Customer Relationship Management - An Emerging Business Need


By

Narinder Tanwar
Sr. Lecturer
Department of Management Studies
B.S. Anangpuria Institute of Technology & Management
Faridabad
 


"Only those who become attached to their customers, figuratively and literally will survive".
                                                                                                                    Tom Peters
                                                                                                                   (Thriving on Chaos)

No organization is secure today unless its every action is processed through the customer's eyes. Today's businesses are facing fierce and too aggressive competition while operating in both domestic and global markets. Traditional marketing methods have failed to deliver results in recent times.

Customer Relationship Management (CRM)

The diverse and uncertain environment has forced organizations to restructure themselves in order to enhance their chances to survival and growth. The restructuring efforts have included, among others, the emergence of the "new paradigm" which is commonly referred as Customer Relationship Management (CRM). Customer Relationship Management business strategy places the customer at the center of the organizations' universe. Relationships in today's world are more important than anything else which an organization wishes to maintain with their associations. It has become extremely important for all organizations to maintain rich and fruitful relationships, and it has become even more and more important to sustain them to be rewarding forever.

Customer relationship management (CRM) is a term which is not only used by business organizations today to maintain such good relationships with their present and old clients and associates but the terminology is now being used by almost any type of organization to create a beneficial environment for them and all in today's era of competition. CRM has played an ever increasing and important role in the growth of all such organizations those have developed a sense of understanding towards customer service and satisfaction and implementing CRM.

CRM is a business approach that integrates people, processes, and technology to maximize the relations of an organization with all types of customers. CRM helps in understanding the customer better, which enable organizations to effectively customize their products and service offerings according to the customer needs in order to retain customers and increase customer's loyalty and satisfaction. Many organizations are embracing customer relationship management strategies to reap benefits such as enhanced revenues and high profits.

The basic proposition of a CRM strategy is based on the age-old idea that knowledge, understanding, and serving the customer is the best method developing a sustainable competitive advantage. But building a sustainable and successful relationship with a large customer base is not the easiest thing to do and carries a direct impact on many core operational processes. At the heart of a perfect CRM strategy is the creation of mutual value for all the parties involved in the business process. It is about creating a sustainable competitive advantage by being the best at understanding, communicating, and delivering values to the existing customers in addition to creating and keeping new customers. It addresses to the changing needs of the customers by developing products and services that continuously seek to satisfy the lifestyle and need patterns of individual customers. Organizations tend to acquire a structure around customer segments and not on the basis of product lines to deliver customer satisfaction.

(Figure 1: Basic CRM Strategy)


CRM is a corporate level strategy, focusing on creating and maintaining relationships with customers. An effective CRM system is able to identify factors important to clients, promote a customer oriented philosophy, adopt customer based measures, develop end-to-end processes to serve customers, provide successful customer support, handle customer complaints, track all aspects of sales, create a "holistic" view of customers' sales and service information. The long-term success of an organization depends mainly on how well it attracts and retains a large customer base. Managing relationships with customers is very important for organizations since improved relationships increase business value. CRM helps in leveraging information regarding customer behavior to achieve high levels of customer satisfaction, retention, and loyalty all resulting in improved profitability.

CRM life cycle begins with the integration of front office systems and the centralization of the customer- related data. The benefits of this phase include improved front office efficiency and productivity. In this phase, the customer data has to be collected in detail and maintained properly. Customer profile regarding demographics, socio-economic and lifestyle characteristics of customers has to be colleted. Based on collected data, analysis of customer begins to understand behavior, identify the pattern of buying and trends, and discover causal relationship. The out of this is strategic business decision. Business processes and organizational structures are refined based on the improved customer understanding gained through analysis.

Benefits of CRM

The benefits of customer relationship management are abounding. It allows organizations not only to retain customers, but enables more effective marketing, creates intelligent opportunities for cross selling and opens up the possibility of rapid introduction of new brands and products. To be able to deliver these benefits, organizations must be able to customize their product offering, optimize price, integrate products and services and deliver the service as promised and demanded by the customer base. Keeping the customer happy is obviously one way of ensuring that they stay with organization. However, by maintaining an overall relationship with customer, companies are able to unlock potential of their customer base and maximize contribution to their business. Based on successful CRM implementations, the following benefits seem reasonable:

  • Increased sales volume: Increased sales result from spending more time with customers and gathering more and more information about their preferences about the products and services.
  • Increased margin: Increased margin resulting from knowing customers better, and providing a value product on discounting prices.
  • Improved customer satisfaction ratings: Customer will be more satisfied if he finds the company to be more responsive and better in touch with their specific needs.
  • Decreased marketing administrative costs: Since the company has specified its target segment customers, it knows their needs better so it is not wasting unnecessary time and money which result into decreased marketing costs.

Conclusion

Customer relationship management does not enable a quick win. It is a long-term approach that has to be adopted at a strategic level. Whilst the value of customer relationship management has been identified by organizations, they are yet to look at the bigger picture and understand all of associated benefits that would enable their business strategies to be successful. Those responsible for delivery are perhaps the most informed about these strategic benefits yet the transformation is long-drawn-out process. The competencies required to deliver these customer benefits are: to deliver on its service promise, integrate products and service channels effectively, customize products & service and their respective prices, create opportunities for cross selling and delivery mechanisms for the onward promotion of these products and services and reduce the gestation period to market by allowing quick and effective introduction of new products and services.

REFERENCES

* Raman, V. Venkata, and G. Somayajulu, 'Customer Relationship Management A Key To Corporate Success,' Excel Books, 2003.
* Mukerjee, Kaushik, 'Customer Relationship Management A Strategic Approach to Marketing,' Prentice Hall India, 2007.
* Shainesh, G., Sheth, N. Jagdish, 'CRM A Strategic Perspective,' Macmillan India Ltd., 2007.
* Dyche, Jill, 'The CRM Handbook A Business Guide to Customer Relationship Management,' Pearson Education, 2007.
* Rey, B., 'The Paradigm of CRM,' Marketing Mastermind, 2007, pp. 54-56.
 


Narinder Tanwar
Sr. Lecturer
Department of Management Studies
B.S. Anangpuria Institute of Technology & Management
Faridabad
 

Source: E-mail December 31, 2007

          

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