Customer relationship management (CRM) is an approach to managing a company's interaction with current and future customers. The CRM approach tries to analyze data about customers' history with a company, in order to better improve business relationships with customers, specifically focusing on retaining customers, in order to drive sales growth. One important aspect of the CRM approach is the systems of CRM that compile information from a range of different channels, including a company's website, telephone, email, live chat, marketing materials, social media, and more. Through the CRM approach and the systems used to facilitate CRM, businesses learn more about their target audiences and how to best cater to their needs. However, the adoption of the CRM approach may also occasionally lead to favoritism within an audience of consumers, leading to dissatisfaction among customers and defeating the purpose of CRM.
Types of CRM
Operational CRM
The primary goal of CRM systems is to integrate and automate sales, marketing, and customer support. Therefore, these systems typically have a dashboard that gives an overall view of the three functions on a single page for each customer that a company may have. The dashboard may provide client information, past sales, previous marketing efforts, and more, summarizing all of the relationships between the customer and the firm. Operational CRM is made up of 3 main components: sales force automation, marketing automation, and service automation.
- Sales force automation works with all stages in the sales cycle, from initially entering contract information to converting a prospective client into an actual client. For example, in August, 2000, Oracle released a CRM software package, OracleSalesOnline.com, which makes contacts, schedules and performance tracking available online so that a customer's information is easily accessible for all employees working at the office or remotely. Sales force automation implements Sales promotion analysis, automates the tracking of a client's account history for repeated sales or future sales and coordinates sales, marketing, call centers, and retail outlets. It prevents duplicate efforts between a salesperson and a customer and also automatically tracks all contacts and follow-ups between both parties.
- Marketing Automation focuses on easing the overall marketing process to make it more effective and efficient. For example, by scoring customer behavior, Salesforce's Marketing Cloud allows a business to adapt marketing campaigns to how engaged customers are with a business. CRM tools with marketing automation capabilities can automate repeated tasks, for example, sending out automated marketing emails at certain times to customers, or posting marketing information on social media. The goal with marketing automation is to turn a sales lead into a full customer. CRM systems today also work on customer engagement through social media.
- Service automation is the part of the CRM system that focuses on direct customer service technology. Through service automation, customers are supported through multiple channels such as phone, email, knowledge bases, ticketing portals, FAQs, and more. For example, Microsoft's Dynamics CRM Software tracks call times, call resolution and more in order to improve the efficiency of customer service within a business.
Analytical CRM
The role of analytical CRM systems is to analyze customer data collected through multiple sources, and present it so that business managers can make more informed decisions. Analytical CRM systems use techniques such as data mining, correlation, and pattern recognition to analyze the customer data. These analytics help improve customer service by finding small problems which can be solved, perhaps, by marketing to different parts of a consumer audience differently. For example, through the analysis of a customer base's buying behavior, a company might see that this customer base has not been buying a lot of products recently. After scanning through this data, the company might think to market to this subset of consumers differently, in order to best communicate how this company's products might benefit this group specifically.
Collaborative CRM
The third primary aim of CRM systems is to incorporate external stakeholders such as suppliers, vendors, and distributors, and share customer information across organizations. For example, feedback can be collected from technical support call, which could help provide direction for marketing products and services to that particular customer in the future.
Small Business Crm Video
Main Components of CRM
The main components of CRM are building and managing customer relationships through marketing, observing relationships as they mature through distinct phases, managing these relationships at each stage and recognizing that the distribution of value of a relationship to the firm is not homogenous. When building and managing customer relationships through marketing, firms might benefit from using a variety of tools to help organizational design, incentive schemes, customer structures, and more to optimize the reach of its marketing campaigns. Through the acknowledgement of the distinct phases of CRM, businesses will be able to benefit from seeing the interaction of multiple relationships as connected transactions. When firms manage these relationships through their various stages, they gain crucial intelligence, for example, which products have the highest likelihood of purchase. The final factor of CRM highlights the importance of CRM through accounting for the profitability of customer relationships. Through studying the particular spending habits of customers, a firm may be able to dedicate different resources and amounts of attention to different types of consumers.
Relational Intelligence
Relational intelligence, or awareness of the variety of relationships a customer can have with a firm, is an important component to the main phases of CRM. Companies may be good at capturing demographic data, such as gender, age, income, and education, and connecting them with purchasing information to categorize customers into profitability tiers, but this is only a firm's mechanical view of customer relationships. This therefore is a sign that firms believe that customers are still resources that can be used for up-sell or cross-sell opportunities, rather than humans looking for interesting and personalized interactions. Below is a diagram of the steps when serving a client while using a CRM system:
Impact on customer satisfaction
Customer satisfaction has important implications for the economic performance of firms because it has the ability to increase customer loyalty and usage behavior and reduce customer complaints and the likelihood of customer defection. The implementation of a CRM approach is likely to have an effect on customer satisfaction and customer knowledge for a variety of different reasons.
Firstly, firms are able to customize their offerings for each customer. By accumulating information across customer interactions and processing this information to discover hidden patterns, CRM applications help firms customize their offerings to suit the individual tastes of their customers. This customization enhances the perceived quality of products and services from a customer's viewpoint, and because perceived quality is a determinant of customer satisfaction, it follows that CRM applications indirectly affect customer satisfaction. CRM applications also enable firms to provide timely, accurate processing of customer orders and requests and the ongoing management of customer accounts. For example, Piccoli and Applegate discuss how Wyndham uses IT tools to deliver a consistent service experience across its various properties to a customer. Both an improved ability to customize and a reduced variability of the consumption experience enhance perceived quality, which in turn positively affects customer satisfaction. Furthermore, CRM applications also help firms manage customer relationships more effectively across the stages of relationship initiation, maintenance, and termination.
Examples
Research has found a 5% increase in customer retention boosts lifetime customer profits by 50% on average across multiple industries, as well as a boost of up to 90% within specific industries such as insurance. Companies that have mastered customer relationship strategies have the most successful CRM programs. For example, MBNA Europe has had a 75% annual profit growth since 1995. The firm heavily invests in screening potential cardholders. Once proper clients are identified, the firm retains 97% of its profitable customers. They implement CRM by marketing the right products to the right customers. The firm's customers' card usage is 52% above industry norm, and the average expenditure is 30% more per transaction. Also 10% of their account holders ask for more information on cross-sale products.
Wells Fargo is another example of a company that has successfully implemented CRM into their firm. The Wholesale Banking division of Wells Fargo has almost 300 different products and services, with many business customers who use a range of products. Therefore, customers need a seamless experience from product to product and service to service. The firm implemented cloud technologies to help connect people with customers and has seen customer satisfaction drastically improve.
Amazon has also seen great success through its customer proposition. The firm implemented personal greetings, collaborative filtering, and more for the customer. They also used CRM training for the employees to see up to 80% of customers repeat.
CRM Paradox
Part of the paradox with CRM stems from the challenge of determining exactly what CRM is and what it can do for a company. The CRM Paradox, also referred to as the "Dark side of CRM," may entail favoritism and differential treatment of some customers. This may cause perceptions of unfairness among other customers' buyers. They may opt out of relationships, spread negative information, or engage in misbehavior that may damage the firm and it's reputation. Such perceived inequality may cause dissatisfaction, mistrust and result in unfair practices. A customer shows trust when he or she engages in a relationship with a firm under the idea that the firm is acting fairly and adding value to his or her life somehow. However, customers may not trust that firms will be fair in splitting the value of their products or services. For example, Amazon's test use of dynamic pricing (different prices for different customers) ended with very poor public relations for the company. As seen in the Amazon example, although firms use both human and technological factors to assess a proper CRM process, experts suggest that focusing on the human factors, like management, increases the potential of successful CRM, since managers can make a coordinated effort on organizational changes within a company, which often has an impact on customer satisfaction.
CRM technologies can easily become ineffective if there is no proper management, and they are not implemented correctly. The data sets must also be connected, distributed, and organized properly, so that the users can access the information that they need quickly and easily. Research studies also show that customers are increasingly becoming dissatisfied with contact center experiences due to lags and wait times. They also request and demand multiple channels of communications with a company, and these channels must transfer information seamlessly. Therefore, it is increasingly important for companies to deliver a cross-channel customer experience that can be both consistent as well as reliable.
How to Improve CRM within a Firm
Consultants, such as Bain & Company, argue that it is important for companies establishing strong CRM systems to improve their relational intelligence. According to this argument, a company must recognize that people have many different types of relationships with different brands. One research study analyzed relationships between consumers in China, Germany, Spain, and the United States, with over 200 brands in 11 industries including airlines, cars and media. This information is valuable as it provides demographic, behavioral, and value-based customer segmentation. These types of relationships can be both positive and negative. Some customers view themselves as friends of the brands, while others as enemies, and some are mixed with a love-hate relationship with the brand. Some relationships are distant, intimate or anything in between.
Analyzing the Information
Based on this information, managers must understand the different reasons for these types of relationships, and provide the customer with what they are looking for. Companies can collect this information by using surveys, interviews, and more with current customers. For example, Frito-Lay conducted many ethnographic interviews with customers to try and understand the relationships they wanted with the companies and the brands. For example, they found that most customers were adults who used the product to feel more playful. They may have enjoyed the company's bright orange color, messiness and shape, for example.
Companies must also improve their relational intelligence of their CRM systems. These days, companies store and receive huge amounts of data through emails, online chat sessions, phone calls, and more. Many companies do not properly make use of this great amount of data, however. All of these are signs of what types of relationships the customer wants with the firm, and therefore companies may consider investing more time and effort in building out their relational intelligence. Companies can use Data mining technologies and use of web searches to understand relational signals. Social media such as Facebook, Twitter, blogs, etc. is also a very important factor in picking up and analyzing information. Understanding the customer and capturing this data allows companies to convert customer's signals into information and knowledge that the firm can use to understand a potential customer's desired relations with a brand.
It is also very important to analyze all of this information to determine which relationships prove the most valuable. This helps convert data into profits for the firm. Stronger bonds contribute to building market share. By managing different portfolios for different segments of the customer base, the firm can achieve strategic goals.
Employee Training
Many firms have also implemented training programs to teach employees how to recognize and effectively create strong customer-brand relationships. For example, Harley Davidson sent its employees on the road with customers, who were motorcycle enthusiasts, to help solidify relationships. Other employees have also been trained in Social psychology and the social sciences to help bolster strong customer relationships. Customer service representatives must be educated to value customer relationships, and trained to understand existing customer profiles. Even the finance and legal departments should understand how to manage and build relationships with customers.
Reviewing Processes and Designing New Processes
Firms that do not have well-designed and logical processes cannot be successful in achieving their goals. Companies should define their business goals and evaluate their CRM processes to improve and expand to fit their needs. Applying new technologies is also helpful because using CRM systems requires changes in infrastructure of the organization as well as deployment of new technologies such as business rules, databases and Information technology.
Examples
CRM Systems
- Data warehouse technology, used to aggregate transaction information, to merge the information with CRM products, and to provide key performance indicators.
- Opportunity management which helps the company to manage unpredictable growth and demand, and implement a good forecasting model to integrate sales history with sales projections.
- CRM systems that track and measure marketing campaigns over multiple networks, tracking customer analysis by customer clicks and sales.
- Some CRM software is available as a software as a service (SaaS), delivered via the internet and accessed via a web browser instead of being installed on a local computer. Businesses using the software do not purchase it, but typically pay a recurring subscription fee to the software vendor.
- For small businesses a CRM system may consist of a contact manager system that integrates emails, documents, jobs, faxes, and scheduling for individual accounts. CRM systems available for specific markets (legal, finance) frequently focus on event management and relationship tracking as opposed to financial return on investment (ROI).
- Customer-centric relationship management (CCRM) is a nascent sub-discipline that focuses on customer preferences instead of customer leverage. CCRM aims to add value by engaging customers in individual, interactive relationships.
- Systems for non-profit and membership-based organizations help track constituents, fundraising, sponsors' demographics, membership levels, membership directories, volunteering and communication with individuals.
CRM Systems in Practice
Call centers
As well as tracking, recording and storing customer information, CRM systems in call centers codify the interactions between company and customers by using analytics and key performance indicators to give the users information on where to focus their marketing and customer service. The intention is to maximize average revenue per user, decrease churn rate and decrease idle and unproductive contact with the customers. CRM software can also be used to identify and reward loyal customers over a period of time.
Growing in popularity is the idea of gamifying, or using game design elements and game principles in a non-game environment such as customer service environments. The gamification of customer service environments includes providing elements found in games like rewards and bonus points to customer service representatives as a method of feedback for a job well done. The repetitive act of answering support calls all day can be draining, even for the most enthusiastic customer service representative. When agents are bored with their work, they become less engaged and less motivated to do their jobs well, making it likely for them to make mistakes. Gamification tools can motivate agents by tapping into their desire for rewards, recognition, achievements, and competition.
Contact Center Automation
Contact Center Automation, the practice of having an integrated system that coordinates contacts between an organization and the public, is designed to reduce the repetitive and tedious parts of a contact center agent's job. A contact center automation prevents this by having pre-recorded audio messages that help customers solve their problems. For example, an automated contact center may be able to re-route a customer through a series of commands asking him or her to select a certain number in order to speak with a particular contact center agent who specializes in the field in which the customer has a question. Software tools can also integrate with the agent's desktop tools to handle customer questions and requests. This also saves time on behalf of the employees.
Social Media
Social CRM involves the use of social media and technology to engage and learn from consumers. Because the public, especially among young people, has increasingly using social networking sites, companies use these sites to draw attention to their products, services and brands, with the aim of building up customer relationships to increase demand.
Some CRM systems integrate social media sites like Twitter, LinkedIn and Facebook to track and communicate with customers. These customers also share their own opinions and experiences with a company's products and services, giving these firms more insight. Therefore, these firms can both share their own opinions and also track the opinions of their customers.
Enterprise Feedback Management software platforms, such as Confirmit, Medallia, and Satmetrix, combine internal survey data with trends identified through social media to allow businesses to make more accurate decisions on which products to supply.
Location-based Services
CRM systems can also include technologies that create geographic marketing campaigns. The systems take in information based on a customer's physical location and sometimes integrates it with popular location-based GPS applications. It can be used for networking or contact management as well to help increase sales based on location.
CRM Systems for Business-to-business Transactions
According to a Sweeney Group definition, CRM is "all the tools, technologies and procedures to manage, improve, or facilitate sales, support and related interactions with customers, prospects, and business partners throughout the enterprise". The quote assumes that CRM is involved in every Business-to-Business (B2B) transaction.
Despite the general notion that CRM systems were created for the customer-centric businesses, they can also be applied to B2B environments to streamline and improve customer management conditions. For the best level of CRM operation in a B2B environment, the software must be personalized and delivered at individual levels.
The main differences between Business-to-Consumer (B2C) and Business-to-Business CRM systems concern aspects like sizing of contact databases and length of relationships. Business-to-Business companies tend to have smaller contact databases than Business-to-Consumer, the volume of sales in Business-to-Business is relatively small, in Business-to-Business there are less figure propositions, but in some cases they cost a lot more than Business-to-Consumer items and relationships in Business-to-Business environment are built over a longer period of time. Furthermore, Business-to-Business CRM must be easily integrated with products from other companies. Such integration enables the creation of forecasts about customer behavior based on their buying history, bills, business success, etc. An application for a Business-to-Business company must have a function to connect all the contacts, processes and deals among the customers segment and then prepare a paper. Automation of sales process is an important requirement for Business-to-Business products. It should effectively manage the deal and progress it through all the phases towards signing. Finally, a crucial point is personalization. It helps the Business-to-Business company to create and maintain strong and long-lasting relationship with the customer.
An example is with Costco Wholesale Corporation using FreeCRM to track its Business-to-Business partnerships and programs. The firm is able to track all data and negotiate with affiliate partners to track the relationship from beginning to end. It also helps the firm track special programs with participating organizations and give special discounts and deals.
CRM Adoption Challenges
Companies face large challenges when trying to implement CRM systems. Consumer companies frequently manage their customer relationships haphazardly and unprofitably. Many times, they may not effectively or adequately use their connections with their customers, due to misunderstandings or misinterpretations of a CRM system's analysis. Clients who want to be treated more like a friend may be treated like just a party for exchange, rather than a unique individual, due to, occasionally, a lack of a bridge between the inputted data in a CRM system's analysis and the analysis output. Many studies show that customers are frequently frustrated by a company's inability to meet their relationship expectations, and on the other side, companies do not always know how to translate the data they have gained from CRM software into a feasible plan of action. In 2003, a Gartner report estimated that more than $2 billion had been spent on software that was not being used. According to CSO Insights, less than 40 percent of 1,275 participating companies had end-user adoption rates above 90 percent. Many corporations only use CRM systems on a partial or fragmented basis. In a 2007 survey from the UK, four-fifths of senior executives reported that their biggest challenge is getting their staff to use the systems they had installed. 43 percent of respondents said they use less than half the functionality of their existing systems. However, market research regarding consumers' preferences may increase the adoption of CRM among the developing countries' consumers.
Market Leaders
The CRM market grew by 12.5 percent in 2012. The following table lists the top vendors in 2006-2008 and 2012-2014 (figures in millions of US dollars) published in Gartner studies.
The four main CRM system vendors include Salesforce, Microsoft, SAP, and Oracle, with Salesforce representing an 18.4% market share, Microsoft representing a 6.2% market share, SAP representing a 12.1% market share and Oracle representing a 9.1% market share in 2015. Other providers also are popular for small and mid market businesses. For nine different categories of CRM, Enterprise CRM Suite, Midmarket CRM Suite, Small-Business CRM Suite, Sales Force Automation, Incentive Management, Marketing Solutions, Business Intelligence, Data Quality and Consultancies, there are different market leaders. Between the different market leaders, each one's services cater to a different professional field, from healthcare to Manufacturing.
Enterprise CRM Suite
For Enterprise CRM Suite, Microsoft ranks the highest in depth of functionality, company direction, Customer satisfaction and 5-year cost for Software and maintenance because of its integrated customer engagement products, especially through Office 365 and PowerBI, two Business Analytics platforms. Whereas Microsoft's CRM platforms are mostly used in the Financial Services, Public Sector and Professional Services fields, its competitors in Enterprise CRM Suite, NetSuite, Oracle, Salesforce and SAP, cover the additional fields of Retail, Software, Wholesale/Distribution, Communications, High-Tech, Healthcare and Government.
Midmarket CRM Suite, Small-Business CRM Suite, Sales Force Automation
In terms of Small-Business CRM Suite, Midmarket CRM Suite and Sales Force Automation, Microsoft also is viewed as the best in terms of depth of functionality, company direction, Customer satisfaction and 5-year cost for software and maintenance for its Dynamics CRM platform. This platform integrates various components, engaging customers at multiple points. Microsoft's competitors in Small-Business and Midmarket CRM Suite, Hubspot, Infusionsoft, Zoho, BPMonline, NetSuite, Oracle, Salesforce and SugarCRM, cover additional CRM needs for fields like Real Estate, Communications, Retail, Software, Wholesale/Distribution, High-Tech, Healthcare, Government, Agency Partners, Marketing Agencies, Consultancies and Education.
Incentive Management
Xactly is rated the highest in terms of depth of functionality, company direction, Customer satisfaction and 5-year cost for software and maintenance for Incentive Management in its Sales Performance Management products. Xactly is known for offering strong incentive management products for companies of any size, and recently, with its Xactly Insights product released in August, 2014, their software helps companies compare themselves to their competitors in order to reform business plans. Covering fields from Software/High-Tech to Business Services to Life Sciences, Xactly's products provide tools for a range of professional fields. Xactly's competitors in Incentive Management, Callidus Software, IBM (Varicent), NICE Systems and Synergy, cover additional Incentive Management product needs for fields such as Insurance/Financial Services, Telecommunications, Banking and Travel.
Marketing Solutions
Salesforce's Marketing Cloud is known for its complex architecture which allows its users to connect to multiple applications and data sources within and outside of Salesforce through a single browser interface. in terms of depth of functionality, company direction, customer satisfaction and 5-year cost for software and maintenance, Salesforce is ranked higher than its competitors in the category of Marketing Solutions. Although Marketing Cloud is mostly used in the Financial Services, Manufacturing/Retail and High-Tech fields, other fields such as Media, Environment, Communications and Pharmaceutical are serviced by companies like Adobe, IBM, Oracle Marketing Cloud and Teradata.
Business intelligence
In terms of the Business Intelligence category, Teradata ranks the highest, mostly due to the strength of its depth-of-functionality. Through their Unified Data architecture of their products, they have many options for customer segmentations, targeted campaign delivery and content customization. Though their products are typically used in the Financial Services, Pharmaceutical and Retail fields, other fields like Healthcare, Communications, Consumer Products, Insurance, Wholesale, Government and Professional Services are catered by Teradata's competitors in Business Intelligence, IBM, Oracle, QlikTech and SAS Institute.
Data quality
When considering the Data Quality category for CRM products, Informatica ranks above the other companies for its depth of functionality, customer satisfaction and overall company direction. Though Informatica caters to the Healthcare, Financial Services and Manufacturing fields, its competitors, Experian, IBM, Pitney Bowes and SAS Institute, also provide CRM products specializing in high data quality for fields like Government, Retail, Telecommunications, Utilities and Insurance.
Consultancies
In terms of CRM for consultancies, Appirio was ahead of its competitors due to its expansion in the area of mobile application development in 2015. Although Appirio caters to the fields of Retail, Technology and Education, its competitors in the field, Capgemini, Ernst & Young, Hitachi Consulting and IBM Global Business Services, mainly cater to the Communications, Financial Services, Government, Manufacturing and Healthcare fields.
Trends
In the Gartner CRM Summit 2010 challenges like "system tries to capture data from social networking traffic like Twitter, handles Facebook page addresses or other online social networking sites" were discussed and solutions were provided that would help in bringing more clientele. Many CRM vendors offer subscription-based web tools (cloud computing) and SaaS. Some CRM systems are equipped with mobile capabilities, making information accessible to remote sales staff.Salesforce.com was the first company to provide enterprise applications through a web browser, and has maintained its leadership position. Salesforce continues to be a market leader as the CRM with the most customers and is rated-highly among their customers.
Traditional providers have recently moved into the cloud-based market via acquisitions of smaller providers: Oracle purchased RightNow in October 2011 and SAP acquired SuccessFactors in December 2011.
The era of the "social customer" refers to the use of social media (Twitter, Facebook, LinkedIn, Google Plus, Pinterest, Instagram, Yelp, customer reviews in Amazon, etc.) by customers. CRM philosophy and strategy has shifted to encompass social networks and user communities.
Sales forces also play an important role in CRM, as maximizing sales effectiveness and increasing sales productivity is a driving force behind the adoption of CRM. Empowering sales managers was listed as one of the top 5 CRM trends in 2013.
Another related development is vendor relationship management (VRM), which provide tools and services that allow customers to manage their individual relationship with vendors. VRM development has grown out of efforts by ProjectVRM at Harvard's Berkman Center for Internet & Society and Identity Commons' Internet Identity Workshops, as well as by a growing number of startups and established companies. VRM was the subject of a cover story in the May 2010 issue of CRM Magazine.
In 2001, Doug Laney from Gartner developed the concept and coined the term 'Extended Relationship Management' (XRM). Laney defines XRM as extending CRM disciplines to secondary allies such as the government, press and industry consortia.
Dennison DeGregor (2011) describes a shift from 'push CRM' toward a 'customer transparency' (CT) model, due to the increased proliferation of channels, devices, and social media.
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