Customer Relationship Management (CRM)

CRM OVERVIEW

Customer relationship management (CRM) has been adopted by many organisations in recent years because of their effort to become more customer focused to face the increasing competition. Many companies highlighted that they have applied CRM methods and experienced success. CRM evolves from business processes such as relationship marketing and the increased emphasis on improved customer retention through the effective management of customer relationships.

One view of CRM is the utilisation of customer-related information or knowledge to deliver relevant products or services to customers.  Another view of CRM is that it is technologically orientated. Advances in database technologies such as data warehousing and data mining are crucial to the functionality and effectiveness of CRM systems.  A study conducted in a UK-based manufacturing company demonstrates that in reality CRM is a complex combination of business and technological factors.  In addition, CRM is considered a holistic process of acquiring, retaining and growing customers.  Thus, CRM is not simply some applications or software but the philosophy, the way a company works so as to build long-lasting relationships with its customers.  CRM is a comprehensive strategy and the process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer.

BENEFITS OF CRM

CRM permits businesses to leverage information from their databases to achieve customer retention and to cross-sell new products and services to existing customers.  Companies that implement CRM make better relationships with their customers, achieve loyal customers and a substantial payback, increased revenue and reduced cost.  CRM when successfully deployed can have a dramatic effect on bottom-line performance.

According to a study conducted in the sector of banking, convenience of location, price, recommendations from others and advertising are not important selection criteria for banks. From customers’ point of view, important criteria are: account and transaction accuracy and carefulness, efficiency in correcting mistakes and friendliness and helpfulness of personnel.  Thus, CRM, high-quality attributes of the product / service and differentiation proved to be the most important factors for customers.

Another study conducted in a European bank shows that with CRM, the bank was able to focus on profitable clients through efficient segmentation according to individual behaviour. Information about ‘who buys what and how much’ enabled the bank to have a commercial approach based on the client and not solely on the product. Thus, the bank was able to better satisfy and retain its customers.

SUCCESS AND FAILURE FACTORS OF CRM IMPLEMENTATION

CRM should be placed at the heart of the organisation and a holistic approach should be adopted because CRM reaches into many parts of the business.  Thus, CRM should be beyond a front-office contact management system.

Another issue is that of sourcing, since many organisations have few alternatives but to outsource a significant proportion of their CRM solution as they lack the resources to develop CRM software.  Managers have a basic understanding of CRM and the IT department has little time to research CRM or to develop software solutions. Thus, in many cases, external consultants should be used to acquire knowledge of CRM. In addition, best-practice examples, that is, the practical guidelines on how to design and implement CRM successfully are few within an industry.

In CRM implementation, a vision or strategic direction for the project is highly important because else the project may fail.  Furthermore, CRM involves business process change to align with the system.  Another major problem is the selection of the appropriate project team.  The integration of CRM systems is also essential, as well as the selection of a suitable CRM software package, which is able to integrate with many other enterprise applications.  Customers should not have to deal with the complexity of the companies and CRM should make things easier for them.

Other success factors of CRM are: Process fit, that is, the CRM system must be designed around an elaborate understanding of a CRM process so as to leverage the marketing and sales effort. Customer information quality, that is, making effective use of customer information resources. System support, because only if the system has been implemented and adopted successfully, a firm is able to reap its benefits.  Another important factor is culture, because employees should accept the changes and be prepared for what the implementation of CRM will bring.

Source: Blery, Evangelia and Michalakopoulos, Michalis (2006) “Customer relationship management: A case study of a Greek bank”, Journal of Financial Services Marketing, 11 (2), pp. 116-124