Introduction:

Customer Relationship Management (CRM) is a business strategy that

leverages four core assets -people, processes,
technologies, and knowledge - to improve profitability of the
enterprise and build better customer relationships. It intelligently
finds customers, markets to them and provides after sales service. It
is a comprehensive approach to creating, maintaining and expanding
customer relationships; the emphasis here being on comprehensive
and customer relationships. It is not just related to one department,
but all and deals with providing customers with the highest level of
comfort.
Its basic aim is to return to the world of personal marketing. The
concept itself is relatively simple. Rather than market to a mass of
people or firms, market to each customer individually. In this one-toone approach, information about a customer (e.g., previous
purchases, needs, and wants) is used to frame offers that are more
likely to be accepted.
Thus, technology is an essential part of CRM. These systems capture,
manage, and track behavioral, demographic, and psychographic
customer data. An employee can enter customer data into the CRM
system, or a customer can enter it through an integrated self-service
system, such as an automated interactive voice response (IVR)
system, Web page, kiosk, or mobile app. Once the information is
captured, it can be tracked and managed to help companies increase
revenue, lower costs, improve productivity, and bolster customer
relationships.

When Companies use CRM with a proper demand specification, a lot

of time and costs can be saved based on right expectations versus
systems capability and it becomes an integral powerful part of the
management; rather than just being a technology, it becomes a
comprehensive approach to an organizations philosophy in dealing
with its customers. Of course the data gathered by CRM must
consider customer privacy and security.
Here is what the basic relation of CRM is with the Customer:

History of CRM:
Initially (before 1993) CRM included two markets primarily:
1) Sales Force Automation This was designed to support
salespersons in managing their touch points and to provide them
with event calendars, improving their accuracy and efficiency
with

customers. It included:
Contact Management
Activity Management
Communication Management
Forecasting
Sales Analysis

 Document Management
Opportunity Management
Order Management
Product Configuration
2) Customer Service This was after sales activity to satisfy
customers. The goal of Customer Service is to resolve internal
and external customer problems quickly by giving them accurate
answers. It Included:
Call Center Management
Field Service Management
Help Desk Management
Today CRM includes not only these two but also:
3) Sales and Marketing Management This works under the
assumption that the Sales and marketing forces dont exist in
isolation but must work as a part of the whole system. Salesmanagement has to work in a broader and newer environment,
in co-existence with the traditional lines. The present emphasis
is now on total development of human resources. It includes:
Planning
Co-ordination
Controlling
Motivating
4) Contact and Activity Management The focus of Activity based
Management is in knowing the true costs of products, services,
processes, activities, distribution channels, customer segments,
contracts, and projects and providing value analysis, cost drivers
and performance measures on the same. With this insight it
seeks to improve decision making in the future.

Drivers for CRM Applications:

Economically, it is cheaper for the company to retain an existing

customer than to find new ones. By Pareto Principle, we can say that
20% of a company's customers generate 80% of its profits. Also, it
takes an average of 8 to 10 physical calls in person to sell a new
customer, 2 to 3 calls to sell an existing customer. Every Dissatisfied
customer more than 10 people about his experience with the advent
of social networking, while every 5% increase in retaining existing
customers turns into 25% or more increase in profitability. These
statistics are one driving goal.
Another driving goal is that with the advent of e-commerce the
customer can deal with the salespersons or customer care personnel
much more continently rather than having to travel to a brick and
mortar place or call a phone number and wait in a queue to talk to
somebody. Thus, it is very important that you take care of your
customers in this environment or the customer may easily shift to a
competitor, who on the internet, is just a few clicks away.
Thus the goals of CRM are:
1) To increase revenue growth Cross sell products that many
customers buy together.
2) To increase customer satisfaction -- Make their experience so
pleasant and smooth that they are drawn to you because of the
experience.
3) To reduce sales and distribution costs -- Targeted, rather than
mass advertising. Use web applications to make sales. Manage
customer relationships rather than products.
4) To minimize customer support costs Make all information
available to the customer service representatives. Automate the

call center so that representatives have direct access to

customer history and preferences and therefore can cross-sell.
Some Myths Regarding CRM:
Firstly there are certain myths regarding CRM that need to be got out
of the way:
1) A good CRM system guarantees successful marketing. CRM is
not a strategy but a tool to help and modify the existing or future
market strategies. Before it achieves a viable CRM system, a
company needs the right value propositions and strategies to
implement the customer centric philosophy of the CRM. CRM
requires more commitment and loyalty by the company to the
customer rather than the other way round. In absence of high
quality products and services, the company cannot hope to make
good use of this tool.
2) To use CRM, a company must be organized by customer
segments rather than products. Restructuring an organization is
time-consuming, expensive, and painful for any company.
Without appropriate coordination with other functions in a
company, restructuring is not as effective. For example, channel
strategies should be combined with CRM capabilities so a
customer does not receive different offers from the same
company by different departments.
3) Successful CRM requires a large centralized database with
complete customer data. Many successful financial companies
maintain databases at the product level. By having many smaller
databases, a company can simplify the system design and

maintenance and ownership of customers. Hardware and

software need to be of very high standards for large databases.
4) CRM requires the most advanced and sophisticated analytical
techniques. Clean, well arranged data is more important in CRM
than fancy data analysis. Incomplete, inaccurate, or outdated
customer information should not be used as it renders
everything subsequent to it completely useless. Future-oriented
and hypothesis-based analysis and anticipation are the most
effective analytical tools used in CRM.
5) CRM is a turnkey project. Database, infrastructure, and
supporting business processes are required to start CRM
programs. However, it is not necessary to set up everything
together. Rather CRM is a test, run, test process. An iterative
and incremental approach is cheaper and more effective than
turnkey based approach. Lessons from mistakes are important to
educate employees about how to use CRM.

Basic Assumptions of CRM Technology:

We need to know the basic assumptions made by the technology
before we delve into it. This is because these form the basis of its
limitations and give insight into when it might fail to give results, thus
prescribing caution. The major assumptions are as follows:
1) Habitual action. A basic idea of CRM is that the future behavior
of customer is similar to their previous behavior. This
assumption is both right and wrong because with time, behavior
patterns are bound to change. The most important thing in CRM
though is to predict the future behavior of the customer. Because

only through this can the company serve them according to their
needs in the future. That their needs may have changed needs
to be kept in mind while approaching customers with data and
analysis from a CRM system.
2) The current data on the customer is always correct. The quality
of the data on the behavioral patterns of customers and their
demographic needs to be maintained because if the information
is incorrect, the decisions are bound to fail. Many a times the
customer data comes in through various sources and input
methods. We need to ensure that the data we get is not outdates,
the customer is giving a valid feedback, etc. according to the
channel from which the data comes in. Thus, the data needs to
be perdiodically cleaned and maintained so that it may become
useful for CRM. This requires considerable expense. The firm
must update and track changes in customer information. For
example, people move; income levels change; marriages, births,
and deaths occur.
3) Consumers Want Individual, Differentiated Treatment, Services,
and Products. This basic assumption of CRM is that the
customer always wants individualized products. However, this
cannot always be satisfied because we cannot deliver all of the
required personalized products and services. Another problem is
that many a time customers make decisions based on fashion
and current trends. Furthermore, rapidly evolving technology
keeps changing customer demands. Therefore, the important
part of CRM is providing the right products and services at the
right time rather than just providing individualized products and
services.

Principles and Architecture of CRM:

All the processes of CRM are based on the following principles:
1) Treat every customer individually. CRM is based on the
philosophy of personalization. Every customer should be
remembered and given personal treatment. Services and
products for that customer must be designed to according to
their individual preferences. This will create a better experience
for the customer, but will increase the costs to the vendors. In
the words of Jeff Bezos, the founder of Amazon: our vision is
that if we have 20 million customers, then we should have 20
million stores.
2) Through this personal relationship, acquire and retain
customers. Maintain a continuous, healthy contact with the
customer in order to develop a strong relationship with them by
personalized product offerings. Ensure that this is not a hassle
for them or it will drive them away. Regularly reward customer
loyalty and provide a high standard of products and services,
thus leading to retaining of customers.
3) Select Good Customer instead of Bad Customer based on
their Lifetime Value. All companies have limited resources and
there may be situations when all customers cannot be given the
best treatment. In such a situation, we must find and keep the
best customers, that is, the ones who generate the most profits.
They deserve the best customer care, while the worst ones, who
are primarily a liability for the company, should be dropped.

To implement these principles, the CRM technology is architectured

to have the following steps of consumer intelligence built in:

1) Data gathering
Gathering all the sources from which the data about the

2) Data

customer can be obtained.

Considering all important parameters and touch points.
Collection of the data from all the sources.
Accumulating Data in a well organized repository.
Analyses
Design patterns for the analysis and conduct detailed
analysis of the data based on the various parameters

decided.
Take various samples into consideration.
Do the final formulation of the results of the analysis.
3) Formulation of Strategy
Derive conclusions from the results.
Carry out data segmentation for more effective utilization
of the conclusions by various departments.

 Prepare models of customer behavior and how to approach

them.
4) Implementation
Take the actions based on the results and the model.
Ensure that all the acting departments know about it.
Store the final repository with plants.
From an IT plus CRM point of view, the following tools can be used to
do these tasks:
1) Identification
Cookies
Website personalization
Customer profiling
2) Differentiation
Data Mining
Organizational Learning
Individual Level Analysis
3) Interaction
Web Application
Wireless Communication
Call Centre Management
Auto Response System
4) Customization
Enterprise Resource Planning
E-Commerce
Sales Automation
Marketing Process Automation
Thus we observe that a combination of CRM techniques with IT and
Data Science techniques leads to the best extraction, interpretation
and utilization of customer data. An organization which follows the
above steps in its CRM will come up with a good customer data
repository. This repository leads to given solution map.

Components of CRM Technology:

The CRM technology, which is designed to implement the Architecture
and Principles given above, is basically made up of three components:
1) The CRM Engine:
The CRM Engine is the customer data repository or the
data mart or data warehouse where all data on the
customer is captured and stored including basic things like
name, sex, birthdate, phone number and address.
This could also include more sophisticated information like
the number of time you access a particular website and
what you did on the pages you accessed.
CRM engine provides a single gathering point for all
individual customer information so that a unified customer
view can be created.
The CRM engine is the core providing personalization.
2) Front Office Solutions:

 The front-office solutions are applications that run on top of

the customer data warehouse (CDW). These applications
could be Sales Force Automations, EMA or service and
support and customer interaction applications.
The hallmarks of these front office solutions are Analytics,
Reports and Instant access to information.
They provide the employees the information to decide what
to do next with the customer.
More specific applications may also provide the option of
self service to the customer.

3) Enterprise Application Integrations

These application integrations connect CRM front office
with CRM back office and also form connections between a
new CRM system and old outdated computer systems or
enterprise systems for information flows, data analytics
and reporting.
These codes also enable communications within the CRM
system itself. Thus they were also called middleware.
EAIs essential functions are providing messaging and data
mapping services to form bridges between systems.

Note that in the above diagram:

Analytical CRM analyses the data that has been created through
operational CRM to build a picture of the customer.
Collaborative CRM uses new and traditional communication
technologies to enable customers to interact with the organization
and allows a much better level of response to the customers.
Once IT comes into the picture along with CRM, the components of
the technology increase (as seen before in the architecture segment).
The structure of a typical CRM system with IT technologies
incorporated into it looks like this:

We can say that the better the IT technology being used in

conjunction with the CRM, the better the performance of the company
because their data is better and thus customers will be more satisfied.
Now, use of Predictive Analytics on the current behavior leads to
Predictive CRM which helps identify the most lucrative customers and
give best service accordingly. Thus, use of Predictive analytics
improves the efficiency and usefulness of CRM.
Interactive CRM includes the integration of instant communication
with the analyzed data and leads to higher customer satisfaction.
Thus, we need to use specific tools for CRM which have come up from
IT technologies. These tools include:
1) Intelligent email

 Email is the most powerful means of communication

between customers and companies in the current date,
however, research shows that organizations replied to very
few emails sent by customers and the replies took a lot of
time.
With the development of AI technology, faster and effective
responses to customer queries can be generated by the
computers themselves for most of the FAQs.
2) Collaborative chat
Customers grievances can be addressed by live chat and if
they are logged in, their entire history should be accessed
by the Customer Service Representative leading to a good
experience for them.
3) Self help
Traditional FAQs can be complemented by intelligent FAQs,
where an intelligent search system can reinterpret the
customers question to give relevant results which a
keyword search may be unable to give.
4) Telephony
Computer telephony integration (CTI) can be incorporated
as web pages can now be equipped with call-back buttons
that can, when clicked on, open a window in which a
customer can provide a phone number where he/she can be
reached for questions or other service provision

5) VoIP
VoIP is a technology whereby an organisations Local Area
Network (LAN) or Wide Area Network (WAN) can be used
to transfer both data and voice.
A VoIP salesperson can use web pages to show new
products or services while conversing with the customer
about their various attributes.

Customer Life Cycle:

While Customer Life Cycle Management (CLM) is not the same as
CRM but it is related to CRM and so we will see a bit about it.
Customer Life Cycle is a term used to describe the progression of
steps a customer goes through when considering, purchasing, using,
and maintaining loyalty to a product or service.

The above is an example from the banking sector. The CLC has been
applied to a customer keeping in mind the various schemes the bank
offers. This helps the bank retain its customers and increase profits.
The primary basis for CLC is that it is cheaper to retain customers
than to recruit additional customers. Thus, the entire customer
lifecycle must be properly measured throughout its duration, and can
be examined on an individual customer or against a mean average.

This includes things like purchase history, which includes regency

frequency and quantity; gross amount of money spent on acquiring
and retaining the customer through marketing dollars, resources
spent generating each sale, as well as post sales service and support;
and the duration or longevity of that customer's relationship with your
business.

Customer Lifetime Value:

A fundamental concept of Customer Relationship Management is the
lifetime value of a new customer. The basic idea is that customers
should be judged on their profitability to the firm over the total time
(thus called lifetime "lifetime") they make purchases.
A sophisticated calculation of CLV takes into account not only average
purchase of a customer, but also things like Retention Rate, influence
of Loyalty Programs, Discount Rate and Time Value of Money.
An Example shows a calculation:
Assume that 100,000 customers are obtained in Year 1 and that an
increasing percentage of those who continue from one year to the
next stay loyal. Furthermore, assume that these loyal customers will
spend more each year. The assumed cost of retaining a customer is
$6/year and that the initial cost is 5 times that, $30. The discount rate
is taken to be 20%.
The result might look as follows, with the values shown shaded:

Now, consider the fraction of the revenue that is expense, and the cost
to retain both on an individual bases (Acquire/Retain Cost) and the
Total Acquisition Cost for all customers. Note that the Total
Acquisition Cost is obtained by multiplying the Acquire/Retain Cost by
the number of customers in that year.

The gross profit is obtained by taking the difference between

revenues and variable cost. The net present value of profit is found by
discounting the gross profit (20% per year in the example) The
average customer lifetime value is obtained by dividing the
cumulative NPV by the number of original customers (i.e., 100,000).

The table can serve as a template. That is, by substituting values that
apply to a particular firm, it can be used to estimate lifetime value for
a particular situation.
Note: The above example calculation has been taken as it is from the
paper: Customer Relationship Management by Paul Gray.
Issues With CRM:
Finally, there are still some issues with CRM that will be resolved with
time:
1) Customer privacy
The personalization process in CRM requires identification
of each individual customer and collections of demographic
and behavioral data.
However, this is the very data that customers consider as
private.
The customer should always be informed about their data
being collected and allowed to decline the same.
Customers should be allowed to access and change their
own data at any time they wish to do so.
2) Data Security

 With hacking becoming an increasingly alarming

phenomenon, the security of the data collected from the
customers should be of utmost importance for a company.
The company needs to invest a lot of money on digital
security systems.
3) Technical Immaturity
Technical gaffes must be avoided at all costs as they lead to
a very frustrating costumer experience and are sure to
drive them away.
These could take place because of improper maintenance
or due to insufficiently prepared technology.
Also the hardware and software for storing the data need
to be of the topmost quality.

Thank You