Customer relationship management

Overview

Customer relationship management (CRM) is a strategic process that organizations use to manage, analyze, and improve their interactions with customers. By using data-driven insights, CRM often involves dedicated information systems that help store and analyze customer data, support communication, and coordinate sales, marketing, and service activities. CRM systems compile data from a range of different communication channels, including a company's website, telephone (which many services come with a softphone), email, live chat, marketing materials, and more recently, social media. They allow businesses to learn more about their target audiences and how to better cater to their needs, thus retaining customers and driving sales growth. CRM may be used with past, present or potential customers. The concepts, procedures, and rules that a corporation follows when communicating with its consumers are referred to as CRM. This complete connection covers direct contact with customers, such as sales and service-related operations, forecasting, and the analysis of consumer patterns and behaviours, from the perspective of the company. The global customer relationship management market size is projected to grow from $101.41 billion in 2024 to $262.74 billion by 2032, at a CAGR of 12.6%

History

The concept of customer relationship management started in the early 1970s, when customer satisfaction was evaluated using annual surveys or by front-line asking. At that time, businesses had to rely on standalone mainframe systems to automate sales, but the extent of technology allowed them to categorize customers in spreadsheets and lists. One of the best-known precursors of modern-day CRM is the Farley File. Developed by Franklin Roosevelt's campaign manager, James Farley, the Farley File was a comprehensive set of records detailing political and personal facts about people FDR and Farley met or were supposed to meet. Using it, people that FDR met were impressed by his "recall" of facts about their family and what they were doing professionally and politically. In 1982, Kate and Robert D. Kestenbaum introduced the concept of database marketing, namely applying statistical methods to analyze and gather customer data. By 1987, Pat Sullivan and Mike Muhney had released a customer evaluation system called ACT! based on the principle of a digital Rolodex, which offered a contact management service for the first time. The trend was followed by numerous companies and independent developers trying to maximize lead potential, including Tom Siebel of Siebel Systems, who designed the first CRM product, Siebel Customer Relationship Management, in 1993. In order to compete with these new and quickly growing stand-alone CRM solutions, established enterprise resource planning (ERP) software companies like Oracle, Zoho Corporation, SAP, Peoplesoft (an Oracle subsidiary as of 2005) and Navision started extending their sales, distribution and customer service capabilities with embedded CRM modules. This included embedding sales force automation or extended customer service (e.g. inquiry, activity management) as CRM features in their ERP. Customer relationship management was popularized in 1997 due to the work of Siebel, Gartner, and IBM. Between 1997 and 2000, leading CRM products were enriched with shipping and marketing capabilities. Siebel introduced the first mobile CRM app called Siebel Sales Handheld in 1999. The idea of a stand-alone, cloud-hosted customer base was soon adopted by other leading providers at the time, including PeopleSoft (acquired by Oracle), Oracle, SAP and Salesforce.com. The first open-source CRM system was developed by SugarCRM in 2004. During this period, CRM was rapidly migrating to the cloud, as a result of which it became accessible to sole entrepreneurs and small teams. This increase in accessibility generated a huge wave of price reduction. Around 2009, developers began considering the options to profit from social media's momentum and designed tools to help companies become accessible on all users' favourite networks. Many startups at the time benefited from this trend to provide exclusively social CRM solutions, including Base and Nutshell. The same year, Gartner organized and held the first Customer Relationship Management Summit, and summarized the features systems should offer to be classified as CRM solutions. In 2013 and 2014, most of the popular CRM products were linked to business intelligence systems and communication software to improve corporate communication and end-users' experience. The leading trend is to replace standardized CRM solutions with industry-specific ones, or to make them customizable enough to meet the needs of every business. In November 2016, Forrester released a report where it "identified the nine most significant CRM suites from eight prominent vendors".

Strategic

Strategic CRM concentrates upon the development of a customer-centric business culture. The focus of a business on being customer-centric (in design and implementation of their CRM strategy) will translate into an improved CLV.

Operational

The primary goal of CRM systems is integration and automation of sales, marketing, and customer support. Therefore, these systems typically have a dashboard that gives an overall view of the three functions on a single customer view, a single page for each customer that a company may have. The dashboard may provide client information, past sales, previous marketing efforts, and more, summarizing all of the relationships between the customer and the firm. Operational CRM is made up of three main components: sales force automation, marketing automation, and service automation.

Sales force automation works with all stages in the sales cycle, from initially entering contact information to converting a prospective client into an actual client. It implements sales promotion analysis, automates the tracking of a client's account history for repeated sales or future sales and coordinates sales, marketing, call centers, and retail outlets. It prevents duplicate efforts between a salesperson and a customer and also automatically tracks all contacts and follow-ups between both parties. Marketing automation focuses on easing the overall marketing process to make it more effective and efficient. CRM tools with marketing automation capabilities can automate repeated tasks, for example, sending out automated marketing emails at certain times to customers or posting marketing information on social media. The goal with marketing automation is to turn a sales lead into a full customer. CRM systems today also work on customer engagement through social media. Service automation is the part of the CRM system that focuses on direct customer service technology. Through service automation, customers are supported through multiple channels such as phone, email, knowledge bases, ticketing portals, FAQs, and more.

Analytical

The role of analytical CRM systems is to analyze customer data collected through multiple sources and present it so that business managers can make more informed decisions. Analytical CRM systems use techniques such as data mining, correlation, and pattern recognition to analyze customer data. These analytics help improve customer service by finding small problems which can be solved, perhaps by marketing to different parts of a consumer audience differently. For example, through the analysis of a customer base's buying behavior, a company might see that this customer base has not been buying a lot of products recently. After reviewing their data, the company might think to market to this subset of consumers differently to best communicate how this company's products might benefit this group specifically.

Collaborative

The third primary aim of CRM systems is to incorporate external stakeholders such as suppliers, vendors, and distributors, and to share customer information across groups, departments, and organizations. For example, feedback can be collected from technical support calls, which could help provide direction for marketing products and services to that particular customer in the future.

Customer data platform

A customer data platform (CDP) is a computer system used by marketing departments that assembles data about individual people from various sources into one database, with which other software systems can interact. As of February 2017, about twenty companies were selling such systems and revenue for them was around US$300 million.

Components

The main components of CRM are building and managing customer relationships through marketing, observing relationships as they mature through distinct phases, managing these relationships at each stage and recognizing that the distribution of the value of a relationship to the firm is not homogeneous. When building and managing customer relationships through marketing, firms might benefit from using a variety of tools to help organizational design, incentive schemes, customer structures, and more to optimize the reach of their marketing campaigns. Through the acknowledgment of the distinct phases of CRM, businesses will be able to benefit from seeing the interaction of multiple relationships as connected transactions. The final factor of CRM highlights the importance of CRM through accounting for the profitability of customer relationships. By studying the particular spending habits of customers, a firm may be able to dedicate different resources and amounts of attention to different types of consumers. CRM systems may also incorporate automation features to streamline repetitive tasks such as data entry, follow-ups, and customer segmentation. Relational Intelligence, which is the awareness of the variety of relationships a customer can have with a firm and the ability of the firm to reinforce or change those connections, is an important component of the main phases of CRM. Companies may be good at capturing demographic data, such as gender, age, income, and education, and connecting them with purchasing information to categorize customers into profitability tiers, but this is only a firm's industrial view of customer relationships. A lack of relational intelligence is a sign that firms still see customers as resources that can be used for up-sell or cross-sell opportunities, rather than people looking for interesting and personalized interactions. CRM systems include:

Data warehouse technology, which is used to aggregate transaction information, to merge the information with CRM products, and to provide key performance indicators. Opportunity management, which helps the company to manage unpredictable growth and demand and implement a good forecasting model to integrate sales history with sales projections. CRM systems that track and measure marketing campaigns over multiple networks, tracking customer analysis by customer clicks and sales. Some CRM software is available as a software as a service (SaaS), delivered via the internet and accessed via a web browser instead of being installed on a local computer. Businesses using the software do not purchase it but typically pay a recurring subscription fee to the software vendor,or use free versions of software suites, like those offered by HubSpot and Salesforce. For small businesses, a CRM system may consist of a contact management system that integrates emails, documents, jobs, faxes, and scheduling for individual accounts. CRM systems available for specific markets (legal, finance) frequently focus on event management and relationship tracking as opposed to financial return on investment (ROI). Notable small business CRMs, which are typically subscription-based, include those developed and sold by Salesforce, Freshworks, Pipedrive, and Close. CRM systems for eCommerce focus on marketing automation tasks such as cart rescue, re-engaging users with email, and personalization. Customer-centric relationship management (CCRM) is a nascent sub-discipline that focuses on customer preferences instead of customer leverage. CCRM aims to add value by engaging customers in individual, interactive relationships. Systems for non-profit and membership-based organizations help track constituents, fundraising, sponsors' demographics, membership levels, membership directories, volunteering and communication with individuals. CRM not only indicates technology and strategy but also indicates an integrated approach that includes employees knowledge and organizational culture to embrace the CRM philosophy.

Effect on customer satisfaction

Customer satisfaction has important implications for the economic performance of firms because it has the ability to increase customer loyalty and usage behavior and reduce customer complaints and the likelihood of customer defection. The implementation of a CRM approach is likely to affect customer satisfaction and customer knowledge for a variety of different reasons. Firstly, firms can customize their offerings for each customer. By accumulating information across customer interactions and processing this information to discover hidden patterns, CRM applications help firms customize their offerings to suit the individual tastes of their customers. This customization enhances the perceived quality of products and services from a customer's viewpoint, and because the perceived quality is a determinant of customer satisfaction, it follows that CRM applications indirectly affect customer satisfaction. CRM applications also enable firms to provide timely, accurate processing of customer orders and requests and the ongoing management of customer accounts. For example, Piccoli and Applegate discuss how Wyndham uses IT tools to deliver a consistent service experience across its various properties to a customer. Both an improved ability to customize and reduced variability of the consumption experience enhance perceived quality, which in turn positively affects customer satisfaction. CRM applications also help firms manage customer relationships more effectively across the stages of relationship initiation, maintenance, and termination.

Customer benefits

With CRM systems, customers are served on the day-to-day process. With more reliable information, their demand for self-service from companies will decrease. If there is less need to interact with the company for different problems, then the customer satisfaction level is expected to increase. These central benefits of CRM will be connected hypothetically to the three kinds of equity, which are relationship, value, and brand, and in the end to customer equity. Eight benefits were recognized to provide value drivers.

Enhanced ability to target profitable customers. Integrated assistance across channels. Enhanced sales force efficiency and effectiveness. Improved pricing. Customized products and services. Improved customer service efficiency and effectiveness. Individualized marketing messages are also called campaigns. Connect customers and all channels on a single platform.

Examples

Research has found a 5% increase in customer retention boosts lifetime customer profits by 50% on average across multiple industries, as well as a boost of up to 90% within specific industries such as insurance. Companies that have mastered customer relationship strategies have the most successful CRM programs. For example, MBNA Europe has had a 75% annual profit growth since 1995. The firm heavily invests in screening potential cardholders. Once proper clients are identified, the firm retains 97% of its profitable customers. They implement CRM by marketing the right products to the right customers. The firm's customers' card usage is 52% above the industry norm, and the average expenditure is 30% more per transaction. Also 10% of their account holders ask for more information on cross-sale products. Amazon has also seen successes through its customer proposition. The firm implemented personal greetings, collaborative filtering, and more for the customer. They also used CRM training for the employees to see up to 80% of customers repeat.

Customer profile

A customer profile is a detailed description of any particular classification of customer which is created to represent the typical users of a product or service. Customer profiling is a method to understand your customers in terms of demographics, behaviour and lifestyle. It is used to help make customer-focused decisions without confusing the scope of the project with personal opinion. Overall profiling is gathering information that sums up consumption habits so far and projects them into the future so that they can be grouped for marketing and advertising purposes. Customer or consumer profiles are the essences of the data that is collected alongside core data (name, address, company) and processed through customer analytics methods, essentially a type of profiling. The three basic methods of customer profiling are the psychographic approach, the consumer typology approach, and the consumer characteristics approach. These customer profiling methods help you design your business around who your customers are and help you make better customer-centered decisions.