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Final Project Report on Conceptual Framework for Customer Relationship Management

Final Project Report on Conceptual Framework for Customer Relationship Management

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Published by Sophia Ali
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Published by: Sophia Ali on May 16, 2009
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12/12/2012

 
Section IConceptual Framework for CRM
What is Customer Relationship management?
Customer relationship management is creating a team relationship among sales, marketing, andcustomer support activities within an organization.Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention in whicha variety of after marketing tactics is used for customer bonding or staying in touch after the saleis made.Shani and Chalasani define relationship marketing as
“an integrated effort to identify,maintain, and build up a network with individual consumers and to continuouslystrengthen the network for mutual benefit of both sides, through interactive, individualizedand value-added contacts over a period of time”.
The core theme of all CRM and relationship marketing perspectives is its focus on co-operativeand collaborative relationships between the firm and its customers, and/or other marketingactors.CRM is based on the premise that, by having a better understanding of the customers’ needs anddesires we can keep them longer and sell more to them.Growth Strategies International (GSI) performed a statistical analysis of Customer satisfactiondata encompassing the findings of over 20,000 customer surveys conducted in 40 countries byInfo quest.The conclusions of the study were:
A Totally Satisfied Customer contributes 2.6 times more revenue to a company as aSomewhat Satisfied Customer.
A Totally Satisfied Customer contributes 17 times as much revenue as a SomewhatDissatisfied Customer.
A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a TotallySatisfied Customer contributes to a business.
 
By reducing customer defection (by as little as 5%) will result in increase in profits by 25%to 85% depending from industry to industry.
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An important facet of CRM is “customer selectivity”. As several research studies have shownnot all customers are equally profitable (Infact in some cases 80% of the sales come through20% of the customers). The company must therefore be selective and tailor its program andmarketing efforts by segmenting and selecting appropriate customers for individual marketing programs. In some cases, it could even lead to “ outsourcing of some customers” so that acompany better utilize its resources on those customers it can serve better and create mutualvalue. However, the objective of a company is not to really prune its customer base but toidentify appropriate customer programs and methods that would be profitable and create valuefor the firm and the customer. Hence, CRM is defined as:
Customer Relationship management is a comprehensive strategy and process of acquiring,retaining and partnering with selective customers to create superior value for the companyand the customer.
As is implicit in the above definition, the purpose of CRM is to improve marketing productivity. Marketing productivity is achieved by increasing marketing efficiency and byenhancing marketing effectiveness. In CRM, marketing efficiency is achieved becausecooperative and collaborative processes help in reducing transaction costs and overalldevelopment costs for the company. Two important processes for CRM include proactive customer businessdevelopment and building partnering relationship with most important customers. These lead tosuperior value creation.The basic concept is that the customer is not someone outside the organization, he is a part of the organization.

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