LESSON 01

CUSTOMER RELATIONSHIP
MANAGEMENT
Lesson Objectives:
At the end of this lesson, you will be able to:
● Describe customer relationship management
(CRM)
● Identify the different types of customer
relationship management
● Describe the advantages and disadvantages of
CRM
Getting Started
Discover companies that utilize CRM
Harry Gordon Selfridge is a successful retailer, owner
of Selfridge’s Department store in London who learned
that the triumph of his store depends on the happiness of
his customers by making sure that they will get good
service and the employees will give it to them. He is one
of the retailers who pioneered the phrase, “The customer
is always right” in 1909. In your opinion, is it true that the
customer is always right? Why or why not? Write your
answer on the space provided.
 Before the supermarket, the mall, and the automobile,
people purchased goods at their neighborhood store. The
owners and employees recognized customers by name and
knew their preferences and wants. For their part, customers
remained loyal to the store and made repeated purchases. Over
time, however, this personal customer relationship became
impersonal as people moved from farms to cities, consumers
became mobile, and supermarkets and department stores
achieved economies of scale through mass marketing. Although
prices were lower and products were more uniform in quality,
the relationship with customers became nameless and
impersonal.
 The customer relationship has become even more
impersonal with the rapid growth of the Internet and the
World Wide Web. In today’s hypercompetitive
marketplace, customers are increasingly powerful; if they
are dissatisfied with a product and/or a service from one
organization, a competitor is often just one mouse click
away. Further, as more and more customers shop on the
Web, an enterprise does not even have the opportunity to
make a good first impression in person.
History Of Customer Relationship Management
 Customer Relationship Management (CRM) refers to
the overall strategy of increasing sales and profitability,
creating long-lasting relationships with customers, and
increasing loyalty. It also focuses on putting the customer
first and delivering a better, more personalized customer
experience. Basically, these are the methodologies and
software tools to leverage customer information in order to
achieve the following:
Build greater customer loyalty and therefore greater
productivity per customer
• Prevent customer attrition (loss of a customer)
• Acquire new customers who are most likely to
become profitable
• Up-sell (sell more profitable products/services) or
cross-sell (sell additional products/services) to
unprofitable customers to move them to a profit
position
• Reduce inefficiencies that waste advertising cost
 Customer Relationship Management Process
The process begins with marketing efforts, where the
organization solicits prospects from a target population of
potential customers. A certain number of these prospects
will make a purchase and thus become customers. A
certain number of these customers will become repeat
customers. The organization then segments its repeat
customers into low-value and high-value repeat
customers. An organization’s overall goal is to maximize
the lifetime value of a customer, which is that customer’s
potential revenue stream over a number of years. Over
time all organizations inevitably lose a certain percentage
of customers, a process called customer churn. The
optimal result of the organization’s CRM efforts is to
maximize the number of high-value repeat customers
while minimizing customer churn.
CRM is basically a simple idea: Treat different customers differently,
because their needs differ, and their value to the company also may
differ. A successful CRM strategy not only improves customer
satisfaction, but it makes the company’s sales and service employees
more productive, which in turn generates increased profits.
 Customer Touch Points

Organizations must recognize the numerous and diverse

interactions that they have with their customers. These various types
of interactions are referred to as customer touch points. Traditional
customer touch points include telephone contact, direct mailings,
and actual physical interactions with customers during their visits to
a store. Organizational CRM systems, however, must manage many
additional customer touch points that occur through the use of
popular personal technologies. These touch points include e-mail,
Web sites, and communications via smartphones. The touch points
are important in data consolidation plays an important and critical
role to a successful CRM.
 Types of Customer Relationship Management

Organizational CRM supports front-office business

processes; these are activities that directly interact with
customers like sales, marketing, and service. It uses sales and
marketing automation to give you a complete view of each
customer’s journey. The two major components of operational
CRM systems are customer-facing applications and customer
touching applications.
 Analytical CRM systems provide business intelligence by
analyzing customer behavior and perceptions. For example,
analytical CRM systems typically provide information concerning
customer requests and transactions, as well as customer responses
to the organization’s marketing, sales, and service initiatives. These
systems also create statistical models of customer behavior and the
value of customer relationships over time, as well as forecasts
about acquiring, retaining, and losing customers. An analytical CRM
gathers, organizes, and analyzes your customer data and sales
data to help you make better business decisions. This data can
include the average deal cycle, customer retention rates, monthly
recurring revenue, and any other information you collect.
 Analytical CRM systems analyze customer data for a
variety of purposes, including:
● Designing and executing targeted marketing
campaigns;
● Increasing customer acquisition, cross selling, and up
selling;
● Providing input into decisions relating to products and
services (e.g., pricing and product development);
● Providing financial forecasting and customer
profitability analysis.
 
The Relationship between Operational and Analytical
CRM