Customer relationship management (CRM)

Customer relationship management (CRM) is a broad term that covers concepts used by companies to manage their relationships with customers, including the capture, storage and analysis of customer information.

Aspects of CRM

There are three aspects of CRM which can each be implemented in isolation from each other:

• Operational CRM- automation or support of customer processes that include a company’s sales or service representative
• Collaborative CRM- direct communication with customers that does not include a company’s sales or service representative (“self service”)
• Analytical CRM- analysis of customer data for a broad range of purposes

META Group (acquired by Gartner in April 2005) developed this conceptual architecture in the late-1990s, and dubbed it the “CRM Ecosystem”

Operational CRM

Operational CRM provides support to "front office" business processes, including sales, marketing and service. Each interaction with a customer is generally added to a customer's contact history, and staff can retrieve information on customers from the database as necessary.

One of the main benefits of this contact history is that customers can interact with different people or different contact “channels” in a company over time without having to repeat the history of their interaction each time.

Consequently, many call centers use some kind of CRM software to support their call centre agents.

Collaborative CRM

Collaborative CRM covers the direct interaction with customers. This can include a variety of channels, such as internet, email, automated phone (Automated Voice Response AVR). It can generally be equated with “self service”.

The objectives of Collaborative CRM can be broad, including cost reduction and service improvements.

Analytical CRM

Analytical CRM analyses customer data for a variety of purposes including

• design and execution of targeted marketing campaigns to optimise marketing effectiveness
• design and execution of specific customer campaigns, including customer acquisition, cross-selling, up-selling, retention
• analysis of customer behaviour to aid product and service decision making (e.g. pricing, new product development etc.)
• management decisions, e.g. financial forecasting and customer profitability analysis
• prediction of the probability of customer defection (churn).

Analytical CRM generally makes heavy use of predictive analytics.

Strategy

Several commercial CRM software packages are available which vary in their approach to CRM. However, CRM is not just a technology, but rather a holistic approach to an organisation's philosophy in dealing with its customers. This includes policies and processes, front-of-house customer service, employee training, marketing, systems and information management. Hence, it is important that any CRM implementation considers not only technology, but furthermore the broader organisational requirements.

The objectives of a CRM strategy must consider a company’s specific situation and its customers needs and expectations.

Technology Considerations

The technology requirements of a CRM strategy can be complex and far reaching. The basic building blocks include

• A database to store customer information. This can be a CRM specific database or an Enterprise Data warehouse.
• Operational CRM requires customer agent support software.
• Collaborative CRM requires customer interaction systems, eg an interactive website, automated phone systems etc.
• Analytical CRM requires statistical analysis software as well as software that manages any specific marketing campaigns.

Each of these can be implemented in a basic manner or in a high end complex installation.

Successes

While there are numerous reports of "failed" implementations of various types of CRM projects, these are often the result of unrealistic high expectations and exaggerated claims by CRM vendors.

In contrast there are a growing number of successes. One example is the National Australia Bank (NAB) which has pursued a CRM strategy for over ten years and has won numerous awards for its efforts.

Privacy and Data Security

The data gathered as part of CRM must consider customer privacy and data security. Customers want the assurance that their data is not shared with third parties without their consent and not accessed illegally by third parties.

Customers also want their data used by companies to provide a benefit for them. For instance, an increase in unsolicited telemarketing calls is generally resented by customers while a small number of relevant offers is generally appreciated by customers.