Customer Relationship Management (CRM)
CRM is a business philosophy based on the premise that those
organizations that understand the needs of individual customers are best
positioned to achieve sustainable competitive advantage in the future.
- A customer strategy starts with understanding who the company's
customers are and how the company can meet strategic goals.
- As the business world increasingly shifts from product focus to
customer focus, most organizations recognize the treating existing customers
well is the best source of profitable and sustainable revenue growth in the age
of e-business, however, an organization is challenged more than ever before to
truly satisfy its customers.
Recently, Frequency, and Monetary Value
An organization can find its most valuable customers by using a
formula that industry insiders call RFM-recency, frequency, and monetary value.
In other words, an organization must track:
- How recently a customer purchased items
(recently)
- How frequently a customer purchases an item
(frequently
- How much a customer spends on each purchase (monetary
value)
The evolution of CRM
Knowing the customer, especially knowing the profitability of
individual customers, is highly lucrative in the financial service industry.
There are three phases in the evolution of CRM:
1. CRM Reporting technology help organizations identify their customers across other
applicants
2. CRM analysis technology helps organizations segment their customers into
categories such as best and worst customers.
3. CRM predicts technological help organizations make predictions regarding customer
behavior such as which customers are at risk of leaving.
The Ugly Side of CRM: Why CRM Matters More Now than Ever Before
Now companies have no choice as the power of the customer grows
exponentially as the internet grows. In every case, customers have become an
integral part of the action as a member of the aggregated, interactive,
self-organizing, auto-entertaining audience on businesses. However, this should
no be a surprise, since it was the customers crazy passion and hobbies and
obsessions-that build up the web in the first place.
Customer Relationship Management's Explosive Growth
When customers buy on Internet, they see, and they steer, entire
value chains.
- Customer web interaction become conversations, interactive dialogs
with shared knowledge, not just business transaction. Web- based customer care
can actually become the focal point of customer relationship management and
provide breakthrough benefits for both the enterprise and its customers,
substantially reducing costs while improving service.
- Current users allow allocating 20 percent of their IT budget to CRM
solutions.
The two components of a CRM strategy are:
- Operational CRM supports traditional transactional processing for day-to-day
front-office operations or systems that deal directly with the customers.
- Analytical CRM supports back-office operations and strategic analysis and includes
all systems that do not deal directly with the customers.
The primary difference between operational CRM and analytical CRM in
the direct interaction between the organization and its customers.
-Personalization occurs when a website can know enough about a person's likes and
dislikes that it can fashion offers that are more likely to appeal to that
person. Many organizations are now utilizing CRM to create customer rules and
templates that marketers can use to personalize customer messages.
Customer Relationship Management Success Factor
CRM solutions make organizational business processes more
intelligent. This is achieved by understanding customer behavior and
preferences, then realigning product and service offering and related
communications to make sure they are synchronized with customer needs and
preferences. If an organization is implementing a CRM system, it should study
the industry best practices to help ensure a successful implementation.
Using he analytical capabilities of CRM can help a company Anticipate
customer need and proactively serve customers in way that build relationship,
create loyalty, and enhance bottom lines.
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