Introduction

CRM concept

The concept of Customer Relationship Management (CRM) and how it has evolved over
time. It notes that there has been ongoing debate and disagreement about what exactly CRM means
and how it should be defined. Some people view it as a set of software applications used to support
marketing, sales, and customer service, while others see it as a disciplined approach to building and
maintaining profitable customer relationships. The significant market for CRM technology, citing
estimates of annual spending on such technology and predicting future growth. It also acknowledges
that while technology can be a useful tool in implementing a customer strategy, it is not the only
factor to consider.

Definitions of CRM

• CRM is an information industry term for methodologies, software and usually Internet
capabilities that help an enterprise manage customer relationships in an organized way.
• CRM is the process of managing all aspects of interaction a company has with its customers,
including prospecting, sales and service. CRM applications attempt to provide insight into
and improve the company/customer relationship by combining all these views of customer
interaction into one picture.
• CRM is an integrated approach to identifying, acquiring and retaining customers. By enabling
organizations to manage and coordinate customer interactions across multiple channels,
departments, lines of business and geographies, CRM helps organizations maximize the
value of every customer interaction and drive superior corporate performance.
• CRM is an integrated information system that is used to plan, schedule and control the pre-
sales and post-sales activities in an organization. CRM embraces all aspects of dealing with
prospects and customers, including the call centre, sales force, marketing, technical support
and field service. The primary goal of CRM is to improve long-term growth and profitability
through a better understanding of customer behaviour. CRM aims to provide more effective
feedback and improved integration to better gauge the return on investment (ROI) in these
areas.
• CRM is a business strategy that maximizes profitability, revenue and customer satisfaction
by organizing around customer segments, fostering behaviour that satisfies customers, and
implementing customer-centric processes.

We can resolve the debate between managerial and technological schools by conceiving of CRM
as taking three main forms: strategic, operational and analytical, as summarized below.

Strategic CRM is a core customer-centric business strategy that aims at winning and keeping
profitable customers.

Operational CRM focuses on the automation of customer-facing processes such as selling, marketing
and customer service.

Analytical CRM is the process through which organizations transform customer-related data into
actionable insight for either strategic or tactical purposes.
 STRATEGIC CRM

Strategic CRM is focused on creating and maintaining a customer-centric culture that is

dedicated to delivering value to customers and retaining their business. A customer-centric culture is
reflected in the leadership and behaviors of the company, as well as the systems and processes in
place. In this type of culture, resources are allocated to where they will best enhance customer
value, and customer information is collected, shared, and applied across the business. While many
businesses claim to be customer-centric, few truly are, and that customer-centricity can sometimes
compete with other business orientations such as product, production, and selling.

Product-oriented

The concept of product-oriented businesses, which are companies that believe customers
choose products based on factors such as quality, performance, design, or features. These
businesses are often highly innovative and entrepreneurial and may be more focused on creating
new products or trends rather than responding to customer research. The passage notes that
product-oriented companies may over-specify or over-engineer their products, making them too
costly for many customers. It also mentions that this approach is more suitable for a small subset of
relatively price-insensitive customers, known as "innovators," who are likely to respond positively to
company claims about product excellence.

Fashion houses as an example of product-oriented businesses and mentions Apple as a

particularly iconic example.

Conclusion:

Product-oriented businesses are focused on creating high-quality, innovative products and may be
more entrepreneurial in nature.

Pros of this orientation include the ability to create demand for products that customers did not
know they needed and the potential for strong brand loyalty.

Cons of this orientation include the risk of over-specifying or over-engineering products, making
them too costly for many customers, and the fact that this approach is only suitable for a small
subset of relatively price-insensitive customers.

Production-oriented

The concept of production-oriented businesses, which are companies that focus on

operational excellence and seek to offer customers the best value for money, time, and effort. To
achieve this, they strive to keep operating costs low and develop standardized offers and routes to
market. Production-oriented businesses are less interested in customization, complexity, and
innovation, and tend to serve customers who want "good-enough," low-priced products and
services. They do not believe that customers have unique needs or wants.

While it is possible to be profitable by being the lowest-cost business player, an excessive

focus on operational efficiency can make a company blind to disruptive changes and lead to the
production of cheap products that no one wants to buy. The passage cites Wal-Mart as an example
of a production-oriented business.

Conclusion:

Production-oriented businesses focus on operational excellence and strive to offer customers the
best value for money, time, and effort.
Pros of this orientation include the ability to keep operating costs low and the potential to serve a
large customer base with "good-enough" products at low prices.

Cons of this orientation include a lack of customization, complexity, and innovation, as well as the
risk of becoming blind to disruptive changes and producing cheap products that no one wants to
buy.

Sales-oriented

The concept of sales-oriented businesses, which are companies that believe that investing in
advertising, selling, public relations, and sales promotion will persuade customers to buy their
products. Sales-oriented businesses often follow a production orientation, in which they focus on
producing low-cost products and then promoting them heavily to sell them. In this type of business,
dealmakers and persuaders are important figures.

This approach can be successful in rapidly growing markets and can lead to strong market
share growth and economies of scale. However, it also carries risks, such as the possibility of winning
large contracts without making money from them, and a focus on immediate sales that does not
allow enough resources to experiment and innovate to serve emerging customer needs and wants.

Conclusions:

Sales-oriented businesses believe that investing in advertising, selling, public relations, and sales
promotion will persuade customers to buy their products.

Pros of this orientation include the potential for strong market share growth and economies of scale
in rapidly growing markets.

Cons of this orientation include the risk of winning large contracts without actually making money
from them, and a focus on immediate sale that does not allow enough resources to experiment and
innovate to serve emerging customer needs and wants.

Customer or market-oriented

The concept of a customer or market-oriented company, which is a company that prioritizes the
needs and wants of its customers. Such a company collects, disseminates, and uses customer and
competitive information to develop better value propositions for its customers, and is constantly
adapting to changing customer requirements and competitive conditions. There is evidence that
being customer-centric is correlated with strong business performance. Many managers would
argue that customer-centricity must be right for all companies. However, at different stages of
market or economic development, other orientations may have stronger appeal.

Conclusion:

Customer or market-oriented businesses prioritize the needs and wants of their customers and
collect and use customer and competitive information to develop better value propositions.

Pros of this orientation include the ability to adapt to changing customer requirements and
competitive conditions, as well as a strong correlation with business performance.

There are no specific cons listed for this orientation.

 STRATEGIC CRM AT HONDA AUSTRALIA

the use of Customer Relationship Management (CRM) at Honda

Australia. Honda realized that consolidating and freeing up the flow
of customer data could improve the efficiency and effectiveness of
its business, and developed a strategy called "Customers for Life"
based on data integration and a whole-of-customer view. To
implement this strategy, Honda integrated customer data from
multiple spreadsheets and databases into a single CRM platform
hosted in the cloud and removed responsibility for managing
customer relationships from individual departments, moving it to a
dedicated CRM unit. The use of CRM has allowed Honda to
consolidate outbound customer communication and accurately
measure its effectiveness, as well as build workflows into customer
touchpoints to guarantee follow-up on any negative comments. As
a result, Honda has been able to reduce complaint resolution time
and become a more unified brand that understands its customers.
 OPERATIONAL CRM

Operational CRM automates customer-facing business processes. CRM software applications enable
the marketing, selling and service functions to be automated and integrated. Some of the major
applications within operational CRM

Marketing automation

• Campaign management
• Event-based (trigger) marketing
• Marketing optimization

Sales force automation

• Account management
• Lead management
• Opportunity management
• Pipeline management
• Contact management
• Quotation and proposal generation
• Product configuration

Service automation

• Case (incident or issue) management

• Customer communications management
• Queuing and routing
• Service level management

Marketing automation

Marketing automation (MA) applies technology to marketing processes.

It includes campaign management modules that allow marketers to use customer-related

data to develop, execute, and evaluate targeted communications and offers. MA is particularly
useful in multi-channel environments, where it helps to coordinate communication and offer
strategies and evaluate performance across different channels.

Event-based or trigger marketing refers to the development of messaging and offers to

customers at specific points in time, based on customer behaviors or contextual events.

Real-time marketing combines predictive modeling and workflow automation to make

relevant offers to customers as they interact with a company's technologies at different touchpoints,
such as websites and retail outlets. It allows companies to predict which products and services will
be most appealing to customers based on their choices, enquiries, and profiles, and to refresh these
offers in real time based on customer behavior.

Sales force automation

Sales force automation (SFA) is the use of technology to manage a company's selling activities.

It includes software that can be configured to follow the selling process of any industry or
organization and includes features such as lead generation, lead qualification, lead nurturing, needs
identification, proposal generation, handling objections, and closing the sale.
 SFA also includes opportunity management software that tracks opportunities as they
progress through the sales pipeline and lead management and sales forecasting applications.

Contact management software helps users manage their communications with customers
and quotation and proposal generation software helps salespeople produce prices and proposals for
customers.

Product configuration applications allow salespeople or customers to design and price

customized products, services, or solutions.

SALES FORCE AUTOMATION AT ROCHE

Roche is a healthcare company that implemented a sales force

automation system in order to better understand their customers and
improve services and sales effectiveness. Prior to implementation,
customer information was collected from various sources and not
integrated into a single database, resulting in incomplete views of
customers. The implementation of the system allowed Roche to create
customer profiles, segment customers, and communicate with existing
and potential customers, leading to increased success in identifying,
winning, and retaining customers.

Service automation

Service automation refers to the use of technology to improve customer service operations,
such as call centers and contact centers. It aims to reduce costs, improve service quality and
productivity, enhance customer experience, and increase customer satisfaction.

Different types of service automation are used depending on the product being serviced,
such as online diagnostic tools for consumer products and field service for large capital equipment.

Partner relationship management (PRM) technology is used to support the use of indirect
channels for sales and service functions by enabling effective communication and collaboration
between the company and its partners.

Self-service automation, such as online FAQs and chatbots, is used to allow customers to
resolve issues or get information without the need for direct interaction with company staff.

CUSTOMER SERVICE AT JETBLUE

JetBlue is a low-cost airline known for its customer service and

has won multiple JD Power customer service awards. It started
using Twitter in 2007 initially as a sales promotion channel, but
eventually also used it for real-time customer service. The airline
was able to use Twitter to quickly address customer frustrations,
experiences, and pleasant surprises, improving its ability to
understand customer experiences and make necessary
improvements.
 ANALYTICAL (OR ANALYTIC) CRM

Analytical CRM is the use of customer-related data to improve both customer and company
value. This data can come from internal sources like sales and marketing data, as well as external
sources like business intelligence and lifestyle data.

Analytical CRM helps companies understand their most valuable customers, predict which
customers may switch to competitors, and determine which customers will respond to specific
offers. It also allows companies to tailor their selling approaches to different customer groups and
deliver customized solutions to customer problems.

Analytical CRM can lead to more effective cross-selling and upselling, as well as better
customer retention and acquisition. It is an essential part of many CRM implementations.

ANALYTICAL CRM AT AXA SEGUROS E INVERSIONES (AXA)

AXA, a Spanish insurer with revenues of over €1.8 billion,

implemented a predictive policy cancellation model using SAS'
data mining solution to improve their understanding of
customers and make more personalized offers. The model was
applied to current and cancelled policies in various offices and
used to create control groups that were not targeted in any way
and groups that were targeted by marketing actions. The result
was a reduction in the policy cancellation rate by up to nine
percentage points in targeted segments, allowing AXA to design
and execute personalized actions and customer loyalty
campaigns for high-value customers.

WHERE DOES SOCIAL CRM FIT?

Social CRM involves the use of social media data to manage customer relationships. It can enhance
analytical CRM by providing additional data about customers and support operational CRM by
allowing customers to make purchases through social media. However, it is not a fundamental type
of CRM like strategic, operational, and analytical CRM, and it may not fully replace an overall
relationship strategy for all companies.

MISUNDERSTANDINGS ABOUT CRM

As with all major management initiatives, there are a number of common misunderstandings about
the nature of CRM. Sometimes, to scope a phenomenon, it is useful to say what it is not. These
misunderstandings are described below.

1. CRM is not just database marketing.

CRM is not just about database marketing, which involves building and using customer
databases for marketing purposes. While CRM does involve using customer data for marketing, it
also includes strategic and operational elements that go beyond just database marketing.

2. CRM is not just a marketing process, it also includes selling and service functions.

Misunderstanding 2: CRM is not just a marketing process, but a comprehensive strategy that
encompasses the entire organization and its interactions with customers. It involves the use of
software applications for marketing activities such as market segmentation, customer acquisition,
retention and development, but also extends into selling and service functions. CRM aims to
improve customer relationships and create value for both the customer and the company by
integrating customer data and using it to customize products and services, improve people
management and focus research and development efforts. The data can be shared across the
extended enterprise with outside suppliers and partners as well.

3. CRM is not just an IT issue, it also involves people and process.

Misunderstanding 3 is that CRM is solely an IT issue. While IT is a necessary part of CRM, it is

not the only part. Successful CRM implementations also require people and processes to be
involved. While some CRM initiatives may involve IT investments, others may not require any IT
involvement at all and may instead focus on changing employee behaviors and improving customer
relationships through other means.

4. CRM is not just about loyalty schemes.

Misunderstanding 4 is that CRM is only about loyalty schemes. Loyalty schemes are used by
some businesses as a way to track customer data and improve communication and offer
development, but they are not the only aspect of CRM. Loyalty schemes may also serve as a way to
retain customers who have invested in the scheme and do not want to lose their accumulated
credits.

5. CRM is not just about cost reduction, it also involves creating and maintaining long-term
beneficial relationships with customers.

Misunderstanding 5 is that CRM can be implemented by any company. While any company
can try to implement operational CRM and can work towards a more customer-centric strategic
approach, analytical CRM requires customer-related data in order to identify valuable customers and
tailor different offers to different customer segments. Without this data, it is not possible to
implement analytical CRM.

DEFINING CRM

CRM (customer relationship management) is a business strategy that aims to create and
deliver value to targeted customers at a profit by integrating internal processes and functions, and
using customer-related data to align efforts with those of the company. It is often enabled by
technology, which changes the customer's experience of interacting with the company. CRM aims to
impact costs and revenues, and customer experience is a key consideration. There are three main
types of CRM: strategic, operational, and analytical. Misunderstandings about CRM include the belief
that it is just database marketing, only a marketing process, only an IT issue, only about loyalty
schemes, and can be implemented by any company.

CRM CONSTITUENCIES

There are several important constituencies having an interest in CRM:

• companies implementing CRM,

• their customers and partners,
• vendors of CRM systems,
• CRM cloud solution providers,
• social media platforms,
• vendors of CRM hardware and infrastructure, and
• management consultants.
 CRM can impact customer satisfaction and loyalty, and is often implemented using technology
such as software and hardware. It involves the integration of internal processes and functions, and
the use of customer-related data. CRM implementation can be aided by management consultants,
who can offer expertise in strategy, business, application, and technical consulting, as well as help
with systems integration and project management.

COMMERCIAL CONTEXTS OF CRM

CRM is used in a variety of commercial contexts to manage customer relationships. Examples include

banks using CRM for its analytical capabilities to manage customer defection and enhance
cross-selling,

automobile manufacturers using CRM to improve relationships with distribution networks

and gather knowledge about customer requirements,

technology solution vendors using CRM to automate sales processes and deliver customer
service online, and

consumer goods manufacturers using CRM to understand costs-to-serve and customer

profitability, implement key account management practices, and run cost-effective marketing
campaigns.

THE NOT-FOR-PROFIT CONTEXT – THE ‘THIRD SECTOR’

CRM is also used in the not-for-profit sector, including by charities, NGOs, education
institutions, and governments. These organizations use CRM to maintain relationships with
stakeholders, such as alumni or donors, and to improve service delivery.

However, it can be difficult to apply CRM concepts developed for profit-centric organizations
to the not-for-profit sector, as the focus is not on maximizing profit but on serving the needs of all
stakeholders.

Governments, for example, typically provide more services to vulnerable citizens, who may
not be profitable customers but are important to help. Operational CRM solutions are often used to
improve government service delivery.

Charities may also segment donors by their level of involvement and size of donations, trying
to increase their value to the organization.

THE UK DRIVER AND VEHICLE LICENSING AGENCY

The UK's Driver and Vehicle Licensing Agency (DVLA)

streamlined its process for annual taxation of road vehicles by
storing roadworthiness certificates online, allowing the agency
to verify insurance on each vehicle, and enabling car owners to
pay and receive their tax discs online. This operational CRM
(Citizen Relationship Management) system improved
compliance and reduced costs for the government, while also
saving time and effort for car owners.
 MODELS OF CRM

A number of comprehensive CRM models have been developed. We introduce four of them here.

The IDIC model

The IDIC model is a strategy for building closer relationships with customers. It suggests that
companies should identify their customers, differentiate them based on value, interact with them to
understand their expectations, and customize their offer and communication to meet those
expectations.

The CRM Value Chain

The CRM Value Chain is a model developed by Francis Buttle that outlines the steps a
company should take to create and deliver value to its customers in order to increase customer
profitability. The model consists of five primary stages: customer portfolio analysis, customer
intimacy, network development, value proposition development, and managing the customer
lifecycle. It also includes four supporting conditions: leadership and culture, data and IT, people and
processes, and network development. The model outlines the steps a company should take to build
relationships with its customers and create value propositions that will acquire and retain profitable
customers.

Payne and Frow’s 5-process model

The 5-process model of CRM developed by Adrian Payne and Pennie Frow identifies five
core processes in CRM: strategy development, value creation, multi-channel integration,
performance assessment, and information management. The first two represent strategic CRM, the
multi-channel integration process represents operational CRM, and the information management
process is analytical CRM.
The Gartner competency model

The Gartner competency model for CRM identifies eight areas for companies to focus on in
order to have successful CRM practices: building a CRM vision, developing CRM strategies, designing
valued customer experiences, intra- and extra-organizational collaboration, managing customer
lifecycle processes, information management, technology implementation, and developing
measures of CRM success or failure.
What is customer value, and why is this term essential for CRM?

Customer value is the economic value of the customer relationship to a company, expressed
as a contribution margin or net profit. It is an important marketing metric that helps companies
measure and optimize their marketing efforts by incorporating customer value at the core of their
decision-making process. In the context of CRM, customer value is used to determine and optimize
corporate practices and methods that maximize the lifetime value of each customer to the company.

2. What makes CRM the preferred approach to marketing in the modern information age?

3. List some key changes in the business environment. How are these changes driving the shift from
product-based marketing to customer-based marketing?

4. Which technologies influence strategic CRM, on both the consumer and the company sides?

5. How has CRM evolved in the past decade? List some primary changes and their effect.