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Customer Relationship Management
April 7, 2020
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Customer Relationship Management (CRM) is a strategy used to learn more about customer’s needs and behaviours to create, develop and enhance relationships with carefully targeted customers.

Many organisations view CRM as primarily a technological issue and as a result implement systems that more often than not fail. This is because they assume that CRM is ‘done’ once the right system has been found. The real value of CRM, however, transpires when it is regarded as a strategy or approach that deconstructs the underlying processes, relationships and structures concerning customer behaviour. It is important to align organisation wide business processes to such strategies.

Technological CRM solutions comprise of systems that link together the different influxes of customer information, for example from mail campaigns, web sites, call centres, and sales and marketing. The information is then organised by operational systems (for example sales and inventory systems) and analytical systems. However, these systems “don’t provide the divisional and holistic customer view needed”[1] as they underrate the value of individual customer relations and the benefits of building a strategy to derive benefit from the information.

There is common agreement that a customer relationship should be managed in stages: [2]

1. Recruitment: The customer is targeted and encouraged to purchase. 

2. Welcoming: Make sure the customer knows how to use the product or service and has a contact in the company in case of queries. 

3. Get to Know: Make sure information is exchanged. This stage is where companies can analyse loyalty, satisfaction and retention to determine the future strategies required for individual customers. 

4. Account Management: At this state, customer relationships are managed securely and additional needs problems are identified ahead of time through good communication with the customer. 

5. Intensive Care: If a problem arises and the customer is dissatisfied, for example from bad service or changing needs, special attention is needed to return customers to stage four. 

6. Dissociation of the Relationship: This is where a customer no longer purchases. It may be possible to win them back in time if the reason for leaving is resolved. 

Challenges

The above stages will benefit if businesses first decide on the information they need and what they want to do with that information. Many commentators state that there is little point in endlessly gathering customer data if this knowledge cannot be used. Successful CRM relies on the ability to access information and the existence of internal organisational structures that manage this data. So rather than focusing on technology-based processes, businesses must change the way information is integrated and utilised throughout the organisation. Even before the information is gathered there must be a customer strategy in place that builds relationships based on the individual company and their individual customers. 

A Harvard Review written in 2002 [3] is still as relevant today describing the importance of:

  • Acquiring Customers: The most valuable customers must be identified so their needs can be identified. This means the product or service can be improved to retain valuable customers and marketing strategies can be directed to attract new customers. Technology can analyse historical revenues and cost to predict future value, although this can be fraught with difficulty (see ‘Measuring Customer Value’ article). 
  • Producing the Right Value Proposition. By studying customer needs and surveying competitors, the product or service can be developed to meet the needs and demands. Technology can show product and service behaviour data, create new distribution channels and develop new pricing models. 
  • Instituting the Best Processes. Research must be carried out on the most appropriate and effective ways to deliver the service. Technology can process transactions faster, and provide information to manage logistics and the supply chain. 
  • Motivating Employees. Employee loyalty and attitude must be appropriate. Technology can assist to create and implement incentive schemes to retain employees and improve attitude, which will ultimately impact customer service. 
  • Learning to Retain Customers. Customer behaviour must be analysed to determine what keeps them loyal, why they defect and what wins them back. Technology can track these aspects through monitoring buying behaviour and customer service satisfaction levels. 

Managerial Implications

Again in 2002, Lynette Ryals [4] suggests some managerial implications for implementing a CRM into a company: 

  • Managers will need to oversee and support the implementation of organisation wide strategies of CRM. 
  • Although CRM is not purely a technological issue, new software may have to be put in place for CRM support. Such technology will allow companies to gain information on buying behaviour, to monitor marketing strategies and to respond to suggestions or complaints. 
  • A new emphasis may be needed to stress value creation (for example customer loyalty and word of mouth advertising) rather than just profit (monetary value). This means creating strategies that span the lifetime of the customer relationship. This can help improve returns, minimise risk and gain the benefits from the customer.
  • Aims to retain customers may require changes to pricing policies which reward longer-term customers. It may be necessary to implement other strategies such as outlining cheaper alternatives to customers to induce trust. 
  • Customer risk (i.e. losing a customer) must be managed by detecting early signs of abandonment, such as slower payments or keeping lower than usual balances in an account. 
  • Managers can benefit from good customer relations by asking customers to recommend solutions. This can be achieved by involving them in new product development for innovation and referrals benefits (i.e. word of mouth), e.g. by free trials. 
  • Employees have to be empowered to act in ways that maximise value creation rather than short-term profit. For example, by allowing them the authority to deal directly with complaints, one way being to offer reduced prices. 

Employee Segmentation

A recent development within CRM is that of employee segmentation, which is based on attaining the optimal workforce in order to meet customer needs. It looks to match the skills and capabilities of employees to the needs and expectations of different groups of customers. To do this, the customer portfolio must be analysed and their needs identified, and the workforce must be segmented into groups or job families to match customer profiles. Companies such as B&Q have found that employee segmentation has generated more revenue and greater customer loyalty. 

Principles:

  • businesses should support and reflect the customer base 
  • customers should expect expert advice and ‘people insight’ (which is based on analysing the links between employee data, store performance and customer satisfaction) 
  • employees should be capable of delivering new strategies, for example managers should be able to deliver new customer propositions and teams must be in place to deliver the business plan 

Customer-facing staff, on-site support staff and support teams (call centre representatives) are the groups most likely to be affected by these principles. 

Employee segmentation can help to build on customer relations; maximise the potential of technology; enable fast, high-quality service by front-line staff; ensure employees are empowered, motivated and in the right job; and improve employee engagement (higher morale, satisfaction, lower absenteeism and turnover). In some cases, this may only be fully realised with a complete change in workforce (although in practice this may not be realistic), but may just mean a re-evaluation of how capabilities should be employed. 

Employee segmentation generally moves away from staff working to ‘productivity metrics’ (e.g. calls per hour within call centres) to developing experienced staff with in-depth knowledge on the product or service. This means more quality time will be spent with each customer. Reward structures will change accordingly towards customer-related competencies, skill level and commercial awareness. [5] 

Conclusion

Customer relationship management methods will vary depending on the type of customer and business sector. However, we believe that in all cases a complete reliance on technology cannot build the most effective relationships. Technology can provide and collate valuable information, but it is the individual analysis of this, the organisation-wide integration of this knowledge, coupled with timeless good manners and communication skills that will produce real results.

[1] Stewart Deck, ‘What is CRM?’, CNN at http://edition.cnn.com/2001/TECH/industry/05/23/what.is.CRM.idg/index.html (23 May 2001).

[2] Merlin Stone, Neil Woodcock & Muriel Wilson, ‘Managing the Change from Marketing and Planning to Customer Relationship Management’, Long Range Planning, Vol 29 No. 5 (1996) pp 675-683.

[3] Darrell K Rigby, Frederick F Reichheld & Phil Schefter, ‘Avoid the Four Perils of CRM’, Harvard Business Review (February, 2002) pp 101-109.

[4] Lynett Ryals, ‘Are Your Customers Worth More Than Money?’ Journal of Retailing and Consumer Services, Vol 19 Issue 5 (September, 2002) pp 241-251.

[5] Jim Matthewman, ‘Strong Division’, People Management (February, 2003), p 34.


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