2. CRM evolution
Customer relationship management itself is not a new concept but is now practical due to recent advances in enterprise software technology. An outgrowth of sales force automation (SFA) tools, CRM is often referred to in the literature as one-to-one marketing (Peppers and Rogers, 1999). SFA software automates routine tasks such as tracking customer contacts and forecasting. The goal of SFA is to allow the sales force to concentrate more on selling and less on administrative tasks. It should be noted, however, that CRM also has its roots in relationship marketing which is aimed at improving long run profitability by shifting from transaction-based marketing, with its emphasis on winning new customers, to customer retention through effective management of customer relationships (Christopher et al., 1991). Thus, CRM is a more complex and sophisticated application that mines customer data that has been pulled from all customer touch points, creating a single and comprehensive view of a customer while uncovering profiles of key customers and predicting their purchasing patterns. Technology that tracks and analyzes customer behavior allows companies to easily identify the best customers and focus marketing efforts and reward those who are likely to buy often. Acquiring a better understanding of existing customers allows companies to interact, respond, and communicate more effectively to significantly improve retention rates.
Innovations in technology, competitive environments, and the Internet are just several factors that make one-to-one initiatives a reality. Companies can develop these relationships to customize the shopping experience, better predict online buying patterns, entice customers with special offers or services, evaluate the economic advantage of each customer, and build long-term mutually beneficial relationships. The following examples highlight some of the benefits of CRM applications.
Ritz-Carlton, an upscale chain of hotels, records guest preferences gleaned from conversation with customers during their stay and uses them to tailor the services that customers receive on their next visit at any other Ritz-Carlton in the world. Requests for items such as hypoallergenic pillows and additional towels are recorded for future use so that personalized goods and services can be added for repeat customers. Mining customer data allowed Bank One to significantly reduce turnover among its most profitable small business customers by assigning dedicated account managers (Conlon, 1999). The service industry, however, is not the only industry to harness people, process, and technology to manage resilient customer relationships. Dell Computer Corporation exemplifies CRM success by combining IT with front and back office operations. Every PC that Dell manufactures is already sold. From the Internet, Dell customers are able to configure their own system, from thousands of hardware and software combinations, with an easy-to-use ordering system that provides delivery dates as well as progress updates.