Client Relationship Management - Essay Example

Client Relationship Management Introduction In the increasingly competitive global market environment, the organizations are seeking out for new ways to achieve a competitive position in the industry. One of the most effective ways to achieve that is to create a good relationship with the clients with whom the business is being conducted. Over the years, the global business practices have evolved dramatically. Previously, the companies took a product oriented approach which usually evolved to a customer oriented approach that gave birth to the concept of relationship marketing (Dyche, 2008). This paper is focused on the relevance of client relationship management in the constantly changing market environment. It will encompass the details of topic of discussion on how it has been leveraged by the companies to gain competitive advantage over the others. It will also contain important industrial examples to justify the statements. Client Relationship Management The client relationship management (CRM) of an organization involves the interaction of company with its customers and other external business partners. The interactions with the clients are mostly conducted in such a manner that it leads to a long term working relationship with them. CRM has come to the vanguard of organizational practices only since the last ten years (Ed, 2008). The terminology of CRM may be relatively new, but the underlying concept is being used for a relatively longer period of time. The business houses have tried out different forms of customer retention techniques to ensure a steady cash flow and gain a strong position in the industry. However, the CRM that is commonly used today are quite different from that of the past practices. Previously, the employees used to keep track of the loyal customers by memorizing their identities and keeping track of their preferences. This process may be effective in maintaining a good relationship with the customers, leading to customers’ retention by increasing the likelihood of the customers’ return. Over time the business market scenario has changed. This is mostly because of the increased competition from newly developed firms and changing demand of customers. Customer or Client Relationship Management becomes quite difficult when the business of the company starts to grow with increased customer base and increased product portfolio (Buttle, 2008). It then becomes almost impossible for the employees to memorize the identity and preferences of all the customers. Modern client relationship management is mostly technology driven. There are several CRM softwares available for the firms which can be utilized to track the consumers’ behavior and their purchase pattern (Fjermestad, 2006). The CRM software utilizes a pattern recognition algorithm that allows the user to monitor individual preferences and offer them product suggestions and discounts based on the identified pattern. It can be stated that the modern CRM is different from that of traditional practices on the grounds of technological advancements. It helps the company to manage the one on one relationship between the firms and a huge number of customers. The primary function of the CRM is to efficiently retain the profitable customers by creating and maintaining proper relationships with them (Becker, Greve and Albers, 2009). However, in case of business customers or business clients the process of maintaining the relationship is slightly different. The firms can completely rely on the technological support for managing the relationships with commercial customers or end users, but in cases of business clients the human interaction is necessary to build a long term relationship with them. Although the firms use an electronic database to store and mine data regarding the details of the clients, but in order to actually close the business deal, human interaction is highly important. It creates a perception in the client’s mind which acts as the determinant of whether or not he will be interested to conduct business again (Chang, Park and Chaiy, 2010). Implications of Client Relationship Management The importance of client relationship management is increasing constantly owing to the constant rise in competitiveness in the market. The firms are trying to draw the customers by using several attractive propositions mostly on the grounds of value addition and unique product development (Baran, 2010). However, at often times the value addition offered by the firms becomes standardized and there are no differentiating factors that help the customers to determine which brand to purchase. In such cases, the firms try to create differentiation by developing a good relationship with the customers. Currently, every firm tries to capture the highest market share by attracting new customers and by maintaining the highest level of customer retention (Brown, 2008). In this regard, the CRM plays an imperative role. The company with a steady customer base will also have a steady cash flow and will eventually gain competitive advantage in the industry by gaining higher market share. Thus, it can be stated that in order to gain competitive advantage in the industry, the firm needs to have a robust client management system. Moreover, from the perspective of managing the business client, maintaining a good relationship is imperative to organizational success. Now-a-days most of firms are dependent on the financial support from the investors. Therefore, maintaining a good relationship with the business partners is essential to ensure repeated investments from their sides, thereby leading to competitive advantage for the firms (Brink and Berndt, 2009). Building Relationships with Clients The process of relationship building is a relatively long term process, which involves constant interaction between the company and the client. The responsibility of relationship building is mostly handled by the relationship managers. They are required to possess certain skill sets to foster long term relationship with the customers. These skills include Trust Building, Empathy and selfless independence (Dyche, 2008). Trust Building involves earning trust of the clients by constant demonstration of behavioral integrity in terms of honesty, transparency, reliability and consistency. The relationship managers always ensure that no false promises are being made and that all the promises made from the company’s side is fulfilled. Empathy allows the managers to think in perspective of the other party and make appropriate decisions that complement the interest of both sides. This requires good listening skills and proper decision making capability (Jha, 2008). Selfless Independence indicates that the managers need to have a proper balance between the interest of the client and firm. He needs to approach to a win-win situation for both the parties. This as a result will lead to client satisfaction and at the same time will lead to organizational objectives (Fjermestad, 2006). Achieving competitive advantage The competitive advantage can be achieved by the firm by employing the perfect combination of technological CRM and customer management skills and abilities of the relationship managers. Primarily, the CRM solutions offer a strategic implementation and support which is required to deliver the right quality of product and services which is capable of meeting the needs and expectations of the most profitable customers (Kincaid, 2007). Proper implementation of CRM allows the company to evolve from a business oriented approach to a customer centered approach. The customer data regarding their purchasing pattern or preferences are often communicated to the entire organization, so that different departments can have a unified objective that yields customer satisfaction. This as a result leads to a holistic approach of CRM where the entire organization is involved in fulfilling the needs of the customers, which in turn fosters better development of customer relationships thereby leading to higher levels of customer retention (Knox, 2009). The primary goal of CRM is to create a customer data archive where several fragments of customer behavioral data are stored, and are analyzed to develop valuable organizational assets. Over time, this repository of customer data increases in size which then facilities the managers to develop responsive strategies for individual customer segments. This as a result allows the firms to make future forecast of changes in the customers’ behavioral pattern and design their marketing strategies accordingly (Kumar and Reinartz, 2009). Thus taking proactive actions allows the companies to take the first mover advantage, thereby gaining competitive advantage over the rivals. Organizations can also gain competitive advantages by retaining customer loyalty. Customer loyalty needs to be achieved in a cost effective manner by constantly maintaining the proper communication with the client and adding the right set of value so that he stays committed to that organization or brand and does not easily shift to any of the rivals. Lombardo (2010) mentioned that the customer relationship management system allows the companies to attain a holistic relationship solution. The CRM tool is used to gather deeper information about the market and gain insight about the customers’ preferences. However, it has been stated that the firms which are best known for their competitive advantage and their leadership position in the industry did not start implementing CRM system from the beginning of their business operation. The first try to differentiate themselves from their rivals by innovative product or service development and gain customer preference by value addition. At the beginning of any business operation, it is quite natural that the company will have a smaller client base which may not require a CRM tool to foster relationship and customer loyalty (Chen and Popovich, 2003). In the later stage of the business when the firms realize that it is facing immense competitive challenge from the competitors, then it shift to adopting new ways of fostering customer loyalty and retention. This is where the CRM tool comes into play. As the customer base starts increasing, it then consists of several types of people, each with different types of preference and purchasing power. Therefore, keeping track of all the customers is not humanly possible for the employees. This challenge is easily faced by using CRM systems. The company that has the most accurate customer data and can utilize them by reshaping their marketing strategies accordingly, are the ones that can gain competitive advantage over the others (Reinartz, Krafft and Hoyer, 2004). Over the years, the customers have become more brand conscious. The value addition of a particular product or service is measured by more parameters than by simple counting the product features. This change in consumer behavior is a matter of concern for the marketers as building a strong brand image in a competitive environment can prove to be challenging. In order to create strong brand equity, the firms need to create a positive perception among the customers regarding the company and the brand. This can be achieved by fostering a strong relationship with the customers and by meeting their changing demands (Hennig-Thurau and Hansen, 2000). Brand image is often measured by the perceived value offered by the company; this may be in terms of product features or may be in terms of the customer relations. This makes it imperative for the firms to utilize client relationship to create a strong brand image, which in turn will lead to higher competitive advantage (Conner, 2008). CRM is quite commonly used by retailers such as Walmart, Tesco, Asda, etc. These retailers have an extremely huge customer base and their product portfolio is also quite large. Therefore, it becomes highly challenging to track thousands of products and the preference of millions customers. However, it is quite important for the firms to find out the current purchase pattern of the customers so that it can stock the right product in the right amount so as to meet the market demand. In order to solve this problem, the firms use robust CRM tools. These tools track the purchasing pattern of each customer through the loyalty program cards or by tracking their credit or debit card (Reinartz and Kumar, 2003). The algorithm is capable of tracking individual customers and can isolate any changes in the patter of their purchase behavior. According to the identified pattern, the program can automatically offer next product suggestions which may be complementary to the previous suggestions. Utilizing CRM tools are easier for online retailers like Amazon and Ebay as the customers need to create an account with the retailers (Kumar and Reinartz, 2009; Butscher, 2006). This as a result makes it easier to communicate with them. Since each and every purchase is made through a particular account, so it becomes easier for the retailer to track the purchase pattern of the customers. This as a result facilities the company to offer products that are largely preferred by that particular person. By tracking the purchases made by a particular customer, the CRM tool can find out his favorite color of clothes, or his favorite brand or his interest in any particular product category. For example, if a customer purchases clothes which are mostly blue in color, then the CRM tool will automatically suggest clothes of blue color. Thus, it becomes easier for the retailers to manage large number of customers and a large product portfolio with accuracy (Brink and Berndt, 2009). Conclusion The global business marketing is constantly changing with a pace that is faster than ever. The industries are becoming saturate with well established players and each of them is trying to seek out for new ways to achieve higher market share and gain competitive advantage over the rivals. The firms always try to differentiate themselves by creating value addition either by product innovation or by meeting the changing needs of the customers. The increased competiveness in the market has compelled the firms to focus on building strong relationships with the customers so that they can foster high customer retention and spreading of positive word of mouth. Using client management tools and strategies allows the companies to manage customer relations and meet the changing needs of the customers with ease. The CRM offer customer data to the firms mostly on the grounds of their purchasing pattern and their personal preferences. This pattern can be utilized by the companies to offer customized product suggestions and discount offers, thereby adding customer value. The company that has the most accurate and exhaustive data regarding the customers are capable of changing their marketing strategies accordingly. Thus it can be clearly stated that in the changing marketing scenario, client management is of epitome importance to foster competitive advantage in the industry. Reference List Baran, R, J., 2010. Principles of Customer Relationship Management. 2nd ed. Oxford: Butterworth Heinemann. Becker, U.J., Greve, G. and Albers, S., 2009. The impact of technological and organizational implementation of CRM on customer acquisition, maintenance, and retention. International Journal of Research in Marketing, 26(3), pp. 207–215. Brink, A. and Berndt, A,. 2009. Relationship marketing and customer relationship management. 4th ed. Gordon & Breach: Bristol. Brown, S, A., 2008. 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The impact of customer relationship characteristics on profitable lifetime duration. Journal of marketing, 67(1), pp. 77-99. Reinartz, W., Krafft, M. and Hoyer, W. D., 2004. The customer relationship management process: Its measurement and impact on performance. Journal of marketing research, 41(3), pp. 293-305. Read More