Wouldn’t it be great to have tools we could use to track our interactions with customers to better understand their needs?
And manage current relationships with our customers as well as our customer leads.
Retaining customers is cheaper than attracting and converting new customers.
So we are more profitable!
This article is about customer relationship management and explains how it works and the benefits of using CRM.
It‘s cheaper to retain customers than it is to attract new ones. It pays to look after them.
What is Customer Relationship Management?
Customer relationship management (CRM) is a strategic business approach to managing interactions with existing and potential customers.
Grounded in the foundations of relationship marketing, CRM is often used to describe technology-based systems that manage customer information and solutions.
“Relationship marketing theory provides the foundations of CRM, which is the process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer.” (Parvatiyar & Sheth, 2001)
The focus is on customer retention through streamlined processes and staying connected to customers to improve the relationship. Firms manage and analyze their interactions with their past, current and potential customers.
Firms can use numerous customer communication channels to compile data, including a company’s website, telephone, email, live chat, and social media.
The ultimate goal of CRM is to increase sales.
A Brief History of CRM
Customer relationship management dates to the 1970s. Initially, businesses used surveys to evaluate customer satisfaction. As computer technology developed, companies used spreadsheets to categorize and analyze data and create lists of customers, which became the basis for database marketing.
In the 90s, CRM evolved as more large tech companies such as Oracle got involved and created customer software solutions, including sales force automation and customer service.
With the advances in the internet, the early 2000s saw CRM migrate into cloud technology, meaning users could access it online from any computer.
Being online also removes the burden of installing and updating software, keeping IT costs lower and is extremely flexible for businesses to upgrade as they grow.
Industry-specific software or full-customized CRM was also replacing standardized CRM options to meet businesses’ needs further. Industry data suggest Worldwide spending on CRM will exceed USD 110 Billion by 2027.
“Uncertain markets and dwindling brand loyalty are critical factors which are leading service-based firms to adopt CRM as a business strategy.” (Dewnarain, Ramkissoon, & Mavondo, 2019)
The Benefits of CRM
A customer-centric marketing strategy allows firms to create and maintain relationships with their target market. CRM is a vehicle for this.
With rising customer acquisition costs and increasingly price-sensitive customers (They do not like to pay more), creating long-lasting, mutually beneficial relationships is key to increased customer retention.
The better we are at providing solutions to customers, the higher chance they will remain loyal, increasing their lifetime value to a firm.
CRM is a comprehensive approach to providing customer solutions.
Information is kept and organized about leads and customers, as well as every interaction that takes place. If customers regularly interact with multiple people on your team, it allows everyone in a firm to keep track of conversations.
“Organisations today must focus on delivering the highest value to customers through better communication, faster delivery, and personalized products and services.” (Chen & Popovich, 2003)
Some of the direct benefits to businesses of using a CRM are:
- Increased ability to target profitable customers.
- Enhanced salesforce effectiveness and efficiency.
- The marketing and sales teams function together more cohesively.
- We have improved customer service effectiveness and efficiency.
- Products/services customized to individual customer needs and preferences.
- Communication channels are integrated into a single platform.
- Increased responsiveness to changing customer needs.
- Improved data to more precisely segment customers based on their characteristics/needs.
- Individualized marketing based on customer behaviors.
- Increased opportunities to cross-sell and up-sell customers.
- It’s a key component of a sales funnel.
The Functions of CRM
The underlying function of CRM is to build customer relationships and to manage these as they mature through distinct stages. Firms keep a database of customer information to understand better those customers and better meet their needs.
The firm helps them analyze their customer data to identify sales opportunities and manage customized marketing campaigns from a central location.
For large organizations, one of the most significant benefits of CRM is that everybody has access to the data, making it easier to collaborate across teams and the entire customer lifecycle.
Sales, marketing, and customer support become integrated and automated.
Every detail about individual customers is kept, such as who they are and how their interaction with the firm.
Knowing these details helps everyone do their job better as it provides context about customer’s needs and situations, so one staff member can pick up the conversation where the last one left off.
Firms can manage inquiries across channels without losing track of conversations.
“To some, it meant direct mail, a loyalty card scheme, or a database, whereas others envisioned it as a help desk or a call center.
Some said that it was about populating a data warehouse or undertaking data mining; others considered CRM an e-commerce solution, such as the use of a personalization engine on the Internet.” (Payne & Frow, 2005)
CRM allows for marketing automation to make it more effective and efficient.
Firms can set up repetitive marketing tasks such as social media posts or email marketing to be sent to groups of customers at various times, with different messages, based on customer segments’ individual needs and behaviors.
Marketing aims to put the right message in front of the right people at the right time. CRM systems also monitor how customers preferred communication methods.
Daily emails? Weekly emails? Monthly phone calls?
Automation of the salesforce is another crucial function of CRM. Wherever a customer is in the sales cycle (buyer decision process), firms customize their communication for their situation (assuming we know enough about them).
CRM tracks a customer’s history with the company to know as much about them and tailor their communication.
It is critical to categorize recent sales leads accurately, as special sales promotions with different offers can be targeted at diverse groups of customers to fit their needs best.
Firms can focus and prioritize the right leads that are likely to be the best opportunities to close profitable deals. Firms do not want to waste time and resources on prospects who will never become profitable customers or clients.
Sales reps can work more efficiently, and sales forecasting becomes more accurate.
Another benefit of CRM is that customers are served better on a day-to-day process.
Direct customer service technologies mean that support becomes more personalized and automated, and customers are supported through multiple channels.
CRM keeps a record of every customer interaction, the extra insight into customers helping businesses be more constructive with improving their customer service experience and providing better solutions.
Another valuable function of CRM is the ability to analyze customer data collected through multiple digital sources.
Data mining helps businesses to learn more about their target customers.
We can find out where our sales come from, what characteristics our customers have, the best way to communicate with them, and how to best cater to their needs.
Through analyzing our data, we can find patterns in consumer behavior that informs our decision-making. Identify any potential issues, as well as what is going well.
Analytics provides all sorts of customer information, such as their past sales and how they reacted to previous marketing efforts. If we find out that certain customer groups are not purchasing, we can change our offer.
It can be a trial and error process better to understand their buying behavior and spending habits over time.
In summary, a value proposition is the summary statement of why a customer would choose a company’s product or service. It frames how they uniquely provide value to customers.
This article has discussed the importance of creating a value proposition and the steps a business can take to create its own and differentiate itself from competitors.