The importance of keeping customers for as long as possible, in what Essay

The importance of keeping customers for as long as possible, in what is seen often as a short-term approach to sales - Essay Example This is the main concern of the so-called consumer relationship management (CRM) models today. Vogt defined CRM as a customer-focused business strategy designed to optimize profitability, revenue and customer satisfaction. (p3) Shanmugasundram (2009) also posited that it is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. (p9) Unarguably there are numerous meanings and interpretations of CRM. Nonetheless, they all agree that a CRM strategy is always characterized by a quest to establish a relationship with a client in such a way that it contributes to the competitive advantage of the organization, which ultimately results to profitability. The simple logic is to make the customer happy so that the sales keep on coming. How does it work? As previously mentioned CRM strategies are diverse and varied. Sometimes, its distinction depends on the industry using it and sometimes it depends on specific needs and market trends. However, the fundamental principle emphasizes the importance given to people - naturally, there are the consumers but also, there is an emphasis given to the employees. According to Shanmugasundram, the principle is all about building enduring relationships that can lead to a profitable business organization and that both consumers and employees are fundamental to their achievement. This is expressed in the following model. Fig. 1: CRM Model (Shanmugasundram, p9) The model is pretty much straightforward: there are four crucial elements involved: Leadership, Delight, Loyalty and People. The model, as demonstrated above, puts the People at the center, with all the rest of the elements working together seamlessly for their benefit. The model ultimately aims for customer satisfaction. This is important because it has already been proven that satisfaction and a number of resulting variables, including customer loyalty lead to the probability o f purchase at different price points. This is also highlighted by the fact that only 26 percent of purchase decisions of consumers are influenced by advertising and that factors such as personal experience and referrals are more frequently cited. (Rai 2008, p145) Francis Buttle (2008) explained that, â€Å"a satisfied customer is more profitable than a dissatisfied one. If satisfaction declines, customers become more reluctant to buy unless prices are cut. If satisfaction improves the opposite is true.† (p47) This point is further reinforced by The American Customer Satisfaction Index Model (see fig. 2). Fig. 2: The American Customer Satisfaction Index Model (Buttle, p47) CRM and Technology An important variable in CRM models and strategies is the use of technology to achieve its objectives. CRM, in this context, becomes what Foss and Stone called as the methodologies, technologies and e-commerce capabilities used by companies in managing customer relationships. (p3) The adva nces in technology, particularly in communications, transportation and logistics have empowered organization to add value to their products and services. For example, an organization can use databases as part of the wider CRM strategy to build and keep accurate and up-to-date information about its customers. (Canwell and Sutherland 2003, p249) By doing so, the organization is able to analyze customer behaviors and expectations and develop better products