Customer Relationship Management (CRM) Strategies and Implementation
Customer Relationship Management (CRM)
Better Customer Insights
As customer relationships mature, suppliers gain a deeper understanding of customer needs and expectations, while customers also gain clarity on the supplier’s capabilities. This enables suppliers to effectively identify and fulfill customer requirements, leading to increased sales and profitability. Trust and commitment between both parties tend to grow as relationships deepen over time.
Lifetime Value
CRM emphasizes the concept of viewing customers as a source of lifetime income rather than isolated transactions. For instance, a General Motors customer is estimated to be worth $276,000 over their lifetime of car purchases, parts, and service. Losing a customer to a competitor can result in a significant loss of revenue, making customer retention a crucial strategic goal.
Customer Satisfaction, Loyalty, and Business Performance
CRM aims to improve business performance by enhancing customer satisfaction and fostering loyalty. This is based on the “satisfaction-profit chain” model, where customer insights enable companies to better understand their customers and create superior value propositions and experiences. Increased customer satisfaction leads to higher repurchase intentions and actual purchasing behavior, ultimately impacting business performance.
Planning and Implementing CRM Projects
CRM projects involve five key stages:
- Develop the CRM strategy
- Build the CRM project foundations
- Specify needs and select partner
- Implement the project
- Evaluate performance
Stage 1: Develop the CRM Strategy
A CRM strategy is a high-level plan that aligns people, processes, and technology to achieve customer-related goals. Key steps include:
- Situation analysis
- Identify target customers or segments
- Define market offerings
- Evaluate distribution channels
- Commence CRM education
- Develop the CRM vision
- Set priorities
- Establish goals and objectives
- Identify people, process, and technology requirements
- Develop the business case
1. Situation Analysis
A framework is helpful to guide the analysis, answering questions such as:
- Where are we now?
- Why are we where we are?
- Where are we going to be in the short and long term?
2. Customers or Segments
Key considerations include:
- Target and served segments
- Customer-related marketing and sales objectives
- Sales volume and customer satisfaction levels
- Market share and share of customer spending
- Effectiveness of customer acquisition, retention, and development strategies
- Customer touchpoints and their experience
- Impact of customer management processes on costs and experience
- Technologies used to support marketing, selling, and service functions
3. Market Offerings
Analyze aspects such as:
- Products offered and branding strategy
- Brand awareness and competitive landscape
- Competitive advantages and disadvantages
- Value-added services and customer benefits
- Pricing and margins compared to competitors
4. Distribution Channels
Evaluate:
- Direct and indirect distribution channels
- Channel effectiveness and penetration levels
- Emerging and declining channels
- Competitor distribution strategies
- Channel partner experience and margins
- Impact of channel management processes on costs and experience
5. Commence CRM Education
CRM can have different meanings for different people. Education is crucial to ensure all stakeholders have a clear understanding of CRM and its implications. This helps address misconceptions, encourage participation, and identify opportunities for improvement.
6. Develop the CRM Vision
The CRM vision is a high-level statement of how CRM will transform your customer-related business. Examples include:
- Building trust-based relationships with members to represent their interests and satisfy their needs.
- Delivering a customer experience that consistently creates enthusiastically satisfied customers.
- Building and maintaining long-term relationships with valuable customers through personalized experiences and anticipating their needs.
7. Set Priorities
CRM projects vary in scope and can impact sales, marketing, or service functions. Clear priorities, often focused on cost reduction or enhanced customer experience, may emerge from the situation analysis. Prioritize projects with quick wins, fast returns, or low costs, while acknowledging the challenges of implementing longer-term priorities.