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Customer Relationship Management

Essay by review  •  February 6, 2011  •  Research Paper  •  2,786 Words (12 Pages)  •  1,811 Views

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Customer relationship management (CRM) is the new title for relationship marketing. Explain why this is so and suggest how CRM can be effectively incorporated into a marketing plan.

Over the past fifteen years Relationship marketing (RM) has been slowly developing into customer relationship management (CRM) (Gilligan et al 2003). Markets change, even when profitable, they may mature and saturate, so we cannot be surprised that companies are changing their strategies in order to satisfy the consumer (Sturdy et al 2001). The difference between the two can be seen within the two definitions; Relationship marketing as a company that specialises in relationship marketing helps clients build relationships with their channel partners and employees, as well as customers (Duncan 2002). Whereas customer relationship management is as McDonald (2002) defines: A continuous performance initiative to increase a company's knowledge of its customers. It is clear that from these definitions that the main difference from the two is that RM concentrates on all of its relationships whether it is with its partners, employees or even its customers. Where the quote says: 'even its customers' it gives off the idea that the customer is the least important of the three, in contrast to CRM, whereby it is simply all about the customer.

Solomon et al (2002) suggests that marketers are carefully defining customer segments and listening to people as never before. Many companies have realised that the key to success is building lifetime relationships between brands and customers. Marketers who believe in this philosophy are making an effort to keep in touch with their customers on a regular basis, and are giving them reasons to maintain a bond with the company over time. Some companies establish these ties by offering services that are appreciated by their customers. Many companies donate a small percentage of the purchase price to a charity such as the Red Cross or the World Wildlife Fund, or for the care of the poor and marginalised in society.

Brassington et al (2003) concurs with Sturdy et al (2001) and Solomon et al (2002) by stating that the way in which organisations relate to their customers have evolved extensively in recent years. Brassington goes on to say that an essential part of customer relationship understands the customers, keeping them informed and creating a positive reason for them to continue to do business with you. Contrary to popular beliefs, committed customers often do enjoy regular contact, preferably mail or e-mail, with their favourite companies. A 'thank you' call or 'how are you getting on with the product or service' can be useful ways in showing the customer that their business is appreciated.

The changes which have been observed in the United States, in Western Europe, and in the UK, support Gummesson's (1987) claim that the management of long term customer relationships, in industrial and organisational markets, should be the primary concern of marketing strategists (Hartley et al 1996). To break this down Gummesson is stating that customer relationships are extremely important and that companies should base themselves around customer care in order to gain customer loyalty.

An example of good customer service is in Japan where one store minimizes queuing as an obstacle by handing out towels (hot in winter and cold in summer) to motorists queuing for parking outside the store. This is one of a number of examples found throughout the world today of companies looking after their customers. Smith (1998) states that good customer care starts with good management skills and that these managers are changing or need to change in order to run a successful business. Smith goes on to suggest that tomorrow's successful companies will be learner, less hierarchical and more flexible. This means that tomorrow's manager will have to be multi-skilled and fully understand people management, customer care programmes and quality management programmes.

Another revolution in relationship building is being brought to us by courtesy of database marketing. This involves tracking consumers' buying habits by computer and crafting products and information tailored precisely to people's wants and needs. Keeping close tabs on their customers allows database marketers to monitor their preferences and communicate with those who show an interest in their products or services. Information is then sent to the appropriate division for follow up. Blockbuster Entertainment Corp. is testing a system that makes recommendations based on a consumer's prior video rentals and offers special promotions based on these choices. However, some consumers feel threatened by this kind of surveillance and resist such marketing efforts. Hence, the attempts made to ensure that database marketing conforms to the requirements of respondent confidentially. Kotler (1997) & Solomon et al (2002). Middleton (2001) goes as far as saying that apart from the ability to target individuals, databases have a powerful market research value in generating detailed knowledge of repeat buyers and cutting the cost of undertaking traditional usage and attitude studies among buyers.

According to Hollensen (2003) and Morgan (1996) managing relationships with customers, suppliers and competitors is now an integral part of a firm's strategic marketing agenda, and therefore is extremely important to companies. Berry (1995) asserts that through RM service, providers gain a better knowledge of the customer's requirements and needs. Some managers are engineering their companies towards the customer as CRM slowly takes over from RM. A major factor in the considerable amount of marketing thinking over the past fifteen years has been the notion of loyalty, and how long-term, cost-effective relationships might be developed with customers. In a lot of ways, it could be said that it is a logical development of the way in which the focus of marketing has changed from the early 1980s view that marketing is essentially a business function to the idea that, more realistically, it is (or should be) an organisational attitude, ethos and culture. (Gilligan et al 2003). Gilligan goes on to suggest that:

'one of the most powerful things about relationship marketing is the recognition that the cost of gaining a new customer, particularly in mature and slowly declining markets, are often high'.

CRM offers benefits to both customer and supplier. As said before, many people see CRM as the best way to retain customers in the long run by creating added value for them and by doing so this gains competitive advantage in an increasingly competitive market. Mittal and Lasser (1998) and Arnould et al (2002) have agreed with

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