The philosophy of CRM is the recognition of the fact that a
long-term relationship with customers can be one of the
most important assets of an organization, providing
competitive advantage and increased profitability.
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CRM Fundamentals ____________________________________________4
How It Works? _________________________________________________5
CRM Systems and Technology _________________________________7
Defining CRM Objectives ______________________________________8
CRM Goals Differentiated by Departments ____________________9
Purposes of Customer Relationship Management ____________11
Measuring the Success of CRM ______________________________13
CRM is a business philosophy that describes a
strategy placing the client in the center of its
processes, its activities and its culture.
IT applications are the tools that allow an Many industries evolved their method of
organization to implement the CRM doing business over the years. The providers
strategy. The new IT developments can help that offer large amounts of products
an organization regularly adapt its struggled over the years to create brands
strategies. based on quality and price. But the clients'
empowerment and their importance have
The main CRM concept is quite simple. increased. Today, in an environment ruled
Throughout many years, the companies by Internet, when changing providers can
focused their efforts primarily on lowering be done with just a few mouse-clicks, the
the costs and improving their internal problem becomes more complex. It affects
efficiency. Thus they concentrated more on each organization, no matter if it
the internal processes, often automatizing concentrates on clients or on business.
back-office functions elements like
manufacturing, logistics and finance. It has been proven that necessary costs for
client maintenance are significantly lower
In contrast, the management effort than those associated with new client
invested in client service, for example acquisition. While businesses will continue
selling and marketing, was often relegated to extend the clients database, they should
in a last place. As the market gets stronger also concentrate on keeping and multiplying
and the providers become more efficient in the best of these clients. Increasing a
offering products or services, it becomes client's action - or in other words the
more difficult to differentiate between quantity of business each client generates -
rivals. What is the true difference between becomes as important as increasing the
two types of toothpaste? In the meantime, action of the market. Through a good
as the quality of services and products administration of the relationship with a
improves, client expectations increase. As good client, the profitability will certainly
long as the client has the possibility of grow.
changing his provider, it becomes harder to
Essentially, the above represents the
keep him loyal. In conclusion, it is highly
concept of Customer Relationship
important for a modern company to own a
system that will shorten the reaction time
to customers' requests and complaints, thus
offering support and quality for its services.
The term CRM became popular in the mid-1990s
even though the principles that underline the
concept of relationship management -
representing the essence of marketing - are not
new and have been practiced for a long time,
especially by small businesses.
Since the marketing instruments used by According to studies, the average
small businesses (e.g., mostly personal company loses between 20 and 50
contact between buyer and seller and percent of its customers every year, and
therefore a good knowledge of the buyers also finds it hard to retain its best
needs) are not achievable for larger customers.
businesses, CRM technology should enable
Deregulation, diversification and
managing customer relationships on a larger
globalization have stimulated a dramatic
rise in competition. These marketplace
realities have forced companies to switch
The philosophy of CRM is the recognition
from a product-centric approach to a
that a long-term relationship with
customer-centric approach. According to
customers can be one of the most
IDC, the CRM industry gained momentum in
important assets of an organization,
the past years and the CRM application
providing competitive advantage and
market increased by 84 percent, to $6.2
billion in 2000.
How It Works?
Customer Relationship Management (CRM) is a
complex system, consisting of procedures,
strategies, software and web applications, that
assists a company in organizing and managing the
relationship with its clients.
CRM facilitates the interaction with clients Generally, this consists of pages that
through the most efficient, the fastest and contain answers to the most frequently
the most sofisticated channel of asked questions (FAQs). More complex
communication - the Internet. It is a systems analyze the questions and search
solution that concentrates on the people, the database for possible answers. In each
the processes and the information from case, the system should be updated
within a company, and aims to support its constantly, as new problems and new
clients better and increase the level of solutions appear. The most sophisticated
fidelity/loyalty. systems will automatically quot;learnquot; from the
cases where the problems were solved,
The spectacular growth and the continuous adding the necessary information in their
reevaluation of the organizations that use databases.
websites brought the Internet to the
Because many users don't trust the web
attention of today's management
concept, part of the Internet support
philosophy. The Internet offers another
systems will offer different ways to
infrastructure through which the
communicate directly with the agents,
organizations can interact with clients in
including online chatting. Most of the web
the same way they interact through phone,
based systems will have this feature, that
fax or email. The complexity of this
will allow clients to be contacted or to
interaction through multiple channels
contact the agents directly over the phone,
indicates some areas in which technology
thus respecting the request of receiving
can reduce personnel effort and
services through the favorite channel of
communication. When this facility is
At this moment, many companies consider activated in an integrated system, the
that the advantage of the web is actually contact center will have the possibility to
the fact that visitors can find answers on identify the client immediately and to
their own, thus minimizing the effort of the access his interaction history with the
companies, reducing direct contact with organization.
the agents and improving the efficiency.
CRM Systems and
Data sources that are used in CRM systems are
customer service inquiries, customer surveys or
sales force input such as purchase history,
shipping history, account data, demographic data
and Web sales data.
Since a part of this information is obtained Some examples of CRM initiatives are:
through enterprise resource planning - A database that specifically tracks
systems, ERP databases must be integrated customer service issues;
with some aspects of the CRM databases. - A web page that allows customers to
Furthermore, CRM technology includes check inventory availability, order
different aspects of information status, and place orders;
- Data warehousing to build an
management, including integration with
information database to better
other enterprise-related systems and
understand your customers;
methods that convert data to usable
- Capturing visitor data including their
information. CRM uses technology, strategic
planning and personal marketing techniques name, e-mail, location, and purchasing
to build a relationship that increases profit preferences.
margins and productivity. It uses a business
strategy that puts the customer at the core
of a company's processes and practices. The
implementation of CRM software should
come along with a change of the company's
mindset to become more customer
oriented. It requires this customer focused
business philosophy to support effective
sales, marketing, and customer service and
Defining CRM Objectives
The business objectives for the Furthermore, The Conference Board
implementation of CRM software are: surveyed 96 global firms in order to analyze
- Increased customer number and the CRM programs. 52 percent of the
customer profitability; interviewed companies have implemented a
- Increase in market share; CRM solution and, among others, the top
- Increased campaign response; three strategic motives were to increase
- Higher customer satisfaction ratings; customer retention and loyalty, to respond
- Greater number of returning customers effectively to competitive pressure and to
on the Web site; achieve a competitive advantage, and to
- Simplified internal organization (shrink differentiate competitively based on
workflow, shortens cycle times, and customer service superiority (see Figure
eliminates non-productive information 10).
CRM Goals Differentiated by
Different departments have different objectives
when adopting a CRM program.
In the following, some examples of Sales - The sales department objectives are
department-specific goals are presented: to deploy sales force automation across
regions, to track contact history, to
Customer Support - Customer service streamline the sales process, and to qualify
objectives are: obtain basic information prospects based on past experience.
about customers and their complaints, Field Service - Field service implies the
customer satisfaction monitoring and service or repair of the customer's
faster complaints resolution in order to equipment on the customer's premises.
raise customer retention rates, to Field service engineers need to monitor
increase self-service efficiencies, and to customer complaints and repairs histories.
mitigate the need for in-person
Marketing - The marketing department
is interested in performing dynamic
customer segmentation to begin more
targeted customer communications and
campaigns, refined marketing
campaigns, customer satisfaction by
segment analysis, and tracking
About one third of the 100 companies
According to a survey conducted by The
surveyed have a CRM strategy, but again
Database Group concluded in November
only one third of them achieved their plans.
2000, retailers with an implementation
However, about a quarter executes
level of 15.1 percent – one of the
important components of CRM. These
pioneering sectors for CRM – and utilities
components are, e.g., the ability to deal
companies with 17.9 percent
with customers consistently across multi
implementation level lead the field for CRM
communications channels (21 percent of
strategy. Banks and insurers are heaving
companies) and the linkage of key customer
relatively poor CRM implementation levels,
information databases (28.8 percent of
7.3 percent, and 4.4 percent
implementation level respectively, but are
expected to catch up in the next years.
However, their share on total customers is
very high (see also Figure 4).
Purposes of Customer
CRM, in its broadest sense, means managing all
the interactions and business activities between a
company and its customers.
This includes, but is not limited to, • Provides a mechanism to track all points
improving customer service. A good CRM of contact between a customer and the
program will allow a business to acquire company, and does it in an integrated
customers, service the customer, increase way, so that all the sources and the
the value of the customer to the company, types of contacts are included, and all
retain good customers, and determine the users of the system see the same
which customers can be retained or given a view of the customer (reduces
higher level of service. A good CRM program confusion).
can improve customer service by facilitating • Helps to identify potential problems
communication in several ways: quickly, before they occur.
• Increases the efficiency of customer • Provides an user-friendly mechanism for
interaction through all the registering customer complaints
communication channels available. (complaints that are not registered with
• Facilitates the collaboration between the company cannot be resolved, and
the client and the provider using the are a major source of customer
web, thus reducing the costs of dissatisfaction).
customer relations management. • Provides a fast mechanism for handling
• Provides product information, product problems and complaints (complaints
use information and technical assistance that are resolved quickly can increase
on web sites that are accessible 24 customer satisfaction).
hours a day, 7 days a week. • Provides a fast mechanism for
• Identifies how each individual customer correcting service deficiencies (correct
defines quality, and then designs a the problem before other customers
service strategy for each customer, experience the same dissatisfaction).
based on these individual requirements • Uses internet cookies to track customer
and expectations. interests and personalizes product
• Provides a fast mechanism for managing offerings accordingly.
and scheduling follow-up sales calls to • Provides a fast mechanism for managing
assess post-purchase cognitive and scheduling maintenance, repairs
dissonance, repurchase probabilities, and on-going support (improves
repurchase times, and repurchase efficiency and effectiveness).
Measuring the Success
As mentioned, one of the most difficult parts of a
CRM project is defining success parameters.
Even if the success factors are different, in Another financial success indicator is the
the end many companies choose the ROI customer lifetime value (CLV). It allows
(Return on Investment) as the only success companies to measure beyond one time
factor, although this choice is controversial. period and beyond one customer, and
Sometimes, CRM systems measure the ROI combines both the discounted cash flow,
simply as the incremental revenue or the activity costs and the probabilities for
margin return from implementing a CRM customer retention to help understand the
technology. This has only limited impact of different CRM scenarios. The
applicability, as it doesn’t give sufficient profitability outcomes of the most likely
insight to make ongoing decisions that scenarios that can be implemented must be
improve the customer relationship. It compared to find the best path to increase
considers the problem only from the total profitability.
business point of view, and sees the
customer only as a source of revenue, while 30%
CRM ROI should integrate both the margin
and the customer satisfaction. 25%
A study conducted by the researchers at the
University of Dayton illustrates four major
measurements for CRM success: 18%
- The CRM's ability to impact corporate
strategy (according to 25 percent of 15%
- Successful technological integration
(according to 23 percent of
- Enhanced strategic partnerships 5%
(according to 20 percent of
- Assimilation of CRM-related 0%
technologies (according to 18 percent of The CRM's ability to impact corporate
Successful technology integration
Enhanced strategic partnerships
Assimilation of CRM-related
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