Customer Relationship Management (CRM) is a phenomenon that
is becoming a major discipline within business. CRM can be
traced back to the airlines' attempt to gather information about
their customer flying habits in order to stop their high-fare
airliners choosing low-fare carriers, however, the concept was
invented even further back, when the shop owner knew all his
customers by first name and they knew his name. In 1998 The
Economist Intelligence Unit (EIU) in conjunction with Andersen
Consulting published the result of a CRM survey of different
companies around the world. The survey revealed a new heightened
focus on CRM as a discipline, where companies increased their
customer focus and using a process approach to customer
relationship management. This was a market shift from the
traditional transaction-based and functionally managed approach
where the relationship with customer was divided up and dealt
with by different departments. The EIU report also showed that
between 1994 and 1997 the spending on customer relationship
management software and services grew from $200 million to $1.1
billion in the USA. The EIU report is one of many investigations
that indicate a growing interest in CRM and some literature
concerning CRM even postulate that companies will have to adapt
it to survive.
Several researchers define CRM differently.
Coldwell defines CRM as:
"Customer relationship management is a combination of business
process and technology that seeks to understand a company's
customer from the perspective of who they are, what they do, and
what they like"
and Hobby, defines CRM as:
"A management approach that enables organizations to identify,
attract and increase retention of profitable customers by
managing relationships with them".
However, I have found the following definition of CRM, to be the
most adequately:
"CRM is a business strategy - an attitude to employees and
customers - that is supported by certain processes and systems.
The goal is to build long-term relationships by understanding
individual needs and preferences - and in this way add value to
the enterprise and the customer".
This definition places the strategy of adding value to the
customer in the focus, whereas the first mentioned definition
gives technology and processor first priority. As the chosen
definition explains, the systems and processes are vital support
elements in creating value for the customer. The
second-mentioned definition is found to be somewhat thin and
practical useless but it notice an important aspect of CRM, that
the organization has to learn how to listening to customers. In
the definition, CRM is defined as a business strategy. This is
an important aspect, as CRM is not to be seen as a concept or a
project but as a business strategy, which affects all parts of
the company.
CRM is about identifying, retaining, and maximizing the value of
a company's customers. CRM is a sales- and service business
strategy where the organization wraps itself around the
customer, so that whenever there is an interaction, the
information exchanged is relevant for that customer. This means
knowing all about that customer and what the profitability of
that customer is going to be. CRM is an effort to create the
whole picture of a given customer, bringing together consistent,
comprehensive and credible information on all aspects of the
existing relationship, such as profitability information, risk
profiles and cross-sell potential.
To keep customers satisfied and make them return, CRM, as a
strategy, is not a new phenomenon. Every company wants
profitable and loyal customers. The new aspect is that companies
start to measure this profitability and loyalty and use this
information to segment customers and develop strategies for
approaching these customers.
However, before implementing CRM, companies need to have some
basic foundations settled. First of all, the basic quality of
the products has to be in order, i.e. if the product does not
live up to the expectations of the customer, he will not be
satisfied, hence loyal for long. The typical strategies prior to
CRM are quality control systems such as Total Quality Management
(TQM). Secondly, companies also have to know more about their
customers before implementing CRM. I.e. they have to evaluate,
which customers are most valuable in terms of profitability,
loyalty and future expectations. Thirdly, the companies have to
have the necessary technology to enable the employees to access
information about customers in order to offer customers the best
service. Finally, CRM needs full support from the management of
the company to stand a chance of success.
Source: Rasmus Nielsen
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