Customer Relationship Management, CRM – an introductory explanation of the term

Published May 4, 2020 22.15 PM CEST

Written by Daniel Back

Customer Relationship Management, CRM, is a term that has two meanings:

1. A strategy according to which a business’ objectives can best be achieved by identification and satisfaction of the customers explicit an implicit need and wishes.

2. An IT system that is used as support to identify, segment, acquire and keep the best mix of customers for the growth of the business.

The emphasis should be placed on the fact that one cannot do the job without the other one. There are of course advocates for both sides that propose that each works just fine without the other.

Customer Relationship Management encompasses management, organization and administration of customers and customer relations in a business. In this are also included processes with an IT system as support in the work. CRM should definitely not be seen as an IT system foremost, the emphasis is on the strategic and tactical parts. CRM effects the organization and processes of the business. The IT system is a support in the work.

CRM focuses on customer satisfaction and the overall customer experience. It is profitable to work with CRM, because it is expensive to acquire new customers and therefore also more cost effective to focus work on retaining existing customers. To increase the customer satisfaction the business should focus on marketing, sales and service to the existing customer base. In this way the business can increase the life time value of the customers.

The objective of CRM is to make the business understand the value of the customers for the business and understand the needs of the customers. With CRM the businesses strive to attract new customers, while keeping existing loyal recurring customers. Work is focused on the customers and their satisfaction to achieve a long time value for the business. A major part of the CRM work is to get and analyze relevant data from the customers. These data can be used by everyone at the company to help in meeting the customers’ needs. As a part of CRM is calculating customer value and customer lifetime value. The evolution of this is Customer Value Management, CVM. CRM is now considered one of the most important tools for a business’ success in the new era of competitive landscape, where the customer has the absolute power. Businesses must meet different customer needs in an adaptive manner. CRM, the way to proactively manage the customer relations.

The key to successful CRM is to craft a strategy that leads to the business becoming customer centric. When the strategy is in place, you need a system to support the daily work, analyzes, reporting and development of the set strategy. The CRM work is a constant cycle and not just a project. When the initial implementation is done, you will have to constantly develop and refine your strategy, tactics and processes.

Step 1 is to craft a customer-centric strategy. As with all strategies it is of utmost importance that you do your research and directly from the outset is very clear with your objectives, both short- and long-term. You must know what you want to accomplish and understand your customers – long before you even start to consider an IT system.

It will require good planning that emanates from clear and realistic goals. In which direction should your business go?

Photo by Aziz Acharki on Unsplash

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