What is Customer Relationship Management, or CRM? Customer Relationship Management concerns the relationship between the organization and its customers. Customers are the lifeblood of any organization be it a global corporation with thousands of employees and a multi-billion turnover, or a sole trader with a handful of regular customers. Customer Relationship Management is the same in principle for these two examples - it is the scope of CRM which can vary drastically.
CRM focuses on the relationship
Successful organizations use three steps to build customer relationships:
- determine mutually satisfying goals between organization and customers
- establish and maintain customer rapport
- produce positive feelings in the organization and the customers
The organization and the customers both have sets of conditions to consider when building the relationship, such as wants and needs of both parties;
- organizations need to make a profit to survive and grow
- customers want good service, a quality product and an acceptable price
Why do organizations undertake CRM?
CRM is a new concept to many organizations. If it's new to you, here's why most forward-thinking organizations devote lot of energy and resources to the set up and management of a CRM capability.
How CRM impacts on the organisation?
CRM can have a major impact on an organisation through:
- shifting the focus from product to customer
- streamlining the offer to what the customer requires, not want the organisation can make
- highlighting competencies required for an effective CRM process
The ultimate purpose of CRM, like any organizational initiative, is to increase profit. In the case of CRM this is achieved mainly by providing a better service to your customers than your competitors. CRM not only improves the service to customers though; a good CRM capability will also reduce costs, wastage, and complaints (although you may see some increase initially, simply because you hear about things that without CRM would have stayed hidden). Effective CRM also reduces staff stress, because attrition - a major cause of stress - reduces as services and relationships improve. CRM enables instant market research as well: opening the lines of communications with your customers gives you direct constant market reaction to your products, services and performance, far better than any market survey. Good CRM also helps you grow your business: customers stay with you longer; customer churn rates reduce; referrals to new customers increase from increasing numbers of satisfied customers; demand reduces on fire-fighting and trouble-shooting staff, and overall the organisation's service flows and teams work more efficiently and more happily.
Features of good CRM
The old viewpoint in industry was: 'Here's what we can make - who wants to buy our product?'
The new viewpoint in industry is:
- 'what exactly do our customers want and need?' and
- 'what do we need to do to be able to produce and deliver it to our customers?'
What do customers want?
Most obviously, and this is the extent of many suppliers' perceptions, customers want cost-effective products or services that deliver required benefits to them. (Benefits are what the products or services do for the customers.) Note that any single product or service can deliver different benefits to different customers. It's important to look at things from the customer's perspective even at this level.
More significantly however, customers want to have their needs satisfied. Customers' needs are distinctly different to and far broader than a product or service, and the features and benefits encompassed. Customers' needs generally extend to issues far beyond the suppliers' proposition, and will often include the buying-selling process (prior to providing anything), the way that communications are handled, and the nature of the customer-supplier relationship.
Modern CRM theory refers to the idea of 'integrating the customer'. This new way of looking at the business involves integrating the customer (more precisely the customer's relevant people and processes) into all aspects of the supplier's business, and vice versa. This implies a relationship that is deeper and wider than the traditional 'arms-length' supplier-customer relationship.
The traditional approach to customer relationships was based on a simple transaction or trade, and little more. Perhaps there would be only a single point of contact between one person on each side. All communication and dealings would be between these two people, even if the customers' organization contained many staff, departments, and functional requirements (distribution, sales, quality, finance, etc).
The modern approach to customer relationship management is based on satisfying all of the needs - people, systems, processes, etc - across the customer's organization, such as might be affected and benefited by the particular supply.