Customer Relationship Management: Meaning, Importance, Types

What’s it: Customer relationship management (CRM) refers to the process of dealing with customers and usually includes developing, enhancing, and maintaining effective customer relationships. The company manages information and builds databases about its customers to better satisfy them. It usually uses a system or software to help with the work process. Examples of CRM systems typically support the marketing, sales, and customer support processes.

Importance of customer relationship management

Customer relationship management is essential in running a successful business. If companies can build good relationships with their customers, it will be easier for them to make money. The ultimate goal is to optimize customer satisfaction, revenue, and profitability.

Much data and intense competition. Today’s technology allows companies to capture a lot of information about customers. They can mine it for valuable information on how to satisfy customers. The process of storing, mining, processing, and providing program recommendations occurs automatically with software help. Thus, in today’s highly competitive environment, adopting it is increasingly important to acquire new customers and retain existing ones.

Customer focus. Companies collect, maintain, and report detailed information about customers. It enables them to design more customer-oriented strategies and programs. They can improve business processes around sales, marketing, and service functions at all customer contact points.

Loyalty. By being more customer-oriented, companies can satisfy them. That, in turn, creates customer loyalty. High loyalty means money will continue to flow to the company.

More intimate relationships. Companies improve relationships with existing customers by providing more appropriate services. They can customize it according to the needs and requirements of each customer.

CRM involves several interdependent processes to support mutually beneficial relationships between companies and customers. It includes a pre-sale, sales, service, or other processes directly or indirectly related to the marketing function.

CRM integrates customer-specific information into various business functions of the company. That way, the company can improve its marketing effectiveness and efficiency and substantially improve the customer experience with the company.

Efficiency. CRM software usually relies on automation processes for several functions or services. Through a CRM system, companies store customers’ and prospects’ contact information and sales opportunities in a centralized location. The system then automates customer service and support to suit each individual customer. For example, the software provides suggestions to customers based on their personal purchase history. Such automation can ultimately streamline work processes and save more money.

How customer relationship management works

Customer relationship management generally involves the following three processes:

• Centralizing customer information. It contains customer profiles, including phone numbers, addresses, purchase and search history, ratings, etc.
• Mining and analyzing information. Companies extract and structure information about customers, including segmenting them into groups. They identify customer characteristics, including their interests, preferred communication channels, what messages they respond to most, and what they care about.
• Developing response automation. Companies develop algorithms to link customer profiles and needs with the most suitable company services.

Types of customer relationship management

When you shop online, you may also receive their services. For example, when you buy a product online, the site owner sends a thank you note. It doesn’t come from the company owners or staff, but the software. Likewise, when you have not made a purchase for some time, the company may send discount information to your smartphone screen.

Customer relationship management systems are usually divided into several types according to the functions or work processes of the company, including:

• Operational CRM
• Analytical CRM
• Collaborative CRM

Operational CRM

Operational CRM automates marketing, sales, and support services functions. For example, for a marketing function, the system automates repetitive tasks such as posting marketing information on social media and sending automated marketing emails to customers at specific times.

Sales CRM focuses on closing deals. It helps the company stay aware of sales opportunities as the customer gets closer to the buying stage. Companies design systems to quote prices, track performance, coordinate sales with a call center or warehouse, and receive real-time feedback.

CRM Support manages complaints and customer feedback so that it can follow up on them effectively. For example, it centralizes all customer inquiries, whether via email, social media messages, or phone calls, into a CRM database. The system then develops the most suitable answer without having to answer it manually.

Some advanced CRM Support software programs also have response systems. They process incoming emails and determine if they need to be responded to personally or automatically. Or, they direct customers into live chat rooms or co-browsing.

Analytical CRM

Analytical CRM helps companies better mine and process information about customers. While operational CRM connects customers with sales, analytical CRM helps to understand customer characteristics. That is by collecting data from various points of contact.

Analytical CRM systems adopt statistical and computational techniques to recognize customer patterns and characteristics, classify them, and provide the most suitable service potential recommendations. The end result will probably go to the dashboard to help make better business decisions.

Collaborative CRM

Collaborative CRM allows teams of various business functions or work processes to share information about customers. Companies can improve information exchange between departments such as marketing, research and development, production, logistics, and customer service.

Those functions usually work separately. So, in this case, collaborative CRM synergizes their work processes.