Why Customer Relationship Management? What Makes CRM Viable? Ankit Kedia, Australia, Member What makes CRM a viable option is the cost dynamics
- The cost of getting a new customer is 4 times the cost of retaining an existing customer.
- 80% of a firm's business comes from 20% of the customers.
Hence the firm should channelise its efforts in retaining this 20% section of customers through its CRM activities.
What Makes Customer Relationship Management Viable
Emiel Veenstra, Business Consultant, Netherlands, Member Ankit, I completely agree. Although one important factor should not be forgotten: to check whether the customer, even if he is one of the 20%, is profitable.
So, I think this is an element you should add to CRM: Only keep the customers that are profitable.
Therefor the company must have the possibility to calculate the real costs and thus profits per customer.
Viability of Customer Relationship Management (CRM)
Stefania Escobar, Student (University), Colombia, Member I agree too! And one way of estimating customer profitability is the CLV (Customer Lifetime Value) Concept, a good approach to know what will be the expected purchase behavior. Customer Loyalty Programs look to improve customer retention rate, customer profitability and reduce marketing costs.