Customer Relationship Management

The term Customer Relationship Management, or CRM for short, refers to systems and processes within companies that aim to standardize and improve customer service with the help of customer data in order to achieve greater customer loyalty. Also known in German as Kundenbeziehungsmanagement, customer relationship management brings together various departments such as sales and marketing to ensure a uniform approach that is ultimately intended to increase business success.

In CRM, unlike many other entrepreneurial guidelines, the focus is not on sales or profit, but on the customer and customer relationships. This approach is particularly widespread in the business-to-business sector, where it is very difficult for companies to win new customers. Although online marketing has made many things easier here and opened up new solutions, it is still often difficult and, above all, expensive in the business-to-business sector to win new customers for one’s own company.

Customer relationship management is also used in the business-to-consumer sector, but it plays a somewhat different role there, because CRM for corporate customers is generally based on processes and solutions that are very individually tailored to customers. However, since companies that sell their products to end consumers normally have significantly more customers than companies from the B2B sector, such a personal solution is hardly feasible as a goal. Nevertheless, customer relationship management can also be used for such companies, because if the measures of sales and marketing are coordinated via a CRM system, the relevant target groups for the company can be identified. These can then be addressed in a much more individualized manner, which leads to stronger customer loyalty and can have a positive impact on the company’s image in addition to its entrepreneurial success. However, an even more individualized approach to CRM requires a wealth of measures that can usually only be implemented with a relatively small number of customers.

The basis of customer relationship management is reliable and uniform customer data. The company must therefore try to learn as much as possible about its customers so that it can then assess and influence the development of customer relationships. The basis for this is usually provided by a CRM system, which stores all kinds of information about customers in a database and makes it available to the various departments such as sales and marketing.

As a rule, CRM systems provide the following information:

  • Address information of customers
  • Order history
  • marketing or other measures
  • statistical information about orders, sales, etc.

Based on the information in the software, all employees involved learn which measures have been taken to improve customer relations and customer loyalty. In addition, with the help of the statistical data, you can very easily see whether the measures were successful and the goal was achieved.

To make working with the CRM system easier, most software products offer additional functions, such as the integration of office programs or e-mail clients, task management, a time management tool, or the ability to import or export data.

Areas in Customer Relationship Management

It is true that the goal of CRM is to bring together all relevant departments in the company so that they can pull together in maintaining customer relationships. Of course, this does not mean that the departments take over the tasks of other departments – i.e., sales will not initiate marketing measures or vice versa. CRM can be roughly divided into the following three processes or areas:

  • Marketing
  • Sales / Distribution
  • Customer service

The task of marketing is to use the data provided by the CRM software to address existing customers as individually as possible with various measures. Depending on the size of the target group, these can be direct contacts, but also newsletters, customer brochures, surveys and the like. Of course, actions that allow communication in both directions are particularly helpful for customer relationship management, as this allows new customer data to be collected for the CRM software. In addition, marketing has the task of acquiring new customers, whereby the data from the CRM system also forms the basis here. Based on the data, the marketing department can determine which measures and which marketing channels are most promising.

Sales follows on from marketing and should bind newly acquired and existing contacts to the company through the most direct and individual communication possible. This can take the form of a conversation, for example, in which the customer’s exact needs and wishes are inquired about, but customized offers and special conditions for specific orders are also possible. For customer relationship management, the most important thing is to continue the communication in order to collect more data about the customer. In this way, their requirements can be better and better narrowed down and, accordingly, better fulfilled. The customer feels well looked after thanks to CRM and is thus more inclined to place further orders.

Of course, customer service in customer relationship management also only applies to existing customers, but it can make a significant contribution to customer loyalty. If employees inquire about possible customer wishes or problems as part of after-sales management, the company shows that it is not only interested in sales. Here, too, CRM software provides an important basis, because the customer data collected by marketing and sales allows customer service to respond very individually to the respective business partner. If the customer had expressed special requests during negotiations, customer service can now ask whether these were implemented according to the customer’s ideas. This gives customers the feeling that they are being served by a genuine partner.

Elements of customer relationship management

CRM can be subdivided not only into different areas, but also into four components that are used by departments as needed. The components are:

  • analytical Customer Relationship Management
  • operational Customer Relationship Management
  • communicative Customer Relationship Management
  • collaborative Customer Relationship Management

In analytical CRM, customer data is consolidated and evaluated. Accordingly, CRM software and its capabilities play a central role here. What data can be collected with the software? How can it be evaluated? These questions should already be considered when selecting the CRM software, because effective customer relationship management is not possible without evaluating the data. For this purpose, methods from the field of business intelligence are used, in particular data mining, i.e. the systematic statistical evaluation of larger data sets. In this way, trends can be identified, and it is also possible to check whether certain measures have brought the desired success and whether there may have been unexpected side effects.

The task of operational CRM is to translate the insights gained in analytical CRM into concrete measures. This includes, among other things, classifying customers into different areas. In this way, it is possible to determine the importance of the customer for the company, the market segment in which the customer is active, whether other market segments could be of interest, whether the order potential in the core segment has already been exhausted, and the like. In addition, further customer data is to be obtained in operational CRM, which, with the help of the software, provides more precise insights into the customers.

In communicative CRM, the various communication channels are managed so that contacts with the customer can be coordinated. For example, if a customer was contacted via a newsletter, they can be followed up with a personal conversation. In this way, the communication channels are coordinated and the various measures can build on each other. Without this coordination, some of these measures would probably come to nothing or, in the worst case, would even be counterproductive because the customer would feel harassed or not well taken care of.

Collaborative CRM, just like communicative CRM, serves the purpose of coordination. However, the aim here is not to coordinate measures externally, but to coordinate them within the company. Thanks to the software, all departments involved in customer relationship management work with the same data, but this does not mean that they also proceed in a coordinated manner. With collaborative CRM, a company-wide coordinated approach becomes possible, with clear responsibilities and goals.

With customer relationship management, a company aligns its strategy with the needs of the customer in order to meet them in the best possible way and thus ensure long-term customer loyalty. However, in order to operate customer relationship management successfully, various departments within the company must work together and implement measures in a coordinated manner. The basis for this is a database of customer data, which is evaluated and updated with the help of CRM software.

This approach is particularly interesting for companies that operate in highly competitive markets where it is difficult to acquire new customers.

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