12 – Customer Relationship Management

Introduction

CRM is a framework for identifying, attracting, satisfying, and retaining lucrative customers by managing successful relationships to generate increased and guaranteed profitability. This is the stage at which the corporation concentrates on developing long-term relationships with only profitable clients by providing financial and social rewards. CRM also recommends businesses neglect unprofitable or less profitable consumers in favour of focusing on high-profit customers with whom they will have long-term relationships.

Because of factors such as globalisation, increased competition, and short product life cycles, the role of marketing has shifted over the last decade. Marketers now focus on CRM rather than individual transaction-oriented customers.

12.1 Objective

CRM has four objectives.

1. Long-term earnings are prioritised: CRM prioritises long-term profits over acquiring clients for a single transaction to generate a small profit now. To gain long-term profits, the company should invest in profitable clients and serve them better at the expense of current profits.

2. Customer retention: It has been proven that retaining existing customers is less expensive than obtaining new ones. Attracting new clients has significant costs, such as advertising, but retention costs, such as serving the customer, are thought to be lower. However, many businesses fail to understand this and opt out of retention measures.

3. Customer welfare at a profit: CRM states that selected profitable clients should be supported at the sacrifice of current profits to reap more profits in the future through a loyal customer base that will not switch to competitors. The company should give welfare and services to customers and establish long-term relationships with them, and loyalty should be created from the ground up to the partnership level.

4. Creating the strategy: CRM should be included in business and marketing plans to produce better results, and the entire organisation should be dedicated to serving profitable customers at the loss of profits today to generate more profits tomorrow.

It is essential to highlight that CRM is not a new concept in the corporate world, but its use has expanded over the last decade.

CRM does not focus on profit from a single transaction but on obtaining superior long-term profits by understanding targeted consumers and creating value for them. As a result of CRM, customers are satisfied and are more likely to stay with the business, which leads to better organizational processes. The value creation process is a critical component in fostering loyalty.

12.2 Features of CRM

1. Concentrate on the consumer rather than the revenue from a single transaction.

2. Creating consumer value instead of simply adding product features.

3. Long-term focus

4. Excellent customer service

5. Strong customer commitment based on loyalty

6. A high level of client engagement to determine customer wants and better service them.

12.3 CRM Advantages Over Mass Media Marketing

1. Reduce Advertising: Because CRM focuses on client retention rather than attracting new consumers, there is no need to market aggressively, and the strong loyalty developed through CRM will lead to the customer purchasing the product with less advertising effort.

2. CRM allows the company to identify profitable clients, which prevents the company from overspending on unprofitable customers and underspending on profitable customers.

3. CRM will give the business a competitive advantage based on the service provided rather than competing on pricing.

12.4 Customer Relationship

It is critical to maintain and strengthen client relationships for the following reasons:

1. There are higher marketing costs associated with cultivating new client interest. The expenses of educating a new consumer far outweigh the costs of establishing the relationship required to maintain exchanges between buyer and vendor (Barnes and Glynn, 1992). According to estimates, the cost of recruiting new consumers might be up to six times that of retaining existing clients (Desatnick, 1987; Sellers, 1989; Congram, 1991).

2. Long-term customer connections mean ongoing exchange opportunities with existing customers at a lower marketing cost per customer (Gronroos, 1990b). Reichheld and Sassier say, “The trend is the same across a wide range of business: the longer a company has a customer, the more money it tends to make” (Reichheld and Sasser 1990).

3. Viewing client exchanges as a revenue stream rather than a collection of discrete transactions allows for cross-selling of related services over time as well as premium pricing for the customer’s trust in the organisation (Reichheld and Sasser, 1990; Congram 1991).

4. Customers and contact staff can develop more practical new product ideas if they have strong customer relationships with a high degree of familiarity and communication on both sides (Kiess-Moser and Barnes, 1992).

5. Good customer interactions can result in positive word-of-mouth from successful and minimal negative word-of-mouth from unsuccessful exchanges. Where there have previously been solid relationships, service quality cracks can often be papered over.

12.5 Understanding Customer Relationship Management (CRM)

CRM is a corporate strategy built on individual customers, customised products and services, and open lines of contact and feedback from participating enterprises that benefit both buying and selling organisations. The purchasing and selling organisations have a “learning relationship,” with the client wanting to engage with the vendor and grow as a devoted customer. In exchange, the seller attempts to maximise the connection’s value for the client’s benefit. In brief, CRM provides a framework for selling organisations to gain a competitive advantage by embracing customer demands and developing value-driven long-term partnerships.

12.6 Determinants of CRM

Trust: The willingness to trust one firm’s capacity, honesty, and motive to service the other company’s needs as agreed upon tacitly and explicitly.

Value: A selling organization’s ability to meet the needs of a customer at a lower cost or higher benefit than competitors, as measured in monetary, temporal, functional, and psychological dimensions.

In addition to trust and value, salespeople must: understand customer needs and problems; meet their commitments; provide superior after-sales support; ensure that the customer is always told the truth (must be honest); and have a strong interest in establishing and maintaining a long-term relationship.

Stages

1. The Pre-relationship Stage:

The occurrence that prompts a buyer to seek a new business partner is referred to as the Pre-relationship stage.

2. The Early Stage:

Although there is a significant deal of ambiguity and distance between the buyer and seller, experience is being gained.

3. The Development Stage:

As the volume of transactions increases, so does the amount of commitment, and the distance is decreased to a social exchange.

4. The Long-term Stage:

The Long-Term Stage is distinguished by the companies’ mutual importance to one another.

5. The Final Stage:

The final stage is when the companies’ interactions become institutionalised.

A Relationship Life Cycle Model

Salespeople’s roles as relationship builders and promoters Salespeople identify potential customers and their needs; approach key decision makers in the buying firm; negotiate and advance dialogue and mutual trust; coordinate cooperation between customers and their company; encourage the inter-organizational learning process; contribute to constructive resolution of existing conflicts; and lead the customer relationship development team.

12.7 Customer Relationship Management

To establish, develop, and improve the process of building trust and commitment with the customer, the global salesman must engage in the following actions. Relationship development Choose an acceptable offering; Personalize the relationship; Connect the solutions to the demands of the consumer; Discuss the customer’s concerns; summarise the solution to confirm the benefits; and obtain commitment.

To establish, develop, and improve the process of building trust and commitment with the customer, the global salesman must engage in the following actions: Improving the relationship. Customer happiness should be assessed; actions should be taken to ensure satisfaction; open, two-way communication should be maintained; and we should work together to generate value and expand mutual prospects.

Prospects who are suitable for relationship building Possibilities for increasing value Customer profit potential is high, low, and high. Make use of a non-customized technique. Look for other opportunities elsewhere. Create a robust and long-lasting relationship. Concentrate on a loyalty-building programme.

Networks of relationships: A successful CRM strategy will result in the construction of a one-of-a-kind company asset known as a relationship network. A relationship network comprises the company and its important clients with long and lasting business connections. A global salesperson’s extra responsibilities include managing client value, acting as a customer advocate, enhancing customer loyalty, and building a “healthy” and profitable network of relationships.

CRM is a new business strategy that is founded on trust and value: The value creation process is the main function of CRM; customer connections evolve; global salespeople play the roles of both relationship builders and relationship boosters in the process; and CRM’s fundamental concept is to provide superior value to customers to convert prospects into customers, consumers into loyal customers, and loyal customers into partners.

12.8 Marketing Strategy Continuum

Transaction marketing is popular in the consumer-packaged goods industry, but as companies are compelled to become more service-oriented in their approach, relationship marketing is progressively displacing transaction marketing. The following are the driving forces underlying this displacement:

1. More advanced or diversified technology

2. Increasing customer satisfaction

3. Customers’ access to a broader range of options

All firms are seen to be on a continuum, with transaction and relationship marketing being the two extremes. The requirement for relationship marketing depends on the type of business; for example, transaction marketing is best suited to commodities, and relationship marketing is best suited to services. While various factors may influence the status of a certain product and customer behaviour, selecting an appropriate mix of marketing types for consumer durable and industrial goods is critical.