Research Paper on "Customer Data Analysis Customer Relationship Management"

Research Paper 10 pages (2801 words) Sources: 5

[EXCERPT] . . . .

Customer relationship management takes a holistic look at the organization's interactions with customer. Value, it is proposed, is not merely developed from the sales transaction, but from the careful cultivation of long-term relationships with the customer. Relationship marketing takes this concept further, and applies it to all stakeholders. If an organization can engage all stakeholders and leverage those relationships, it can build competitive advantage and ultimately drive value. These concepts provide the underlying framework for a shift in managerial thinking and tactics away from a transactional approach to business and towards a long-term relationship based approach.

Customer Relationship Management

Customer relationship management has become a critical success factor for a number of businesses. The modern competitive landscape is, for most firms, challenging. Almost every industry is characterized by intense competition. In order to win market share, each firm attempts to offer a unique proposition to customers. Doing so, however, is not always easy. Many products and services are relatively commoditized. Even ones that are unique today soon will not be, if the idea is of any value. For example, FedEx introduced overnight courier service. Soon, UPS and DHL were in that space as well. When competition becomes intense, firms can respond in a number of ways. One of these ways is to lower prices, that is to engage in a cost leadership strategy. The other way to address the competitive intensity is to find a way to differentiate your offering from that of your competitors. With commoditized products, this soon falls to the marketing department. One tactic that has proven consistently useful is customer relationship management.

Customer relationship management is a deliberate strategy that the organization implements to organize its customer relations process. This approach is holistic, meaning that the entire organization becomes involved. Various points of contact with customers, such as marketing, technical support, customer service and contract negotiation, become streamlined. The objective is to develop a total relationship with the customer that goes beyond the immediate transaction, or even set of transactions (Anderson & Kerr, 2002).

There are several goals of customer relationship management, including improving customer retention, developing new business with old customers and attracting new customers. Customer retention is improved through CRM techniques in a number of ways. CRM tactics often emphasize regular contact (Ghavami & Olyaei, 2006). Traditional marketing is often focused on finding new customers, but CRM emphasizes the need to retain existing customers. Consumers are bombarded with advertising and marketing, and it is reasonable to expect that some of this comes from the organization's competitors. By keeping in regular contact with its customers, and organization can effectively neutralize the impact of competitors' marketing campaigns.

Customer retention is also improved because each communication is a fresh marketing opportunity. The contact may be about an offer, but it may not be. It may simply be a courtesy call, or even an incoming service call. When communication is established with the customer, it provides an opportunity to engage the customer. Information can be gathered about the customer's needs, so that the sales team can tailor an opportunity. The contact person may be able to determine if there is an area where the customer is dissatisfied but for some reason does not wish to volunteer that information. Each contact can help to make the customer happy, to identify new opportunities for business, or simply to keep the organization front and center in the customer's mind. This is one of the critical steps to fostering loyalty in the customer -- make sure they understand that you are there to meet their needs, and they will turn to you when they have needs to be met.

Another goal of customer relationship management is to develop new business with existing customers. This can mean several things. The customer could patronize the business more frequently; the customer could make larger purchases; or the customer could select the company as a business partner on an entirely different project. It is sometimes assumed that if an organization has a customer, that customer is giving all of its business to the one organization. In reality, this is seldom the case. Many customers prefer to do business with multiple companies, in order that they keep their own options open. Ideally, however, a firm could convince its customers to do the majority of their business with them. For example, a restaurant could, through sound CRM practice, convince their customers to dine more often. A beauty salon could convince its patrons to purchase additional services. An accounting firm could foster a relationship with its customers that leads to work at its consulting arm.

Lastly, customer relationship marketing can serve to attract new customers. There are two mains ways in which this occurs. The first is through referrals. If a firm with a strong customer relationship management program satisfies its customers, those customers may in turn refer other business to the company. In addition, a strong customer relationship management program can be a selling point to help attract new customers. The firm can develop a reputation for its treatment of customers, which can in turn attract new customers. An example of this would be with Nordstrom and their strong customer relationship building. Alternatively, the CRM program can become part of the sales pitch, used to attract customers by highlighting it as one of the benefits of choosing your organization.

The underlying philosophy of CRM is that because of the high cost of attracting new customers, relative to the cost of a CRM program, the cost per dollar of revenue earned will be lower when that revenue is earned from existing customers rather than from new customers. This requires the building on strong relationships, not just fleeting transaction-based relationships. The relationships, ideally, would be at the organizational level. The relationship, therefore, is multifaceted. It is also long-term in nature. While traditional marketing approaches emphasize transactions, customer relationship management is predicated on the theory that the transactions will come, steadily and over time, as long as the relationship is maintained. It is not, therefore, necessary to complete a sale with each communication. As long as the relationship has been further cultivated as a result of that communication, then the strategy has been effective. The reward, it is believed, will come later.

Implementation of Customer Relationship Management

When the customer relationship management field first came to prominence, CRM was largely viewed as an information management issue. Software systems were introduced to help companies organize their clients, prioritize their sales calls, track communications and other functions relating to CRM. This software was vital because it reintroduced the concept of the long-term relationship to business. At one point, all business relationships were interpersonal, but as companies grew larger customer relations became impersonal. Customers deal with different departments and different contacts constantly, and this software allowed for the reintroduction of the long-term time frame to customer relationships. Any agent, speaking to any customer, could immediately gain access to the customer's history with the firm, records of previous transactions, and a communications history.

The field of customer relationship management, however, has evolved beyond software. CRM has become a "customer-centric philosophy that must permeate the entire organization" (CRM Media, 2002). Implementing CRM, therefore, is more complex than simply installing CRM software. There are three key steps to the process. Technology is the first step, and allows customer information to be stored and disseminated throughout the organization.

The second step is the people. The entire organization must be engaged, in particular the parts of the organization that have direct customer contact. Even those areas of the organization that do not have direct customer contact should be aware of the CRM strategy and how their role supports it. Each person that has customer contact, be they in customer service, technical support, billing or sales, should understand how their role impacts the relationship with the customer. They should be trained on their interactions with the customer, and on how to identify customer needs. Training is essential to the development of a group of people capable of executing a CRM strategy.

The third step is the processes. Because the different components of the organization must work together to address customer needs, there needs to be effective communications mechanisms. Traditional marketing organizations have something of a "silo" structure, where different parts of the company do not communicate with one another. For customers, this is frustrating and is not conducive to building a strong, lasting relationship. An organization with strong customer relation management will have integrated communication systems that allow different departments within the organization to communicate with each other efficiently and effectively. Some of these will be embedded in the technology, but some of the communication must come in the form of processes. Complaints delivered to a customer service agent need to be efficiently forwarded to the relevant service department. Sales opportunities identified by billing need to be forwarded to the sales team. Internal communication systems that link the organization are essential.

There also needs to be cohesive processes to follow… READ MORE

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