In this paper, the development of leads and customers as they relate to CLV is evaluated. The overall aim is to develop an understanding of how organizations utilize CLV to generate leads, convert them into contacts, and develop stable customer relationships. The specific objectives of the paper are to explain how the notion of customer relationship management leads to superior performance. The report will explore how CLV integration enhances business processes such as marketing, sales, and services. The report will also investigate the various types of CRM and how they contribute to the objective of improving customer relationships.
Customer relationship management (CRM) entails the various strategies, technologies, and practices companies use to manage interactions with customers for the drive of improving business relationships and boosting growth. The objective of CRM is to enable creation and maintaining of sustainable competitive advantages that will make the firm to be the best in understanding, communicating and developing existing customer relationships besides creating and nurturing new ones (Huang & Xiong, 2010). In this regards, CRM programs are designed to gather information on customers across different channels and points of interaction such as social media, marketing materials, telephone calls and direct mails.
Best practices in the implementation of CRM involve a combination of people and technology based systems that seek to understand customers by capturing information. This implies that as technology advances, CRM processes are likely to change. Research has identified four major types of information captured on CRM systems. These are customer profile, customer purchasing profile, customer purchasing preferences, and customer service profile (Oztaysi, Sezgin & Ozok, 2011). All these information can help businesses to build robust strategies for maximizing the acquisition of new customers and retention of current ones. The information can also help businesses to anticipate customer needs in addition to identifying the most profitable market niches. The information can also help businesses to build sustainable value for customers by tailoring the customer service experience.
Since CRM relies on the utilization of information technology, there are various options for the delivery of these systems. The most common ones are on-premise CRM and hosted CRM. On-premise CRMs are tailored systems that can be purchased off-the-shelf. Examples of these systems include Oracle, SAP, and Siebel. Since on-premise CRM can be tailored, they are easier to integrate to other systems in the business. The main shortcoming with on-premise CRM systems is that they are expensive and can take a long time to implement. Hosted CRM is web-based applications that do not require downloading and installation of software. Examples of these systems include Microsoft Dynamics, NetSuite, and Entellium. The services offered by hosted CRM are rented on a periodic basis. The most widely known category of hosted CRM is the cloud-based CRM. Various types of cloud-based systems are available, which allow companies to capture, distribute and analyze information about customers. Although hosted CRM services are cost-effective, they are vulnerable to intrusion and breach of data privacy because another party is in control of customer data.
Although CRM systems are based on specific software, the process of implementing CRM entails more than just installing the software and teaching employees how to use it. Regardless of the nature of the size of an organization, all functional areas of the business need to be engaged. These include human resources, marketing, IT, product development and sales. The involvement of all these functions implies that CRM is not a mere technology but a business strategy. Most importantly, employees need to understand CRM and what it means for the company. This can be achieved through formal training of the employees.
One of the most important concepts in CRM is Customer Lifetime Value (CLF), which describes the total value attributed to the entire future relationship between a company and a customer. Simply put, CLF is the difference between total revenue and total costs associated with a precise customer (Oztaysi, Sezgin & Ozok, 2011). It is expressed as the current dollar value of the net profit that can be expected to be obtained from a particular customers purchases over the life of the relationship with that customer. In essence, CLF indicates what the average customer is worth of the company. In todays competition based world of business, CLF is a critical aspect of market intelligence that companies rely on to implement strategies for effective business growth. It provides benchmarks for assessing business growth and also for evaluating the firms value.
According to Huang and Xiong (2010), CLV helps businesses to allocate customer procurement budget prudently based on what each new customer is expected to bring to the company in the long run. CLV data can be used to build more detailed and accurate customer personas for the determination of market targeting and advertising. This way, CLV helps firms to spend advertising budget more efficiently by focusing on the customer segments that deliver optimal value to the company. It also provides an excellent indication of the current performance of marketing campaigns vis-a-vis the competitive moves made by rivals in the industry.
CLV also helps companies to decide on the most effective management strategies in line with the retention of customers. As Kanji (2002) explains, CLV data can be used to encourage the development of a company culture that emphasizes long-term satisfaction of customers as opposed to focusing solely short-term sales. Where future customer value is deemed to be significant enough, the CLV data can be used to decide on the number of resources to be used in retaining specific segments of customers. This helps firms to manage their customer relationships in the most profitable manner and accordance with the companys core business objectives.
Although CRM is a relatively new concept in the field of management, it has evolved steadily over the years and will continue to evolve as new technologies emerge for supporting interactions between customers and businesses. In effect, companies will need to adapt their CRM initiatives to meet the ever-changing customer behaviors in an unpredictably dynamic market (Agariya & Singh, 2012). One of the most important CRM trends that future organizations must contend with is mobility. With new technologies such as tablets and smartphones becoming popular, there are more opportunities to interact with customers via these platforms. The new mobile technologies offer better opportunities for interacting with customers more conveniently regardless of time or geographic location.
Another major future trend in CRM is the integration of business processes and CRM. As a large amount of information about customers become available, CRM systems will need to be integrated with other systems so that all people in an organization can be actively involved in nurturing relationships with customers (Demo & Rozzett, 2013). It can be noted that as competition increases, customers are confronted with greater choice and brand. As such, businesses need to do more than just delivering information to attract and retain profitable customers. They need to make a long-lasting emotional impression. Future CRM tools will be designed in such a manner as to be able to provide businesses with the kind of information needed to appeal better to customers.
Operational, Analytical and Strategic CRM: Do They Exist?CRM has grown in strategic importance to become the most important philosophy encompassing all the methodologies, technologies and capabilities that help businesses to manage customer relationships in a well-organized manner. Today, CRM is applied in many organizations as the primary tool for managing all aspects of interaction with customers including prospecting, service, and sales (Rima & Jasilioniene, 2007). Different CRM applications have been developed, which attempt to provide crucial insights into business-customer relationships combining all outcomes of customer interaction into one centralized point. It is for this reason that CRM is used as an integrated approach for prospecting, acquiring and retaining customers. By providing a platform for coordinating interactions with customers across multiple channels, geographies and lines of business, CRM helps firms to maximize the value derived from each customer. This, in turn, helps in driving superior business performance.
Literature supports three dominant forms of CRM: strategic, operational and analytical. The focus of strategic CRM is on developing and maintaining a culture of the customer-centered business. Such a culture is characterized by immense dedication to winning and keeping customers for as long as possible by innovating and delivering better value than competitors. Aspects of strategic CRM are reflected in leadership behaviors, formal company systems and stories and myths that are created with the specific aim of enhancing returns from customer interactions (Attaran, 2004). In organizations with customer-centric cultures, it could be expected that more resources are allocated to the areas where they could lead to the greatest customer value. For example, reward systems could be created that motivate employees to focus on achieving higher levels of customer retention and satisfaction. Among other considerations, strategic CRM reinforces the value of developing products with the best quality, design, features, and performance. The rationale behind this consideration is the assumption that customers are more likely to choose low priced but high quality and innovatively designed products. By fulfilling this customer need, businesses strengthen the relationship with the customers.
Operational CRM seeks to automate...
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