Concept of CRM….an extract from “Customer Relationship Management”
Concept of CRM
CRM refers to a business strategy that enables organizations to better serve the needs of their customers, improve customer service, achieve a high level of customer satisfaction; thereby maximize customer loyalty and retention. It encompasses a number of technologies used to streamline customer interaction, which helps in finding, acquiring, and retaining customers. The CRM system of an organization integrates information from all data sources to provide a holistic view of each customer in real time. Some of the most popular definitions of CRM are given as follows:
- According to Gartner, “A business strategy designed to optimize profitability, revenue and customer satisfaction.”
- According to Price Waterhouse Cooper (PWC), “A business strategy that aims to understand/appreciate, manage and personalize the needs of the organization’s current and potential customers.”
- According to Jill Dyche, “The infrastructure that enables the delineation and increase in customer value and the correct means by which to motivate valuable customers to remain loyal and buy again.”
- According to Paul Greenberg, “A philosophy and a business strategy, supported by a system and a technology, designed to improve human interactions in a business environment.”
Evolution of CRM
The concept of CRM came into existence in the 1980s. Later in the 1990s, it brought a revolutionary change in the business environment. Now, CRM has become a strategic element in all organizational decisions. CRM has gone through various development stages, which are described as follows:
Stage I: Refers to the first generation of CRM in organizations. In this stage, CRM was used as a functional approach and involved only two aspects, namely Sales Force Automation (SFA) and Customer Service and Support (CSS). SFA involves presales functions, such as maintaining customer data and generating leads. On the other hand, CSS involves aftersales activities, such as customer service, help desks, and field service support.
Stage II: Refers to the second generation of CRM. In this stage, CRM was used to support front-office activities and fulfill the requirements of customers.
Stage III: Refers to the third generation of CRM. In this stage, organizations realized the need of integrating front-office CRM systems with back-office CRM systems.
Objectives of CRM
Implementing CRM involves high cost and efforts. This is because organizations need to spend a large amount in purchasing an appropriate CRM system, hiring consultants, and training employees. Therefore, it is essential for an organization to establish clear CRM objectives prior to its implementation. The following are the main objectives of implementing a CRM system in an organization:
- Simplifying marketing and sales processes
- Providing better customer service
- Acquiring new customers and retaining the existing ones
- Improving organizational efficiency and productivity
- Reducing operational costs
Benefits of CRM
As you know, the main purpose of CRM is to provide quality services to customers and achieve a high level of customer satisfaction. The following are some other advantages of CRM:
- Establishing effective communication channels
- Gathering information related to customers
- Creating detailed profiles of individual customers
- Achieving a high level of customer satisfaction
- Tracking new sales opportunities
- Increasing market share and profit margins
- Enhancing customer loyalty
- Fulfilling customer requirements
Misunderstandings about CRM
Different organizations have different misunderstandings about CRM. These misunderstandings are required to be checked before it affects the revenue and cost structure of an organization. Some of these misunderstandings about CRM are as follows:
CRM is a database of customers: Refers to the biggest misunderstanding about CRM. It is often assumed that CRM is only used to get information related to customers. However, CRM is a much broader and refined term. It not only stores customer information, but fulfills the information requirements of different departments of an organization.
CRM is only a part of marketing department: Refers to the misconception of organizations that CRM is a responsibility of marketing department. However, CRM is used by various departments of an organization to take business decisions. For example, the finance department of an organization uses CRM to prepare annual budgets.
CRM is too technical to learn: Refers to a misunderstanding that CRM is technical software and only technicians can handle it. However, a CRM system can be used effectively by anyone in an organization if a proper training is given to him/her.
CRM is a promotional tool: Refers to a misunderstanding that CRM is used for the promotion of an organization. However, CRM is a tool that helps organizations understand the needs and expectations of customers and take business decisions accordingly.
Types of CRM
As discussed earlier, CRM is a powerful tool that organizations use to acquire new customers and retain the existing ones. It helps organizations by providing information related to customers and taking sound business decisions. However, the usage of CRM differs across organizations. For example, some organizations may use CRM to enhance its sales productivity, while other organizations use it to improve the quality of customer service. Based on its different applications, CRM can be classified into four main categories.
- Operational CRM
- Analytical CRM
- Sales intelligence CRM
- Collaborative CRM
Operational CRM provides support to the front-office operations of an organization, such as sales and marketing. Every interaction with customers provides information about them, such as customer contact history. This information is stored in customer database for future references. Operational CRM helps an organization track information related to customers. It can be of different types, which are as follows:
- Enterprise Marketing Automation (EMA): Refers to a type of operational CRM that helps an organization in performing various marketing activities, such as customer segmentation and event-based marketing. For example, EMA enables an organization to segment its customers based on various factors, such as their income level, age, and tastes, and place its products accordingly. Apart from this, it is used to create a database for the existing and potential customers and conduct marketing campaigns. This helps an organization improve its marketing efficiency.
- Sales Force Automation (SFA): Refers to another type of operational CRM that is designed to automate sales related activities, such as lead generation and lead qualification. It helps an organization to prepare a list of leads (potential customers) and assign these leads to salespeople. On the other hand, SFA enables salespeople to contact leads, track their response, and generate reports.
In the previous section, you have learned that operational CRM is used to collect information related to customers. On the other hand, analytical CRM helps an organization analyze the collected information and take various product related decisions. It analyzes customer information for various purposes, which are as follows:
- Conduct marketing campaigns to improve marketing efficiency
- Execute customer campaigns, such as customer acquisition and cross selling
- Analyze customer behavior for making product-related decisions
- Make various management decisions, such as financial forecasting and customer profitability analysis
Sales Intelligence CRM
Sales intelligence CRM is a tool used by an organization to optimize and evaluate key sales processes. It helps salespeople analyze information related to customers and take various sales decisions. Apart from this, sales intelligence CRM enables an organization to track available sales opportunities, enhance sales productivity, and provide better customer service. This helps organizations in maximizing their revenues.
Sales intelligence CRM is primarily designed for organizations involved in the wholesale, distribution and manufacturing segments. In today’s highly competitive market scenario, it helps organizations to track cross-sell, switch-sell and up-sell opportunities by analyzing customer buying trends.
Collaborative CRM is an approach of managing customer relationships in which the various departments of an organization, such as sales, marketing, and operations, share information that they collect while dealing with customers. For example, the customer support department of an organization may share customers’ feedback with the marketing department to determine the demand of products and services in the market. The main aim of this collaboration is to improve the quality of customer service, which helps in achieving a high level of customer satisfaction.
Another function of collaborative CRM is that it integrates various channels used for interacting with customers, such as telephone, e-mail, voice chat, application sharing, desktop sharing, file transfer, and collaborative browsing. Generally, collaborative CRM is customized according to the requirements of customers. It covers a wide area of operations, such as the consolidation of sales force, field service, help desk, and marketing automation applications. The following are three main objectives of collaborative CRM:
- Facilitating effective customer interaction
- Reducing customer service costs
- Gathering information related to customers
However, the main drawback of collaborative CRM is that it requires coordination among different departments, which makes it a time consuming process.
Customer Relationship Management
ISBN: 978-93-5004-454-4, Author: Jaspreet Kaur Bhasin, Pages: 464, Price: Rs.399/-W/CD