The Impact of Customer Relationship Management (CRM) on

Customer Retention (CR)

K K Jayasree
MBA Student, SMS ,CUSAT,

I. Introduction
Marketing is one of the core disciplines of successful management today.
Obviously marketing is important in all areas of the organization, and
customers are the reason why business exist. In toady’s highly competitive
environment, business needs to better understand their customers, which who
are the most profitable, and how to best retain those customers. This
understanding meets through different channels which one is CRM.
“CRM is short for Customer Relationship Management, the industry term for
the set of methodologies and tools that help an enterprise manage customer
relationships in an organized way.”.CRM helps companies make sense of
customer needs and helps companies manage these relationships more
intelligently and help predict the future. Such knowledge provides a crucial
competitive differentiation for companies to gain market share and reduce
operational costs with retaining their customers. CRM Strategy
implementation is based on the concept that an organization's most valuable
asset is the customer and the organization must manage its customer
relationships wisely.
In another word, CRM is an effective tool for allowing customers to perform
their own services via a verity of communication channels, and also make
sawing and encourage new customers.

Research Problem

Managing customer relationship effectively and effectively boots customer

satisfaction and retention rates. Organizations have discovered and
research studies have shown that retaining current customers is much less
expensive than attempting to attract new ones.
Therefore, the research problem is study of impact of CRM process within
customer retention for obtaining more efficiency in customer relationship.

Research Objectives
The purpose of this study is to explore the impact of Customer Relationship
Management on Customer Retention, In order to reach our purpose the
following research question is stated:

 What is the role of Customer Relationship Management Process in

customer retention?
 What types of impact (if there is any) the application of CRM will
have on the customer retention?

II. Background and Significance

The idea behind Customer Relationship Management is not new; even

the earliest merchants knew it was a good idea to build relationships
with customers to keep them coming back (Jobber, 2004).
In the early stages of commerce this was a much easier thing to do, the
old mom-and-pop stores are a good example of this, staff knew exactly
who each customer were, and sales people knew what customers
preferred and also who could pay and who usually paid on time.
However, when firms grew, information about individual customers
became lost among the masses. To deal with the ever expanding
customer bases, customer groups or segmented marketing was created,
where customers are put in slots that best fit their desires. (Bose. 2002).
A company’s product can quickly be compared to another, and many
companies are offering very similar products or services to each other.
Companies are also realizing they can more easily lock in customers by
understanding their needs and competing with exceeded expectations,
something which CRM systems can help organize (H. Kale, 2004).
The results of this study would hopefully be significant in the sense that it would
enable companies to better understand why customers defect; the effect of customer
relationship management and the various motivational factors which could be
harnessed to inspire customers to retain them to increase and sustain productivity.
The study will contribute to the existing knowledge on customer relationship
management and customer retention.

III. Literature Review

“CRM is based on the based on the basic marketing belief that an organization
that knows its customers like individuals. Its components may include data
warehouse that store all a company’s information, customer service system,
call centers, e-commerce, web marketing, operations system and sales
systems . In practices, CRM system range from automated customer-contact
system to the company- wide pooling of customer information.” (Kotler – pp.
409 - 410).
“From another perspective, CRM is a strategic view of how to handle customer
relations from a company perspective. The strategy deals with how to
establish, develop and increase customer relations from a profitability
perspective. Based upon knowledge about the individual customer’s need and
potential, the company develops customized strategies describing how
different customers should be treated to become long-term profitable
customers.” (John Johansson & Fredrik Strom – p . 2).

“Customer retention is increasingly being seen as an important managerial

issue, especially in the context of saturated market or lower growth of the
number of new customers. It has also been acknowledged as a key objective of
relationship marketing, primarily because of its potential in delivering
superior relationship economics, i.e. it costs less to retain than to acquire new
customers. The assumption is that generalized theories, which imply universal
applicability, tend to overlook the distinctive impact of conceptualized
business conditions on effective customer retention strategies.” (Rizal Ahmad
& Francis Buttle - pp. 149-161)
“The advent of 4Ps marketing theory in the early 1960s, on the back of large-
scale industrial development and mass production, influenced the way
marketers saw their customers. Customers, under this traditional or classical
approach, are seen as groups of homogeneous potential buyers with the same
needs. Marketers then predicted what customers needed, produced the
products and pushed them to their customers through their distributors or
drew the customers towards the points of sale by manipulating the 4Ps
marketing mix: price, place, promotion and product.” (Shostack - P. 73-80).
The CRM areas are extended into many fields, from marketing to strategic
decisions. In recent years CRM is facilitated by the convergence of several
other paradigms of marketing and by corporate initiatives that have
developed around the theme of cooperation and the collaboration of
organizational units and their stakeholders, including customers.
From academic point of view, an important question is whether CRM become
well respected, distinct and discipline in marketing . Here, we define the
marketing in core concept and then, we explain the CRM. We break this item
in four category, goals, process and elements of CRM. One of the main items in
CRM is customer retention. Because the CR is one of the top target of CRM
method.

IV. Research Design and Methods

We are going to study the correlation between Customer Relationship
Management (CRM) and Customer Retention (CR) and the impact of CRM on
CR. In fact, better understanding and extensive study of these concepts are our
main goals for establishing research priorities and formulating research
questions.
The sources of the study that have been used here are both primary and
secondary in nature in order to construct a set of criteria which can be served
as a standard to better evaluate the relationship between CRM and CR
resulting from customers. Secondary sources of information such as books,
scholarly articles have been selected on their relevance to the research
objectives and thoroughly reviewed. Data collection technique can entail
various processes like observation, questionnaire and interviews or a
combination of all of these. In our study, we have used the survey method in
which closed ended questions have been used to collect respondents opinion.
Primary data have been collected through a field survey of the customers ,
both public and private, were invited to participate in the survey . Hence, the
sampling frame consisted of the usual visiting customers. A survey
questionnaire consisting of 23 items was developed based on exhaustive
literature review, where the focus has been shed on four main factors A five
point likert scale agreement, ranging from 1= strongly agree to 5= strongly
disagree, has been used to measure each item

V. Preliminary Suppositions and Implications

The goal of this research proposal was to study the impact of Customer
Relationship Management systems and practices on today’s Customer
Retention endeavor. CRM has been a key element of the modern marketing in
recent years. All around the world companies in different sizes have been
trying to utilize CRM systems to help them with their competitive businesses.
On the other hand because of vigorous competition, not only acquiring new
customers is becoming difficult but also holding existing customers is a quite
challenging task.
It is a lot cheaper to keep existing customers happy than to attract new ones.
But maintaining relation with existing customers in level that constantly
encourage them to stay with a company is a dynamic and meticulous job. That
is why computerized CRM system can play a critical role in success of a
company. But the way that CRM systems are used can make substantial
different on the outcome. Along with sales and marketing, all the other
departments of a business should be involved with CRM processes. A new
emerging approach that recently has been attracting corporations is Customer
Value Management. Their goal is to identify the value that can be delivered to
customers along with their products through their supportive processes and
services.
A fundamental principle of CRM is that all customers are not the same. CRM
is based on the idea of treating different customers differently. Another
words, it is not possible to attract and retain all customers with the same
policy and treatment. Companies have to discover the differences and adjust
their policies accordingly. “Customer retention” requires strategy and it
should be considered by management team a mainstream activity which
requires same level of attention that other marketing and sales strategies may
require.

VI. Reference
Ahmad, R., & Buttle, F. (2002). Customer retention management: a reflection of
theory and practice. Marketing Intelligence & Planning, 20(3), 149-161. 

H. Kale, “CRM Failure and the Seven Deadly Sins,” Marketing Management,
Vol. 13, No. 5, 2004, pp. 42-46.

Jobber, D. (2004) Principles and Practice of Marketing. 4th Edition, McGraw-

Hill International, London.

Johan Johansson & Fredrik Strom "Customer relationship management"

2002:016 SHU: 1404-5508.

Kotler, P. and Armstrong, G., 2012. Principles Of Marketing. 14th ed. Boston:

Pearson Prentice Hall.

Narver, J and Slater, S (1990), " The effect of a market orientation on business
profitability", Journal of marketing, vol.54, pp 20-35.

R. Bose, “Customer Relationship Management: Key Components for IT

Success,” Industrial Management & Data Systems, Vol. 102, No. 2, 2002, pp.
89-97.
Shostack G.L. - “Breaking free from production marketing.” - Journal of
Marketing, April 1997.