Relationship management, also called customer relationship management (CRM), refers to a business’s process of managing and optimizing interactions with its customers: past, present, and future. You can manage relationships with customers in your direct interactions with them and through CRM software like Salesforce or Hubspot.
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.
Evolution of Customer-Supplier Relationship
Awareness: The parties come in contact with each other and see each other as a possible customer or supplier.
Exploration: The parties find out more about one another’s capabilities and business prospects. Trial purchasing takes place and performance is assessed. If deal is not smooth then the relationship terminates with the damage of less costs.
Expansion: It is composed of attraction, communication, bargaining, development of rules, and development of expectations from each other.
Commitment: Trust begins to develop and deals are executed as per the norms and expectations. Mutual understanding and cooperation develops, and number of transactions starts building up.
Dissolution: Not all relationships can survive. Some relationships are terminated either bilaterally (both parties agree to end) or unilaterally (one party decides to end). If it is bilateral decision then both parties retrieve the invested amount and resources. Supplier exits relationship in case of failure to contribute sales volume or profit. Customer ends relationship unilaterally due to changes in product requirement, repeated servicing failure, etc.
There are various schools of thoughts with different theories of relationship management.
Theory by Industrial Marketing and Purchasing Group (IMP Group)
- Buyers and sellers both actively participate in the transaction to find solutions to their respective challenges.
- Buyer-seller relationships are normally long-term and close.
- Relationships are composed of interpersonal bond, connections among businesses, and strengths or weaknesses of the business.
- The transactions often occur with respect to relationship’s history.
- The businesses chose the mode and the manner of interaction with the entities at various levels of importance.
Theory by Nordic School
A Scandinavian services marketing group, named The Nordic School, emphasizes on supplier-customer relationship. It identifies the triplet of relationship marketing as:
- Interaction: As customers and suppliers interact, each one provides a service to another. Customer provides information and supplier provides solution.
- Dialogue: Communication is bilateral and is essential for the survival of the relationship.
- Value: The business needs to generate something that is perceived as value to the customer.
Theory by North American School
According to this theory, good relationships reduce costs significantly. Trust and commitment are vital attributes of a successful relationship. By connecting the trust to the commitment, this theory states that trust created on the basis of minimal functional conflicts, communication, non-opportunistic behavior, and cooperation. Commitment is linked to high relationship termination cost and relationship benefits.
Theory by Anglo-Australian School
It states that relationships are important not only from the viewpoint of customers but also from the angle of stakeholders of the business such as employees, suppliers, and government. It also found out that customer’s satisfaction and customer retention are value drivers of any business.
Theory by (Guanxi) Asian School
This theory is based upon the teachings of Lord Buddha regarding social conducts and acts of reciprocation. This theory states that people from a family, friendship, same-clan fellowship are connected to each other due to informal social relationships which impose them to follow reciprocal obligations to acquire the resources by exchanging favors and cooperation.