WHAT IS CRM?

In the marketing literature the terms customer relationship management and

relationship marketing as used interchangeably. As Nevin (1995) points out, these
terms have been used to reflect a variety of themes and perspectives. Some of
these themes offer a narrow functional marketing perspective while others offer a
perspective that is a broad and somewhat paradigmatic in approach and orientation.
A narrow perspective of customer relationship management is database marketing
emphasizing the promotional aspects of marketing linked to database efforts
(Bickert 1992).
Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention
in which a variety of after marketing tactics is used for customer bounding or staying
in touch after the sale is made (Vavra 1992). A more popular approach with recent
application of information technology is to focus on individual or one-to-one
relationship with customers that integrate database knowledge with a long-term
customer retention and growth strategy (Peppers and Rogers 1993). Thus, Shani
and Chalasani (1992) define relationship marketing as an integrated effort to
identify, maintain, and build up a network with individual consumers and to
continuously strengthen the network for the mutual benefit of both sides, through
interactive, individualized and value-added contacts over long period of time.
Jackson (1985) applies the individual account concept in industrial markets to
suggest CRM to mean, Marketing oriented toward strong, lasting relationships with
individual accounts. In other business contexts, Doyle and Roth (1992), ONeal
(1989), Paul (1988), and have proposed similar views of customer relationship
management.

Another important facet of CRM is customer selectivity. As several researches studies

have shown not all customers are equally profitable for an individual company
(Storbacka 2000). The company therefore must be selective in tailors its program and
marketing efforts by segmenting and selecting appropriate customers for individual

marketing programs. In some cases, it could even lead to outsourcing of some

customers so that a company better utilize its resources on those customers it can
serve better and create mutual value. However, the objective of a company is not to
really prune its customer base but to identify appropriate programs and methods that
would be profitable and create value for the firm and the customer. Hence we define
CRM as:

Customer Relationship Management is a comprehensive strategy and

process of acquiring, retaining and partnering with selective customers to
create superior value for the company and the customer.

1.1.1 DEFINITION OF CUSTOMER:

DEFINITION 1:
According to Shri. Mohandas Karamchand Gandhi, the father of nation,
A customer is not an outsider to our business. He is a definite part of it. A customer is not an
interruption of our work. He is the purpose of it. A customer is doing us a favour by letting us
serve him. We are not doing him any favour. A customer is not a cold statistic; he is a flesh and
blood human being with feelings and emotions like our own. A customer is not someone to argue
or match wits with. He deserves courteous and attentive treatment. A customer is not dependent
on us. We are dependent on him. A customer brings us his wants. It is our job to handle them
properly and profitably both to him and us. A customer makes it possible to pay our salary,
whether we are a driver, plant or an office employee.
As these above definitions suggest, a customer is not necessarily someone who is currently
purchasing from the marketer. In fact, customers may fall into one of three customer groups:

Existing Customers Consists of customers who have purchased or otherwise used an

organizations goods or services, typically within a designated period of time. Existing

Customers are by far the most important of the three customer groups since they have a

current relationship with a company and, consequently, they give a company a reason to
remain in contact with them. Getting these Existing Customers to purchase more is
significantly less expensive and time consuming than finding new customers mainly because
they know and hopefully trust the marketer and, if managed correctly, are easy to reach with
promotional appeals.

Former Customers This group consists of those who have formerly had relations with

the marketing organization typically through a previous purchase. However, the marketer
no longer feels the customer is an Existing Customer either because they have not purchased
from the marketer within a certain timeframe or through other indications. The value of this
group to a marketer will depend on whether the customers previous relationship was
considered satisfactory to the customer or the marketer.

Potential Customers The third category of customers includes those who have yet to

purchase but possess what the marketer believes are the requirements to eventually become
Existing Customers. These requirements to become a customer include such issues as
having a need for a product, possessing the financial means to buy, and having the authority
to make a buying decision. Locating Potential Customers is an ongoing process for two
reasons. First, Existing Customers may become Former Customers and, thus, must be
replaced by new customers. Second, while we noted above that Existing Customers are the
best source for future sales, it is new customers that are needed in order for a business to
significantly expand.
Once we have understood who a customer is, it is necessary to understand what customer
satisfaction is and why it is important.

1.2 Customer Profiling:

Customer profile may be defined as customer description that includes demographic,
geographic and psychographic characteristics, buying pattern, creditworthiness, purchase
history etc. This description may include information pertaining to the income level,
Occupation, level of education, age, gender, hobbies, and/or area of residence. For example,

magazine advertising salespeople provide advertisers with customer profiles describing the
type of person who will be exposed to the advertisements in that magazine. The description
may include income, occupation, level of income, occupation, level of education, age,
gender, hobbies, area of residence etc.
These customer profiles which are built by the companies help them to understand their
customers better. Using this customer profile the companies are able to identify and segment
their potential customers.

1.3 CUSTOMER SATISFACTION:

The word "satisfaction" comes from the Latin words satis (enough) and facere (to do or
make). These words suggest the true meaning of satisfaction, which is fulfillment.
Managerially, fulfillment usually translates to solving problem & satisfying the customer is
not enough. To produce high level of customer loyalty, businesses need to move beyond
more satisfaction, to customer delight.
1.3.1 The Purpose of Business: Peter F. Drucker, considered to be one of the leading management
gurus in the world, believes that the purpose of business to create nd then retain a satisfied customer.
Although firms have to make money, Drucker argues that making money is a necessity and not a
purpose. It is, in fact, the end result, a desirable outcome of creating a satisfied customer. Theodore
Levitt, a Harvard Business School Professor, who explains this by an analogy with human beings,
expresses similar sentiment - all humans have to eat to survive, but eating is not their purpose.
Furthermore, making money does not provide a legitimate reason for society to support the
moneymaking enterprise. A society supports businesses because they serve its member by catering to
their needs to leave them satisfied. If a firm dissatisfies customers, then not only will these specific
customers stop buying from the firm, but the society at large will condemn the firm and may even
penalize it - to the point of its extinction. In response to such messages, co part of the corporate
mission, and utilizes an understanding of customer behavior as input to all its marketing plans &
decisions.