Customer Relationship Management (CRM): Types, Models, and Strategy

Posted on Nov 26, 2025 in Marketing

Customer Relationship Management (CRM) Defined

Customer Relationship Management (CRM) is an integrated information system used to plan, schedule, and control pre-sales and post-sales activities within an organization. CRM embraces all aspects of dealing with prospects and customers, including the call center, sales force, marketing, technical support, and field service.

The primary goal of CRM is to improve long-term growth and profitability through a better understanding of customer behavior. CRM aims to provide more effective feedback and improved integration to better gauge the return on investment (ROI) in these areas.

Core CRM Functions

  • Support
  • Sales
  • Service
  • Orders
  • Analysis
  • Marketing (Mkt)
  • Strategy

Strategic CRM

Strategic CRM focuses upon the development of a customer-centric business culture. This culture is dedicated to winning and keeping customers by creating and delivering value better than competitors.

Customer Relationship Lifecycle Stages

  1. Sales
  2. Service & Support
  3. Management
  4. Marketing (Mkt)

Types of CRM

Operational CRM

Operational CRM automates and improves customer-facing and customer-supporting business processes. CRM software applications enable the marketing, selling, and service functions to be automated and integrated.

Operational CRM Activities

  • Public Relations (PR)
  • Communication
  • Database Management
  • Customer Loyalty
  • Acquisition
  • Documentation
  • Analysis
  • Customer Care

Analytical CRM

Analytical CRM is concerned with capturing, storing, extracting, integrating, processing, interpreting, distributing, using, and reporting customer-related data to enhance both customer and company value. Analytical CRM builds on the foundation of customer-related information.

Customer-related data may be found in enterprise-wide repositories, including:

  • Sales data (purchase history)
  • Financial data (payment history, credit score)
  • Marketing data (campaign response, loyalty scheme data)
  • Service data

Collaborative CRM

Collaborative CRM describes the strategic and tactical alignment of normally separate enterprises in the supply chain for the more profitable identification, attraction, retention, and development of customers.

For example, manufacturers of consumer goods and retailers can align their people, processes, and technologies to serve shoppers more efficiently and effectively. They employ practices such as:

  • Co-marketing
  • Category management
  • Collaborative forecasting
  • Joint new product development
  • Joint market research

Key CRM Models and Frameworks

The IDIC Model

The IDIC model suggests companies should take four actions to build closer one-to-one relationships with customers:

  1. Identify: Determine who your customers are and build a deep understanding of them.
  2. Differentiate: Segment your customers to identify which customers have the most value now and which offer the most potential for the future.
  3. Interact: Engage with customers to ensure you understand customer expectations and their relationships with other suppliers or brands.
  4. Customize: Tailor the offer and communications to ensure customer expectations are met.

The CRM Value Chain Model

This model consists of five primary stages and four supporting conditions, all leading toward the end goal of enhanced customer profitability.

Five Primary Stages:

  1. Customer portfolio analysis
  2. Customer intimacy
  3. Network development
  4. Value proposition development
  5. Managing the customer lifecycle

These stages are sequenced to ensure that a company, supported by its network of suppliers, partners, and employees, creates and delivers value propositions that acquire and retain profitable customers.

Four Supporting Conditions:

  • Leadership and culture
  • Data and IT
  • People and processes

These conditions enable the CRM strategy to function effectively and efficiently.

Payne’s Five Process Model

This model clearly identifies five core processes in CRM:

  1. The strategy development process (Strategic CRM)
  2. The value creation process (Strategic CRM)
  3. The multichannel integration process (Operational CRM)
  4. The performance assessment process
  5. The information management process (Analytical CRM)

The Gartner Competency Model

The Gartner model suggests that companies need competencies in eight areas for CRM implementation to be successful:

  1. Building a CRM vision
  2. Developing CRM strategies
  3. Designing valued customer experiences
  4. Intra- and extra-organizational collaboration
  5. Managing customer lifecycle processes
  6. Information management
  7. Technology implementation
  8. Developing measures indicative of CRM success or failure

Customer Relationships and Retention

Understanding Relationship Evolution

Relationships change over time. Parties become closer or more distant; interactions become more or less frequent. Because they evolve, they can vary considerably, both in the number and variety of episodes, and the interactions that take place within those episodes.

Dwyer identified five general phases through which customer–supplier relationships can evolve:

  1. Awareness
  2. Exploration
  3. Expansion
  4. Commitment
  5. Dissolution

The Economic Rationale for Customer Relationships

The fundamental reason for companies wanting to build relationships with customers is economic. Companies generate better results when they manage their customer base to identify, acquire, satisfy, and retain profitable customers. These are key objectives of many CRM strategies. Improving customer retention rates has the effect of increasing the size of the customer base.

Strategic Customer Retention

There is little merit in growing the customer base aimlessly. The goal must be to retain existing customers and recruit new customers that have future profit potential or are important for other strategic purposes.

Not all customers are of equal importance. Some customers may not be worth recruiting or retaining at all, such as those who:

  • Have a high cost-to-serve
  • Are debtors or late payers
  • Are promiscuous (switch frequently between suppliers)

Reduced Marketing Costs Through Retention

Improving customer retention reduces a company’s marketing costs because fewer dollars need to be spent replacing churned customers.

For example, it has been estimated that it costs an advertising agency at least 20 times as much to recruit a new client as it does to retain an existing client.