What is CRM (Customer Relationship Management)?

Credit: Dreamstime

Customer relationship management, or CRM, is typically an organization-wide business strategy designed to reduce the costs associated with obtaining customers and increasing profitability through customer loyalty. The idea behind CRM is to gather all information regarding a client within the organization to give a unified and holistic view of each customer. CRM thus enables sales, customer support and marketing to make more informed and faster decisions on cross-selling and upselling to target markets.

The evolution of customer relationship management

CRM is often thought of only as a type of software intended to gather customer information and buying details. The technology of a CRM was intended to simply aggregate information about customer needs and behaviors to identify buying habits. However, like many ideas this one evolved into an organizational philosophy of customer-centric service. Many organizations now use CRMs to learn about their customer to develop stronger relationships with them, as the foundation of many a business’s success comes from customer relationships.

Whereas the customer relationship proves to be the heart of a business’s success, the CRM is the pump that funnels an organization’s life blood. CRMs are intended to help an organization gain insight into the value of a customer, which is only half the equation of a good CRM initiative.

Elements of a CRM initiative

Customer relationship management is a multifaceted effort that necessitates the use of not only CRM software, but also effective employee management. The basic elements of a CRM initiative in an organization are broken down into three main parts:

  • People
  • Processes
  • Technology

The people working within a business, from the CEO to the customer service representative, need to not only buy into the idea, but also support it. The company then needs to create processes intended to build upon the CRM initiative, such as identifying methods through which a process will benefit the customer. Then, the company must have the right technology to drive the processes and provide data to employees.

In a world dominated by the collection of information and software, companies need to manage customer relationships in an organized way. If effectively implemented, CRMs for a business can do all of the following:

  • Help an organization enable the marketing department not only to identify, but also to target the customers most likely to respond, manage marketing campaigns and generate quality leads for sales.
  • Improve sales management through an optimization of information shared throughout the company and streamlined for improved use.
  • Facilitate the creation of individualized relationships with customers to improve customer satisfaction, retention and profits, catering higher level of services to customers who are most profitable.
  • Provide employees with needed information and processes to not only know customers, but understand and identify customer needs and reinforce the customer relationship.

Customer relationship management as an ideology

Many companies make the mistake of thinking about CRM as a technology only. Instead, companies need to think of it as a hub for information about customers, sales, marketing effectiveness, market trends and responsiveness. Creating a truly comprehensive resource in this regard is not without its own challenges. Identifying relevant customer information and how to use that data is quite difficult for any organization new to adopting a CRM-centric mentality.

Depending on the size of the company and the breadth of data, fully adopting and implementing a CRM initiative can take anywhere from weeks to more than a year. Smaller companies might implement a low-cost solution for several hundred dollars a month in the form of a web-based CRM, but larger organizations might spend millions purchasing, installing, customizing and training on the use of a CRM.

CRM software

Countless web-based applications exist that allow an organization to store its customer relationship information. Many of these can be integrated into an eCommerce site to automatically track and identify buyer behaviors for the company to act upon.

The most prominent CRM used today is that of Sales Force, due to its wide range of features and ease of implementation. Other solutions like Oncontact and Sage ACT! Premium offer varying levels of performance at a lower price.