Saturday, February 20, 2010

Customer Relationship Management (CRM)

"The purpose of business is to create and keep a customer." --Peter Drucker
Customer Relationship Management (CRM) enables businesses to do exactly that – to create and keep a customer. Customer Relationship Management Systems are technology assisted systems, which enables enterprises to create and retain customers.

In this blog post, we will have a look at some of the basic concepts of Customer Relationship Management.  

There are several definitions for Customer Relationship Management but the most common one seems to be: CRM System involves the alignment of people, processes and technologies that help an enterprise manage customer relationships in an organized way. The aim of CRM is to build a stronger relationship with customers, which will lead to build both customer loyalty and increased profits.

Customer Relationship Management helps an organization to:
a) assist its marketing department in identifying their best customers for repeat business, manage marketing campaigns, and generate leads, which have a high chance of conversion into sales, for the sales team.
b) improve telesales, account management, and sales management by optimizing information shared by multiple employees
c) develop personalized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; to identify the most profitable customers and provide them the highest level of service.
d) equip employees with the information and processes necessary to know their customers, understand and identify customer needs and effectively build relationships between the company, its customer base, distribution partners, and vendors.

The marketing department plans and runs marketing campaigns, which are programs and activities by which companies advertise products and services to potential customers. Different types of marketing campaigns include:
(i) Awareness Campaigns – used to increase awareness of a brand
(ii) Brand Campaigns – generally used by new companies to connect brand with services and offerings
(iii) Lead Generation Campaigns – used to collect contact information for use in direct marketing
(iv) Customer Loyalty Campaigns – used to recognize and reward regular customers

The leads generated by marketing campaigns is shared within the sales and marketing team. These leads will be contacted separately and depending on the response of the contact, the leads will be classified based on their probability of becoming a potential customer or prospect customer.

Once the lead gets elevated to the status of a potential customer or prospect customer [based on criteria set by the organization], the sales team aggressively keeps in touch with the contact until the potential customer is won (potential customer becomes a customer) or lost(potential customer decided not to go with the offering). The sales team is also responsible for providing details of the products/services offered by the organization. They also manage quotes/estimates and related negotiations. Other terms and conditions of the deal are also tracked and managed by the sales team. All information pertaining to activities carried out in relation to a lead/potential customer like e-mails, telephone calls and meetings and tracked by the sales team. Appropriate follow-up actions are also carried out and monitored by the sales team. If the potential customer or prospect customer is lost the circumstances are noted and will be analyzed later to avoid repeating such losses.

Once a potential customer agrees to buy a product/service from the company, the potential customer gets elevated to the status of ‘customer’ or ‘client’. In some organizations, the first time customers are referred to as ‘customer’ and from the second time, the customers are referred to as ‘client’.

Developing personalized relationship with customers is a key focus area for any CRM system. For this, every customer is assigned to a team member within the organization who is primarily responsible for maintaining the customer relationship in a cordial fashion. This involves major tasks like keeping track of resolution of customer complaints to relatively minor tasks like sending wishes/gifts to the customer on his/her birthday, wedding anniversary and during other events which have a personal significance for the customer. Such notes from the organization, though relatively minor from a CRM perspective, can often have profound impact on the customer in terms of ‘feel good’ factor.

Keeping a customer satisfied is not only good for repeat business from the same customer, but also in terms of ‘word of mouth’ publicity. Customer Relationship Management enables organizations to understand their customers better, identify customer needs, and build effective relationships between the organization, customers, vendors, and distribution partners. In order to derive full benefits from Customer Relationship Management Systems, they need to be tuned to specific needs of the industry. Studies have shown that careful implementation of CRM System and their diligent use has resulted in increase of sales volumes of up to and even more than 30%. ["On average, sales and marketing costs average from 15% - 35% of total corporate costs. So the effort to automate for more sales efficiency is absolutely essential. In cases reviewed, sales increases due to advanced CRM technology have ranged from 10% to more than 30%." --Harvard Business Review]

There are quite a few CRM Systems in use across different industry verticals. Open source CRM Systems are also becoming popular. We will not go into the details here as it is beyond the scope of this blog post.

Let us conclude this blog post with another quote by Peter Drucker: 
“We've spent the last 30 years focusing on the ‘T’ in IT[Information Technology], and we'll spend the next 30 years focusing on the ‘I’. ”  

And CRM is all about focusing on the ‘I’ – Information. 

~ Sunish

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