In the contemporary world, customer relationship management (CRM) plays an essential part in the typical organization's marketing system. In the market structure, the demand for understanding how to manage customer relationship effectively has increased. Firms have realized that the esteemed and potential customers have distinct economic value to their business and hence need to use their communications strategy and customer offering offerings. As a result, companies are shifting from brand centric or product-centric marketing strategies to the customer-centric method. According to Payne and Frow (2005, p.168), CRM is defined as "a strategic approach that is concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments." In other words, CRM is a strategic process of acquiring and analyzing customer to build a precise and effective marketing campaigns and handling relationships for retention optimization. Therefore, this process focuses on the customer satisfaction, knowledge and retention. Contrary to the "selling" approach that initially focuses on service or products and hence lead to customer, CRM strategies focus on the customer first and then move toward the sales. This report attempts to explain various phases of CRM and the importance of the CRM in the modern market to understand this approach effectively.
Phases of CRM
CRM usually consist of three phases that are designed to bring the organizations of firms closer to their customers and have a distinct impact on the customer-business relationship. These phases include customer acquisition, enhancing customer relationship, and the customer retention.
Customer acquisition
Through the CRM, acquiring new customers has always been the initial stage in establishing and enhancing business relationships. This phase involves promoting the services and products to attract new customers. According to Vaman (2007), both the direct-marketing module and contact management module provide fertile ground for companies to market and promote their services or products to prospects effectively.
Vaman defines direct marketing module as various promotional strategies that involve direct contact with the target customer. In this case, direct marketing software are used to ensure that companies can identify their target customers for specific promotional criteria such as using direct emails and then analyzing the customers' response (Vaman, 2007). On the other hand, contact management module helps the organizations to acquire complete prospect and customer information. Advanced software can help to capture essential customer data such a name, phone number, address, email addresses, and in some cases social media contacts. With this information, companies can facilitate ongoing and future communication access. However, in this phase, companies must ensure that the value proposition supported by exceptional service and after-sales services to attract more customers (Aier et al. 2012).
Customer Relationship Enhancement
The next and essential phase of CRM is increasing the profitability of the prevailing customers or the customer relationship enhancement. This phase ensures that the organizations can enhance cross-selling of services, and increase sales that lead to profitability. According to Aier et al. (2012), the proposition value is based on the lower cost and the offer of convenience. CRM is an integral approach that helps the firms to acquire a better understanding of their prevailing customers' behaviors and needs and promote profitability from the prevailing customers through a cross-selling approach. According to Vaman (2007), this phase allows the businesses to customize their services and products to match the individual customer's preference and needs.
Customer retention
In this phase, the customer service strategy of CRM system provides the companies with the edge in supporting the existing customers. Therefore, customer service in the CRM system can be used to increase customer satisfaction and at the same time reduce the cost of support. Vaman argues that it is easier to lose a customer that the company had spent substantial resources to acquire due to poor customer services (Vaman, 2007). The retention involves the adaptability of the services by not providing what is demanded by the general market but by what the existing customer demands.
In the case of customer retention, the proposition value is to provide a product or service to the best interest of a customer through a positive relationship. Therefore, the company must determine the needs and preferences of the existing customers to strategize on building brands that meet the existing customer's needs and preferences. In most cases, many firms are concentrating more on the retention strategy than the attraction of new clients. However, companies should ensure effective data analysis and systematic and regular follow-up communication to identify the characteristics of the customers and prospects that provide the best profitability potential. Consequently, such activities help in developing a great focus on retaining essential customers.
All the above phases of customer relationship management are interrelated and offer the fundamentals of a new organizational structure, where business activities focus on the needs of the customers. These phases involve gathering and analyzing the customers' information to identify the customers' needs, how the firm can meet these needs, and hence provide those needs.
Importance of CRM
Understanding CRM is vital to organizations to help them identify their customers and achieve their goals. Using the CRM strategies companies are in the position to determine their customers' needs and preferences and then re-focus their strategies to serve their customers better. CRM helps the businesses realize goals such as need-based selling strategy, excellent customer service, sales staff support, effective cross-selling, and customer retention and generation strategies. In this case, companies must master on marketing mix that includes product, place, promotion, and price unique to every prevailing customer. Therefore, a company must ensure their sales personnel have adequate training and technology to promote services or products and to help them develop strategies to enhance value and profit using cross-selling approach. Sugandhi (2003) argues that CRM helps the firms to achieve business growth through enhancement of competitive excellence and competitive edge.
CRM also helps the organizations to promote uniqueness within the organizational architecture to help enhance differentiation and hence gain a competitive advantage over the competitors. Various activities must be achieved to ensure that the company is unique from its competitors. A company or the management must develop a comprehensive approach that is tailored to meet the specific needs of the customers. The company must also develop a customer-focused operating culture and environment that help in producing the differentiated products. In addition, the company must engage in the continuous upgrade of competencies to remain focused on enhancing the benefits and satisfying the customers. Companies can use the CRM to understand market segment relationship and formulate an action plan to assist the staff working in various segments to develop a plan that maximizes benefits to the customers or prospects.
Through understanding the market segment and providing support to the staff in the organization, CRM can increase an organization's potential to increase profitability. CRM is an important concept that enhances internal communication, enables the employees to interact and work together to achieve a common goal, and make selling process more effective and easier than before. Significantly, the CRM leads to increased customer loyalty and satisfaction. A business that utilizes the CRM model has to make a commitment to evolve and change concerning customers' lifecycle, change in needs, wants, and consumption behaviors, and changes in economic and business conditions. Such evolution is significant for company's profitability and continued success.
An effective CRM approach also helps the organizations to develop an enhanced sales strategy. The last thing a business would like to experience is declining profitability because of targeting the wrong customers. To mitigate this situation, CRM offers client management programs that provide valuable intelligence regarding the trends in long-term sales, and consequently, help the organizations readjust their results tactics and sales strategies.
In conclusion, the CRM strategy can be used to help the business overcome the challenges of increased competition caused by diversification, globalization, and deregulation. In the contemporary world, customers are exposed to the market that has many options, hence requiring firms to redesign their strategies to retain their best customers and ensure they are profitable and royal. According to the three phases of CRM, organizations should formulate strategies that focus on making their clients interested in the development and growth of the competitive edge. In addition, the CRM requires the companies to be careful with the staff selection and training as well as providing technologies and services required to support them. Managers should note that installation and implementation of CRM software or technology are not enough to help the organization achieve profitability. Companies must reward employees who are engaged in customer-oriented behaviors and CRM activities
References
Aier, S., TEAR 2012, & PRET 2012. (2012). Trends in enterprise architecture research and Practice-driven research on enterprise transformation: 7th Workshop, TEAR 2012, and 5th Working Conference, PRET 2012, held at The Open Group Conference 2012, Barcelona, Spain, October 23-24, 2012. Proceedings. Berlin: Springer.
Payne, A., & Frow, P. (2005). A strategic framework for customer relationship management. Journal of marketing, 69(4), 167-176.
Sugandhi, R. K. (2003). Customer Relationship Management. New Delhi, India: New Age International.
Vaman, J. N. (2007). ERP in practice: ERP strategies for steering organizational competence and competitive advantage. New Delhi, India: Tata McGraw-Hill Pub. Co.
