Customer relationship management

The objective of customer relationship management (CRM) is to increase customer loyalty in

order to increase profitability and is thus a key aspect of e-business.
Definitions
 CRM is an approach to building and sustaining long-term business with customers.
 e-CRM is the use of digital communications technology to maximise sales to existing
customers and encourage continued usage of online services.
The customer lifecycle
CRM involves four key marketing activities (the 'customer lifecycle').
(1) Customer selection - defining what type of customer is being targeted.
 Who are we targeting?  What is their value?  Where do we reach them?
(2) Customer acquisition - forming relationships with new customers.
 Need to target the right segments.
 Try to minimise acquisition costs. Methods include traditional off-line techniques (e.
advertising, direct mail) and online techniques (e. search engine marketing, online PR, online
partnerships, interactive adverts, opt-in e-mail and viral marketing)
 Service quality is key here.
 Choice of distribution channel also very important.
(3) Customer retention - keeping existing customers.
 Emphasis on understanding customer needs better to ensure better customer satisfaction.
 Use offers to reward extended website usage.
 Ensure ongoing service quality right by focussing on tangibles, reliability, responsiveness,
assurance and empathy.
(4) Customer extension (or 'customer development') - increasing the range of products bought by
the customer.
 "Re-sell" similar products to previous sales  "Cross-sell" closely related products  "Up-sell"
more expensive products
Customer acquisition
Methods of acquiring customers can be split between traditional off-line techniques (e.
advertising, direct mail, sponsorship, etc)and rapidly-evolving on-line techniques:
Techniques for retaining customers
 Personalisation - delivering individualised content through web-pages or e-mail. For example,
portals such as Yahoo! enable users to configure their home pages to give them the information
they are most interested in.
 Mass customisation - delivering customised content to groups of users through web-pages or e-
mail. For example, Amazon may recommend a particular book based on what other customers in
a particular segment have been buying.
 Extranets - for example, Dell Computers uses an extranet to provide additional services to its
'Dell Premier' customers.
 Opt-in e-mail - asking customers whether they wish to receive further offers
.  Online communities - firms can set up communities where customers create the content.
These could be focussed on purpose (e. Autotrader is for people buying/selling cars), positions
(e. the teenage chat site Doobedo), interest (e. Football365) or profession. Despite the potential
for criticism of a
company's products on a community, firms will understand where service quality can be
improved, gain a better understanding of customer needs and be in a position to answer criticism.
Customer extension
Customer extension has the objective of increasing the lifetime value of a customer and typically
involves the following.
 'Re-sell' similar products to previous sales.
 'Cross sell' closely related products.
 'Up sell' more expensive products.
Propensity modelling
Propensity modelling involves evaluating customer behaviour and then making
recommendations to them for future products.
Comparison with transactional marketing
Gordon (1998) states that there are six dimensions that illustrate how relationship marketing
differs from the historical definition of marketing. These are that:
 relationship marketing seeks to create new value for customers and then share it with these
customers.
 relationship marketing recognises the key role that customers have both as purchasers and in
defining the value they wish to receive.
 relationship marketing businesses are seen to design and align processes, communication,
technology and people in support of customer value.
 relationship marketing represents continuous cooperative effort between buyers and sellers.
 relationship marketing recognises the value of customers' purchasing lifetimes (i. Customer
Lifetime Value).
 relationship marketing seeks to build a chain of relationships within the organisation, to create
the value customers want, and between the organisation and its main stakeholders, including
suppliers, distribution channels, intermediaries and shareholders.
Customer relationship management systems (CRMs)
CRMs do what they say: they help organisations to form and maintain relationships with
customers. Customers of large organisations rarely speak to a specific named individual. This is
especially so if the organisation uses a call centre approach to handle customers' calls. It is,
however, important that the customer feels he or she is getting a good service, where the
organisation knows about previous sales,customer preferences, previous problems and previous
conversations, a CRM will show the following information on-screen to employees dealing with
customers.
 The customer's name, address, telephone number, email and, if applicable, web address. 
Current debtors ledger balance.  If the customer is an organisation, named individuals employed
by the customer with whom the organisation deals, together with their job titles and authority
levels.  Some additional information about customer's employees, for example that that person
is a technical expert, or previously worked for a certain company, or does not like to be
contacted before 2pm.  Summaries of previous conversations with the customer.  Details of
previous sales to the customer – description of goods/services and value.  Diary entries to
remind the organisation to carry out agreed tasks for the customer.
It is immensely valuable to have this information available when dealing with customers, both to
talk intelligently to the customer, and identify sales opportunities that might arise during the
conversation. CRM packages therefore allow organisations to have a much more informed,
professional and, it is hoped, profitable relationship with customers.

 The growing interest in relationship marketing suggests a shift in the nature of marketplace
transactions from
discrete to relational exchanges, from exchanges between parties with no past history and no
future to
interactions between parties with a history and plans for future interaction.
Software solutions
Software plays a vital role in CRM. It can organise, automate and synchronize marketing and
sales actions.

SAP's Customer relationship management (CRM) module

The online aspects (there are many others) of SAP's CRM module includes the following
features:
E-marketing
Supports customer loyalty processes via the Internet.
Personalizes customers' Web experiences.
Generates additional revenue through a website via catalogue management, content
management,
customer segmentation and personalization.

E-commerce
Runs B2B and B2C selling processes on the Internet.
Enables a full range of online selling processes, including pricing and contracts, interactive
selling, web auctions, and selling via partners.

Streamlines sales and fulfilment with end-to-end order-to-cash processes.

E-service
Offers customers an intuitive channel to perform service tasks, from requesting a service visit to
logging a complaint or registering a product.

Enables customers to checking order status, obtain order tracking information, manage accounts
and payments, and research and resolve product problems.

Services complex products that require sophisticated maintenance.