What is it?
CIMA Official Terminology describes customer relationship management as a culture, possibly supported by appropriate information systems, where an entity emphasises the interface between itself and its customers. Knowledge is shared, within the entity, to ensure that the customer receives a consistently high service level.
Many of the principles of customer relationship management can also be applied to supplier relationships.
What benefits does CRM provide?
The focus on customer relationship management has become increasingly core to all organisations. Companies have increasingly recognised the significant costs related to the loss of customers and are trying to better understand, measure, manage and improve customer retention. CRM helps organisations examine how to measure and improve long-term customer lifetime value.
CRM software systems combine sales, marketing and customer service functions, with benefits including better understanding of buying habits, better identification of prospective customers, and increased customer satisfaction.
Increasingly, they are integrated with e-commerce systems, allowing businesses to build a detailed image of their customer or membership base. This leads to improvements in marketing, sales processes, customer services, analysis and reporting.
A more recent development has seen businesses harnessing the power of social media. By monitoring what customers and target markets are saying about their products or services on their own or generic sites such as Twitter and Facebook, businesses can identify opportunities and areas for improvement. It is essential for businesses to consider the global impact of customer feedback.
The following diagram shows one approach to implementing CRM:
Source: Adopted from the CRM Excellence Model, best Practices. 2001.'
Questions to consider when implementing CRM
- Does our business have a customer-focused culture?
- How do/how will we measure customer satisfaction?
- What are the long- and short-term objectives?
- What does success look like?
- What will we do with the information gathered?
|Actions to take / Dos||Actions to Avoid / Don'ts|
How Tesco and Asos.com work with customer information
Tesco processes information from two-thirds of the transactions at its tills to learn more about its customers’ buying patterns in different stores and at different times of the day.
This wasn’t always the case. When Sir Terry Leahy, who pioneered the use of big data in large-scale retail during his 14-year tenure as CEO of Tesco, arrived at the group, he found little in the way of sophisticated research.
His introduction of the Clubcard – a rewardcard for customers – gave Tesco a high level of information on its customers and saw the group grow from being the third biggest retailer in the UK to the third biggest in the world.
‘I was a little surprised, when I came into the business, how subjective it was – how people would make decisions on the basis of no information whatsoever,’ says Sir Terry.
‘The bar code came along in the 1980s and that revolutionised a lot of things. You were getting the beginnings of a database then on products, and then the big breakthrough was when you had enough computing power to gather customer information as well as product. It really did make a difference. The year the Clubcard was launched was the year we overtook Sainsbury’s to second place in the UK.’
Other retailers, such as online fashion house ASOS.com, which has quickly grown to a market capitalisation of £1.4bn, are reaping the rewards from using big data. ‘I’ve had every scrap of information about my customers since day one,’ says ASOS.com chief executive Nick Robertson. ‘There was no bigger evidence of that than when we got caught up in the Buncefield fire at an oil depot in 2005. I had the names and addresses of every single customer who had placed orders so we were able to contact them to explain the situation. Once we were back, I emailed all the same customers again to say we had a bit of stock we needed to clear now because it’s a fire sale, come and shop. We got back on our growth trajectory as a result of having all that data.’
Related and similar practices
- Customer profitability analysis (CPA)
- Supplier relationship management (SRM)
- CGMA customer value tool