CRM stands for Customer Relationship Management. There are more than 45 definitions of CRM (Zablah, Bellenger and Johnston, 2004), used in academic literature, on main CRM portals or used by top CRM vendors. All in common represent a strategy to reduce costs and  increase profitability by keeping long term relationships with customers (consumers, companies, government, or even other department of the same firm).

Benefits:

Customer satisfaction

Primary goal of CRM is to collect relevant data about customers. Once you have the data you can use them to identify customers preferences and make them satisfied. It has a positive impact on customer retention and obviously on financial results. Reichheld and Sasser (1990) mentioned in their study that 5% improvement of the so called customer retention rate caused the company profit to rise by 25 – 85 %.

Customer retention

To acquire a new customer is more expensive than to convince your current one to purchase goods/services (Liswood, 1989). Using CRM data may create an illusion on the customer side about his uniqueness and personal approach even though you provide the same service to others as well. On the other side excessive usage of such data could be counterproductive – customer could feel monitored.

Strategic information, reporting

To have and collect good data is the most crucial part of CRM. It’s not a one time process, it is rather a long term project of updating data and doing analyses to make the output relevant. If the reporting modul is available in CRM software it provides important information to help managers in decision making. Advantages of reporting module:

  • Summary of sales, success of marketing campaigns, real time request processing,
  • profitability of product and services, companies often support the unprofitable ones,
  • overview of the profitability of customers,
  • customer satisfaction,
  • acquisition costs,
  • discount effectivity,

If company uses the above mentioned information correctly it can forecast the market and its customers behavior and target the marketing campaigns in a better way.

Increase of customer lifetime value

We can split the life cycle of a customer into three phases – acquisition, relationship development, relationship termination. It is well known that a satisfied customer will share his experience less than the unsatisfied. That’s why the relationship development is key also for acquisition. Moreover satisfied customers swill come back and buy other goods repeatadly. Altghough termination of the relationship is underestimated part of the CRM, it is necessary to register and analyze the reasons – why it happened, under what circumstances, what is the learning outcome for the company.

Conclusion

I covered the reasons why it is good to have CRM implemented in a company. Nevertheless there is one huge (hidden) assumption to have the positive outcomes from using it – employees who use CRM responsibly. CRM must be functional on all the levels of company hierarchy and employees have to input real data. With regards to CRM software used – it must be easy to use and eye-candy. Employees have to feel comfortable to use it every day or even every minute.