The Importance of Keeping Customers - Essay Example

? The importance of keeping s for as long as possible, in what is seen often as a short-term approach to sales. The general rule in any business - or at least to those organizations that intend to survive and always be competitive - is to: first, find customers; and, secondly, to keep them as long as possible. This latter aspect is the focus of the concept called customer relationship management (CRM), the subject of this paper’s examination. Definition While it is impossible to actually keep a consumer for the rest of his life, there are steps that can be taken to ensure his loyalty for a considerable period of time. This is the main concern of the so-called consumer relationship management (CRM) models today. Vogt defined CRM as a customer-focused business strategy designed to optimize profitability, revenue and customer satisfaction. (p3) Shanmugasundram (2009) also posited that it is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. (p9) Unarguably there are numerous meanings and interpretations of CRM. Nonetheless, they all agree that a CRM strategy is always characterized by a quest to establish a relationship with a client in such a way that it contributes to the competitive advantage of the organization, which ultimately results to profitability. The simple logic is to make the customer happy so that the sales keep on coming. How does it work? As previously mentioned CRM strategies are diverse and varied. Sometimes, its distinction depends on the industry using it and sometimes it depends on specific needs and market trends. However, the fundamental principle emphasizes the importance given to people - naturally, there are the consumers but also, there is an emphasis given to the employees. According to Shanmugasundram, the principle is all about building enduring relationships that can lead to a profitable business organization and that both consumers and employees are fundamental to their achievement. This is expressed in the following model. Fig. 1: CRM Model (Shanmugasundram, p9) The model is pretty much straightforward: there are four crucial elements involved: Leadership, Delight, Loyalty and People. The model, as demonstrated above, puts the People at the center, with all the rest of the elements working together seamlessly for their benefit. The model ultimately aims for customer satisfaction. This is important because it has already been proven that satisfaction and a number of resulting variables, including customer loyalty lead to the probability of purchase at different price points. This is also highlighted by the fact that only 26 percent of purchase decisions of consumers are influenced by advertising and that factors such as personal experience and referrals are more frequently cited. (Rai 2008, p145) Francis Buttle (2008) explained that, “a satisfied customer is more profitable than a dissatisfied one. If satisfaction declines, customers become more reluctant to buy unless prices are cut. If satisfaction improves the opposite is true.” (p47) This point is further reinforced by The American Customer Satisfaction Index Model (see fig. 2). Fig. 2: The American Customer Satisfaction Index Model (Buttle, p47) CRM and Technology An important variable in CRM models and strategies is the use of technology to achieve its objectives. CRM, in this context, becomes what Foss and Stone called as the methodologies, technologies and e-commerce capabilities used by companies in managing customer relationships. (p3) The advances in technology, particularly in communications, transportation and logistics have empowered organization to add value to their products and services. For example, an organization can use databases as part of the wider CRM strategy to build and keep accurate and up-to-date information about its customers. (Canwell and Sutherland 2003, p249) By doing so, the organization is able to analyze customer behaviors and expectations and develop better products and services out of it. In this area, an important The efficacy of CRM is demonstrated in the example of the past strategies by the wireless industry. Martin explains: The wireless industry, similar to many others, has a long track record of treating noncustomers better than existing customers. In an effort to woo new customers, wireless providers traditionally give far better deals… than to those who have been with the company the longest. Only after an established customer defects do providers launch a “win back” campaign. (p7) The above example underscores how companies lose money and compromise profitability when customers defect to rival outfits. The cost of luring new consumers is aggravated by the more expensive cost spent in making them come back once they leave due to poor service or weak relationship with the organization. The CRM strategy of Wal-Mart’s online store (see Fig. 3) is an excellent example of the structure that drives an effective CRM thanks to a comprehensive CRM plan in tandem with the benefits provided by technology. This model has ensured an improvement of customer retention rate in addition to an increase in online sales for the retail chain. (Shanmugasundram, p181) Through CRM, retail organizations such as Wal-Mart, could collate and look through all the customer data – call center, credit card, people who contact over the Internet, etc. – which are stored in one place. (Rowley 2004, p67) These information can help the store chain identify the best strategy to address specific needs and expectations. Fig. 3: Wal-mart Online Store CRM (Shanmugasundram, p181) Shifting Towards the Relational Model Again, CRM contributes in the life-time value that the customer represents because loyalty from their part is naturally given in exchange for some reciprocal benefit. In the quest to achieve high customer-satisfaction levels as part of the shift towards relational-oriented sales strategy, sales personnel of organizations must contend with learning more and comprehensively about their customers at the same learn more about technology and other resources that facilitate the process of knowledge attainment and the shift in service/product delivery. (Agnihotri, p3) These tasks are daunting and must be addressed in order for the strategy to be effective. Also, another problematic area in the move from transactional to relational strategy in sales and marketing concerns the cost. If a strategy, for instance, is targeted towards a wider and non-specific customer base, the investment required will increase, compromising sales margin and pricing elements. According to Le Meunier-fitzhugh et al., the solution is to select customers wisely and managed their loyalty as necessary. (p348) Conclusion Keeping customers or ensuring their loyalty is crucial for a business organization’s profitability. CRM models and strategies play an important part in this area because they lead to customer satisfaction. It has been proven, especially these days when consumers are more educated and demanding, that positive experience still lead the factors that influence loyalty and purchase decisions. References Agnihotri, R 2010, Effective Sales Force Automation and Customer Relationship Management: A Focus on Selection and Implementation. New York: Business Expert Press. Buttle, F 2008, Customer Relationship Management. Oxford: Butterworth-Heinemann. Canwell, D and Sutherland, J 2003, Edexcel leisure and tourism GCSE. Cheltenham: Nelson Thornes. Foss, B and Stone, M 2001, Successful customer relationship marketing: new thinking, new strategies, new tools for getting closer to your customers. London: Kogan Page Publsihers. Greenberg, P 2004, CRM at the speed of light: essential customer strategies for the 21st century. Emeryville, CA: McGraw-Hill Professional. Le Meunier-fitzhugh, K, Craven, D and Piercy, N 2011, Oxford Handbook of Strategic Sales and Sales Management. Oxford: Oxford University Press. Martin, N 2008, Habit: the 95% of behavior marketers ignore. Upper Saddle River, NJ: FT Press. Rai, A 2008, Customer Relationship Management: Concepts And Cases. New Delhi: PHI Learning. Rowley, L 2004, On Target: How the World's Hottest Retailer Hit a Bull's-Eye. John Wiley and Sons. Schneider, M 2002, Total Customer Relationship Management. New York: Cengage Learning. Shanmugasundaram, S 2009, Customer Relationship Management: Modern Trends And Perspectives. New Delhi: PHI Learning. Vogt, H 2009, Open Source Customer Relationship Management Solutions. Hamburg: Diplomica Verlag. Read More