Customer relationship marketing (CRM) is a highly topical and relevant way of thinking about marketing. It is relevant because of the internet and the impact it has had on the way companies do marketing.
In this article, I would like to discuss six of the key conceptual elements that underpin the CRM approach.
Element 1: customer differentiation
As the name implies, CRM is a customer-centric business approach. With this approach, a company aims to differentiate its offer of products or services by customer profile. Rather than a more conventional approach, where a company differs primarily by its products or services.
Element 2: Long-term emphasis
The goal here is to build a relationship with a customer over a period of time. This approach fits very well with many Inbound Marketing strategies that are used on the Internet.
This ongoing relationship has both cost and revenue benefits. On the cost side, it is almost always less expensive to market to an existing customer than to find a new one. The reason is simple; they already trust your organization.
Element 3: Ongoing transactions
This is somehow related to item two above. Instead of looking for single transactions with customers, look for multiple transactions. This can be in the form of cross-selling, upselling, etc. Or it may be that you become the preferred provider of a certain niche product or service.
Sometimes this is an economic necessity, as the cost of obtaining a first transaction is so high that only repeat sales make the process worthwhile.
Element 4: Two-way communication
A central element in building meaningful customer relationships is your ability to stay in touch with a company. With the advent of social media, email, and SMS, this is even easier. This technology allows communication to become more of a two-way process. And it is the customers who have the same probability of initiating a communication as the organization.
This is a great way to get real feedback on people’s wants and needs. And it fits well with item one above; creating customer-centric products and services.
Element 5: Retention Approach
With the CRM approach, a business focuses more on how to retain customers rather than just how to acquire more customers. Aiming for a low churn rate is considered highly desirable and is often a profitable way of doing business.
This characteristic again ties in well with the shift in power between buyers and suppliers that the Internet has created. Buyers are no longer dependent on supply companies to tell them what is available. They can go online and do their own research and share stories with other people who have used a product or service.
Element 6: Equity sharing
By trying to share a set of values with their clients, companies can build strong relationships. These strong relationships translate into a clear brand identity, which transcends the ability for organizations to simply buy loyalty with advertising or special offers.
In short, CRM is a major change in marketing practice, from mass marketing to individualized marketing. The focus has shifted from acquiring many new customers to retaining and growing more business from a smaller base of high-value loyal customers.