Module No 1: Evolution of Customer

Relationship
• Introduction-Meaning and Definitions of CRM (2 Marks)
• Features of CRM (5 Marks)
• Emergence of CRM Practice-Stages (2Marks)
• Factors responsible for the Growth of CRM (5 Marks)
• Process of CRM (2/5 Marks)
• Framework of CRM (5 Marks)
• Benefits of CRM (5 Marks)
• Types and Scope of CRM (5/15 Marks-Combined)
• Customer Profitability-Meaning (2 Marks)
• Trends in CRM (5/15 Marks)
• CRM & Cost Benefit analysis (2 Marks)
• CRM & Relationship Marketing-Strategies (2 Marks)

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 EVOLUTION OF CUSTOMER RELATIONSHIP

INTRODUCTION
In the current scenario, the goal of organizations is not to have
‘quick sales’ rather they are expected to focus on ‘long term
relations’ and Customer Relationship Management (CRM) is the
only key to attain what businesses need. The success lies in creating
and maintaining honest and healthy relations along with providing
expected offerings. This requires active interaction with customers
all the time to understand what else they want i.e. relationship
building. Concept of CRM emerged in 1980s, while this concept was
transformed within a decade, as business environment changed
drastically due to liberalization, privatization and globalization.

CUSTOMER RELATIONSHIP MANAGEMENT (CRM): MEANING

AND DEFINITIONS
CRM is basically a business strategy that focuses on customer
retention and satisfaction. To maintain and manage relationships
with their customers, organizations need to systematically collect,
store and analyse their customers’ information, which includes their
names, contact details, needs and preferences, history of
purchases, repeat orders and expected future transactions.

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Following are some of the widely accepted definitions of the
term ‘Customer Relationship Management’ (CRM):
According to Dick Lee, “Relationship Management is putting the
customer in the middle of business cycle.”
According to Wimshurst and Mackay (2002), “CRM is a complete set
of activities covering all functions of the organization, relating with
and supporting a customer.”

FEATURES OR CHARACTERISTICS OF CUSTOMER RELATIONSHIP

MANAGEMENT
Modern customers are well aware and informed; they not only
expect the best quality products and services but also a warm
interaction with those who are offering these products and services.
They expect to get what exactly they want and in no time.
Following are some of the characteristics of Customer Relationship
Management:
1. Process: Customer Relationship Management is not one-shot
activity; rather it involves a systematic process. This process
starts with identifying a customer and maintaining all the
corresponding details into the CRM system or program.
2. Strategy: CRM is a business strategy that enables an
organization to serve the needs of its customers well.
3. Customer Satisfaction: CRM focuses on understanding the
needs of customers and enhancing customer satisfaction,
which further leads to retention and loyalty.

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 4. Holistic View: Organization’s CRM system displays the holistic
view of customers’ information from all data sources e.g. an
organization’s loyal customer may buy online from the
company website or they may personally visit the retail store.
5. Dual Outcomes: Customer Relationship Management (CRM)
is an upright idea or strategy that focuses on making the
relations with customers stronger on one hand, while reducing
cost and enhancing productivity along with profitability on the
other.
6. Cost: CRM involves commitment of huge costs and efforts.
Choosing an appropriate CRM system, hiring suitable CR
managers, installing CRM software, training of sales personnel
and staff, all this requires commitment of large amount of
funds.

STAGES OF CRM
A. Stage 1
o First generation of CRM
o CRM was a functional approach
o SFA (Sales Force Automation) and CSS (Customers
Service and Support) are the two aspects of this stage

B. Stage 2
o Second generation of CRM
o CRM was used to assist front line activities and fulfil the
requirements of customers

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 C. STAGE 3
o Third generation of CRM
o Integration of departments for CRM
o Amalgamation of front line CRM systems with back office
CRM system

FACTORS RESPONSIBLE FOR THE GROWTH OF CRM

In the modern business world, CRM practice has reached to another
level. Marketers are forced to be more concerned with customer
retention and loyalty. Following are some of the factors responsible
for the growth of CRM over years:
1. Shifts in Business: After 1980s, there were rapid shifts in
the business world that changed the customers’ power
drastically. For various products, supply was exceeding
demand and sellers were left with little pricing power.
2. Retention is Cheaper: With the growth of
industrialization, organizations slowly realized that
retaining customers is less costly and offers a more
sustainable competitive advantage as compared to
acquiring the new ones.
3. Competition: As businesses progressed, the component
of competition became very vital as suggested by Michael
E. Porter in his famous Five Forces Model of Competition.
With the advent of new technology and advanced product
features, customers’ expectations started rising,
therefore, businesses were left with no other options
except relationship building.

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 4. Increased Awareness: Widespread education and
information enhanced the level of awareness among
consumers. They make informed purchasing decisions
after going through online reviews and ratings.
5. Consumer Laws: Introduction of various consumer laws
over years was another reason behind the growth of CRM
practices in the business world. For safeguarding buyers
from different forms of exploitation, Consumer Protection
Act was introduced as a milestone in 1986, which was
amended multiple times to match up the needs of various
consumers.
6. Liberalization and Globalization: Opening up of
economies globally made the entire world a global village,
which equipped the consumers with standard
information all around the world.
7. Variety of Options: Availability of endless options at the
disposal of customers was another factor responsible for
the growth of CRM over years.
8. Developments in the Banking Sector: Advent of online
banking, multiple payment options, credit cards, debit
cards, UPI, internet banking and other technological
advancements equipped the customers with new tools,
who were able to take instant decisions to make a
purchase or not.

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PROCESS OF CRM
CRM process is a strategy for keeping every customer interaction
personalized and meaningful. To understand the CRM well, one
must know about Customer Life Cycle:
CRM Cycle starts with Outreach and Customer acquisition and
leads towards customer loyalty. Different phases through which
CRM help to support the relationship between a business and its
customers are as follows:
1. Acquire and Retain: CRM helps a business in acquiring new
customers through excellent contact management, direct
marketing, selling and fulfilment. Loyal and valuable
customers are identified from customer databases and are
rewarded for their commitment.
2. Enhance: Technologically enabled CRM in collaboration with
skilled sales and service specialists offers excellent customer
service. Customer experience is enriched with variety of
strategies. Therefore, customer must be:
o Understood well
o Differentiated on certain criteria, known as segmentation
o Offered product and services according to their
requirements
3. Develop and Customize: CRM has to be designed and
customized according to the needs of customers and nature of
organization.
4. Interact and Deliver: Finally, the skilled salespersons interact
with potential and exiting customers and deliver them what is
being designed for them.

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FRAMEWORK OF CRM
Most of the companies use CRM as a key source to attain
competitive advantage. The framework of CRM involves various
components and processes. The following is the general framework
of CRM.
1. Designing the CRM Strategy: For making CRM work
successfully, the organizations have to start with clearly
defined purpose/objectives that will be in synchronization with
CRM.
2. Customer Segmentation and Selection: Then the
organization tries to tap all possible sources from where
customers can be found. The customers are identified and
segmented on the basis of certain criteria/behaviours, and
myriad marketing strategies are devised as per the
requirements of each segment.
3. Customer Targeting: One to One relationship marketing
strategy is used to target the right customer chosen in previous
stage. Special promotional appeals, price discounts, perks,
and other offers are given through various media such as
telemarketing, direct mails or one to one calls.
4. Designing Data Base: The companies collect detailed data of
their potential and existing customers and design a repository
of information about their customers from various touchpoints
including sales, marketing, customer support and social
media.
5. Arranging CRM Software: To store and manage customer
information effectively, modern organizations use robust

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 software, which perform specialized functions related to sales,
customer support and marketing.
6. Analyzing the Data Base: The data available in customer data
base is analyzed and this stage is called data mining. The
analysis offers required information in various formats such as
CLV (Customer Lifetime Value) to the organization.
7. Relationship Performance: Relationship marketing is the
most widely used tool to enhance customer satisfaction and
delight. It is known that best relationships can be developed by
offering quality products and flawless services to customers.
8. Privacy Issues: In the CRM framework, privacy of customer
information is a very crucial aspect. CRM contains personal
information of customers, which may sometimes be taken for
granted. It may lead to several privacy issues.
9. Metrics: The measurement of CRM performance can’t be
ignored. It is necessary to identify how the entire CRM system
has performed and it is done with help of CRM metrics. Metrics
are the guidelines for measuring success of CRM in an
organization.

BENEFITS OF CRM
The basic idea behind CRM program in an organization is to offer
quality services, so that it can attain and sustain satisfied
customers for long. CRM offers variety of benefits, which include the
following:
1. Customer Satisfaction: CRM seeks to achieve a higher level
of customer satisfaction in the organization. When

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 organizations have customers’ information such as their
previous purchase history and interactions, they can provide
better and faster customer support/service.
2. Effective Channels of Communication: CRM program assists
in establishing effective communication channels to reach the
existing and potential customers.
3. Systematic Customer Information: Customers’ information
is collected and systematically analyzed in an effective CRM
program. Organizations can make use of various software
programs to collect, analyze and utilize the detailed customer
information which includes demographic and purchase related
data.
4. Increased Profitability and Market Share: CRM is a business
strategy that focuses on customer satisfaction and retention. It
also offers the benefit the enhanced profitability and market
share by attracting new customers and retaining the existing
ones. Upselling and cross selling further lead towards
increased revenue.
5. Designing Customer Profiles: The customers’ information
collected in the CRM program can be effectively utilized in
designing the detailed profiles of every individual customer,
which includes personal details, buying habits, frequency of
purchase, feedback, post purchase behavior etc.
6. Enhanced Customer Loyalty: Positive customer experience
leads to customer satisfaction and customer loyalty, which are
two crucial elements for the growth of an organization. With
the help of CRM program, customer centric culture is created

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 which helps in identifying customer needs and converting
them into loyal and satisfied consumers.
7. Tracking New Opportunities: CRM assists in identifying new
opportunities for an organization.
8. Understanding Needs: CRM helps a business in
understanding what it needs to do to get new customers and
hold the existing ones for long.
9. Cost Reduction: By managing the customers’ complaints in
time and identifying the wasteful activities from customers’
viewpoint, CRM assists in reducing overall cost.

TYPES OF CRM
Customer Relationship Management facilitates an organization in
acquiring new customers and retaining the existing ones. The
objectives for which CRM is implemented in the organizations differ
from each other; some organizations may have the objective of
revenue enhancement, while for others it may be opportunity to tap
prospects.
1. Operational CRM: The organizational operations can be
categorized in two types, Front Line/Office operations and
Back Line/Office operations. Front line operations are
operations/activities that lead to direct interaction with
customers such as sales operations, marketing activities,
customer service actions etc. Back line operations are the
operations/activities which are meant to assist the front-line
operations and don’t directly deal with customers such as

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 financial management, HR planning, HRM and production
management, demand analysis etc.
2. Analytical CRM: Operational CRM focuses on collecting
customer information, while Analytical CRM aims at analyzing
this information. The analysis process assists in taking various
policy decisions such as product design, pricing etc. Customer
information is analyzed by the organizations through expert
analysists for variety of purposes such as:
• To estimate the future moves of customers i.e. whether they
are going to buy organizational products in the future or not
• To analyze the customer behavior which would assist in
various product decisions
• To plan the marketing campaigns
• To take policy decisions e.g. budgeting requirements, HR
recruitments etc.
3. Sales Intelligence CRM: Sales intelligence CRM is used by the
organizations dealing in distribution and manufacturing
activities. This CRM focuses on improving strategic sales
processes of an organization. Customer information collected
via Operational CRM is analyzed to take sales related
decisions. Under Sales intelligence CRM, customers buying
behavior are analyzed with the following purposes:
• To take the strategic sales decisions
• To track the sales opportunities
• To enhance sales revenue and productivity
• To offer better customer service
4. Collaborative CRM: As the name suggests, Collaborative CRM
focuses on the collaborative working of various organizational

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 departments especially on the customer information sharing.
Various departments work in the organizations such as
Production, Finance, Marketing and Sales, IT, Operations etc.
All these departments work for better customer satisfaction
and relations. When the departments share customer
information with each other, it leads to following benefits:
• No duplication of activities
• Better customer service
• Control over customer service costs

SCOPE OF CRM
Customer Relationship Management is a broadly recognized and
widely implemented strategy for managing a company’s interactions
with customers, clients and sales prospects. The overall goal to find,
attract and win new clients, nurture and retain the ones, company
already has. Scope of CR covers 360 degree view of its customers so
that no aspect of any customer remains unattended.
1. Relationship Building: Relationship management is a crucial
component of CRM. Variety of strategies are used by the
organizations to build and sustain long term relationships with
chosen customers.
2. Sales Management: It includes finding the prospects and
monitoring the same from first contact to final sale. Upcoming
sales automation software have streamlined all phases of
sales process, resulting in time minimization in pursuing
clients.
This function includes:

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 • Opportunity management
• Contact management
• Order placement
• Sales force automation
3. Marketing: CRM systems for marketing help the enterprise to
identify and target potential clients and generate qualified
leads for the sales team. This function includes:
• Campaign management i.e. tracking and measuring
multichannel campaigns
• Demographic analysis
• Metrics monitoring i.e. monitoring clicks, responses, leads,
deals etc.
• Tele-marketing
• Marketing automation
4. Customer Service and Support Management: Organizations,
these days, are making use of technology platforms to improve
customer experience. CSS management includes:
• Call center management
• Intelligent call routing
• Knowledge management
• Customer service automation
• Integrated account information or computer telephone
integration
5. Integration Function: The organizational operations can be
categorized in two types, Front Line/Office operations and
Back
Line/Office operations and these two categories must be
integrated to get effective outcomes. This function includes:

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 • Integrate back-end data with front-end systems
• Integrate front-end system data with back-end systems
• Data synchronization
6. Lead Tracking/Management: Leads i.e. potential customers
have to be managed through various offline and online
methods and CRM offers variety of techniques for lead
management.
7. Data Management: Companies work with customer
databases. Managing these data systematically and utilizing
them in optimal manner is very vital. Data management
function includes:
• Data Mining
• Data Warehousing
With the increase in complexities in business world, the scope
of CRM has also widened.

CUSTOMER PROFITABILITY (CP): MEANING

Customer Profitability is an evaluation process in which the
organization focuses on assigning costs and revenues to different
segments of customer instead of assigning to the products or
departments.
In simple terms, Customer Profitability is company’s view of the
possible profits to be made from its customers.

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TRENDS IN CRM
Customer relationship management is a highly integrated part of
overall business strategy. In the era of increased competition, it is
imperative that the businesses focus on long term relationships with
their customers rather than quick sales. It is not suddenly that
businesses have realized that customer is important and must be
given personalized service, but the history of CRM depicts that
managers were focusing on improving customer services over
decades.
The following added dimensions have emerged In modern
businesses:
1. Customization and Personalization: Earlier the businesses
used to come up with a wide range of products and customers
used to choose among them. Today, the customer wants
product as per own discretion and the companies are ready to
serve the customers with what and how they want. CRM has
proved to be a great enabler in opting this customization for the
businesses in a cost effective way.
2. Digitalization: One of the most crucial trends in businesses
today is of digitalization. Digital CRM means creating a digital
customer experience and enhancing the levels of customer
satisfaction. Just knowing the customer profile, their names,
phone numbers, value they can bring is not enough, rather the
companies need their enriched profile along with their
behavior patterns and motivation With the help of digital
technologies, businesses can know client’s preferences in

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 purchasing, their favorite channels and preferred mode of
payments.
3. Shift towards Cloud Based CRM: The business organizations
are preferring cloud-based CRM software to tackle the
challenge of on premise CRM software, as these existing
software involves a high cost for every upgradation. Cloud
based CRM can assist the organizations by reducing the cost of
infrastructural investments.
4. Emerging Dimension of Social Media CRM: Modern
customers are well aware and they take decisions whether to
buy a product or not, based on social media reviews,
Instagram stories, recommendations on YouTube channels
and audience experiences. Therefore, the businesses have to
employ social CRM tools as social media can change the
attitude and preferences of users.
5. Mobile CRM: Majority of the customers have shifted
themselves to smart phones and that’s why the companies are
also developing their personalized mobile applications. These
apps are designed customer handy and the problems are also
handled by chatbots or customer representatives.
6. Integrating Data from Multiple Channels: CRM software
developers are focusing on integrating the customer data
coming from multiple channels e.g. e. mails, smart phones,
chats etc. The unstructured data has to be processed to make
it meaningful and presentable.
7. E-CRM: The term ‘e-CRM’ was coined by Oscar Gomes, which
encompasses all CRM functions performed with the use of net
environment. It denotes performing all CRM functions with the

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 help of digital communication tools such as e. mails, chat
rooms, instant messaging, forums etc. One definition states
that, e-CRM is an integrated online sales, marketing and
service strategy that is used to attract and retain customers for
an organization.

COST-BENEFIT ANALYSIS
Cost Benefit analysis is a process that businesses use to decide
which decisions to take and which to forego. It measures the
benefits of a decision minus costs associated with that decision.
Before taking up a new project, prudent managers conduct cost
benefit analysis to evaluate all potential costs and revenue that
project may generate.

RELATIONSHIP MARKETING
In the words of Philip Kotler and Armstrong, “relationship marketing
is the process of creating, maintaining and transferring excellence,
value-laden relationships between customers and other
stakeholders.”
The term CRM and relationship marketing are being used
interchangeably to reflect a variety of perspectives. In the words of
Berry, relationship marketing relates to attracting, maintaining and
enhancing customer relationships.

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Strategies for Relationship Marketing
1. Permission Marketing: In this method, the organizations
capture the social media logins, customer email addresses,
sign up in various accounts such as Gmail, yahoo mail,
Facebook, Twitter, LinkedIn etc. From these social media
pages, organizations gather information about interests,
background, family and friends of existing and potential
customers etc.
2. Cookie Creators: Cookies follow the customers to all the
websites and web addresses that they visit. They serve
organization’s ads to the potential consumers on various web
addresses.
3. Recommendation Engines: These engines offer suggestions
to the web site visitors based on the products and services on
which customers have shown interest any time in the past e.g.
product bought from Amazon, Pizza ordered from Dominos
etc.
4. Loyalty Programs: Under this strategy, customers are
informed to purchase a loyalty card or program specially
designed for premium customers e.g. Amazon Prime, Zomato
Gold Membership, True Caller Gold Premium etc. With this,
they can have access to enhanced organizational
facilities/services or need to pay lower prices.
5. Special Offers: Customers are requested to give a mobile
number to intimate them about special offers declared from
time to time. Generally, organizations take feedback regarding
their products and services and simultaneously gather
customer information, which is then stored in their data bases.

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