What is Customer Relationship Management?

What is Customer Relationship Management?

You might have received calls from your mobile service provider regarding the usage of your mobile number, including information, such as an average number of STD calls and local calls you have made from your mobile in a period of one month, offering you plans and offers based on this information.

How are these service providers able to provide such detailed information about your number when they have so many customers in your locality itself? How are they able to maintain such a huge database and call the right person with the right information? This is possible only because of CRM.

CRM refers to a business strategy that enables organizations to better serve the needs of their customers, improve customer service, and achieve a high level of customer satisfaction. This further helps in maximizing customer loyalty and retention.

It encompasses a number of technologies used to streamline customer interaction, which helps in finding, acquiring, and retaining customers. The CRM system of an organization integrates information from all data sources to provide a holistic view of each customer in real-time.

However, the implementation of CRM involves high costs and efforts, because organizations need to spend a large amount on purchasing an appropriate CRM system, hiring consultants, and training employees. Thus, it is essential for an organization to establish clear CRM objectives before its implementation.

Some of these objectives include the following:

  • Streamlining marketing and sales processes
  • Providing better customer services
  • Acquiring new customers and retaining existing ones
  • Improving organizational efficiency and productivity
  • Reducing operational costs

Components of CRM

CRM is not a single system; it includes various components that work together to build healthy relationships with customers. These components are shown in Figure:

The components of CRM are discussed as follows:

CRM Software

It automates business processes related to functional areas of CRM such as marketing, customer support, sales, etc. The CRM software includes various modules such as customer contact management, direct marketing, sales automation, call center applications, and helpdesk.

Business Processes

The business processes of an organization can be divided into three levels, namely, strategic planning, management control, and operational control.

An ERP system streamlines the business processes at all levels of an organization, while the CRM system improves business processes at management control and operational control levels.


The CRM system cannot perform on its own unless it is operated by its users. The main users of the CRM system are employees, customers, and business partners.

Hardware and Operating System

Generally, CRM software runs on UNIX, an operating system. Besides, Windows NT and Linux are also used for running CRM software.

Three Phases of CRM

Most organizations implement CRM in phases. This is done to determine whether implementing CRM is beneficial for the organization or not. Generally, CRM is implemented in three phases, which are discussed as follows:


A new customer is an important source of revenue for an organization. Therefore, it is essential for any organization to acquire new customers. Customer acquisition is the process of obtaining new customers or converting prospects into customers.

It involves identifying processes and procedures to locate, qualify, and win new customers. The customer acquisition process of an organization can be successful if the organization focuses on the needs and expectations of prospective customers and establishes a rapport with them.


Customer retention is all about maintaining long-term business relationships with customers. In other words, customer retention is an activity that is undertaken by an organization to reduce customer defections. This is possible if an organization focuses on fulfilling the requirements of customers and exceeding their expectations.

The customer retention activity of an organization begins by establishing a rapport with customers and continues throughout the lifetime of the relationship.

The ability of an organization to retain its customers is not only related to the quality of its products but also related to the service extended by the organization toward its existing customers and the reputation that the product builds in the market.


Customer development is the process of increasing the value of retained customers. Many organizations try up-selling and cross-selling their products for enhancing the value of their customers.

Cross-selling involves selling additional products or services to existing customers, while up-selling is an attempt to offer higher-priced products to existing customers. Generally, customers do not give any positive response to products that are not related to their requirements.

In such a case, an organization may need to go for a down-sell option, which involves providing products at lower prices.

Benefits and Challenges of CRM

CRM helps an organization to achieve higher customer satisfaction and retain its customers. Apart from this, it provides several other benefits to an organization, which are listed as follows:

  • Gathering and storing information related to customers

  • Creating effective communication channels between the customer and the organization

  • Maintaining detailed information about every customer

  • Identifying new sales opportunities by analyzing the changing customer needs and preferences

  • Improving market share and profit margins by acquiring more customers

  • Enhancing customer loyalty

  • Fulfilling customer requirements

Though CRM has so many benefits, all organizations are not able to implement CRM and derive the required benefits. This is because of the different challenges that an organization needs to face while implementing a CRM system.

Some of these challenges are shown in Figure:

The barriers to CRM implementation are explained as follows:

Lack of Guidance

This barrier occurs when CRM objectives are not defined before its implementation. Lack of guidance may further lead to conflicts among the employees of different departments. In such a case, CRM cannot be implemented properly in an organization.

Therefore, it is essential for an organization to establish clear CRM objectives, which help its employees in understanding the purpose of CRM implementation and taking action accordingly.

Integration Problem

It occurs during the collaboration of different business processes of an organization. All the business problems of an organization cannot be solved by using a single CRM application. Therefore, an organization needs a customized CRM application to solve its problems.

In such a case, it becomes difficult for CRM vendors to integrate all the business processes of an organization and provide a single solution.

Inaccurate Data

Successful implementation of a CRM system requires accurate data to get precise results. Any inaccuracy in data may lead to incorrect conclusions.

Employee Problems

Employees are generally reluctant to adopt change in their working style. Sometimes, employees think that CRM is not beneficial for their success. This lack of support from employees becomes a hurdle in a successful CRM implementation.

New Trends in CRM

CRM is a business strategy used by an organization to develop strong relationships with its customers. However, in the past few years, CRM solutions have been evolving rapidly to keep pace with the latest advancements in the marketing strategy of organizations.

One of the major emerging trends in CRM is that organizations have started investing in their most important assets, which are customers.

As lean manufacturing techniques force production departments to become more customer-oriented, CRM is driving sales, marketing, and business development departments to have a deep understanding of customer priorities.

With this renewed focus, organizations are able to better serve the needs of their customers and retain them.

Some of the emerging trends in CRM, which many organizations are using to increase their customer base and maximize their return on investment, are as follows:

Social CRM

It is an emerging trend in CRM that is adopted by many organizations to build long-term relationships with their customers. It is an application of social media to manage all customer interactions.

Social CRM helps an organization perform sales and marketing activities through social networking sites such as Facebook, Twitter, and LinkedIn.

The following are the advantages of social CRM:

  • Providing better customer support
  • Managing business processes
  • Conducting market research
  • Launching a product
  • Managing brand reputation

Mobile CRM

It is an application that allows remote employees to interact with customers and access and update their data, using mobile devices such as smartphones and tablets.

It is widely used by travel and retail organizations. The advent of a number of smartphones worldwide has led organizations to use mobile phones as a key medium for customer engagement.

The benefits of Mobile CRM are:

  • Allowing an organization to reach out to its customers quickly

  • Increasing the sales productivity and effectiveness of an organization

  • Helping an organization in follow up on processes

  • Improving lead conversion rates, thereby gaining a competitive edge

  • Reducing costs associated with sales staff turnover

Global CRM

The world economy has witnessed a frequent shift in trade patterns and culture. Earlier, countries were confined to their national territory and were restricted to cross-border trading. However, over the past few decades, the cross-border business has experienced remarkable growth.

This growth is contributed to advancement in communication and information technologies, privatization and deregulation of economies, and the emergence of global organizations. CRM in these global organizations has become increasingly significant.

Global CRM (GCRM) is a strategic application of processes and practices for managing relationships between customers and organizations operating in multiple countries.

Handling customers in a global environment is a challenging task for an organization due to differences in customer requirements, level of competition, and regulatory framework.

Today, several organizations have become global, thus, there is a need to deeply understand the requirements of customers and maintain effective communication with them.

GCRM enables organizations to identify customer needs and build strong relationships with them. Apart from this, GCRM helps organizations in the following ways:

Achieving Global Efficiency

: Refers to one of the major advantages of GCRM. By expanding globally, an organization can lower its costs and improve its performance. In this context, GCRM helps an organization identify the most profitable customers by providing useful information about them.

Attaining Multi-market Flexibility

Implies that a global organization needs to respond to changes in the international market. Therefore, it is essential for a global organization to understand the differences among different markets to attain a competitive edge in the long run.

GCRM provides information related to different markets, which helps global organizations to get first-mover advantages.

Achieving Worldwide Learning

Refers to another important advantage of GCRM. For achieving a competitive edge, a global organization needs to be aware of current trends and the latest technologies used in the international market. GCRM helps a global organization to collect information related to current market trends.

  • Thomas F. Wallace and Michael H. Kremzar (2001), ERP: Making It Happen: The Implementers’ Guide to Success with Enterprise Resource Planning.

  • Simha R. Magal and Jeffrey Word March (2012), Integrated Business Processes with ERP Systems.

  • What is CRM? Retrieved from http://www.crmasiasolutions.com/ online-business-solutions-articles/6-crm-concepts/76-what-iscrm-basic-concepts-of-crm-solutions.html.

  • The CRM Concept. Retrieved from http://www.gallopercrm.com/ en/galloper/concept.php.

  • HowStuffWorks “Customer Relationship Management (CRM)”. (n.d.). HowStuffWorks. Retrieved from http://money.howstuffworks.com/business-communications/sales-technique7.htm

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