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Customer relationship management

Customer Relationship Management (CRM) is a business strategy designed to

reduce costs and increase profitability by solidifying customer loyalty, alsoknown as customer fidelity or customer allegiance. CRM means getting to

know your customers. The ultimate goal of CRM is one-to-one marketing and

that means dealing with customers as individuals. For example, the computer

maker Dell puts together its products according to the specifications of individual

customers in a process ofmass customization.

CRM is a strategy used to learn more about customers needs and behaviors in

order to develop stronger relationships with them, because good customer

relationships are at the heart of business success. CRM is a process that helps to

bring together lots of pieces of information about customers, sales, marketing

effectiveness, responsiveness and market trends. As such, CRM helps businesses

to gain insight into the behavior and value of customers.

It takes far more to acquire a new customer than to retain one. Therefore, the

objective of CRM is to create loyalty within customers, reduce churn and

encourage repeat business. Customer attrition, also known as customer

churn,customer turnover, or customer defection, is a business term used

to describe loss of clients or customers. Customer defection must be reduced as

much as possible. A company can learn from mistakes by asking those who leave

why they defected, which is known as lost customer analysis. Since it is very

expensive to find new customers, it makes economic sense to retain customers,build customer base and stabilize market share.

When we first attract a new prospect to our business, and then cause them to

buy something from us, it is still early to refer to them as a customer. Until that

person has bought from us more than once, or probably two or three times, it is

not yet their custom to use our product or service, and we are not likely to have

made any profit. Customer loyalty and profitability are subject to change, so it is

good to know where our customers stand on the loyalty ladder. This ladder is

at the heart of building a great business and is a key to gaining referrals.

Referrals represent the most powerful and cost-effective form of marketing mostbusinesses can employ, usually word of mouth.

Those customers that are mistreated tend to warn plenty of other people about

their negative experience, and they are likely to cancel their orders and move

their business elsewhere. On the other hand, those who receive exemplary

services often tell others about their positive experience, and tend to come

back more often and spend more money- they move up the loyalty ladder. There

are seven rungs of this ladder.

Suspects: Suspect is on the bottom rung. It represents anyone who might

buy from us-our target market. This can be quite specific, or as general asanyone with money in their pocket.

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Prospects: Someone who at least knows about our business because of

our marketing, and about whom we may also know something. Obtaining

and recording basic details about every contact we make with potential

customers is the key starting point of building a successful referral-based

business.

Shoppers: Once a person has bought a product or a service from us, we

can mark that person as a shopper. However, we cannot yet use the terms

customer as they have only bought from us once and we dont know

whether we will see them again. It is often at this point that businesses

lose their customers due to lack of interest in the person who just gave

them money.

Customer: Finally, if a shopper has returned to our business and bought

from us again, we can now begin to think of them as a customer. These

are people worth cultivating. Most businesses spend most of their effort on

the first three rungs. A key to keeping customers and moving them

further up the ladder is to make them very happy they have bought from

us.

Members: Once we begin making our customers feel like they belong to

club where they expect and receive exceptional service, they move

further up the ladder to become a member. This exclusive treatment

includes things such as special membership cards, newsletters and

Members only evenings where they get the first viewing of newproducts. The feeling of exclusivity helps to cement customer loyalty.

Advocates: These are the customers who are so pleased with our service

that they actively market our business for us. They endorse our business

and insist on coming back to us. They tell their friends about the quality of

our products, and they dont worry nearly as much about the price as

those people that are just beginning to climb the loyalty ladder in our

business.

Raving fans: They are at the top rung of the ladder. These are special

customers who not only market our business, but actively sell for us. They

are better than any advertisement, and we dont need many of these to

have a business that virtually sells itself. Raving fans need careful

nurturing.

The more customers we help to climb the loyalty ladder, the more our business

will benefit.