The multi-dimensional process through which the organisations gain knowledge about the needs, wants, desires and buying patterns of their customers by establishing a two-way communication with them with the use of information technologies, is known as Customer Relationship Management (CRM). It involves developing a business philosophy and several strategies, Systems and programs, in order to identify profitable Customers and build customer loyalty. It functions on the philosophy that building strong relationships with better customers can increase the organisation’s profitability as the profitability level attached to all the customers is not same. Thus, creating loyal customers who frequently buy organisational products is the main aim here. CRM can be divided into three main components:
Customer: It is important to recognise and manage customers for an organisation as its profit and growth solely depends on customers. Information technologies play a very important role here.
Relationship: Uninterrupted bi-directional communication between the organisation and its customers builds the relationship between them. This relationship can take any form such as continuous or discrete, repetitive or one-time, and short-term or long-term.
Management: CRM is a management function that should be considered not only in marketing department but in the whole corporate culture, departments, and activities. A broad change in the procedures and functions of the organisation and employee attitude is required for CRM. CRM is a new phase of marketing industry which drives the philosophy of information technology enabled relationship marketing. There is an emerging need for CRM in the current marketing scenario as it is equipped with several IT tools such as MS Access, Spreadsheets, Data warehouses, MIS, SMS, Fax, E-mails, Telephones, Loyalty cards, ATMs, etc, These tools help in developing customer loyalty thus profitability of the organisation by improving customer service processes within the organisation with the help of improved analysis of the processed customer data.
Process of Relationship Management + IT = CRM
Hence, CRM inculcates all the IT tools and techniques essential for maintaining relationships with customers.
Architectural Elements of Customer Relationship Management (CRM): Types of Relationship Management
CRM has achieved its significance for providing profit to various organisations the recent years. Following are the types of CRM:
Operational CRM: An operational CRM deals with the automation, improvement and enhancement of various customer-centric processes (customer-facing or customer support) in the business. In operational CRM, numerous interconnected delivery channels are used in business for automation of horizontally linked processes like front office touch points for customers (customer service, sales, marketing, etc.). It also involves the integration of front office and back office. Organisations having direct interaction with their customers implement operational CRM for automated support of their business. In this, persona preferences of customers and their interactions with the organisations are recorded and used by several departments in order to generate Customer information.
Analytical CRM: The analytical CRM deals with automation and improvement of different back-office operations and analysis functional in an organisation. It controls all the processes and operations that are indirectly connected to the customers. Thus, the analytical CRM differs from the operational CRM. In operational CRM, horizontally linked processes like front office touch points for customers (customer service, sales, marketing, etc.) are automated to generate customer information. Whereas, analytical CRM is focused towards exploring the intentions of the cust01ners (by thoroughly analysing the customer related information) to be used by the organisation. Analytical CRM highlights the significant patterns and predictions of the customer data (provided by operational CRM systems), thus, supports and improves the functional operations and decision-making ability of the concerned organisation.
Collaborative CRM: Collaborative CRM is focused towards referring the customers an organised and reliable way by integrating and coordinating the communication channels (phone, fax, e-mail, web, etc.) and customer interactions. The concept Of collaborative CRM not only encompasses enhancing the customer interactions but also inculcates enhancing customer retention as well as freedom. Different departments (marketing, finance, service, sales, etc.) of the Organisation are covered under collaborative CRM. In order to develop effective understanding of the customer, customer information is shared among these departments by collaborative CRM.
Role of Customer Relationship Management (CRM)
The role of CRM can be understood by considering the following points
- Handling the Customer Issue
- Helping Top Management in Decision-making
- Helping Organisation in Attracting and Retaining Customers
- Knowing the Future Course of Action
- Helping in the Expansion of Business
- Helping in Reducing Cost
- Providing Feedback and New Information on Competitors
Handling the Customer Issue: CRM facilitates the organisation and the customer service department in handling the customer issues and problems. As CRM contains vast customer data, the departments dealing with customers are provided with this data to enable the effective customer service transactions. Therefore, the resources available to support department, satisfaction level of customers and profitability of the business is increased due to CRM.
Knowing the Future Course of Action: With the help of CRM systems, the management can easily forecast future course of actions of the organisation. Customer name, address. order Status, account details, transaction dates, Status of transaction (pending or complete), shipping and order fulfilment dates, nature of issues/complaints, demographic details and many other important information is provided by CRM, which is sufficient for the organisations to forecast their decisions.
Helping Top Management in Decision-making: CRM systems help the top managers in decision-making by providing updated data about the satisfied customers and the level of service provided by the frontline staff, Reports required for development of new product or idea can also be generated by CRM software. Moreover, these systems help the top management to decide whether to remove a product from the product line or modify the current product.
Helping in the Expansion of Business: An organisation can increase its business and market by adopting CRM systems. Large number of customers and the relevant information can be stored and processed through such systems as these are capable of dealing with large data. All the required information is available and used through proper implementation of the CRM systems to make the business run successfully.
Helping Organisation in Attracting and Retaining Customers: Customer acquisition and retention is very essential for any organisation. Along with satisfying existing customers, the CRM system is also focused towards new customer acquisition. Customer identification and collection and maintenance of related data (also called opportunity of business), is the first step of customer acquisition process. CRM is critically involved in linking and developing relationship With customers. On account of this relationship, loyalty is developed in existing customers and new customers are also attracted. All these actions lead to broad customer base and increased profitability.
Helping in Reducing Cost: CRM Systems reduce unnecessary costs associated with organisational operations. Due to CRM systems, the necessity of manual and paper work is reduced, thus lesser resources and number of staff are required to manage the organisational operations. Moreover, in comparison to traditional approach of business, the CRM technologies are more economical and effective.
Providing Feedback and New Information on Competitors: Getting performance feedback from the market is very essential for any successfully running organisation. CRM plays a very crucial role in gathering customer feedback. Updated and crucial information about the competitors is also provided by the CRM Systems which is essential for organisations to compete and survive in the market.
Significance of Customer Relationship Management (CRM)
The significance of CRM in the business processes is explained below:
Increased Sales Revenues and Reduced Cost of Sales: CRM results in increased sales revenues from building relationship with customers that provide the needed inforrnation without wasting any extra costs and time. Cost Of sales is also reduced as appropriate and cost-effective sales techniques and approaches are implemented in CRM. CRM inculcates a customer as a partner rather than a subject for revenue.
Increased Customer Satisfaction: CRM leads to increase in number of satisfied customers as their needs and wants are efficiently fulfilled. With the help of CRM, instead of understanding themselves as an object of sales and marketing, customers feel themselves as a part of the organisation. As their needs are efficiently recognised and fulfilled and better customer service is provided to them, the satisfaction level of customers continuously increases.
Lower Costs of Recruiting Customers: By implementing CRM, lower costs of customer recruitment are incurred. The related to various customer-related operations like contact, mailing, marketing, services, fulfillment, follow-up, etc., are reduced due to effective CRM. CRM reduces the required number of customers for maintaining a sound business potential (particularly in B2B markets) so as to control the customer related costs.
Increased Customer Retention and Loyalty: Implementation of CRM system results in increased customer loyalty and retention. The buying frequency of customers increases, they buy in bulk, communicate their needs and expectations (helpful in building relationship), and therefore, Stay attached to the organisation for undefined period.
Customer Knowledge: CRM Systems provide customer information through a common knowledge base which is easily accessible to all the departments of the organisation. It provides updated and accurate information to the employees about the customers. This extracted information helps in making accurate decisions and also aids in being close to the customers so as to forecast and fulfil their needs.
Customisation: Simple and customised solutions (particularly for SMEs) are developed with the help of CRM. CRM helps in easy integration of different business processes within the organisation. It is the CRM which enables the organisation to modify itself according to changing business needs.
Customer Self-Service: In organisations practicing CRM, all the customer service representatives are asked to analyse the large number of customer calls to generate the list of commonly asked questions by them. The organisation here is able to determine the customer support requirements and provide the solutions automatically, as complete customer information is available with it.
Limitations of Customer Relationship Management (CRM)
Along with having major benefits, CRM is also associated with some shortcomings. Following are the limitations of CRM for any business:
Requires Top Management Support: Successful implementation of the CRM is not possible in absence of top management support. For each and every activity in CRM, the approval of the top management is required, which inhibits the flow of business operations.
Complicated and Confusing: CRM system is so complicated that sometimes organisations get confused about its features and use. Some organisations link it with business strategy While others consider it a technology-related aspect.
Problem in Implementation: Incorrect implementation of CRM systems within an organisation leads to several business problems. If any of the organisational department is skipped from being involved in CRM network, the information developed is not complete and reliable. different decisions, schemes and plans based on CRM systems become doubtful.
Fails to Serve Interested Customers: In CRM, along with serving and satisfying regular customers, sometimes organisations fail to focus the other interested customers. Thus, due to loss of such the profitability of the organisation is affected.
Customer Dissatisfaction: Even after the implementation of CRM systems, many organisations still face the problem of customer dissatisfaction.
Training of Frontline Staff: Frontline support staff needs adequate training as they are still not customer-focused. Training the frontline acts as a big challenge in implementation of CRM systems as CRM will only be effective if properly implemented and utilised.
