Customer Relationship Management

It takes months to find a customer and seconds to lose one. 

Customer Relationship Management Customer Relationship Management

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Table of contents

    — Vince Lombardi

    Scoring a customer relationship is hard, but maintaining it is even harder. Just like you won't marry someone you've just met on the street, it's unlikely you will fall in love with the first company you find in the marketplace. Relationships need trust, and in business, the tool to build up trust is customer relationship management. Read on to find out what customer relationship management means and how companies can build long-lasting relationships with their customers.

    Customer Relationship Management Definition

    Customer relationship management combines everything in the company's ecosystem to manage customer relationships successfully. It includes strategies and tactics to optimise customer relations and technology to carry out these strategies effectively.

    Customer relationship management (CRM) is a tool that helps businesses improve their relationships with customers.

    A customer relationship management system includes a database and software to automate the CRM process.

    A database is a software that helps manage the customer relationship.

    The complexity of this software can vary widely depending on the company's needs.

    For example, a simple database may include essential functions such as gathering and storing information, whereas a complex one will allow the marketer to analyse trends and segment customers. Some advanced technology even makes recommendations for the following steps to take.

    Automation of CRM is using technology to reduce human work in customer relations.

    Organisations can apply automation to any aspect of CRM. However, the best automation will follow the customer journey from the first engagement to the end of the life cycle.

    The primary purpose of automation is to improve response time to customer requests and enhance customer satisfaction. Thus, its central tasks include capturing customer data and personalising responses. The automated replies can be programmed based on the customer type, the purpose of the interaction, and the stage of the customer journey.

    Other automation tasks include customer segmentation, response tracking, and future communications improvements.

    Importance of Customer Relationship Management

    Customer relationship management is crucial as it allows businesses to optimise their customer relationships.

    This is important not only in terms of customer loyalty but also in revenue and lifetime value.

    Customer lifetime value (CLV) is the total amount of income that a business can gain from customers throughout their lifetime.1

    A high CLV score means the business has successfully maintained customer loyalty and driven repeat sales from the same customer.

    Businesses should always work hard to improve CLV, and the best way to do so is to invest in improving customer relationships, a.ka., customer relationship management.

    Types of CRM Strategies

    There are three main types of CRM strategies:

    Collaborative CRM

    Collaborative CRM strategies focus on improving real-time information sharing.

    Real-time information sharing means keeping all organisational departments up-to-date with customer data, especially the marketing, sales and customer service departments.

    When everyone is on board with customer data, they can work together to deliver a seamless customer experience when they are on board with customer data.

    Analytical CRM

    Analytical customer relationship management refers to the data analysing aspect of CRM. The goal is to create customer insight based on purchase history and customer interactions with the business.

    The analysis may include collecting and saving data, analysing trends, and making predictions for the future.

    By analysing customers' past interactions with the business, a CRM tool can recommend more products to the customer to increase the chance of purchase.

    Operational CRM

    Finally, operational customer relationship management is the CRM function that connects everyone in the company's ecosystem to improve customer relationships.

    Operational CRM comprises two primary tasks:

    • Create a process of CRM

    • Handle customer relations problems.

    We will talk more about CRM in the next section.

    Customer Relationship Management Process

    The customer relationship management process is parallel to the customer lifecycle.

    A typical customer lifecycle consists of five stages:

    1. Awareness

    2. Acquisition

    3. Retention

    4. Fulfilment

    5. Loyalty.

    Thus, the process of managing customer relationships can be divided into five steps as follows:

    1. Raise customer awareness

    2. Acquire customers

    3. Retain customers

    4. Fulfil customer expectation

    5. Drive customer loyalty

    Raise Customer Awareness

    Raising customer awareness is the first stage in CRM. It happens when the customer interacts with the business and has little information about it.

    To improve customer awareness, companies need to determine their target customer. They can do this by applying the STP (Segmentation, Targeting, and Positioning) model.

    A CRM tool is more than helpful in this stage. It can be used, for example, in tracking customer interactions and seeing what products they save in the shopping cart or whether they have made a purchase. These insights can help to turn random leads into customer segments with similar traits such as age, spending per purchase, and reasons for purchase (which lead magnet they click on).

    A lead magnet is a free item given to customers to obtain their data.

    Acquire Customers

    Once the customer segment is defined, companies need to devise ways to turn those interacting with their business (leads) into customers (make a purchase).

    Again, CRM tools can play a significant role in driving customer leads.

    For example, the company can install a live chat on its website to find out the customer's needs and direct them to a lead magnet that serves their need.

    As the customer enters their information to obtain the lead magnet, the CRM tool will collect data for kickstarting a relationship with him.

    Retain Customers

    A lead can give his information, but that doesn't mean he will make a future purchase from the company.

    For a purchase to be made, companies need to convert that lead into a contact. This process is called customer retention. It involves building a genuine relationship with the customer.

    Companies can kindle a relationship in many ways.

    One of the most common customer relationship nurturing strategies is to send emails offering something of value to the customer. This can be a discount code, an industry update newsletter, product recommendations that match their interest, etc.

    One thing to note is that customers will not value all emails. Most people's inboxes are littered with unread emails. So there's a chance your email will be ignored altogether. How can companies avoid the email black hole? Provide value. Send customers what they want to read. Answer the question: Will this be the email I wish to see after interacting with this company?

    One example of a great newsletter is the Astronomy newsletter publishing Discover - a bi-monthly magazine on the latest science news. The newsletter includes a weekly curation of astronomy events and a section recommending astronomy souvenirs sold on the site, such as cosmic cups, star flashcards, or galaxy calendars. It's undoubtedly the newsletter that an astronomy enthusiast will want to open.

    Fulfil Customer Expectations

    Businesses may acquire and convert many leads, but if the experience sucks, customers will never return.

    The key to driving customer loyalty is providing an outstanding customer experience. This is the area in which CRM can offer a lot of support.

    A CRM system can save customer data in a database to prevent negative customer experiences from repeating themselves and provide quicker support in the future. The support can also be done omnichannel, with social media, website, and emails. When staff is not available, companies can use an automated tool to answer simple requests.

    The perk of using CRM technology is making customer service faster, more seamless, and enjoyable. Customers are more likely to purchase and return for more when they are satisfied with the service.

    Drive Customer Loyalty

    Customer loyalty is one of the primary marketing tasks.

    An application of CRM tools in this area is to track the progress of a referral programme. For example, a company can use a system to keep track of customer points every time they make a referral. An accumulation of these points can lead to a free item or a discount on future purchases.

    Another way that CRM can drive loyalty is by giving customers a quality score or rating their interaction levels. This allows the company to eliminate unqualified leads (those who never contact again) and focus on leads that potentially lead to sales.

    Customer Relationship Management Examples

    Here are some examples of CRM based on the five stages of the customer life cycle:

    1. Raise awareness - A live chat answering customer questions about the company.

    2. Acquire customer - A pop-up with a lead magnet that offers solutions to the customer's problem.

    3. Retain customers - Offer a discount for those not making a purchase yet.

    4. Fulfil customer expectations - Use CRM to store customer issues in a ticket to avoid customer experiences repeating themselves in the future.

    5. Drive customer loyalty - Use a quality score to rate customers and personalise the customer experience.

    Customer Relationship Management - Key takeaways

    • Customer relationship management (CRM) refers to strategies, tactics, and tools that help businesses improve customer relationships.
    • The purpose of CRM is to optimise customer relationships to increase sales and drive customer loyalty.

    • Three are three main CRM strategies: collaborative CRM, analytical CRM, and operational CRM.

    • A customer life cycle follows five stages: awareness, acquisition, retention, fulfilment, and loyalty.

    • CRM process matches the customer life cycle and thus includes five steps: raise awareness, acquire customers, retain customers, fulfil expectations, and drive loyalty.


    1. Austin Caldwell, What Is Customer Lifetime Value (CLV) & How to Calculate?, 2022,
    Frequently Asked Questions about Customer Relationship Management

    What is customer relationship management?

    Customer relationship management means using internal resources and tools to improve and optimise customer relationships. Good customer relationship management can increase the company's loyal fan base, which leads to more sales and customer lifetime value.

    What are the five steps of the CRM process?

    The five steps of the CRM process are:

    1. Raise awareness

    2. Acquire customer

    3. Retain customer

    4. Fulfil expectation

    5. Drive customer loyalty

    Why is customer relationship management important in a market orientation?

    Customer relationship management is important because it allows businesses to retain customers and increase their lifetime value (CLV). Higher customer lifetime value means more repeat sales and higher revenue in the long run. 

    What is analytical customer relationship management?

    Analytical customer relationship management is the creation of customer insight based on their interactions with the business. The analysis may include gathering and storing data, analysing trends, and making predictions for the future. 

    What are the benefits of CRM?

    CRM helps increase sales revenue, drive customer loyalty and improve customer lifetime value. Managing customer relationships successfully is key to business growth and survival. 

    Test your knowledge with multiple choice flashcards

    A database can ________

    Automation can be applied to any step of CRM.

    CRM can help businesses ________

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