book.chapter Section 1 - understanding crm and its success metrics .

CRM is a strategic approach for long-term business growth that aims to persuade customers to continue their business with you based on the added value they received from past interactions. The effectiveness of a CRM program is measured by several key elements. It is important to note that direct marketing and CRM are often mistakenly grouped together, but they are distinct disciplines. Direct marketing uses database information to elicit specific, measurable, and often immediate responses. On the other hand, CRM focuses on cultivating enduring one-on-one relationships with customers, predisposing them to engage in future business with the organization. CRM is defined as a business strategy that actively fosters a preference for an organization among its employees, channels, and customers, leading to increased retention and performance. Essentially, CRM differentiates a "satisfied" customer from a "loyal" customer. Organizations that consistently deliver high value will cultivate loyal customers. Over time, a robust CRM program strengthens the relationship between the customer and the company. At the core of CRM is a continuous two-way dialogue between the organization and the customer. Every potential benefit of CRM relies on the organization's ability to demonstrate credibility and build trust, which requires dialogue from the organization to the customer. Similarly, efforts to understand the customer's value perceptions stem from dialogue in the opposite direction. Without this two-way dialogue, CRM cannot exist. CRM distinguishes between information and knowledge. In today's digital age, businesses are inundated with information. CRM allows an organization to take customer-specific information, edit it, contextualize it, and analyze it in a meaningful way. This process converts information into knowledge. Knowledge is the essence of CRM because it is through customer knowledge and its application that customer relationships can be enhanced using CRM. A viable CRM program comprises five key elements: identifying value from the customer's perspective, setting criteria for prioritizing customer values, establishing a tangible link between delivery and profitability, implementing an effective personalized delivery system, and devising a formula to realistically calculate profitability. Once the customer's priorities are clearly identified, the organization can develop a broad set of specific and relevant qualitative success measures, such as customer retention, share of total customer expenditure, customer lifetime value, and brand loyalty. The effectiveness of a CRM program can be evaluated by determining the lifetime value of the customer, calculating incremental gains, focusing on attracting and retaining the right customers, concentrating on profitability rather than market share, and maintaining a long-term marketing horizon. CRM is all about making your customers' lives easier, their behavior more profitable, and their interests more central to everything your organization does. Key thoughts include: - "Customers don't want to be treated equally. They want to be treated individually." - The Peppers & Rogers Group. - "It's not just what companies say in their communications to customers. It's what they do to show they really care." - Frederick Newell. - "The world is moving even more in a 1-to-1 direction. The winners have learned that the real challenge is to build and manage customer relationships in ways that will modify customer behavior over time and strengthen the bond between customers and the company." - Frederick Newell. - "More information and more technology will not necessarily lead to increased values and return on investment in marketing. The only real values are the values you add for your customers and the values your customers deliver to your company. Real value is not in the data or the technology. It's in the customer knowledge and your use of that knowledge to manage customer relationships." - Frederick Newell.