Customer Relationship Management

Customer Relationship Management, or CRM, is an integration of philosophy and software that caters to customers’ needs. CRM creates a relationship with a customer and ensures that your business is on the top of their mind when the time comes for a purchase. CRM also allows businesses to track their customers. The system calculates their value, their contribution to the bottom line, and ranks them as a desirable, mediocre or undesirable customer.

Some personal examples; my florist has a record of my earlier purchases and the occasion of the purchase. They have my e-mail, and so I receive reminders to send flowers for t holidays and birthdays.  They offer me a choice of selections, and continue to send me reminders up until the last minute, when   I can simply select an item and know that they will take care of delivery. They already have my credit card; so the whole process is seamless. I have never met my florist, but we have a relationship and I don’t even look elsewhere for another florist.

Much of my shopping for home furnishings is done at Bed Bath and Beyond. Each month they send me a voucher for 20% off any one purchase. They also have a no hassle return policy. Why would I go elsewhere?

In the following example, a bicycle retailer in a small American town grew his sales from $50,000 to five million during the time that  Wal Mart, the world’s largest bicycle retailer, arrived in town. Studies have shown that when Wal Mart comes to town, sales for other retailers drop significantly. However, from his CRM system our bicycle retailer learnt that 30% of his customers buy because of price, 30% buy   because of the service and 40% are a bit of both. Knowing that Wal Mart is not known for their great service, this retailer decided to offer exceptional service to those willing to pay for it. In fact, he did not even want to attract customers only willing to pay a low price. He offered a free lifetime service policy, which showed his loyalty and commitment to his customers and of course made them his for life.. His free lifetime service led to the development of a sophisticated customer database, which for example, allowed him to offer children’s bikes when a child reached a specific riding age. Such direct mail marketing had a return of 50%, which is highly unusual.

The issue of loyalty is important and relevant, as corporations on average lose half their customers in five years. Loyalty is actually the absence of a better value alternative (Jim Harris in Blindsided p. 180). We remain loyal to those that provide value. Over time customers become more profitable because they place fewer burdens on the support team. Thus their net worth increases.

Questions:

1. Who are your loyal customers? What is keeping them loyal?
2. Do you treat your most important customers differently from your average customers?>
3. Do you know the value of your customers, and which ones should be considered   the best and the worst?
4. Can you offer a cheaper alternative to your worst customers?
5. What keeps your customers from leaving? What are the costs involved in their leaving?
6. How can you improve your treatment of your customers   so that they won’t consider leaving i.e. develop their loyalty to your business?