Customer Relationship Management Essay

2340 words - 9 pages

Customer Relationship Management
Introduction
Marketing has evolved substantially with the advent of technology. Technology has not only introduced additional communication channels to marketers but also allow them to collect large amounts of data and analyse it efficiently to improve segmentation, communication within segments and designing products to meet the needs of customers. Technology provides customers with more power since they are now able to easily compare offerings from various organizations and selecting the offer with the highest perceived customer value.

In order to remain competitive organizations need to understand their customers better, but Maklan, Knox, and Ryals (2008) argues that it is increasingly difficult to understand customers with traditional marketing methods and that “traditional market research is in danger of being left behind by new practises in sales, marketing and R&D.”(p.221). Customer relationship management (CRM) is one such new practice explained as “an approach based on maintaining positive relationships with customers, increasing customer loyalty, and expanding customer lifetime value” (King & Burgess, 2008,p.421).

The explanation provided by King and Burgess (2008) alludes to an important shift from traditional marketing principles which focused more on transactional selling to that of customer lifetime value (CLV) defined by Ryals (2005) as the net present value of all future customer profits (future revenue stream less future cost to serve the customer). This is supported by the argument that “CLV is rapidly gaining acceptance as a metric to acquire, grow, and retain the ‘right’ customers in CRM. Marketing theory and practice has become more and more customer centered sic, and managers have increased their emphasis on long-term client relationships” (Fan & Ku, 2010, p.205).

This suggests a paradigm shift from traditional marketing principles and that CRM will help organizations not only to grow market share but will help them achieve this with the most profitable customers by evaluating their CLV. Boulding, Staelin, Ehret, and Johnston (2005) investigated whether CRM is fundamentally different from traditional marketing principles “whereby a firm maximizes profits and consumers maximize utility.” (p.155) and that instead of a paradigm shift CRM is “the outcome of the continuing evolution and integration of marketing ideas and newly available data, technologies, and organizational forms.” (p.156). However Boulding et al. (2005) further explains that theorists “also talk about the dual creation of firm and customer value" (p.156) indicating that organizations do not create value in isolation but now do so in collaboration with the customer who also share in the value. This supports the hypothesis that CRM is fundamentally different from traditional marketing with Boulding et al. (2005) concluding that although it can be argued CRM is not substantially different it “represents an evolution...

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