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Chapter: Business Science : Customer Relationship Management : Introduction

Customer Relationship Management

A long term relationship with customers t market. · Customer‘s expectations not only limited to get best are productsnowand services, they also need a face-to-face business in which they want to receive exactly what they demand and in a quick time.



·        A long term relationship with customers t market.

·        Customer‘s expectations not only limited to get best are productsnowand services, they also need a face-to-face business in which they want to receive exactly what they demand and in a quick time.

·        CRM is a business strategy directed to understand, anticipate and respond to the needs of an enterprise's current and potential customers in order to grow the relationship value.

·        The Customer Relationship Management is the procedure that is crucial for every business.




Customer Relationship Management is an upright concept or strategy to solidify relations with customers and at the same time reducing cost and enhancing productivity and profitability in business.


A CRM system is implemented for small business, as well as large enterprises also as the main goal is to assist the customers efficiently.


The Customer Relationship Management is the procedure that is crucial for every business. As the customer is the most important part of the business.




Parvatiyar and sheth (2001) defined CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer.


According to Gartner‖ CRM is a businessitability, s revenue, and customer satisfaction‖.


      A CRM system is not only used to deal with the existing customers but is also useful in acquiring new customers. The process first starts with identifying a customer and maintaining all the corresponding details into the CRM system which is also called an


‗Opportunity of Business‘. The Sales and F out of these customers by sophistically following up with them and converting them into


a winning deal.


                      Customer Relationship Management strategies have given a new outlook to all the


suppliers and customers to keep the business going under an estimable relationship by fulfilling mutual needs of buying and selling.






Customer relationship management is the technique of providing information to prospects and customers, and collecting information about prospects and customers, that allows us to help them evaluate and purchase products that deliver the best possible value to them.

One-to-one marketing, and relationship marketing is to make it easier for the customer to do business with you. Marketing and sales people have many opportunities to influence customer purchase decisions. Until recently it was normal for these functions to be performed separately — by different departments within a company — without acting as a unified team. So we must understand that coordinated efforts are now being made to unify approach




Customer Relationship Management has become a popular name for a variety of software tools and techniques aimed at attracting and retaining customers. In general, CRM uses a centralized database to bring marketing and sales activities together in a unified approach to serving customers.


One-to-one marketing and relationship marketing is to make it easier for the manufacturer to do business.


      Marketing and sales people have many opportunities to influence customer purchase decisions by the way making smooth relationship with the customer.


      The concept of relationship management with respect to the customer, to get efficiency (cost reduction)and responsiveness (instant delivery).


      RELATIONSHIP MANAGEMENT by an organization can be divided into two categories


1. External relations


2. Internal relations




      Two major external stakeholders of a business are customers and suppliers.


Customer relations: customer relations can be defined as the process by which companies promote customer satisfaction and loyalty.


      It involves managing communications with customers, particularly customer‘squestions and complaints and solving their disputes.


      The ultimate goal of customer relations program is to build long term relationships.


      Building a strong reputation for the brand and company.


Supplier relations: All companies tries to build a strong relationship with their suppliers.


      Supplier relationships are different from simple purchasing transactions in several ways. There can be a sense of commitment to the supplier.


      Eg: vendor (seller) sells certain items to the buyer for several times then he thinks that he will come for a next time purchase.




      It is an integrative process with in a system for fostering positive working relationship in a developmental way in a climate cooperation and achievement.


      Internal relationship is an ongoing process that occurs strictly within a company or organization.


      Internal relationship helps to motivate and empower employees at all levels of management and its consistently deliver a satisfying customer experience.


      Features of internal relationship management


      Customer commitment is earned in a social contract


      There is a open ideas for mutual gain.


      Close partnership between suppliers and customers.


      Customers are viewed as individual people and so are value providers.



      Continuous interaction and dialogue between suppliers and customers.


      Focuses on discovering, creating and responding to customer needs.


      Relationships are viewed as enterprise assets.


      There is a systematic collection and dissemination of customer information (detailing and negotiating requirements, expectations, needs, attitudes and satisfaction)




a.   MANAGEMENT OF CHANGE Introduction of IT & new management practices.




The team develops corporate image among the employees.




The CRM team solve an inter departmental conflict and work common benefit of the organisation.


d.   Relationship between companies and customers


e.   Reducing marketing costs


f.     Better customer insights


g.   Life time value(LTV)






The modern concept of customer service has its roots in the Craftsman Economy of the 1800s, when individuals and small groups of Manufacturers competed to produce arts and crafts to meet public Demand. Individual orders were booked for each customer and supplied according to his/her taste and demands. The economies were small and so were the transactions. The manufacturer was able to meet the customers on one to one basis and talk to customer to understand the minute details. Customer care and service were highly personalized.



But then the economics swing was setting in. The technology was increasing and so was it difficult to cater to the individualistic needs of the customer. Gradually, the era of mass production came in.


The advent of Mass Production in the early 20th century, followed by an explosion in the demand for goods after World War II, increased the power of suppliers at the expense of consumers, and thus reduced the importance of customer service. History tells us that customer service as a concept was kept aside in the cell. The manufacturers could produce what they could and these goods will find their way to customers on their own. Infect, it was the age of demand exceeding supplies. There was no need for customer service as an activity or as a tool for promotion or enhancement of markets. But things never remain the same for long periods of time.



A shift in this balance began in the 1970s, as international competition increased, and the dominance of western manufacturers was challenged, first by Japan, then by Korea, China and other developing economies. New world emerged with these Eastern economies taking to tremendous growth Producers responded by improving the quality of their products and services.


They introduced to the world entirely a new concept—the concept of simplicity and convenience and economy to the world The economic boom of the 1990s again increased the power of suppliers who, while not completely reverting to lower standards of service, were able to be more selective of which customers to serve, and of what levels of service to provide.




The overall quality of customer service - in society and in specific industry- will continue to be determined by the relative balance of power between suppliers and consumers; it will improve as competition becomes more intense, and decline as competition decreases. We have to assess the global situation today and derive that we are facing a new development. Briefly, the product similarity is making it more a challenge today than ever before, to upgrade customer services to get an edge over the competitors.


·        The changes in market demand and competitive strategy forced the company to change from transactional marketing to relationship marketing.


· Marketing mix was developed in the 1950s in order to of marketing helps to explore increased demand of the compa


·        The objective of transactional approach of marketing is to sell more products and services to maximize sales and profit.


·        Increased competition and matured markets have led to the low growth. Which results in increased pressure and corporate profitability?


·        The beginning of globalization of markets, new competitions led to the greater customer choice.


·        Companies must move from a short-term transaction oriented goal to long term relationship building goal.



·        Companies are compete successfully in domestic and global markets including customers, distributors, employees, unions and governments.


·        The term marketing domain is defined as stakeholders which have to be taken into consideration in order to develop relationships and to achieve long-term success in the final marketplace.


·        The increased importance of relationship marketing also led to an increasing demand for an efficient customer relationship management.


·        The task of finding who your customers are?


What they exactly want and providing it seems to be a task with difficulties.


·        Understanding and management of customer‘sexpectationsis rather a key to success in order to be able to create satisfied customers.


·        Customer knowledge is required to satisfy their customers and reach the ultimate goal of a company.


·        Create customer knowledge and the utilization of the customer relationship management system is essential.




As marketing has entered the 21st Century, a significant change is taking place in the way companies interact with customers. The traditional view of marketing as a simple exchange process—a concept that might be termed transaction-based marketing—is being replaced by a different, longer-term approach.


Transactional marketing strategies focused on attracting consumers. The goal was to identify prospects, convert them to customers, and co realize that, although it remains important, attracting new customers is truly an intermediate step


in the marketing process. Marketing efforts must focus on establishing and maintaining mutually beneficial relationships with existing customers. These efforts must expand to include suppliers and employees, as well.


The concept, called relationship marketing, refers to the development, growth, and maintenance of long-term, cost-effective exchange relationships with individual customers, suppliers, employees, and other partners for mutual benefits. It broaches the scope of external marketing relationships to include suppliers, customers, and referral sources. In relationship marketing, the term customer takes on a new meaning. Employees serve customers within an organization as well as outside it; individual employees and their departments are customers of and suppliers to one another.


They must apply the same high standards of customer satisfaction to inter-departmental relationships as they do to external customer relationships. Relationship marketing recognizes the critical importance of internal marketing to the success of external marketing plans. Programs that improve customer service inside a company also raise productivity and staff morale, resulting in better customer relationships outside the firm.


Relationship marketing gives a company new opportunities to gain a competitive edge by moving customers up a loyalty hierarchy from new customers to regular purchasers, then to loyal supporters of the company and its goods and services, and finally to advocates who not only buy


the company‘s products but recommend them to ot loyal ones, companies generate repeat sales.




The cost of maintaining existing customers is far below the cost of finding new ones, and these loyal customers are profitable ones. Effective relationship marketing relies heavily on


information technologies such as computer d preferences, and lifestyles along with the increase of electronic communications. This


technology helps companies become one-to-one marketers that gather customer-specific information and provide individually customized goods and services.


The firms target their marketing programs to appropriate groups, rather than relying on mass-marketing campaigns. Companies who study accordingly gain distinct competitive advantages.





      Transactional   marketing,   which   was   develop


      Transactional marketing main concept which cent borden in 1964.



      The marketing mix has since been describe planning and implementation of marketing s



      The focus on transactional marketing is shifting to focus on relationship marketing.


      The firms make the market fall by providing consumer packaged goods at one extreme and the services at the other.


      In this situation all the firms are forced to adopt from transactional to relationship approach.


      Transactional marketing approach is on individual transaction and does not concern continuous relationship with customers.


      Transactional marketing does not contain a strategic long term perspective.


      The relationship marketing focuses on continuous multiple transactions rather than isolated individual transactions.


      It also considers customer as insiders to the business and aims to build a long term and never-ending relationship with them.






Marketing is one of the new discoveries in business management. Of late, marketing has come to occupy significant position in the overall strategic studies. Various challenges are emerging in marketing as well as new approaches are being made in its study to view its different aspects of the many things it has been recently realized that customer is the most important elements in marketing and its sustenance and retention is far more important than any other marketing functions.CRM is one of the core area in marketing.


The major areas of CRM focus on:


      Generation and servicing more loyal customers.


      Expansion of customer base


      Reduction of advertising costs


      Increase in profitable customers


      Ease in introduction of new products


      Personal Information Gathering and Processing, Self-Service.


      CRM is the marketing management practice of identifying, attracting and retaining the most valuable customer to sustain profitable growth


      CRM is the process of making and keeping customers and maximizing their profitability, behaviors and satisfaction.


      Today customer demand open equal access, real time specialized information, convenient access, portability, process and logistics transparency, pricing transparency, global pricing, ability to set prices, choices of distribution channels and control over their information.


      First time customer can become a repeat customer, thereafter a client, then an advocate and finally one‘s partner in progress.


Loyal customers always create a profit and also reduced operating cost, increased purchases and give plenty of referrals.


      The realistic observation on customers that it costs ten times more to sell to new customers than to sell to an existing one.


      Existing customer deliver most of the revenues.


      It‘sveryimportant part of CRM is to identify the Most Valuable Customers (MVC) for the success of the business.


      A small net upward migration of customers (5-10%) can deliver a dramatic improvement in business performance.


      Marketing and sales are charged with influencing customer behavior.


      Customer success always equal to business success.




      Four principal stake holders play a major role in the entire process of customer relationship management.


1. Customers


2. Employees


3. Suppliers


4. Partners




      Perpetual stream of revenue


      Positive referral creation


      Provides premium


      Helps customer retention


      Lowers cost of sale


      Helps understanding consumer behavior


      Provides opportunity to cross-sell and up-sell


      Reduces marketing time


      Channel cost rationalization


      Enables business process re-engineering.



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