Customer Relationship Management
Business people started using the term Customer Relationship Management (CRM) since the early 1990s when the concept of business started to change from being transactional to relational. CRM directly contributes towards customer benefits and the growth of businesses.
Information Technology plays a very critical role in identifying, acquiring, and retaining the customers, and thereby managing a healthy relationship with them.
Here in this chapter, we will discuss the very basics of CRM.
What is CRM?
There can be multiple definitions of CRM from different perspectives −
- From the viewpoint of the Management, CRM can be defined as an organized approach of developing, managing, and maintaining a profitable relationship with customers.
- By equating the term with technology, the IT organizations define CRM as a software that assists marketing, merchandising, selling, and smooth service operations of a business.
- As per Franics Buttle, World’s first professor of CRM, it is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to a target customer at profit. It is grounded on high quality customer data and information technology.
The primary goal of CRM is to increase customer loyalty and in turn improve business profitability.
Ingredients of CRM
Take a look at the following illustration. It shows the ingredients that work together to form a successful CRM system.
Here are some of the important ingredients of CRM −
- Analytics− Analytics is the process of studying, handling, and representing data in various graphical formats such as charts, tables, trends, etc., in order to observe market trends.
- Business Reporting− Business Reporting includes accurate reports of sales, customer care, and marketing.
- Customer Service− Customer Service involves collecting and sending the following customer-related information to the concerned department −
- Personal information such as name, address, age
- Previous purchase patterns.
- Requirements and preferences.
- Complaints and suggestions.
- Human Resource Management− Human Resource Management involves employing and placing the most eligible human resource at a required place in the business.
- Lead Management− Lead Management involves keeping a track of the sales leads and distribution, managing the campaigns, designing customized forms, finalizing the mailing lists, and studying the purchase patterns of the customers.
- Marketing− Marketing involves forming and implementing sales strategies by studying existing and potential customers in order to sell the product.
- Sales Force Automation− Sales Force Automation includes forecasting, recording sales, processing, and keeping a track of the potential interactions.
- Workflow Automation− Workflow Automation involves streamlining and scheduling various processes that run in parallel. It reduces costs and time, and prevents assigning the same task to multiple employees.
Objectives of CRM
The most prominent objectives of using the methods of Customer Relationship Management are as follows −
- Improve Customer Satisfaction− CRM helps in customer satisfaction as the satisfied customers remain loyal to the business and spread good word-of-mouth. This can be accomplished by fostering customer engagement via social networking sites, surveys, interactive blogs, and various mobile platforms.
- Expand the Customer Base− CRM not only manages the existing customers but also creates knowledge for prospective customers who are yet to convert. It helps creating and managing a huge customer base that fosters profits continuity, even for a seasonal business.
- Enhance Business Sales− CRM methods can be used to close more deals, increase sales, improve forecast accuracy, and suggestion selling. CRM helps to create new sales opportunities and thus helps in increasing business revenue.
- Improve Workforce Productivity− A CRM system can create organized manners of working for sales and sales management staff of a business. The sales staff can view customer’s contact information, follow up via email or social media, manage tasks, and track the salesperson’s performance. The salespersons can address the customer inquiries speedily and resolve their problems.
History of CRM
CRM systems are divided based on their prominent characteristics. There are four basic types of CRM systems −
- Strategic CRM
- Operational CRM
- Analytical CRM
- Collaborative CRM
The following table lists the types of CRM and their characteristic features −
|Strategic CRM||Customer-centric, based on acquiring and maintaining profitable customers.|
|Operational CRM||Based on customer-oriented processes such as selling, marketing, and customer service.|
|Analytical CRM||Based on the intelligent mining of the customer data and using it tactically for future strategies.|
|Collaborative CRM||Based on application of technology across organization boundaries with a view to optimize the organization and customers.|
Strategic CRM is a type of CRM in which the business puts the customers first. It collects, segregates, and applies information about customers and market trends to come up with better value proposition for the customer.
The business considers the customers’ voice important for its survival. In contrast to Product-Centric CRM (where the business assumes customer requirements and focuses on developing the product that may sometimes lead to over-engineering), here the business constantly keeps learning about the customer requirements and adapting to them.
These businesses know the buying behavior of the customer that happy customers buy more frequently than rest of the customers. If any business is not considering this type of CRM, then it risks losing the market share to those businesses, which excel at strategic CRM.
Operational CRM is oriented towards customer-centric business processes such as marketing, selling, and services. It includes the following automations: Sales Force Automation, Marketing Automation, and Service Automation.
Salesforce is the best suitable CRM for large established businesses and Zoho is the best CRM for growing or small-scale businesses.
Sales Force Automation
SFA is the application of technology to manage selling activities. It standardizes a sales cycle and common terminology for sales issues among all the sales employees of a business. It includes the following modules −
- Product Configuration− It enables salespersons or customers themselves to automatically design the product and decide the price for a customized product. It is based on if-then-else structure.
- Quotation and Proposal Management− The salesperson can generate a quotation of the product prices and proposal for the customer by entering details such as customer name, delivery requirements, product code, number of pieces, etc.
- Accounts Management− It manages inward entries, credit and debit amounts for various transactions, and stores transaction details as records.
- Lead Management− It lets the users qualify leads and assigns them to appropriate salespersons.
- Contact Management− It is enabled with the features such as customers’ contact details, salespersons’ calendar, and automatic dialing numbers. These all are stored in the form of computerized records. Using this application, a user can communicate effectively with the customers.
- Opportunity Management− It lets the users identify and follow leads from lead status to closure and beyond closure.
Marketing automation involves market segmentation, campaigns management, event-based marketing, and promotions. The campaign modules of Marketing Automation enable the marketing force to access customer-related data for designing, executing and evaluating targeted offers, and communications.
Event-based (trigger) marketing is all about messaging and presenting offers at a particular time. For example, a customer calls the customer care number and asks about the rate of interest for credit card payment. This event is read by CRM as the customer is comparing interest rates and can be diverted to another business for a better deal. In such cases, a customized offer is triggered to retain the customer.
Service automation involves service level management, resolving issues or cases, and addressing inbound communication. It involves diagnosing and solving the issues about product.
With the help of Interactive Voice Response (IVR) system, a customer can interact with business computers by entering appropriate menu options. Automatic call routing to the most capable employee can be done.
Consumer products are serviced at retail outlets at the first contact. In case of equipment placed on field, the service expert may require product servicing manual, spare parts manual, or any other related support on laptop. That can be availed in service automation.
Analytical CRM is based on capturing, interpreting, segregating, storing, modifying, processing, and reporting customer-related data. It also contains internal business-wide data such as Sales Data (products, volume, purchasing history), Finance Data (purchase history, credit score) and Marketing Data (response to campaign figures, customer loyalty schemes data). Base CRM is an example of analytical CRM. It provides detailed analytics and customized reports.
Business intelligence organizations that provide customers’ demographics and lifestyle data over a large area pay a lot of attention to internal data to get more detail information such as, “Who are most valuable customers?”, “Which consumers responded positively to the last campaign and converted?”, etc.
Analytical CRM can set different selling approaches to different customer segments. In addition, different content and styling can be offered to different customer segments. For the customers, analytical CRM gives customized and timely solutions to the problems. For the business, it gives more prospects for sales, and customer acquisition and retention.
Collaborative CRM is an alignment of resources and strategies between separate businesses for identifying, acquiring, developing, retaining, and maintaining valuable customers. It is employed in B2B scenario, where multiple businesses can conduct product development, market research, and marketing jointly.
Collaborative CRM enables smooth communication and transactions among businesses. Though traditional ways such as air mail, telephone, and fax are used in communication, collaborative CRM employs new communication systems such as chat rooms, web forums, Voice over Internet Protocol (VoIP), and Electronic Data Interchange (EDI).
There are collaborative CRMs with in-built Partner Relationship Management (PRM) software application which helps in managing partner promotions. SugarCRM is a popular collaborative CRM. It enables expert collaboration and provides state-of-the-art social capabilities.
CRM Software Buying Considerations
A business needs to consider the following points while selecting a CRM software −
- Business strategy and processes− It helps to automate a customer management strategy. Hence before selecting a CRM software, a business should be clear with its strategies and desired processes.
- Business requirements− CRM systems range from domain specialty solutions that focus on solving a specific area such as sales force automation, marketing automation, services automation, partner management, etc., to complete enterprise management solutions.
- Size of business− Small businesses require tools that are easy to learn and can handle a wide range of the most common tasks. Large businesses opt for applications that handle more complex tasks and thousands of users.
- Customer base− The size of the customer base a business is required to handle.
- Budget− A business needs to set a budget prior vendor selection. The budget allocated for CRM varies according to the degree of customization required.
- Context− The context in which a business is functioning, e.g., B2B or B2C, determines which CRM the business should go for.
- Sales channels− The sales channels a business is employing: Direct sale, channel sale such as distributors, or Direct to customers via retail. They matter while selecting the most suitable CRM software.
- System integration− All the interfaces the business needs and the CRM vendor can support without requiring too much custom services effort.
- Strength of partners− The partners must be able to provide a business with additional support, or help to implement the CRM successfully.