Customer Relationship Management | Meaning | Objectives

What is Customer Relationship Management?

Customer Relationship Management (CRM) is an enterprise-wide strategy for presenting a single face to the customer. A long-term relationship with customer gives the service marketers a competitive edge. A company’s revenue, profit and market share come ultimately from the customers. The need for building a relationship has become the essential part for the long-term success of the organization. The process of CRM involves creation and management of data mines, development of appropriate organizational structure, investment in technology and development of people. CRM remains at the top of the minds of marketing professionals.

Definition of CRM

“Using information-based technologies to drive a share of wallet strategy in markets where personal account management is not appropriate or cost effective”. — Sophron Gartners

Objectives of CRM

The following are the important objectives of CRM

  1. Turning prospects into advocates
  2. Minimizing defections
  3. Having a large proportion of loyal advocates
  4. Having a profitable relationship of the type the customers would desire and with those who desire them.
  5. Using cross selling opportunities without annoying customers.

1. Turning prospects into advocates: The service marketers should identify and qualify prospects. Customer forms the basis on which all strategic activities should be built. The service company should convert prospects into customers. CRM uses the inputs of customer database of the company extensively. The company has to select prospective customers and identify the customer groups. Then, it should convert the customers gradually into advocates. Needless to say, satisfied customers recommend the use of services to their friends and relatives.

2. Minimizing defections: One of the important objectives of CRM is minimizing customer defections. CRM defines customer defections and determines the exact rate of customer defection. The following examples illustrate how customer defections occur.

  1. Customers are attracted to competitors due to their lower prices. The cell phone and airlines industries experience customer defections very frequently due to lower prices.
  2. A regular internet user may change his or her regular cybercafe for faster browsing speed.
  3. When a hotel or a restaurant serves a customer poorly, he may shift to another one.
  4. Customers may move from one city to another or one locality to another and change their banks to the nearest available branch.

The CRM strategy arrests potential defectors by finding out the major reasons for defections and rectify them.

3. Having a large proportion of loyal advocates: A customer goes through stages in his relationship with a brand. He may finally reach the advocate stage where he actively canvasses for a brand. The service firm should try to convert its good customers into advocates, who in turn, would become the ambassadors of the brand. This follows from the first objective and should result in a large number of loyal customers. Loyal customers have an increased level of commitment to a brand. The marketing cost for loyal customers is minimum. The referrals (advocates) give positive word of mouth recommendations to other potential customers. Such recommendations reduce the cost of serving them when they repurchase from the service provider.

4. Having profitable relationship: Customers vary in attitude and behavior. In a competitive market place, customers are exposed to hundreds of selling messages. Customers have limited ability to process information. A number of constraints influences their decision making. Every sale is the result of complex interaction with customers. So, building strong casual relationship with customers is very important. The CRM strategy maintains an ideal relationship without giving an impression to customers that their privacy is being invaded.

5. Using cross selling opportunities without annoying customers: Customers can be groomed for purchasing not one product of the company but for a series of products from the same organization. Credit facility may be provided to customers to buy other service products of the same service provider.

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