Customer Relationship Management (CRM)


Customer Relationship Management, or simply "CRM", is the development of strong relationships with customers by systematically learning about their needs, behaviors, and values, and using this knowledge to manage an efficient and effective fulfillment of their product and/or service requirements in a manner that provides a pleasant experience to them.  This management concept was developed in cognizance of the fact that good customer relationships are the foundation of business success.


The goal of any CRM program is to keep existing customers and gain new ones while maximizing business with each of them.  More specifically, CRM aims to: 1) provide the best customer service and support experience possible; 2) make customer support more efficient and less costly; 3) cross-sell products more effectively; 4) help sales staff close deals faster; 5) simplify marketing and sales processes; 6) find new customers; and 7) maximize revenues from all customers.


The experiences that a customer accumulates in dealing with a company impacts his or her loyalty to the company. Thus, each and every transaction conducted by a customer with a company must have a positive effect on him or her. This will ensure more business with this customer in the future.


According to experts, companies must always consider their customers' needs when making decisions about launching a new initiative.  Knowing customer needs, in this context, does not refer to just the basic ones - but includes the special and customer-specific needs as well. For instance, it is not enough for a company to give its customers expensive and state-of-the-art technology or infrastructure with which they can perform their transactions.  What's more important is for the company to know how the customer wants to go about these transactions, and to give this to them, if not something better. 


Implementing a CRM program within a company is not as simple as buying CRM software and installing it. Many companies fail to recognize the intricacies of setting up a 'true' CRM program, and end up being included in the more than 60% of entities failing in their CRM implementation. CRM is about knowing the individual customers and their respective importance to the company, and building the company's business and technology systems to maximize business with each of them based on this knowledge. The choice of CRM software to use will be easier if the essence of the CRM program itself is known to everyone.


Needless to say, effective and efficient collection and utilization of data about the customers and the company's business with them is imperative if a CRM program is to succeed. Examples of data that CRM projects should be collecting include: 1) responses to marketing campaigns; 2) orders and sales data; 3) order fulfillment and shipping performance data; 4) customer account information; 5) web registration data; 6) service and support records; 7) demographic data; and 8) web sales data.  


Different customers differ in their value to the company. Since customer support and service cost money, It is but natural to provide different levels of support or service to different customers, with more valuable customers getting the most attention.  According to experts, the following must be considered when determining the value of a customer to the company: 1) the total value of the customer's relationship with the company; 2) the potential value of that relationship; 3) the profitability of having that relationship; 4) the insights and knowledge that the customer can provide to the company; and 5) the customer's influence over the company's other customers.


Aside from a good knowledge of the profiles of existing and prospective customers, the types of transactions that they conduct with your company as well as the contact points for these transactions must be mapped out.  Doing so will allow the company to know which aspects of customer support or service they need to give more attention to and strengthen. 


A good selection of which customer information to collect and store is a 'must'  - useless data must not be collected, since they will use up the same valuable resources as useful data. Lastly, all the collected and stored data for the CRM program must be harnessed to the fullest in meeting the objectives of the initiative. 


One effective CRM implementation approach, according to Boise Office Solutions CEO Christopher Milliken, is to 'turn the focus outside-in', which simply means putting oneself in the customers' shoes when developing business and technology strategies.  What kind of support or service the customers need, the customers' preferred methods or channels for transacting with the company, which people within the company are most often contacted by customers, and which information technologies the customers use are examples of what a company needs to know 'from the eyes of the customer.'  Building business and technology strategies around customer needs and wants will ensure that they'll be happy to use your systems and technologies once these have been set up.


Another CRM lesson imparted by Boise from their experience is to make your CRM implementation easy on your customers, even if it means making it more difficult for you.  Disrupting your customers' business during your implementation will leave them with a lasting negative impression about your company.  Making the transition smooth and pleasant, however, will only make them remember the 'improvements' brought about by your new CRM system to their business.


The chances of success in implementing a CRM program may be increased by: 1) breaking down the CRM project into smaller but more manageable pieces; 2) using a pilot project that involves the key departments to introduce the program and learn about it; 3) ensuring that the CRM infrastructure used is fully scalable, and would be easy to expand or improve for future needs; 4) ensuring that the CRM infrastructure used is flexible enough to accommodate the full range of customer diversity that the company might encounter; 5) creating a customer-focused culture.


"Is CRM implementation expensive?" is a common question asked by people who are planning to set up their CRM systems. According to The Data Warehousing Institute, almost 50% of the companies they surveyed had a CRM budget of less than $500K.  Some, however, spend more than $10M for their CRM projects. The cost of CRM implementation therefore varies from one company to another.


Reasons why a CRM project may fail include: 1) lack of communication among the people involved in the project; 2) lack of cooperation, whether consciously or not, from key players and people who keep the vital information; 3) internal mass resistance to change; 4) poor decision-making on the part of management; 5) underestimation of the time, money, and resources required to get a CRM program that really works.


Primary References:


2.  Deck, Stewart, "What is CRM?" 


See Also:   Knowledge ManagementSupply Chain Management;  TQM


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