What is a Customer Relationship Management (CRM) System?

It's impossible to state precisely what customer relationship management (CRM) means to everyone. The term has been applied to almost every element of business that even remotely interacts with a customer. In its infancy, CRM systems were a series of mainframe or server-based applications specific to sales, marketing and support business functions. The applications were lightweight by today's standards and did little more than capture and file critical data. But as cultural boundaries within organizations weakened, individual domains of information gave way to sophisticated applications that could span business functions. By doing so, these applications created the vision of a single view of the customer. For the first time, organizations could track and analyse shifting customer needs, link marketing campaigns to sales results, and monitor sales activities for improved forecasting accuracy and manufacturing demand.

CRM's Evolution

CRM has evolved since its earliest incarnation, originally driven by an inside-out focus, through three phases of evolution: technology, integration and process. Recently have we seen a major leap forward to a fourth phase: customer-driven CRM — an outside-in approach that has intriguing financial promise.

Thus far, almost everything about CRM has focused on improving the effectiveness and efficiency of the seller's organization. Organizations have evolved from sales representatives working from paper notebooks, or a card system, to a tightly integrated network that sees movement in sales activity, predicts product demand on manufacturing, and manages the logistics of complex teams to serve the buyer and seller. Marketing, support services, channel management, revenue management, resource allocation/management, forecasting, manufacturing, logistics and even research and development have all seen the benefits of a well-designed CRM strategy.

Customer-Driven CRM — The Fourth Phase

Today, revenue performance has become the central theme for CRM as organizations seek to achieve and maintain expected financial results. Leading executives are asking:

• Which of my customers have the potential for a high-profit, sustainable relationship?
• What defines profitable and unprofitable customer segments?
• What must change to realize that optimal potential?
• Where's my opportunity for growth?
• Where's my risk for loss?
• Am I making the right decisions related to balancing acquisition, cross-selling and upselling — and for the right customer groups?

Customer driven CRM means that organizations first understand the customer, then move inward to operations. Within the context of the customer, the systems and infrastructure capabilities needed to serve those customers and segmentation-based requirements must be reassessed.

Summary

Developing a CRM strategy isn't an easy task. Complex organizational design, comprehensive technologies and ever-changing customer demands are just the beginning. The lessons learned are monumental but we know that the promises of customer driven CRM are worth the journey.

Here's a simple framework for fourth-generation CRM:

Focus on financial results: Learn how to identify existing profitable customer segments and determine what will establish a profit-based profile for moving forward. Then develop the business requirements to support sustained, and structurally bonded, relationships.

Find cost effective alternatives for non-buyers or low-margin customers: Not all customer relationships are profitable and very few companies can afford to pay to deliver an equal level of services. Control costs and save your best resources for premium accounts — while working to bring low performers into an acceptable profit portfolio.