
- Companies that want to accomplish a customer friendly image.
Steps in Customer Relationship Management. Process
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. Benefits
- 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. Disadvantages
- 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. Conditions
- 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.
Book: Ed Peelen - Customer Relationship Management -
Book: Heskett, Sasser and Schlesinger - The Service Profit Chain
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Customer Relationship Management CRM Special Interest Group
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Compare with Customer Relationship Management:
Relation Marketing
| Value Disciplines
| Multi Channel Marketing
| Analytical CRM |
Operational CRM |
Customer Satisfaction
Model | SERVQUAL
| Co-Creation
Return to Management Hub: Communication & Skills | Marketing
| Strategy
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