Friday, January 18, 2008

Introduction to CRM

Customer Relationship Management has been with us over the ages, for as long as people traded with each other. In those days, the physical closeness in location between the customer and the supplier led to the relationship. Even in less developed countries and traditional societies such business models currently still exist. People congregated on market days and the customers usually buy from people they know, have bought from before. The supplier also knew his customers well, what they liked, how they liked it, what they did not want, and was able to deliver the customer's needs and wants. And based on their knowledge of the customer, they could also add sweeteners to ensure customer loyalty, and bring in related samples to introduce their existing customers to new things. Their loyal customers then spread the word and introduced other customers to them. And gradually they became well known for what they sold or provided.

As countries developed and urbanisation took place, the physical distance between the supplier and the customer increased. Intermediaries and merchants developed to transport the product from the producer to the customer. To pay for their efforts they added their margins on top of the supplier's price.

With increasing urbanisation and industrialisation, suppliers could no longer deal with their customers directly. They could no longer know their customers' needs, wants, preferences, habits, and other characteristics that helped them to compete. The problem then arose of how to compete with products that are not tailored to customers' needs. So they started building brands, and using advertising and mass marketing to persuade remote customers and compete for a greater share of the market. The flavour of the times were mass production, standardisation, strong universal brand, and a deep penetration of the market. However this involved a lot of guesswork, and some big mistakes were sometimes made. The disconnection with the customer also meant that direct-feedback from the individual customer was not available.

Over the years, competition became so fierce that mass marketing became inadequate in ensuring the brand, as customers could easily move to a competitor at any time. Relying on customers to remain with a business without bothering to interact with them is risky. It also became clear that not all customers are equally valuable to a business, and the focus moved to finding out what made a customer valuable. The way a customer interacts with the business can have significant impact on their loyalty and retention, so customer service gained prominence. Costs of acquiring and retaining a customer became really important, and it became clear that selling to an existing customer is cheaper than acquiring and selling to a new customer. Reducing the cost of selling and improving profits required more precise marketing, and this required the firm to be able to gather, retain, analyse and interprete customer data. However, this information gathering, analysis, and interpration was very complex, expensive and could not be easily done manually.

And then computerisation came, followed by the Internet. And it became possible again for suppliers to reach individual customers, connect with them and undertand their needs and wants. This enabled the firm to build a relationship with the individual customer, similar to that seen in the old days, and the field of Customer Relationship Management (CRM) was born. The aims of CRM for the supplier/firm is to deliver value to the customer at a profit, and to deliver that value so well that the customer remained loyal, and the supplier became a first choice for the product/service, with an enhancement of the supplier's reputation and brand. For the customer, the value of CRM is to have a supplier who understands the customer's needs and wants so well, that value was delivered at every interaction, with less mistakes. Since technology is very essential for delivery of the supplier's CRM aims, for some people CRM became synonymous with the technological tools. And some CRM technology vendors and practitioners insisted that their interpretation of CRM was the truth. These differing views affected the implementation and use of CRM technology. Companies and suppliers using these different CRM technology also judged and defined them by their experience of how it met their business needs.

Technology has been the hero and the villain of CRM in practice. For some CRM worked and for others it did not, and the reason for failure was not always due to the CRM technology. And those for whom CRM did not work were quite vocal in blaming either the concept of CRM, or the technology, or the CRM vendors, or all of them. But over the years, it became clear that the problem was not always due to the CRM technology, but the implementation and application of it. CRM is something that companies do. CRM is not something companies buy. CRM technology solutions is meant to help companies do CRM. Like all technology, someone has to turn it on and they need to know what "buttons to press".

CRM is not a fad. It is an underlying principle of interacting with customers or clients, and it is something that all firms should practice. All executives need to understand CRM as a corporate strategy.

These series of articles are aimed at helping all readers understand aspects of CRM. Obviously they are written from the perspective of my experience, but the articles will also incorporate information from the experiences of others, including research findings and more.

Mary Akpala is a CRM Consultant and Trainer for Alpha CRM Ltd in London, England, UK. She helps businesses automate and co-ordinate their business activities. She helps professionals and small businesses to make their working lives a lot easier, and their businesses easier to manage through the use of online collaboration tools and business software. Her emphasis is on training users to make sure they can get the most benefits of the available software by using them properly. You can reach Mary at +44 20 8361 7300 and via the website http://www.alphacrm.com/

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