Customer Relationship Management
The aim of this report is to generate ideas for helping the management team which strives to implement an up to date methods and practices, for keeping the current customers, which will assure the company’s competitive power. This report will also propose techniques for attracting new customers, which will increase the market presence and economic condition of the company.
The report aims to convince the management team that using the Customer Relationship Management model will help in increasing the loyalty of their clients and raising their lifetime value- an index which helps companies to identify their most valuable customers in long term period. This piece of consultancy work will inform the management about the pros and cons of the implementation of Key Account Management system, which is an upgraded version of the ordinary CRM. It will reveal the stages of the development process of such a system, as well as the stages when the system is fully operational.
Each recommendation, advice and conclusion is based upon information, gathered from international authors in the field of Customer Relationship Management, economic journals, publications in specialised press, and field surveys. Introduction Customer Relationship Management has always been known by its complexity and unpredictability. The relations between the company and its customers are built upon a systematic basis, which is constantly upgraded by adding different cooperation parameters, such as good personal relations between the manager of the company and its clients (Jeleva, 2007: 23).
By using CRM methods the company receives valuable information about the needs of their customers, and this data helps the company to build its organizational strategy that covers all aspects of business: production, advertising, sales. Realising the importance of clients for the long term strategy is the first step in changing the management philosophy. Managing relationships with customers includes action areas such as retaining current customers, understanding their needs and increase the number and frequency of their purchases (Gospodinova, 2010: 5).
On the other hand, it helps increase customer satisfaction and building long term relationships with customers. The CRM model works in many ways: it establishes a close relation with customers; it helps in understanding and anticipating the needs of current and potential customers; allows company to collect and use customer information in order to build consumer loyalty and increase value to consumers; deepening of knowledge (not data) about customers over time and use this knowledge to meet their individual needs.
Management teams of organizations strive to establish lasting relationships with their existing clients because attracting new customers requires a large expenditure of resources, especially financial, but also new clients at the beginning are usually somewhat sceptical and suspicious. But the establishment of lasting and equitable relations with the usual huge number of clients is long and difficult process. Its successful conduct is not only an issue of marketing policy, production, logistics and information services within an organization; it is a change in the general philosophy of governance.
Managing relationships What is meant by managing relationships? This suggests a management function. But in the concept of CRM management is not a function of a separate division or unit, and is a property of all major business processes within the organization. In that capacity it affects the organizational structure of the company, to the behaviour of the officers inside and outside of it, as well as its foreign communications.
The information about the customers which is gathered and processed later becomes the company’s corporate database of knowledge (Jeleva, 2007: 23). This system of knowledge is becoming a source of progressive changes and becomes important “know-how”, which distinguishes the organization from its competitors. That is why business needs CRM systems, enabling companies to concentrate their efforts on sales, to enhance the effectiveness of their marketing campaigns.
Some arguments in favour of the introduction of CRM systems are: the growing competition; the increased number of channels of communication with customers; changing corporate priorities, in which companies slip focus of their strategies from the product to the client; the emergence of new technologies, giving an opportunity for the implementation of similar decisions There are numerous technological components in the CRM, but understanding of this strategy mainly in technology aspect is wrong.
In our days CRM is not simply implementation of any technological solution that satisfies all the needs of the company. Rather than that management of the relationship with clients refers to the consumer satisfaction and there is a connection with the technologies, insofar as they appear to be outcome of the trial of its application. It begins with the preconditions – to give consumers what they expect (and even more) and then assess how technology helps to achieve this. Automation of the important business processes of the enterprise is a smart solution (Demin, 2000: 12).
Taking into account the strategic guidelines of the management, the analysis of the business processes indicates which activity of the company should be automated, in order to optimize benefits for the organization, but this does not always mean comprehensive technological solution. Automation of the activities supports business strategy to provide the necessary information for making key decisions; it leads to the improvement of the results – for example, an increase in revenue as a consequence of customer satisfaction.
Automation helps in lowering the cost of sales, so that the investment made by the deployment of a CRM-system shall be paid within a specified period. On the other hand, in spite of the extent of technological provision, communication with the clients is always carried out by the staff of the company. That is why CRM should be considered as a strategic process, which includes specific definition of consumer needs, the definition of the funds for their implementation and the achievement of optimal final result.
This strategic process is carried out by gathering information for customers and market trends (which is essential to the effective supply of products and services of the company on the specified market), and through integrated interaction between technology, people and business activities. In this way companies begin to seek new type of competitive advantage, which will keep their customers. It is important to mention that CRM concept emphasises on retaining of old clients rather than attracting new. CRM key settings
The management team should consider some of CRM’s key settings before deciding to implement this system in their company. This action should be undertaken according to the company’s strategy, because the decision will influence its entire performance. A company that increases its number of new customers by 20 percent in a year but retains only 85 percent of its existing customers will have a net growth rate of only 5 percent (20 percent increase less 15 percent decrease). But the company could triple that rate by retaining 95 percent of its clients (http://www.referenceforbusiness. com/small/Co-Di/Customer-Retention. html 09. 01. 2011).
It is far more favourable for a business organization to keep the current clients and to build business with them, rather than to seek for new customers. Surveys show that the retention of one current client is seven, and more times cheaper than attracting a new one. Managers have to be aware that nowadays customers are seeking closer contacts with the firms, with which they work; therefore relationships with customers depend largely on the quality of personal contacts.
The company have to realize that ny customer portfolio is subject to the Pareto principle – 20% of the clients are responsible for 80% of sales (so-called the Vital few), while the other 80% of the clients generate 20% of sales (so called Trivial many ). This must be taken into consideration when deciding to implement a CRM model within the organization. One of the results of the globalization processes, which managers have to consider, is the fact that in many of today’s markets consumer loyalty is becoming increasingly uncertain, since the choice is becoming increasingly large, and the products – more quality equal.
The last but not least is the outcome of the current fragmented market conditions- the ways and means to influence customers (directly or indirectly) have increased significantly and became more complicated. Customers can now choose between great varieties of models when interacting with business organizations. It is known that CRM projects are complicated, and the most correct decisions are usually made after overcoming a series of obstacles. In the realisation of CRM system many mistakes can be made.
The start of a similar project, however, is sufficiently well-grounded, since the CRM is a business strategy, ensuring the organization with competitive advantages. This concept allows all employees to use general data and unified profile of the customer, which includes accounts, products, services, opportunities (Diller, 1996: 81). This means that the clients meet a prepared employee who understands their requirements and preferences and is ready to offer them the most appropriate service or product. In this aspect the CRM is a necessary reality for any organization.