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Author: Juan Carrión 

Theme: Socio Director de EvaluaRH y profesor de ESIC 

Article Title: Introduction to CRM 

 

There are many definitions of CRM, but the one developed by the expert panel CRMGuru.com is particularly clear: “Client relationship management (CRM) is a business strategy to select and manage customers in order to optimise their long-term value. CRM requires a business philosophy focused on the client and a culture that supports effective marketing processes, sales and service. CRM applications can enable the implementation of an effective CRM system, provided that the company has the culture, strategy and appropriate leadership”. As this definition points out, it is important to stress that a CRM strategy is a competitive (or business) strategy, which primarily has an impact on three functional strategies: marketing, sales and post-sales service.

According to Treacy and Wiersema, CRM strategy seeks competitive advantage throughan intimate knowledge of the consumer. For Porter, CRM strategy would be a type of differentiation strategy (focused or segmented). Even though we sell this type of strategy as something very new nowadays, it is not new at all. In reality, there are no significant conceptual differences between CRM strategy and what has traditionally been called “Relationship Marketing Strategy.”

On the other hand, it is interesting to note how many managers relate CRM strategy to the implementation of a software package. This confusion has led to numerous failures. We must remember that technology is always a means, not an end in itself. As Greenberg says, “what CRM is not, is technology”. Without deep strategic thinking, simple CRM technology deployments are doomed to fail (as has happened on numerous occasions). It is important to clearly differentiate the end of the means.

And so, why this interest in CRM strategy? Without a doubt, the trends in “management” are important, and the imitation effect sometimes leads to excessive interest in certain strategic options, which may not make sense for some companies. In any case, there is a sociological reason for the interest in CRM, customers have unprecedented power due to the fact that they have more experience, are better educated, and above all are increasingly demanding. In many cases, the customer

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moves to dominate the relationship, deciding who to conduct transactions with, and who not.

We can also distinguish different types of areas in which CRM strategies can be of interest:

Sectors in which what matters is the value the customer gets from the company (quality and service), rather than price. It is obvious that if a company is competing in this type of environment, relationships provide the differential value and can be a source of competitive advantage.

Sectors in which it is difficult to differentiate, they offer products and “commodity” services. In these types of sectors a possible strategic option is to differentiate themselves through relationships and try to get loyalty from customers that can buy the same product from another competitor.

Mature sectors (with negligible growth rates), in which the price is normally a major competitive variable. In these cases, if companies want to grow, they have no choice but to “steal” customers from competitors and not allow themselves to be “stolen” from. In these cases, loyalty is the key.

Why in this type of sector and not others? The reason is that in sectors with one (or several) of the above problems, the negotiating power of the final customerrockets. In these cases, issues such as market share or sales volume, are still very important but give way to the customer retention rate, the cost of customer acquisition, the average margin per customer, the average customer lifespan... In short, the current key strategic objective of many companies is not only to attract customers,but keep them (obtain their loyalty). How is this done? Through an ongoing personal relationship that is relevant and fruitful for both parties.

The CRM strategy differentiates the company’sproposed value, improving its ability to meet individual customer needs and achieve high retention rates. To achieve this, we must provide anexcellent product or service that is personalised and includes excellent customer service. In addition, the CRM strategy can facilitate innovation (differentiation) and quality improvement of internal processes (cost reduction). When a company cultivates relationships with customers, it is easier for them to gain valuable information about their preferences, needs, habits, all of which can ease innovation processes. Furthermore, customer orientation during internal processes allows the job to be done more efficiently.