Introduction
Customer Relationship Management (CRM) is the approach and the process that an organization chooses to adopt and implement in order to maintain customer loyalty amongst current customers and to attract in prospective customers.
Purpose of CRM
CRM strategies are designed to build upon current customers and to ensure that they remain loyal to the manufacturer, as well as determining possible new markets and taking advantage of them (Calkins 2005). Thanks to Information Technology, CRM software is more than often regarded as the latest innovation in this field of business. However it is necessary to understand that several CRM strategies have failed where CRM software was the only tool used in the development of the CRM strategy.
Constituents of CRM
CRM strategies incorporates four divisions, the Front office that is designed to deal directly with the customer, the Back office Operations such as maintenance, advertising and manufacturing that influence the functions of the front office, the Business Relationships that the external network builds and fuels, and the extent and depth of analysis of data. An effective CRM strategy gives due regard to each one of these elements with respect to the nature of the strategy (Jobber, 2006). Most CRM strategies are designed to be aggressive so that revenues can roll in faster, whereas several are designed to increase satisfaction levels of current customers. This is why CRM is overall a customer-centric approach to business management.
Reasons for the Success and Failure of CRM Strategies
Countless heavily funded CRM applications have failed in the most experienced of companies. A reason that is commonly attributed and is generally accepted to be the cause of these failures is the occurrence of error in the data used in the designing of the CRM strategy. More than often data that is derived from one source proves to be an insufficient determinant of the required information and measures taken on plans incorporating the patterns of the faulty data patterns therefore fail.
It is necessary to understand here that the value of information that data can provide is in direct proportionality to the cross-analysis of data of the same nature derived from multiple sources. Many organizations make the mistake of forming plans and CRM strategies on the basis of data that is of a preliminary nature, whereas modern day strategy development requires that an extensive cross analysis of the data is performed before it can be considered to be a source of knowledge. A modern day solution to this example can be seen in the purchasing of data through third party sources (Dyché 2002). The likes of Data Quick and Experian are commonly used to get validated information regarding consumption patterns of customers. In certain cases, a difference in definitions of the same element between different departments can cause the departments to adopt varying approaches towards the same market, hence disorienting the execution of the CRM strategy and possibly causing the CRM program to crash. However it is necessary to comprehend that all of these were precautions that are of an internal nature to the organization and the CRM strategy. Light shall now be shed upon the relevance of external factors in the formulation and implementation of a CRM strategy.
The implementation of data gathered and strategies formulated in the back drop of one environment should never be considered acceptable in an external or a secondary environment. Obstacles such as varying political settings and consumer budget lines have direct influences upon the outcome of a CRM strategy in varying environments. For instance, products that reflect freedom, individualism, success, efficiency and achievement are more successful in the Western culture. On the other hand, products that reflect success in terms of family, friends and closeness are more successful in the Eastern Markets. In the same regard, it is also feasible that success metrics be established so that an accurate measurement of the effectiveness of the CRM strategy can be derived. By taking care of all these measures before the strategy is launched, the organization performs a CRM Readiness Assessment of sorts.
Examples of Effective and Ineffective CRM
Let us consider an example to understand what effective and successful CRM really means. Let us consider an American consumer who has been a loyal customer to a local restaurant for years and receives special treatment from the restaurant for the same. Our subject travels to Australia, and we find it highly unlikely that an Australian branch of the same multinational restaurant chain will give our subject the same special treatment as the American branch. On the other hand, regardless of the part of the world from where our subject boards an aircraft, every time he boards a plane of Airline X, his “Frequent Flyer Card” will entitle the customer to the same special treatment as he would receive in any part of the world.
A real world example of a successfully implemented CRM strategy can be witnessed in the CRM strategy General Motors chose to adopt. The CRM strategy that General Motors (GM) has designed implemented and has nicknamed, C3RM, has proven to be very fruitful for GM. Even in the early stages of implementation, positive effects are being observed. GM’s C3RM works by combining as self-funding economic model under the hood of a customer management system that works to drive different business units and internally increase the value of every sales lead or after-sales-service call that GM receives. Hence, GM utilizes its internal working mechanism to encourage the efficient handling of current and prospective customers (Eisenfeld, 2001).
CRM strategies more than often involve heavy funding to cover high designing and implementation costs. That is why organizations have always been on the lookout to determine and take precautionary measures against factors that can lead to the failure of a CRM strategy. It is not only in the implementation of a CRM strategy can suffer failure, but also in the upgrading of one. In 2004, AT&T Wireless lost millions in revenue when their CRM upgrade failed. The project was not designed to be flexible in implementation and AT&T Wireless was overconfident on their CRM upgrade project to such a degree that no substantial contingency measures were kept at the ready and AT&T had no other option but to keep moving through the wreckage of the failed CRM upgrade project (Why, 2004).
Organizations now realize that in order to maintain customer loyalty, it is necessary to take care of customers. This approach is best outlined in the following fundamentals of CRM that American Airlines has chosen to incorporate within its operational framework in order to achieve and maintain customer satisfaction:
- Record and maintain individual and personalized customer information regarding consumption habits and preferences.
- Understand the worth that every separate category of customers holds for the organization.
- Treat customers in the ways they prefer while taking care of their actual worth for the revenues of the organization (Lionel 2007).
Yet sometimes CRM strategies have very little to do with the consumer and more with dealing with consumer queries. For instance, Barclays Bank initiated the operating of a Customer Relationship Management Suite that was designed to provide field based mortgage sales men with accurate and updated information regarding mortgage rates (5minute-Guide.com 2008). This helped the field based mortgage salesmen to provide customers with accurate and reliable mortgage rates, which in turn led to an increase in mortgage sales.
Incorporating CRM
In order for the successful implementation of a CRM strategy, it is necessary to establish and adopt a customer-centric strategy that allows the engaging of line staff into the framework of the strategy while allowing enough flexibility to the managers to change the organization of the related division if necessary. Also, several CRM failures are more than often attributed to faulty calculations made by the tools used in the formulation of the CRM strategy whereas most of the times, it is an error in the data collected upon which the strategy was based that contains errors.
Conclusion
Customer Relationship Management (CRM) is an approach towards Customer retention and acquisition that is purely customer-centric. However the implementation of a CRM strategy is an exercise that includes numerous intricacies but an effectively executed CRM strategy can mean the ultimate growth of an organization.It is for the same reason that CRM has become one of the most sought after approaches in efficient business management.
References
Training and Support – Pilot Programs Spark Interest. 2008. Web.
Calkins, T. 2005. Kellogg on Branding. Wiley. (150-168)
Dyché, J. 2002. Managing Your CRM Project. Web.
Eisenfeld, B. 2001. Relationships Are Born and Nurtured at GM Family First. Web.
Jobber, D. 2006. Principles and Practice of Marketing. McGraw Hill Higher Education.
Lionel, R. 2007. A look at CRM Initiatives & Examples. E-Articles. Web.
Why, C. R. 2004. A Review of CRM Failures. Web.