Customer relationship management approach and theories

customer relationship management approach and theories

that Universities should adopt effective customer relationship management strategies to achieve student .. The theory addresses morals and values that should. This paper aims to demonstrate that customer orientation approach (CRM) is . customer needs (Ndubisi, ) are essential for relationship marketing theory. Customer Relationship Management is a strategy or philosophy which provides a vision for the company It is an important approach in trade.

Following that relational logic, the schedule of CRM will consist in the usage of data analysis in order to gain new customers and retain the valuable ones, as well as to develop measures that can improve those relationships channels of communication, cross selling… towards a mutual maximum generation of value.

CRM is not limited to any specific economic sector: Therefore, CRM is incompatible with strategies where the customer remains undifferentiated: Thus, customer feedback gets a special relevance: Consumer information was never as easy and cheap to obtain.

Due to this, we can say for sure that knowledge management, shared all around the organization, can really make the difference. Is CRM really worth it? The outcomes of CRM implementation are quite a controversial issue, and they had been fully discussed by marketing writers, journalists, and businesspersons.

A priori, it results obvious improving our information management, enhancing our customer services, retaining key customers, encouraging their loyalty… should be a worthy investment.

Theoretical Models of Customer Relationship Management in

So, is it really CRM to blame? It would be unsuccessful to deploy data warehouse technologies in our company if we do not have in our staff trend analysts that can elaborate guidelines for the future.

The scope of CRM is broader than the departmental stage, extending to the whole organization and its lifetime, and has not only electronic implications, but also a very relevant human facet Gummerson,so the employees must also share CRM values. In few words, technological innovations must be always consistent and coherent with the business and marketing purposes of the company and vice versa Wehmeyer, It is also said that one of the main reasons of CRM disavowal by practitioners is the visibility differences between the costs and revenues of CRM technology.

While all costs of IT implementation are instantly clear in bills, the pros, tough real, are not as obvious Day, since revenue generation is a process where multiple factors are also involved.

Theoretical Models of Customer Relationship Management in

Nevertheless, many outcomes of CRM do not come from inside the organization, but from enlarging the profit- earning capacity from the customers. Taking the principle that asserts that relationships are like assets, companies are willing to increase the value of their portfolio in order to obtain more profits. Likewise, building and maintaining these relationships require many resources, so it is a general objective in any organization to optimize its performance, and therefore increase their return on investments.

Having these in mind, we have to be quite meticulous when we are selecting our target buyers from the data that is available through CRM related technologies.

If the costs of maintaining a customer and providing a superior value surpass the incomes coming from that relationship, it is not worth to keep that particular client in the portfolio.

As they will accept to give us much more dollars in exchange of added value coming from a relationship the extra cost is seen fair Verhoef,they should be the focus of our attention, helping at the same time to reduce spending on marketing campaigns, as the number of worthy potential buyers to contact will be narrower.

The main problem of CLV is that, as a prediction, we have to presume the length of the relationship the longer it is, the more profitable it becomeswhich can result very tricky in B2B environments Gummerson, due to the nature of relationships between organizations. A very optimistic length prediction may distort our targeting preferences, so prudence is imperative. Recruiting new customers requires additional spending on marketing campaigns, experts… in order to discover who our potential buyers are, and to communicate them our message: Contrarily, by maintaining long-term relationships with our parties, we would be saving much money and making our customer acquisition costs more efficient.

This loyalty means a barrier for changing to other firm, that amplifies our customer share Verhoef, Now back to lifetime value, it has a major incidence on this matter: Thus, customer retention strongly relies on a consistent and effective management of relationships, and it may be even more critical in a B2B context, where a concrete link with a buyer firm may represent a fundamental source of incomes whose disappearance would result in big financial problems for our company.

In addition, seeking for new contractors involves plenty of costs related with consulting, analysing risks and alternatives, legal issues…So here retention means also stability: Furthermore, since many B2B relationships imply a bond among equals, a real close contact meetings between CEOs, p.

It is very frequent in B2B heavy engineering firms, once they have sold an important piece of machinery to their partner, to offer also their own maintenance services, supported by information and communication technologies. It works as a way for not only diversifying their supply and ensuring new income resources, but also for strengthen their relationships for the sake of obtaining future contracts. Rolls-Royce can be a good example of this The Economist, It is very common for great brands to have online forums where users can interact between themselves and new services rewards, customer support… can be provided.

Thus, we can take advantage from that existent customer base to offer complementary products and services that add more value to their purchases. Extending the fields of our relationships can grew our income without having to incur in customer acquisition costs.

E-commerce usually uses algorithms in order to recommend you what to buy based in your purchase record, and even, like Amazon does, shows products that are frequently bought together.

customer relationship management approach and theories

Its practical consequences are not so different from the supply of added customer services: It is visible that CRM aspects related with customer profitability are not isolated, but interdependent: At this point, we have discussed the implications of adopting a CRM perspective in organizations, but CRM is a two-sided coin founded on a quid pro quo proposition.

As deduced from the previous section, customer profitability would not be possible without the delivery of superior value Jensen, that turns the relationship into a win-win situation. The same existence of an economic exchange implicates that both seller and buyer believe that they receive value from it, because if not, there would not be reasons to do it Bagozzi, CMR acknowledges those basic principles and tries to exploit them in its favour.

As it tries to eliminate non-profitable customers from the equation, the value exchange can be optimized since the efforts of the firm can be allocated correctly. Thus, the company will get its revenues increased while the key customers concentrates the value proposition. Here we have to find a balance between giving the profitable customer a superior value, with the aim to retain him, in exchange for a price that is perceived as fair but that would not undermine the ability of the firm to generate revenues.

Here, giving a major role to customers through collaborative interactions can be chance to achieve differentiation, and CRM-based technologies make this task easier. The Internet and the rise of social medias have facilitated the massive use of one-to-one communications between the firm and its target towards a better understanding and the collection of really relevant data.

Consequently, customers are participants in a process that has the ultimate objective to maximize their satisfaction: The proliferation of mass customization could serve as a good example for this: Accordingly, the core idea of S-D Logic consist in focusing the on the service meaning the application of competences to provide benefits rather than the product a.

Therefore, the point about S-D Logic would consist in understanding the true relational nature of value creation in a broader and more comprehensive perspective that recognizes and commits to the necessary collaborative effort of customers and partners, in order to improve our position, so a customer-centric philosophy such as CRM requires it to realise its full potential.

Nevertheless, profit is not the only value that a firm can get from co-creation: This appears to be more obvious in relationships between businesses, whereas value co-creation may encourage the development of jointed investigation projects, shared technologies, financial agreements towards stability Therefore, CRM provides a framework where there is a dependency between both sellers and buyers, as well as their interests can somewhat converge.

Once that we have done this review on the subject, we are able to summarize the core points of the research work. Even known that Customer relationship management is still a concept under academic evolution, researchers have started to agree in understanding it under a wider, multidimensional, and holistic point of view built around a customer-centric thought.

Thus, benefits from its application will only come with an all-level and consistent implementation.

That is why CRM opts to put emphasis on those key customers with higher potential profitability, to develop relationships with them.

Here elements like customer retention, loyalty, trust, added services, cross selling… can determinate the firm success.

customer relationship management approach and theories

CRM has also its own philosophy regarding with the generation of value: Rather than a passive subject, the customer is a necessary actor; a co-creator that we must take into account in order to gain sustainable competitive advantages.

Being stated the managerial consequences of CRM implementation and its theoretical background, now we are able to issue some advices, with special focus on B2B companies.

If not, it is possible that we will get some rigidities and adaptation difficulties, instead of generating synergies. In addition, very optimistic predictions of expected length of the relationship in order to obtain the CLV should be avoided: Concept of customer is the ultimate consumer who has a 63 International Journal of Business and Behavioral Sciences Vol.

Concept of relationship is to build loyal and profitable customer relationships through the learning relationships. Management is creativity and guiding of a customer-oriented business processes and placing the customer at the center of procedures and experiences of the organization. Experts and theorists have different definitions for customer relationship management that can be classified in four general groups containing strategies, technologies, processes and information systems Thompson, Some of the definitions for customer relationship management from the view of different theorists are as follows: In addition, in line with the customer relationship management, it helps the company in order to maximize the value of every customer Turban et al.

From the above definitions, it can be concluded that CRM strategy is a business to optimize profitability, revenue and customer satisfaction by the organizing services based on customer needs, and also improving customer satisfaction is designed accordance with the principles and implementation process customer oriented. CRM objectives can also be expressed as follows: Types of CRM Systems: These systems can be divided into three general categories: Purpose of participating in a CRM is to improve quality and levels of customer service and result in increased customer satisfaction and customer loyalty as the ultimate goal in a customer relationship management system Zia khosoosi, CRM implementation process Customer relationship management has processes for achieving its goals which is considered from different perspectives.

One of these theories is CRM life cycle model of Kalakota which consists of three phases of attraction, promoting and maintenance, and every phase supports knowledge and comprehending of relationship between the firm and its customer. This theory states that every phase has different effect on communication with customers, therefore strategy used by organization from each phase to another phase would be varied which is shown in the table below Sarafrazi and Memarzadeh, Table 1 CRM processes and organizational attention and strategies associated with them Processes Actions Focus Center of Organization Strategies Attraction Promoting the goods and services leadership Distinguish Innovation Promotion Improving the profitability of existing customers Separation Reducing costs service to customer Maintaining Customer retention for their life focus on providing services based on customer desire Adaptation According to customer — supplying new product Another theory about the processes of the CRM is Swift's model.

According to this model, the process cycle includes the following steps: Analysis of customer characteristics and investment strategies which is done by process of identifying, classification and predicting customer of organization.

Implementation and customer relationship management through relevant information at the right time and providing products using a range of interaction channels. Definition of distribution way and the products that be offered to specific customers and developing strategic communications plans and programs.

customer relationship management approach and theories

With the purpose of attraction and analysis of customer data through the communication that organizations has acquired by interactive paths Swift, Swift defined CRM as a process of continuous learning in which information about each customer would establish a relationship with them.

Customer information is not only sufficient, but also the needs of each of them should be collected and analyzed, and appropriate response should be given. Steps of Serving Clients in Customer Relationship Management In the first step of serving, database is prepared based on data and information of customers. Then information collected in the database is analyzed based on different techniques.

The target customers are selected based on profitability criteria for company. In the next step, appropriate marketing mixture is designed for target customers.

Then by using information obtained from previous stages, communication with customers is started and finally, after the implementation of relationship marketing, the results obtained is monitored and evaluated. The data structure in CRM can be shown by following diagram: Verbal communicat ion Internet Email Advertising Telephone marketing Appropriate data classification The composition and put the data in of the organization database Analysis of data collected Disseminate information to the various components of the organization Support Selling Marketing Management 67 International Journal of Business and Behavioral Sciences Vol.

Critical success factors in CRM implementation strategy Implementing a successful CRM strategy in strategic management of internal market of a company that has the above benefits may depend on the following key factors: Company employees should be trained in the field of interaction and connection with the customers to be able to communicate with customers effectively and also have the ability to use new technologies.

Companies should define their business needs and goals, and related CRM processes should be improved and expanded to achieve these needs.