Customer Relationship Marketing (CRM)

Chapter 1

What is CRM?
Customer Relationship Management is an information industry term for methodologies,
software, and, usually, Internet capabilities that help an enterprise manage customer
relationships in an organized way. For example, an enterprise might build a database about
its customers that described relationships in sufficient detail. Therefore, management,
salespeople, people providing services, and perhaps the customers could directly access
information, match customer needs with product plans and offerings, remind customers of
service requirements, and know what other products a customer had purchased. According
to one industry view, CRM consists of:

Helping an enterprise to enable its marketing departments to identify and target their
best customers, manage marketing campaigns with clear goals and objectives, and
generate quality leads for the sales team.

Assisting the organization to improve telesales, account, and sales management by

optimizing information shared by multiple employees, and streamlining existing
processes (for example, taking orders using mobile devices).

Allowing the formation of individualized relationships with customers, with the aim of
improving customer satisfaction and maximizing profits; identifying the most
profitable customers and providing them the highest level of service.

Providing employees with the information and processes necessary to know their
customers, understand their needs, and effectively build relationships between the
company, its customer base, and distribution partners.

Why is it necessary?
Many companies are turning to customer-relationship management systems to better
understand customer wants and needs. CRM applications, often used in combination with
data warehousing, E-commerce applications, and call centers, allow companies to gather
and access information about customers buying histories, preferences, complaints, and
other data so they can better anticipate what customers will want. The goal is to instill
greater customer loyalty.
Other benefits include:

Provide faster response to customer inquiries.

Increasing efficiency through automation.

Having a deeper knowledge of customers.

Getting more marketing or cross-selling opportunities.

Identifying the most profitable customers.

Receiving customer feedback that leads to new and improved products or services.

Doing more one-to-one marketing.

Obtaining information that can be shared with the companys business partners.

Market leaders
The top vendors of CRM software include Siebel, Vantive, and Clarify along with ERP vendors
Baan Co. and Oracle Corp. These top five vendors contributed 40 percent of overall CRM
revenue, with the market leaders growing a hardy 90 percent combined in 1998.
In the growing segment of CRM professional services, market leaders include Andersen
Consulting, Cambridge Technology Partners, CSC, Deloitte Consulting, EDS/Centrobe,
eLoyalty, Ernst & Young, IBM Global Services, KPMG, and PriceWaterhouseCoopers.
The future of CRM
AMR Research expects the CRM market to change dramatically, reaching $16.8 billion by the
year 2003. The CRM segment is expected to witness 60% revenue growth this year, with
compound annual growth of 49% by 2003. Companies are developing business plans with
CRM strategies as the driving element, as customer service is a top priority.

5 Marketing concepts for Building profitable Relationships with Target

Consumers
Marketing is department of management that tries to design strategies that will build
profitable relationships with target consumers. But what philosophy is the best for a
company in setting marketing strategies?
There are five alternative concepts under which organizations design and carry out their
marketing strategies. They are;
1. The Production Concept,
2. The Product Concept,
3. The Selling Concept,
4. The Marketing Concept,
5. The Societal Marketing Concept.
These concepts are described below;
The Production Concept - The idea of production concept - Consumers will favor products
that are available and highly affordable. This concept is one of the oldest Marketing
management orientations that guide sellers. Companies adopting this orientation run a
major risk of focusing too narrowly on their own operations and losing sight of the real
objective.
Most times; the production concept can lead to marketing myopia. Management focuses on
improving production and distribution efficiency. Although; in some situations; the
production concept is still a useful philosophy.
The Product Concept - The product concept holds that the consumers will favor products that
offer the most in quality, performance, and innovative features. Here; under this concept,
marketing strategies are focuses on making continuous product improvements.

Product quality and improvement are important parts of marketing strategies, sometimes
the only part. Targeting only on the companys products could also lead to marketing
myopia.
For example; suppose a company makes the best quality Floppy disk. But a customer does
really need a floppy disk? She or he needs something that can be used to store the data. It
can be achieved by a USB Flash drive, SD memory cards, portable hard disks, and etc.So
that company should not look to make the best floppy disk. They should focus to meet the
customers data storage needs.
The Selling Concept - The selling concept holds the idea- consumers will not buy enough of
the firms products unless it undertakes a large-scale selling and promotion effort. Here the
management focuses on creating sales transactions rather than on building long-term,
profitable customer relationships.
In other words; the aim is to sell what the company makes rather than making what the
market wants. Such aggressive selling program carries very high risks.
In selling concept the marketer assumes that customers will coaxed into buying the product
will like it, if they dont like it, they will possibly forget their disappointment and buy it again
later. This is usually very poor and costly assumption.
Typically the selling concept is practiced with unsought goods. Unsought goods are that
buyers do not normally think of buying, such as insurance or blood donations. These
industries must be good at tracking down prospects and selling them on a products
benefits.
The Marketing Concept - The marketing concept holds- achieving organizational goals
depends on knowing the needs and wants of target markets and delivering the desired
satisfactions better than competitors do. Here marketing management takes a customer
first approach.
Under the marketing concept, customer focus and value are the routes to achieve sales and
profits. The marketing concept is a customer-centered sense and respond philosophy. The
job is not to find the right customers for your product but to find the right products for your
customers.
The marketing concept and the selling concepts are two extreme concepts and totally
different for each other.
Difference between the Selling Concept and the Marketing Concept
No.

The Selling Concept

The Marketing Concept

undertakes a large-scale selling and

promotion effort

undertakes activities such as; market

research,

The Selling Concept is suitable with

unsought goodsthose that buyers do
not normally think of buying, such
as insurance or blood donations.

The Marketing Concept is suitable for

almost any type of product and market.

Focus of the selling concept starts at the

production level.

Focus of the marketing concept starts at

understanding the market.

Any company following selling concept

Companies that are following the

undertakes a high risk

marketing concept requires to bare less

risk and uncertainty.

The Selling Concept assumes

customers who are coaxed into buying
the product will like it. Or, if they dont
like it, they will possibly forget their
disappointment and buy it again later.

Instead of making assumption, The

marketing concept finds out what really
the consumer requires and acts
accordingly to them.

The Selling Concept makes poor

assumptions.

Marketing concept works on facets

gathered by its market and customer
first approach.

The Four Cs
The Four Cs marketing model was developed by Robert F. Lauterborn in 1990. It is a
modification of the Four Ps model. Here are the components of this marketing model:
Cost According to Lauterborn, price is not the only cost incurred when purchasing a
product. Cost of conscience or opportunity cost is also part of the cost of product ownership.
Consumer Wants and Needs A company should only sell a product that addresses
consumer demand. So, marketers and business researchers should carefully study the
consumer wants and needs.
Communication According to Lauterborn, promotion is manipulative while
communication is cooperative. Marketers should aim to create an open dialogue with
potential clients based on their needs and wants.
Convenience The product should be readily available to the consumers. Marketers should
strategically place the products in several visible distribution points.
Whether you are using the Four Ps, the Seven Ps, or the Four Cs, your marketing mix plan
plays a vital role. It is important to devise a plan that balances profit, client satisfaction,
brand recognition, and product availability. It is also extremely important to consider the
overall how aspect that will ultimately determine your success or failure.
Opening a physical business up carries much greater risk with much higher start-up costs,
employees and also stock levels, in addition to various overheads as well as your heavily
sacrificed time. On the other hand, an online business carries little to no risk as all the risk is
absorbed due to the nature of the internet.
The largest costs are related to domain names, hosting and advertising costs which range
from a few cents to a few hundred dollars, completely depending on your budget. The
biggest difference between the two stores is that an online store yields an unlimited amount
of growth online.

The above diagram shows the customer development process and how a customer is
brought forward from the suspect stage to the prospect stage and finally converted to a
customer and he can also progress through to other levels of the customer development
programme. Readers can also read the AIDAS model to see the initial few stages explained
in detail.
The customer development process starts with a sales funnel. Initially a company might
have a number of suspects. These are customers who meet the appropriate target group.
These target group customers are then called / prospected / met by executives to convert
them to prospects.
These prospects are furthered filtered to disqualified prospects prospects who themselves
dont want to buy the product or are unable to. Once the prospects are convinced and they
buy the product, they are converted to First time customers which with proper service can
convert them to repeat customers.
These repeat customers then become clients who regularly give orders and do not require
any convincing. The client stage is the first of the long term relationship stage for
customers. The clients are then promoted to members wherein they have exclusive
privileges which the companies offers only to their longer relationship customers.
From partners, these customers might progress to Advocates who might also give some
positive feedback for the company which ultimately helps the company in improvement or
moving forward and adjusting to changes in the market. Customer insight can be very
powerful for the organization and it regularly needs such advocates.
Finally, these advocates can also become partners by actively taking part in the running of
the company / businesses. By this time they would have amazing insight in the running of
the business as well as the industry and sector. Several consumer durables companies are
known to have channel partners who have initially been customers for the firm. they have
progressed thus far because of their technical prowess and loyalty to the company over
years.
One thing which should be kept in mind is that at any given point of time any of these
different stages of customers can progress to inactive or ex customers. If there is a glitch in

the service for the customer or if the customer himself runs out of the minimum service
term appointed by the company, then he can immediately turn into an ex customer. Thus it
is wise to retain relations with customers such that as many as possible are converted to
the highest stages in of the customer development process.