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What is CRM (customer relationship management)?

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 so that management, salespeople, people providing service, and perhaps the customer directly could access information, match customer needs with product plans and offerings, remind customers of service requirements, know what other products a customer had purchased, and so forth.

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 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 and identify customer needs and effectively build relationships between the company, its customer base, and distribution partners.

Many organizations turn to CRM software to help them manage their customer relationships. CRM technology is offered on-premise, on-demand or through Software as a Service


Keeping in mind the pace at which technology is changing today, any company which is a step ahead of others because of some web product or service will not be able to hold on to that advantage for long. The key to stability in todays dynamic marketplace is forging long-term relationships with the customers.

Customers can be divided into three zones:

Zone of defection where customers are extremely hostile and have the lowest level of satisfaction. Zone of indifference where customers are not sure. They have a medium level of satisfaction and loyalty towards the company. The third level of customers are in the zone of affection described as Apostles. CRM focuses on bringing customers from level 1 to level 3 and retaining apostle customers.

Customer demands for customization are increasing with every passing day. This has made companies shift their focus from mass production to mass customization. The present scenario of companies using poorly implemented multi channel strategies for living upto the expectations of customers is bringing both customer satisfaction and customer loyalty down the ladder. Take the example of a small enterprise. Here hard work reaps high quality service and over the years develops a database of loyal customers. In this enterprise computers are optional. Then why is the CRM industry attracting investments of millions and billions of dollars? The reason is simple. The concept of Sellers Customer has just rotated 180 degrees to become Customers Seller. This simply states that, now the customer is more powerful than the seller. Options for customers have increased with the cycle of innovation-to-production-to-obsolescence gaining momentum. On the other hand companies are finding it difficult to differentiate themselves in the marketplace. These factors are pushing companies into taking a closer look at their customer relationships.

Models of CRM
A number of comprehensive CRM models have been developed. We introduce five of them here.

The IDIC model

The IDIC model was developed by Peppers and Rogers, the consultancy firm, and has featured in a number of their books. The IDIC model suggests that companies should take four actions in order to build closer one-to-one relationships with customers: identify who your customers are and build a deep understanding of them

differentiate your customers to identify which customers have most value now and which offer most for the future

interact with customers to ensure that you understand customer expectations and their relationships with other suppliers or brands

customize the offer and communications to ensure that the expectations of customers are met.

The QCi model

The QCi model shown in Figure 1.1 is also a product of a consultancy fi rm. 19 The models authors prefer to describe their model as a customer management model, omitting the word relationship . At the heart of the model they depict a series of activities that companies need to perform in order to acquire and retain customers. The model features people performing processes and using technology to assist in those activities.

The CRM value chain

Francis Buttles model was the subject of a recent book. 20 The model, as shown in Figure 1.2 , consists of five primary stages and four supporting conditions leading towards the end goal of enhanced customer profitability. The primary stages of customer portfolio analysis, customer intimacy, network development, value proposition development and managing the customer lifecycle are sequenced to ensure that a company, with the support of its network of suppliers, partners and employees, creates and delivers value propositions that acquire and retain profit table customers. The supporting conditions of leadership and culture, data and IT, people and processes enable the CRM strategy to function effectively and efficiently.

The Gartner competency model

The final comprehensive CRM model comes from Gartner Inc. Gartner Inc. is a leading IT research and advisory company that employs some 1200 research analysts and consultants in 75 countries, and has a signifi cant place in CRM research. Figure 1.4 presents Gartners CRM competency model.

Paynes five-process model

The fourth comprehensive model was developed by Adrian Payne. This model ( Figure 1.3 ) clearly identifi es fi ve core processes in CRM: the strategy development process, the value creation process, the multichannel integration process, the performance assessment process and the information management process. The fi rst two represent

strategic CRM; the multichannel integration process represents operational CRM; the information management process is analytical CRM.