Customer Relationship Management (CRM)

The basic idea  Customer Relationship Management, or CRM, is to increase customer loyalty and retention and increase an organizations profitability. CRM allows an organization to keep in touch with all aspects of the tight relationship with the customer. The structure of CRM is a very important piece to understanding how it really works.

CRM starts with communication between organization and customer, moves to the four functions that continues the flow that finished the CRM system.

Communication - In figure 9.1 in the book there are four ways in which the customer can communicate with an organization. This can be through phone call, web access, Email, or face to face contact. This may be the first impression or the next link in the chain that insures a good relationship with the customer. 

Four Functions- A relationship is not completely developed until several functions have been met. The four functions are accounting system, order fulfillment, inventory system and customer service system.

Now that we understand the basic structure of CRM, it is important to understand the fundamentals. 
  • CRM as a business Strategy
  • Business benefits of CRM
  • Evolution of CRM
  • Operational and analytical CRM
As a Business Strategy
Taking advantage of all CRM has to offer will improve the profitability of any organization. Developing the right strategy to work based off of information within CRM. Knowing as much as possible about the customer allows an organization to pin point the right way to interact. An example brought up in the book explains how the organization Eddie Bauer realized that customers spent five times more when the shopped across all three channels of communication compared to those who only used one. The three channels that Eddie Brauer was is using are catalogs, websites, and stores. Knowing this statistic found by the CRM director, Eddie Brauer is able to understand that if they try to reach out to all their customers in multiple channels, they can boost their revenues.

Business Benefits
Gathering important CRM information from customer habits and behaviors allows the organization to identify patterns and create marketing campaigns, sales promotions, and service to increase business. By knowing exactly what the customer cares most about, an organization is able to change the way they work to better satisfy the customers needs. One of the examples given in the book explains how the New York Knicks was able to target specific customers through email based on who there favorite player is, what they buy and where they buy it. This keeps their marketing strategy quick and clean with less risk of overlap. 

There are three phases mentioned in the evolution of CRM: (1) Reporting, (2) Analyzing and (3) Predicting. Reporting allows organizations to identify customers through applications. Analyzing gives the organization an idea of who their best customers are to target them. Predicting helps the organization prevent and maintain customer turnover. With changes in customer behavior unavoidable, having a well evolving CRM system helps prevent customer loss or even risking doing business with a potentially bad customer. 

Operational and Analytical
Operational CRM is your direct and day-to-day operations, face to face with the customer. Analytical is the background analysis of the customer that is indirect in relation to the customer. To better understand this fundamental part of CRM, a figure is shown (9.5 on page 321). In the operational section of the picture it shows three boxes, Sales Systems, Marketing Systems and Customer service systems. These are Direct interactions that are relayed to the Data Warehouse within the Analytical CRM section. This section also includes a box for data mining which refers to the indirect relationship with the customers, eliminating redundancies and filtering unnecessary data. 

Here is something to help you better understand the importance of CRM in a slightly different way ( CRM VIDEO )
For some more information regarding CRM, visit this helpful Wikipedia site focused on CRM.