Consumers usually face a broad array of products and services that might satisfy a given need. How do they choose among these many marketing offers? Customers form expectations about the value and satisfaction that various marketing offers will deliver and buy accordingly. Satisfied customers buy again and tell others about their good experiences. Dissatisfied customers often switch to competitors and disparage the product to others.
Marketers must be careful to set the right level of expectation. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they raise expectations too high, buyers will be disappointed. Customers value and customers satisfaction are key building blocks for developing and managing customer relationships.
Satisfaction is defined as.
"a persons feelings of pleasure or disappointment resulting from comparing a product's perceived performance (or outcome) in relation to his or her expectations".
Customer satisfaction depends on a products perceived performance in delivering value relative to a buyers expectations. If the products performance falls short of the customers expectations, the buyer is dissatisfied. If performance matches expectations, the buyer is satisfied. If performance exceeds expectations, the buyer is delighted.
Customer Relationship Management
Customer relationship management (CRM) is perhaps the most important concept of modern marketing. Until recently, CRM has been defined narrowly as a customer data management activity. By this definition, it involves managing detailed information about individual customers and carefully managing customers "touch points" in order to maximize customer loyalty.
More recently, however, customer relationship management has taken on a broader meaning. In this broader sense, Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping, and growing customers.
To over come such problems, many companies are now turning to customer relationship management (CRM) to manage detailed information about individual customers and carefully managed customer touch points in order to maximize customer loyalty. In recent years, there has been an explosion in the number of companies using CRM. U.S companies spent an estimated $ 42.8 billion last year on CRM systems from companies such as Siebel Systems, Oracle, Micro Soft and SAS and spending is expected to increase by 11.5% a year through 2007.
CRM consists of sophisticated software and analytical tools that integrate customer information from all sources, analyze it in depth, and apply the results to build strong customer relationships. CRM integrate everything that company's sales, service, and marketing teams know about individual customers to provide a 360-degree view of the customer relationship.
CRM analysts develop data warehouses and use sophisticated data mining techniques to unearth the riches hidden in customer data. A data warehouse is a company wide electronic data base of finely detailed customer information that needs to sifted through for gems.
The purpose of a data warehouse is not just to gather information, but to pull it together into central, accessible location. Then, once the data warehouse brings the data together, the company use high-powered data mining techniques to sift through the mounds of data and dig out interesting finding about customers. Such data systems can give a company a big competitive advantage.
By using CRM to understand customers better, companies can provide high levels of customer service and develop deeper customer relationships. They can use CRM to point out high-value customers, target them more effectively, cross-sell the company's product, and create offers tailored to specific customer requirements.
CRM benefits don't come without cost or risk, not only collecting the original customer data but maintaining and mining it. An estimated half or more of all CRM efforts fail to meet their objectives. The most common case of CRM failures is that companies mistakenly view CRM only as a technology and software solution. But technology alone cannot build profitable customer relationships.
"CRM is not a technology solution-you can't achieve improved customer relationships by simply slapping in some software's ", says a CRM exports.
Instead, CRM is just one part of an effective overall customer relationship management strategy.
Benefits of CRM
Improved customer retention
Purchase amount increases over time
Average of 8%/year in the insurance industry
Reduction in costs
Order processing
Short-term acquisition costs
Customer referrals
On the "grey markets"
Often harmful to profits
Frequently used to level inventories 2-way communications
Improves customer satisfaction
Cultural changes:
Top executives must drive the initiative
Shift from product orientation to customer
Shift in marketing type
Away from mass, towards personal "1:1"
Change in attitude at all levels
Compensation system must change to reinforce new behaviors new positions or teams should be formed.
CRM across Company Functions:
Marketing Account management expertise
Research & Development Specifications that define requirements
Logistics Knowledge of customer service requirements
