What is Customer Relationship Management?

Technology for CRM

Technology enhances a company’s ability to efficiently target prospects and track relationships.

Since we have a customer relationship management class in our Marketing and Digital Marketing programs, it is common that students ask, “What is CRM?” or “What is customer relationship management?” My typical quick response is, “It is a data-driven business marketing system.” While I like this description, it doesn’t tell the entire story of the major role that CRM plays in many successful modern businesses.

Alignment with Marketing

As a marketing professional, I tend to prioritize customer relationship management from a marketing perspective. During the first week of our CRM class, I explain to students how it touches every aspect of the American Marketing Association’s definition of marketing.

The AMA definition centers on four key phases: research and development, communication, distribution and exchanges. The data gathering and analytics elements of CRM are used to research and develop desirable solutions, and to formulate impactful, targeted and efficient marketing communications. Companies also evaluate their distribution systems and channels within CRM to figure which touch points and paths match up with target market behavioral preferences. The role CRM plays in monitoring, developing and maintaining relationships normally begins at the point of purchase or exchange, and continues through follow-up interactions.

The Four-Stage CRM Cycle

Customer Focus

At its core, CRM is about identifying, attracting, engaging and retaining your ideal customers.

In line with the business marketing system perspective, the first week of our class I outline the four-phase CRM cycle, which serves as the framework for the course. The four phases are: Data collection, analysis, program development and implementation.

This construct illustrates the pivotal roles of strategy, infrastructure and software technology in a complete customer relationship management program. Companies need a plan, which includes setting program objectives, so they can develop the right technology infrastructure. Common CRM objectives include increasing the customer base, increasing revenue, improving repeat purchases, extending lifetime customer value, reducing churn and increasing customer satisfaction levels.

Software is used to collect customer profile data, and to track behaviors. These two data types are critical in the next phase of data analysis, where you try to understand why certain people behave in certain ways. We recently discussed the difference between data analysis and analytics, which is the more common, automated approach companies now use. The goal of analytics is to make predictions on behaviors that impact marketing, sales and service activities. As you carry out or implement programs, ongoing data collection is used for future program iterations.

The Role of Software

People familiar with CRM prior to the class often misconstrue that it is simply a software application. This perception goes back to the early days of modern CRM (around the turn of the century), when companies focused more on the technology than the planning or processes that make customer relationship management effective.

Software does play an important role in CRM. You need the right type of program to collect and evaluate data. It is the evaluation of critical data that helps companies make more confident decisions on how to invest marketing resources wisely.

What Else is CRM?

In our class, I discuss three broad areas of application for customer relationship management: Marketing, sales and service. Despite these distinct roles, ideally, people in these functions collaborate in building and executing an effective CRM program.

Marketing is often accountable for lead generation, or developing communication strategies that attract the right people to the company. After a prospect shows interest or completes a lead generation form, sales normally takes over for lead nurturing and the selling process. Service or support teams help address issues during new customer installations, and throughout the entire relationship with the customer. All three functions bear shared responsibility for ensuring customer satisfaction, which drives repeat business, referrals and loyalty.

Conclusions

As you’ve noticed, customer relationship management is very complex. Despite starting the conversation with a quick statement, I encourage students to realize that CRM is really a business system that requires understanding of an entire process, including goal-setting, technology, data and decision-making.

Do you have your own thoughts on the question, “What is customer relationship management?” If so, add a comment and share them with our readers? If you are intrigued and want to learn more, sign up for the DMACC CRM class!

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Neil Kokemuller

Neil Kokemuller has been a Professor of Marketing at Des Moines Area Community College since 2004. Prior to teaching, he worked as a marketing specialist and retail manager. He holds an MBA from Iowa State University

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