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As a relatively new practice, the definition of customer relationship management has been debated by field experts and is ever evolving. In fact, the term has come to mean different things to different individuals and organizations. In its inception, customer relationship management was narrowly defined as promotional marketing based on a customer database Bickert, Peppers and Rogers define CRM to be a complex process that builds one-to-one relationships with customers in order to achieve long term growth According to Gronroos, relationship marketing extends past persuading customers to buy products; it is about fulfilling their expectations in the hope of transforming them into long term, loyal customers Most experts can agree, however, that the central theme of CRM is carefully selecting the most valuable customers and maintaining and strengthening relationships with those customers for long term profit maximization.

Sheth and Parvatiyar define CRM as a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer , p. It is a mutually. Customer relationship management is a relatively new field, but its importance is becoming even more evident as time passes. The paradigm shift from focusing on attracting new customers to retaining current ones is at the backbone of CRM Winer Reichhelds studies revealed that small increases in customer retention rates greatly increased profits, proving that long term customers can be more valuable More revenue on average is generated from repeat-purchase customers when compared to one time buyers Reichheld With potential profit maximization in mind, businesses are turning to customer relationship management in order to better understand customers.

Traditional marketing and mass advertising are proving to be ineffective in such a commoditized environment. With the number of similar products on the market increasing and competition among the firms escalating, companies must look toward capturing customers on some factor other than product quality, price, or convenience Brown They must focus on building unique, one to one relationships with customers based on individual needs and wants; thus, implementing customer relationship management is critical to the growth and future success of firms.

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Evolution of CRM Customer relationship management has evolved from the foundations of mass marketing and brand loyalty. The era was dominated by product innovation, and firms created. Firms focused on the amount of products that could be produced and since speed and efficiency were the top priorities, very little attention was given to customization and overall customer satisfaction. Since the firms were solely concentrated on persuading the customers to buy similar products, the marketing departments were often completely separated from direct consumer contact; no attempts were made to truly understand the customers or their purchasing behaviors.

Branding refers to any feature or quality that can differentiate a product or service from that of a competitor Brown Because of the focus on the consumer-brand relationship, brand loyalty can be seen as a precursor to customer relationship management. The concept of mass marketing naturally led into the competitive transactional marketing that is widely used today.

The primary short term focus of transactional marketing is to attract new customers for single transactions. There is a limited amount. All relationships, including those with suppliers and customers, are kept at a distance in order to ensure that each party is acting in its own interest. Relationship marketing is on the opposite end of the spectrum and differs from transactional marketing in a number of fundamental concepts.

Instead of influencing customers to buy the products, relationship marketing suggests making products to fit the customers. Interaction between firms and customers is critical in the success of managing the customer base. Emergence of CRM A number of factors have contributed to the emergence of customer relationship management including technology, total quality management, growth in the service industry, and heightened customer expectations.

Technology is at the heart of CRM development and is essential on multiple levels of the process. Some believe that technology can be credited with the wide acceptance of relationship marketing Hennig-. The customer database and software technology enable firms to track consumer purchase behavior, product preference, and personal contact information Formant Once customer patterns are recorded in the database, the software can cater direct marketing efforts, such as emails or mailers with coupons and special offers, to each individual customer.

This customer value can only be delivered by highly sophisticated databases that combine information from several external and internal sources regarding demographics, psychographics, survey results and purchase patterns Formant Technology is also imperative in creating customer-friendly and easily accessible websites where customers can enter information, provide feedback, and explore product offerings.

The practice of total quality management has also contributed to the development of customer relationship management. Total quality management is the strategic management of cost and quality control. The practice of maintaining and strengthening those relationships result in firms adopting customer relationship management.

A model for evaluation of customer relationship management systems

In addition to the practice of total quality management and the advent of new technology, the growth of the service industry has drastically impacted the emergence of. Unlike products, services are intangible and consumption is tied closely with production. In order to capitalize on profitable consumers and to maintain and strengthen the producerconsumer relationship, firms are turning to customer relationship management. With every customer interaction that takes place within a firm, there is a possibility that customer expectations will not be met.

The ending outcome can meet, exceed, or fall short of customer expectations.

As competition increases among firms, however, there is a greater emphasis on customer satisfaction and in turn, customer expectations are increasing. Components of CRM Implementation of customer relationship management is a multi-step process that involves seven basic components.

The first key component is the creation of a customer. Customer responses to marketing tactics such as redemption rates regarding coupons, mailers, or emails is also usually recorded in the database. In order to build up the content of the database, companies acquire customer information from warranty cards, loyalty customer cards, company websites, and contests.

The ultimate goal is to collect customer information with every customer interaction Winer Although it is easy for some companies to collect data, it is extremely difficult for others. Winer created a framework regarding data collection and the potential problems that might ensue based on customer interaction and interaction frequency.

The ideal situation for a company involves direct interaction at a high frequency; data collection is relatively easy for these firms. Firms that have indirect customer interaction have the most difficult time collecting data and must work harder to develop ways in which to retrieve customer information. Since technology has enabled customer databases to collect and store a large amount of information, the next vital step in the CRM process is the analysis of this information.

Historically, the data was used to separate the customers into different segments based on descriptive information and comparable purchase behaviors in order. Instead of developing marketing schemes for entire segments, each customer can be analyzed in order to understand future purchases and individual profit potential for the firm Winer This innovative one to one marketing concept encourages firms to address individual customer needs and to analyze lifetime customer value. Each customers past profit is calculated by adding up past profit margins of all purchases and then subtracting the variable costs associated with obtaining that customer.

Clickstream analysis is another kind of data analysis, but it takes place on the Internet and company websites.

Customer Relationship Management Essay Examples

The database records and analyzes consumer website visits, purchases, and shopping patterns in order to predict future customer behavior. The goal of clickstream analysis is to convert those potential shoppers who are browsing the websites into purchasing consumers Winer Through analyzing past behavioral patterns, companies can predict future purchases and tailor their websites to each.


After analyzing all of the collected data, the next step in the CRM process is to actually select the customers that the marketing programs will target Winer Customer relationship management is built upon retaining existing customers instead of acquiring new ones. Therefore, the most desired customers are those who have the highest customer lifetime values.

Firms should concentrate on retaining these customers by focusing marketing programs on them. Customers who dont necessarily have high customer lifetime values but have the potential to be profitable in the future should also be targeted with special customer promotions.

Targeting these selected customers involves a combination of direct marketing including direct mail, emails, sales calls, and telemarketing Winer Although these strategies may be successful sometimes, customer relationship management emphasizes the need for individualized targeting through one to one marketing. One to one marketing involves modifying tactics based on each customers needs, wants, and preferences; products and services are refined to meet the expectations of the most profitable customer segments Brown One of the more popular CRM tactics is using opt-in email services in which customers must agree to receive emails from a company Winer Since this is an opt-in marketing service, customers are more prone to clicking through the email to get to the company website and therefore the success rate is high.

The emailing approach is very beneficial to the company because of the high success rate and low costs associated with it. Once customers are selected from analysis of the database and targeted through one to one marketing programs, the next vital component in customer relationship management is the focus on the actual customer relationships. Firms are now constantly competing with one another to provide better service and higher customer satisfaction Winer Customer relationships can be built upon, reinforced, and improved through a number of CRM programs, including customization, community building, customer service requirements, rewards programs, and loyalty programs Winer Customization can pertain to both products and promotions.

Customer Relationship Management (CRM) Questionnaire Survey

Although more cost is incurred when customizing promotions for particular customers, many companies find that their return on investment makes it worthwhile. When it comes to products, customization has been growing in popularity from both a consumer and company standpoint. Consumers enjoy the option to build their own products by selecting specific attributes or product. As the seller, a company offers customized products or services to increase customer value in order to gain competitive advantage over competitors that offer only standardized products and services.

Customization emphasizes consumer-seller interaction and communication while increasing the chances of satisfaction and future exchanges Porter Customer service goes hand in hand with product and service customization. With customization of essentially every customer-firm contact, customer service is vital in developing long term relationships and CRM. Customer service begins before the purchase transaction, but extends far beyond it through increasing the perceived value of the product or service Christopher, Payne, Ballantyne Firms can engage in two general types of customer service: reactive and proactive.

Reactive service takes place when the customer initiates contact with the firm due to a problem or question. Proactive service involves the firm making the first contact with the customer in order to ensure satisfaction before a formal complaint is made Winer Another relationship program in the implementation of CRM is brand community building.

According to McAlexander, Schouten, and Koenig , p. The web offers the ideal location for these networks to develop and for customers to interact with each other by allowing them to provide discussion and feedback about information regarding products, the brand, and the firm. As these customers exchange stories, product suggestions, and other product related. This split is desirable when the consumers who are included in the exclusive group make repeat purchases and remain profitable to the company. Those who do not feel a part of the group, however, can have negative perceptions and may choose not to support the brand or the company.

The brand community as a CRM program is customer-centric and promotes relationship building in an open, interactive environment. Perhaps one of the most powerful programs in the customer relationship management process is the loyalty program, which is designed to increase customer loyalty and satisfaction. Through a loyalty program, the firm aspires to create a mutually beneficial relationship with the customer; the ultimate goal is for each party to receive a positive benefit Brown Loyalty programs may be implemented in various ways, but all of them are created to retain customers, to generate long term relationships, and to increase the number of customer interactions in order to increase profit.

Before a firm creates a program, it must first define loyalty in company terms and identify the firms goals regarding loyalty. True customer loyalty is a combination of two components: attitudinal and behavioral loyalty. Once individuals have made a mental or emotional commitment, behavioral loyalty often follows in the form of repeat purchases or frequent store visits Reinartz Since true loyalty depends on both the.

According to Reinartz, a loyalty program is defined as a marketing practice that offers rewards for customers to encourage them to make repeat purchases Effective loyalty programs are those that are customized to fit the needs and goals of a company and their customers. When designing a loyalty program, the reward structure accounts for the most defining characteristic. Hard rewards offer tangible or financial benefits such as promotions, free products or services, and price reductions.

Soft rewards are based on psychological benefits and often incorporate special customer recognition or status. These rewards may or may not be connected with the companys product offerings. Firms can choose to directly support their product proposition by allowing customers to redeem loyalty points for free products or price reductions on those products Reinartz On the other hand, firms can offer products that are unrelated to their business. More often than not, however, firms usually choose to offer rewards that are directly tied to their product offerings in order to encourage additional business and further develop the relationships with the consumers.

Offering rewards directly related to the products is also less costly to the firm. No matter the type of reward offered in the loyalty program, firms should reward customers at a high rate, which is determined from the ratio of the monetary value. Consumers are much more satisfied and perceive the loyalty program justified when this rate is higher because the decreased lag time between rewards keep customers perceiving the value of the program.


The effectiveness of the loyalty program comes down to whether or not the consumer adopts the program and consistently uses the tools provided to them, such as a loyalty card Mauri Through offering valuable rewards in a timely manner, customers will increase repeat purchases and strengthen their relationships with the firm and its products. The loyalty program in combination with the other relationship programs allows for the CRM process to cater to the needs and wants of the customer base. Managing the CRM Process Once the CRM components are defined by the firm, the next step is to actively manage the process through role specification, employee training, effective communication, and evaluation.

Role specification is necessary in managing the relationships of CRM, and its main goal is to define the responsibilities and duties of the relationship partners such as the firm, the employees, and the customers Heide Role specification ensures that the individuals responsible for maintaining the relationship are held accountable and are given the necessary resources to continue the CRM programs.