Importance of Customers in Marketing - Research Paper Example

Direct & E-Marketing Importance s in Marketing No body can deny the importance s for business. s are there to buy yourproduct. They are the right most end of your supply chain. Without customers there is no point of doing business or running an organization, whether profit or non-profit. Customers drive business and its processes. Most of the firms have realized the true worth of customers and their stake in business and have started giving special attention to them. Customers are the key stakeholders in a business, which have become the centre of focus for an entrepreneur. Starting from the stage of development of a business plan to the actual operations of any venture, customers retain a pivotal importance in all activities. There are primarily three perspective of a business plan. One is from an entrepreneur's perspective, one is the venture capitalists or Financier's perspective and the third is customer's perspective. It means a business should only be viable if it provides a product or a service that can be of value to customer and can help in customer's utility maximization. When designing a product or deciding about what services the business will provide, customer segmentation is done to ensure that the right product is given to right customers at the right time. All these efforts are made to ensure that more and more customers will be attracted towards an organization's offering and a positive image can be built so that business can create good will in the market and enjoy increase in sales. However, no businessperson can turn his eyes from attracting new customers and increase its customer base but this is also true that old or existing customers also hold a special place when it comes to increase sales and revenue generation. Research shows that old and existing customers are much more effective to increase sale for an organization. A very serious misunderstanding businesspersons use to have these days is that they think if someone becomes their customer, he or she will stay with them, their organization and their product, forever, which happens not to be the case in most of the circumstances. Slowly and gradually, they lose their customer base day by day and keep on wondering why the customers are not coming back to them or why they are leaving. Many reasons have come up for this loss in customer base. Customer loses his or her loyalty when he feels that: Your offering is unfair or unjustified They have some problem or issue relevant to your product or service which remains unsolved or un attended They have a better offer from your competitor He simply feels that you have no care or attention towards your existing customers and he feels ignored. Customers repeat their purchases when they feel themselves loyal with your organization and associate themselves with your product. Still we see organizations spending most of their money in attracting new customers and clients instead of maintaining good relationship with their existing clients to pursue them for repeat purchase. "Before you spend your time and money going after new customers and clients you do not currently have a relationship with consider the following statistics: Repeat customers spend 33% more than new customers. Referrals among repeat customers are 107% greater than non-customers. It costs six times more to sell something to a prospect than to sell that same thing to a customer (Laura Lake, 2007)". Building relationship with existing customer is easy to do. The only thing organizations should keep in mind is to treat customers as a partner in their business and realize the true worth of their customers. Businesses should focus on attracting new customers but at the same time put every effort to please their existing clients. It is necessary because existing clients are the source of a positive word of mouth. A positive word of mouth is the fastest and least costly source of marketing. People tend to believe someone, who has experience your product or service, very easily. Moreover, a positive word of mouth only comes when you have built a strong relationship with your existing clients and they are happy and satisfied with the way you treat them and provide them solutions for their existing and upcoming needs effectively and efficiently. All this put a strong basis for the need of customer relationship management. It is one of the most often discussed topics in the field of marketing and business operations. However, a new concept is also standing shoulder to shoulder with customer relationship management, which is customer-managed relationship. Now there are different views whether the latter is an evolution to the first one or one is better than the other is. A brief discussion on each of the two will lead to an evaluation of both the concepts for an attempt to conclude which one is better. Customer Relationship Management "Customer Relationship Management (CRM) refers to the methodologies and tools that help businesses manage customer relationships in an organized way (Ward S., 2007)". Customer Relationship Management helps organizations to understand their target customer segment, react, and respond quickly to changing customers' needs. When pursuing customer relationship management, firms collect large amount of data regarding their customers and then analyze this data to devise strategies to serve their customers better. This analysis helps management to know about the current issues faced by customers and the future desires or changes expected by customers from organization's product or services. Customer relationship management helps to improve the whole, each and every step of customer relationship cycle which starts when an organization specify their target audience till the point it bring back it's customers for a repeat purchase. An important element in customer relationship management is customer lifetime value. "CLV help management to analyze customer behavior and its purchasing practices, seeks to maximize profits, and is calculated by finding out the present value of all the future revenue streams generated by a customer (bettermanagement, 2007)". Many people think CRM as a use of technology to gather data about their customers, which is a serious mistake. CRM is not only a technology; but a complete process that enables organizations to gather information about customers, sales trends, latest trends, marketing effectiveness and take corrective action. Goals of CRM Customer retention is one of the prime objectives of CRM. Customer retention helps organization to perform behavioral analysis of customers' activities. This analysis provides useful information about customers buying habits, trends, preferences, likings and frequency of purchases. Customer retention helps management to formulate tactical strategies that will help to attract customer to increase their frequency of purchase and to leave a positive image of purchase experience in the minds of customers. "Customer Retention uses behavioral analysis to categorize customers and design tactical strategies that will sustain and maximize the activities of the most valuable customers (bettermanagement, 2007)". CRM enables organizations to provide better customer service. The data gathered and the information generated from that data helps organization to provide better services to the customers since the data provides organization with an idea about how customers like to be served when they are out for purchases. This includes designing the architecture of the outlet as per the customer's taste and product relevancy, the entrance and exits, the staff and their behavior, and the facilities provided to customers at outlet. For example, a famous bookstore provided its customers with baby-sitting facilities at its outlets to provide ease to mothers of young children in purchasing books. Emirates Airline provides its passenger with entertainment, music, movies and programs, in many different languages to provide a home experience to its passengers in flight. Starbucks not only serves coffee but an experience, an experience where customers can spend time in reading newspaper, meetings, or chatting with friends. The overall ambience of the coffee shop provides a real premium class environment to coffee lovers. CRM also provide ease to sales staff in their work in a way that sales staff require less time to close a deal. Data gathered in CRM helps sales staff in knowing their client or customers' preferences and previous purchase decisions. They serve the customers according to their requirement and offer solutions or products that are in line with the previous purchase trends of those customers. Sales staff has an approximate or sometimes accurate idea of what customers will ask for next and they immediately serve the customer as per their requirements, which save a lot of time of sales staff to finalize a deal. Customers also having past experience with the business and its sale staff have confidence, trust in business' offerings, and do not take time to decide about their purchases. This results in great time and cost savings for the business. Customers, with their confidence in sellers' business prefer to repeat their purchases with the same seller rather than finding a new customer and experience a new service al-together, putting themselves in the hassle of long decision-making process for their purchases. Satisfied customers are also a source of marketing for business and businesses have to spend less in their marketing and advertising activities to attract new customers. Such a customer refers others to make their purchases from his or her seller. This results in attracting new customers without incurring much expense. There is a very simple indicator to identify whether the organization is in the need of customer relationship management or not. An organization must assess how many channels a customer has to go through before getting his or her problem solved. If the number of channels is too much, it means customers have to face a lot of difficulty before getting attention on his or her problems and an organization should immediately implement a CRM system before it starts losing its customers. The need is that organizations should know what kind of data it needs to gather for implementing a CRM system and their plans about what it is going to do with data and what purpose it will serve. How to ensure a successful implementation of Customer Relationship Management System A Successful implementation of CRM requires breaking down the whole processes into small pieces such that each piece acts as a separate short program in a particular area. Secondly, try to achieve small short-term goals in the beginning rather than grabbing the big plan right in the beginning and losing everything in the middle. This also helps organization's internal stakeholders to be accustomed, get use to of the Customer Relationship Management system, and have enough time to adapt to it. Extreme care is required in deciding what data is needed to solve customer problems. Efforts to store each data in a hope that it will be useful sometime in future are simply a waste of time, money and effort. Specificity should be there in the type, scope and dept of data required. Flexibility should be a primary feature of a CRM system. "Recognizing the individuality of customers and respond appropriately, a CRM system should have built-in pricing flexibility (management-crm, 2007)". Discussing customer relationship management in such detail we can now move to its sister concept Customer Managed Relationship and we will see which one is better to adopt. Customer Managed Relationship or Customer Relationship Management - An Analysis Customer Managed Relationship talks about empowering employees to establish their relationship with an organization in their own way. "A customer-managed relationship (CMR) is a relationship in which a business uses a methodology, software, and perhaps Internet capability to encourage the customer to control access to information and ordering (Holcombe A. 2007)". However, CMR is still in its development state as far as businessperson thinking is concerned. Some of them still feel unsecured in providing customers the hold of their data or information. Some confuses the word customer managed relationship with self-service. It is merely a mean for company saving. CMR actually comprises of 3 things: 1." An ability to rethink, to reshape your organization and its knowledge so that it is at the disposal of your customers 2. Internet enabled management tools which customers use to get what they want 3. An ability to react to the information being generated and used by customers in order to increase profitability (Massey P. 2007)". It is simply an attempt to provide more and more stake to customers in business process so that they tailor them according to their taste and preferences. The information used by customers during CMR can be used to increases profitability by directly the efforts in the best possible way as close to the customer's choice as possible. Critics believe that CR is mainly concerned about the internal processes of an organization. Efforts in CRM rotate around training and development of an effective sales force, new ways of serving customers and marketing campaign designed to attract customers. These all tings are done by gathering data through different tools such as survey forms or short interviews and then organization strategist and thinkers analyze this data to develop strategies to improve upon customer relationship. In the end, it is all biased or subjected to planner's perception of the information how he interpret he information. Customer Managed Relationship, on the other side, removes this element of subjectivity and hand over customers' fate in their own hand. Customers decide how and when they like to buy product, what facilities they are looking from organization and how they want organizations to handle their transactions and purchases. "Marketing automation is fine, but it's not about the customer. Most marketing automation is about costs and speed. Selling efficiency is not about the customer, it's just about leveraging your resources. Value maximization, in terms of figuring out which of your customer segments are going to deliver the most top or bottom line, that's not about the customer. So a lot of the benefits that are claimed for CRM are really benefits that accrue to the enterprise, but have nothing to do with the customer (Newell F. 2003)" Business gurus say that customer relationship management is an old technique centers on increasing organization's profitability. CMR enables organizations to look at customer's viewpoint. "Customer-driven enterprises look through the lens of the customer, taking an outside-in perspective to ensure that their best customers receive consistently differentiated-and, wherever possible, personalized-service (Accenture, 2007)". CMR is an important tool in building CEV (customers equity value) which is an intangible measure of how well organization as build its relationship with customers. CMR is much more profitable in a sense that it increases CLV more than what CRM does and increases the overall market share for a businesses. CMR requires organizations to provide their customers with three facilities. 1. Customers should have an access to their information. It means they should have access to their profile maintained by the company, their record of previous transactions and to the information as well that businesses infer from customers' data. This helps in creating trust among customers that organizations do not misuse their information. 2. Customers should be entitled to access their information in each department. This helps in building transparency on organization's part. 3. Customers should have an equal weight in comparison to companies' profitability and objectives when designing these systems. David Naylor identifies three reasons why CRM fails. Businesses fail to consider that customers are not interested in how the CRM processes will be helping the business. They always seek how it will benefit them. Organizations fail to take advantage of the data they collect about their customers. They fail to properly analyze the data and get results in the form of improved customer service. Businesses emphasize more on collecting more and more data rather than the specificity and analytical part of it. Business should offer customer services at the right time, in the right form and at the right place, otherwise they would be of no use to them (Naylor D. 2007). Naylor says, "So CMR is much more than just creating self-service applications on the web. It is more than good process design. It is more than successful campaign management". CMR helps businesses to align their objectives based on roots of customer service. Organizations should drive their businesses and formulate their policies keeping in mind the customer's perspective. Feedback and controlling changes should be an essential part of a CMR process. Conclusion After a detailed discussion on CRM and the ability of CMR to take over CRM, it is quiet obvious that CRM and CMR have the same roots and the only difference between them is the approach businesses take to provide customer service. CRM is an inside out approach while CMR is an outside in approach. Critics consider CRM as a bit of selfish approach on organization's part while CMR is more of a considerate approach towards customer. CRM's underlying objective is revenue generation and profitability while the latter purely revolves around customer satisfaction. The customer driven approach followed by businesses these days obviously put CMR on the top but we cannot ignore the importance of CRM in this process since most of the theories and practices that are a part of CMR implementation process are integral elements of CRM at their core. Bibliography Laura Lake, (2007). "Customer Relationships are Key to Your Marketing Strategy". Retrieved on May 30, 2007 from: http://marketing.about.com/od/relationshipmarketing/l/aa070203a.htm Ward S., (2007). "Customer Relationship Management". Retrieved on May 30, 2007 from: http://sbinfocanada.about.com/cs/marketing/g/crm.htm Bettermanagement (2007)). "Customer Lifetime Value". Retrieved on May 31, 2007: http://www.bettermanagement.com/topic/subject.aspxf=488&s=454 management-crm (2007). "Customer Relationship Management". Retrieved on April 30, 2007: http://www.management-crm.com/customer-relationship-management.html Massey P. (2007). "Customer Managed Relationship". Retrieved on May 31, 2007: http://www.crm2day.com/library/EpFkZkpZAZymrEtGZE.php Newell F. (2003). Why CRM doesn't work: how to win by letting customers manage the relationship by Frederick Newell. Published by Bloomberg Press. ISBN: 1-57660-132-3 Accenture (2007). "Looking Through the Customer's Lens". Retrieved on May 30, 2007: http://www.accenture.com/xd/xd.aspit=enweb&xd=ideas/outlook/6.2000/crmchart01.xml Naylor D. (2007). "The shifting Balance of Power - Getting Results in a customer Managed World". Retrieved on May 1. 2007: http://www.callcentrehelper.com/customermanagedrelationships.htm Read More