Theoretical Perspectives Of Customer Relationship Management Marketing Essay
Customer Relationship Management, commonly referred to as CRM, is defined as the customer-oriented approach of a business that comprises of analysis, planning, controlling and co-ordinating of the relationship between a company and its customers; the relationship is developed and nurtured by means of various state-of-the-art technologies required for information gathering and database maintenance Buttle (2008). According to Siems (2010), it is viewed as the combination of three key elements i.e. customer strategies, technology and business processes; when these three aspects are taken into account, an organisation can get in-depth information about its customers and achieve much enhanced customer loyalty and increased profitability.
The primary role of CRM is to engage each customer in a productive exchange of dialogue that will help a company to customize its product or service offerings in ways that will ensure that the customers are attracted, cordial relations with them are developed and they can be retained for long time by offering them higher level of offerings (Yim, Anderson & Swaminathan, 2004).
CRM allows the companies to emphasize on the areas that are important for the customers by monitoring their behaviour as it gives insights about their varying needs, demands and preferences. When a valuable pool of data is gathered, an organisation can successfully offer a service to a customer that exceeds their expectation level; in order to make successive progression, the company will have to employ the mechanisms that will improve the service excellence such as using multiple communication channels like sales and marketing.
Theoretical Perspectives of CRM and Marketing Mix
Since CRM is an organisation wide strategy, it is important that its business strategy comprises of specific target market that it will be focussing on for attracting them, developing long-term relations with them and then taking adequate measures to make them loyal to the company for long period. According to Kim, Zhao and Yang (2008), the essence of CRM theory has origination from three important notions of marketing management i.e. relationship marketing, customer orientation and database marketing. As the Information and Communication Technology (ICT) has enhanced, all three marketing views are merged together in the CRM model (Roberts, Liu & Hazard, 2005).
As the customers are exposed to various marketing activities from unlimited companies and reaching them by using traditional mass advertising mediums has become an outdated concept; the only way to gain access to the target market's attention is by making effective use of CRM activities (Buttle, 2008). Although in some cases, the companies have faced severe loses because they developed their strategy on the basis of wrong data but such mistakes can be avoided by ensuring that appropriate research methods are used for research on customers along with compatible analysis tools (Li, XU & Li, 2005).
There is no concrete definition available for understanding the concept of CRM as it has been defined by many researchers in different ways. For instance, Buttle (2008) defined the concept of CRM as an overall process used by a firm for creation and maintenance of customer relationships that are profitable by fulfilling the promise of delivering excellent customer value proposition and satisfaction. This definition has more emphasis on the marketing aspect that focuses on value creation and employee satisfaction.
On the other hand, Becker, Greve and Albers (2009) give a more technical perspective definition of CRM by stating that it is a strategy used by an organisation that relies on information technology to assist it is providing a detailed, genuine and integrated perspective of its customers which can help it in ensuring that all business processes and interaction with customers support it in maintaining and enhancing relationships that are equally favourable for both parties (customers and organisation).
In addition to these two specific perspectives of CRM, there is one more which is most commonly cited by the marketing management researchers i.e. integrated perspective of CRM that ensures that there is a good blend of technological and business perspectives so that all factors required for proper and effective implementation of CRM are adequately planned (Hutt & Speh, 2007; Palmiater et al., 2008).
Broadly speaking, there are two theoretical perspective of CRM i.e. technical or technological perspective and business i.e. customer-centric perspective. From technical aspect, CRM is important both for operational and analytical purposes that implies that proper systems need to be implemented in the organisation so that they can provide proper foundations for analysis of different customer segments. While, business perspective of CRM emphasizes that relationship marketing should be integrated with marketing mix (product, price, place and promotion) so that a valuable outcome is achieved i.e. customer satisfaction, loyalty and value creation (Siems, 2010).
According to Buttle (2008) and Siems (2010), CRM is a result of an effective blend of both technological and business innovation; CRM is successful with all vital and crucial perspectives of individuals are compiled together and then taken into consideration when developing the marketing strategy. It implies that IT and marketing should be properly aligned within the organisations so that the CRM efforts designed for the customers will prove to be beneficial for the organisation. In order to make successful progression in the dynamic business environment, it is important that all organisational and strategic aspects are properly taken into consideration.
CRM and Marketing Mix
Since CRM is among the vital constituents of the organisational processes as it supports identification of the customers, knowledge creation, development of relationships with the customers and incorporating their demands in the company's product or service offering, it helps in ensuring that the marketing mix is designed in accordance with the customer requirements (Palmiater et al., 2008).
For instance, when Toyota introduced economical cars meaning low priced cars to meet the demands of the middle class people, it was a big failure for the company as its loyal customer's perceived reduction in the quality of the company's products and started switching to other companies. In order to recover from the loss, the Toyota Company had to call back its economical cars and run ads on Television emphasizing that no compromise is made on the quality of its cars.
Similarly, when Unilever realized that its Sunsilk customers were unhappy with the shampoo packaging, it instantly launched new packaging in about a month to meet the demands of the customers. In order to create new image in the customer's minds, it engaged in various CRM activities such as organizing events like fashion shows, getting the product endorsed by the leading celebrities and allowing the customers to avail free hair wash opportunities. Hence, when effective CRM activities are designed, only then the companies are able to attract the customers, develop cordial relations with them and retain them for long period of time.
In order to have a successful implementation of CRM in an organisation, there are four key areas that should be present in its business operations so that it can effectively develop cordial relations with its customers i.e. people, strategy, technology and processes (Hutt & Speh, 2007). According to Roberts, Liu and Hazard (2005), the successive CRM implementation process encompasses four key features i.e. keeping a close focus on the key customers, developing effective CRM plans in accordance with the customers' requirements, proper knowledge management processes so that information can be stored and used appropriately and applying technology within the organisation that supports CRM based strategies.
Since an organisation's success is largely determined by the processes that are employed to develop cordial relations with customers that help them in developing products and services in accordance to the market demands, it is important to ensure that all appropriate and effective mechanisms are in place that will support proper development of CRM strategy. It has become vital for every organisation to develop a CRM strategy on the basis of accurate and up-to-date information about its respective customers so that it is able to enhance its performance in the market. When information about the customers is collected on an ongoing basis, it helps a company to monitor its performance and unleash any unmet needs and demands of the customers.
With the help of an effective CRM process, the organisations are able to offer a diverse range of customized products and services, improve the quality level of existing offerings, enhance the customer value proposition and improve the customer retention rate by exceeding the expectation of the important and valuable customers who are an important constituent for profit generation. However, it is important for the organisations that they define their CRM strategy appropriately as it can affect their CRM plans which can have negative impact as well. It is vital for the organisations to first customer-centric work environment so that everyone is sharing same values and beliefs; this is the most common mistake found in various organisations (Buttle, 2008). Hence, every organisation that wants to make a leading name in the market will have to ensure that it develops a practical and well-defined CRM strategy that will help it in attracting the customers in right way and then retaining them so that they can survive in such tough and dynamic business environment.
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