1. General introduction
Up to now, it has always been the task of marketing to be close to the customer and to know how to reach him in order to ultimately increase sales of the company’s product or service. This focus on customer acquisition is widespread among companies, and many companies consider this to be sufficient in order to survive in the business world. Nonetheless, a vital flaw of this common view is that there is more than just focusing all efforts on acquiring new
customers – That is, convincing the customer that it pays for him/her to continue doing business with the provider, which is called customer retention.
Enter Customer Relationship Management (CRM).
Throughout this paper, the definition of a CRM will be equivalent to the interpretation by Payne and Frow (2005), who state that CRM is a strategic approach that is concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments (Payne and Frow, 2005a). In the 1990s, organizations recognized the need for not relying on customer acquisition all alone, and stressing the relationship with the customer became imperative in the business world’s strategic orientation. Unfortunately, implementing CRM systems turned out to require more work than the plain desire to be chosen as a provider over and over again. A great source of uncertainty was the vague definition of relationship management itself. Another pitfall was how to establish a CRM system in an organization. As relationship management was not up to executives’ expectations, many companies were disappointed by the results – And yet, there were companies that succeeded in implementing a CRM system. Taking a closer look at the markets all over the world shows that all leading companies within their industries possess CRM systems, no matter whether it is in a B2B or B2C setting. This paper aims to convey how a company can use latest research findings to enhance a CRM system in order to maximize benefits and minimize drawbacks and critically portray the pros and cons of relationship management. Therefore, the following pages endeavour to answer the problem statement:
The advantages and disadvantages of relationship management: How can a company integrate recent research findings in order to make its CRM system more efficient?
Table of Contents
1. General introduction
2. Advantages of CRM
2.1 Benefits for the company
2.2 Benefits for the customer
3. Disadvantages of CRM
3.1 Drawbacks for the company
3.2 Drawbacks for the customer
4. Conclusion
Research Objectives and Key Topics
The primary objective of this paper is to examine how organizations can effectively integrate contemporary research findings to optimize their Customer Relationship Management (CRM) systems. By critically analyzing both the advantages and disadvantages of relationship management, the study aims to provide strategic guidance on maximizing benefits while minimizing common implementation pitfalls, ultimately addressing the central question of how to improve CRM efficiency for long-term business success.
- Strategic implementation of CRM systems
- Benefits of CRM for companies and customers
- Common pitfalls and drawbacks in CRM deployment
- Methods for enhancing customer retention and loyalty
- Theoretical frameworks for relationship management
Excerpt from the Book
2. Advantages of CRM
As mentioned above, Payne and Frow (2005) define relationship management as a strategic approach that is concerned with creating additional shareholder value through the development of appropriate relationships with key customers and creating customer segments. This definition already comprises three benefits a company can reap once it has established a well-functioning CRM system:
- Identifying key customers
- Developing appropriate relationships with key customers
- Establishing customer segments
The first way a company can derive an advantage of a CRM system is identification of the organization's key customers. Many companies make a substantial proportion of their earnings with only a few customers, mostly in B2B settings. This is known as the 80/20 rule, as 20% of a company's customers can contribute 80% of the profits (Wikipedia, n.d.). Yet, an important prerequisite for this is establishing a proper IT landscape with up-to-date databases that provide the marketing department with all the necessary information. This enables the company to gather customer data quickly and react to identified needs, which minimizes lead times and ultimately increases customer satisfaction. Identifying current key customers and potential key customers really adds value to the organization since the company knows with whom to bond more closely, e.g. by customized offerings or discounts. The enhanced skills of the company to serve its customers ultimately lead to reduced costs of serving them and also make it easier to target and acquire alike customers (Rigby, Reichheld and Schefter, 2002a). A rule of thumb in marketing is that acquiring new customers is far more expensive and difficult than retaining existing ones, which makes CRM extremely valuable.
Summary of Chapters
1. General introduction: This chapter introduces the shift from pure customer acquisition to the importance of relationship retention and outlines the problem statement regarding efficient CRM integration.
2. Advantages of CRM: This section explores how companies derive value from identifying key customers and segmenting them, while also examining the benefits consumers perceive through stable relationships.
3. Disadvantages of CRM: This chapter identifies the major operational and strategic pitfalls companies face during CRM implementation and discusses the perceived losses and efforts customers experience.
4. Conclusion: The concluding chapter synthesizes the research findings, emphasizing that CRM must be viewed as a strategic, long-term commitment that balances organizational investment with customer value.
Keywords
Customer Relationship Management, CRM, Customer Retention, Customer Acquisition, Shareholder Value, Relationship Marketing, Customer Segmentation, 80/20 Rule, Service Quality, Customer Satisfaction, Competitive Advantage, Data Management, Relationship Hindrance, Perceived Loss, Strategic Framework
Frequently Asked Questions
What is the core focus of this paper?
This paper examines the strategic challenges and benefits of Customer Relationship Management (CRM) to determine how companies can optimize their systems for greater efficiency.
What are the primary thematic areas covered?
The document covers the strategic advantages of CRM, benefits for companies and customers, identification of common implementation pitfalls, and the reduction of perceived customer effort.
What is the central research question?
The central question is: How can a company integrate recent research findings in order to make its CRM system more efficient?
What scientific approach does the author use?
The author employs a literature-based analytical approach, evaluating theoretical models and research findings to derive practical guidelines for CRM management.
What topics are discussed in the main body?
The main body evaluates the pros and cons of CRM for both companies and customers, including the use of conceptual frameworks and the impact of relational benefits on customer loyalty.
Which keywords define this work?
Key terms include Customer Relationship Management, Customer Retention, Customer Acquisition, CRM efficiency, and Relationship Marketing.
What are the four typical pitfalls mentioned in the text?
The four perils identified include: lacking a defined strategy, failing to be customer-focused, assuming more technology is always better, and incorrectly targeting or building the wrong relationships.
How should a company view the CRM system according to the author?
The author suggests that CRM should be treated with the care of "handling a raw egg," emphasizing that constant attention is required to avoid breaking the delicate relationship with the customer.
- Arbeit zitieren
- Master of Science in International Business Michael Bock (Autor:in), 2008, The advantages and disadvantages of relationship management, München, GRIN Verlag, https://www.hausarbeiten.de/document/158342
