What is CRM? Definition, Objectives, Types, Causes of Failure

  • Post last modified:4 November 2021
  • Reading time:10 mins read

What is CRM?

Customer Relationship Management (CRM) is the process of managing all aspects of interaction a company has with its customers, including prospecting, sales and service. CRM applications attempt to provide insight into and improve the company/customer relationship by combining all these views of customer interaction into one picture.

CRM Definition

Parvatiyar and sheth (2001) defined CRM is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer.

According to Gartner, CRM is a business strategy designed to optimize profitability, revenue, and customer satisfaction‖.

Customer Relationship Management is the establishment, development, maintenance and optimisation of long-term mutually valuable relationships between consumers and organizations. – CRM (UK) Ltd (2002)


Concept of CRM

Customer relationship management is the technique of providing information to prospects and customers and collecting information about prospects and customers, that allows us to help them evaluate and purchase products that deliver the best possible value to them.

One-to-one marketing and relationship marketing is to make it easier for the customer to do business with you. Marketing and salespeople have many opportunities to influence customer purchase decisions.

Until recently it was normal for these functions to be performed separately — by different departments within a company — without acting as a unified team. So we must understand that coordinated efforts are now being made to unify the approach.

Customer Relationship Management has become a popular name for a variety of CRM software tools and techniques aimed at attracting and retaining customers. In general, CRM uses a centralized database to bring marketing and sales activities together in a unified approach to serving customers.

Relationship Management

Relationship Management by an organization can be divided into two categories:

  • External Relationship
  • Internal Relationship

External Relationship

Two major external stakeholders of a business are customers and suppliers.

Customer relations: customer relations can be defined as the process by which companies promote customer satisfaction and loyalty.

  • It involves managing communications with customers, particularly customer‘s questions and complaints and solving their disputes.
  • The ultimate goal of customer relations program is to build long term relationships.
  • Building a strong reputation for the brand and company.

Supplier relations: All companies try to build a strong relationship with their suppliers.

  • Supplier relationships are different from simple purchasing transactions in several ways. There can be a sense of commitment to the supplier.
  • Eg: vendor (seller) sells certain items to the buyer for several times then he thinks that he will come for a next time purchase.

Internal Relationship

  • It is an integrative process with in a system for fostering positive working relationship in a developmental way in a climate cooperation and achievement.
  • Internal relationship is an ongoing process that occurs strictly within a company or organization.
  • Internal relationship helps to motivate and empower employees at all levels of management and its consistently deliver a satisfying customer experience.

Customer Relationship Management

Types of CRM

  • Strategic: Strategic CRM is a core customer-centric business strategy that aims at winning and keeping profitable customers.

  • Operational: Operational CRM focuses on the automation of customer-facing processes such as selling, marketing and customer service.

  • Analytical: Analytical CRM is the process through which organizations transform customer-related data into actionable insight for either strategic or tactical purposes.

CRM Objectives

Following are the objectives of CRM:

Enable the company to identify, contact attract and acquire new customers

CRM allows the company to focus its limited marketing resources on the most promising target markets with the highest potential value. This is typically done using the information generated by CRM application which:

  1. Automatically generates customer and market profiles
  2. Identify and target market with high revenues
  3. Generates, leads, tracks marketing campaigns across a variety of media
  4. Selects appropriate contact media, plans promotions and incentives
  5. Manages the proposal process through negotiations to close.

Obtains a better understanding of the customers: their wants and needs

CRM applications, often used in combination with data warehousing, e-commerce applications and call centres, allow companies to gather and access information about customers buying behaviour, wants in terms of products or services provided by the company.

The information is used in the planning and execution go marketing campaigns. It enables customers to seek products and reveal their preferences in an interactive manner.

Defines the appropriate product and service offering and match it to the unique needs of the customer

CRM provides customization and personalization capabilities that gives customers the power to view the enterprise in a way that they can relate to, thereby making it easier for them to do business with it. This includes configuration, pricing, quotation, catalogue and personal generation capabilities that harness the power of the Internet while ensuring the flexibility to respond quickly to changing technical and business conditions.

Manages and optimizes the company’s sales cycle

The productivity of the sale process is increased by accurating the contracting process and improving revenue velocity. This is accompanied to capabilities such as online order entry, credit card processing, tax calculations, auctions, billing, order status and payment processing.

CRM solutions also include tools, which provide the ability to communicate important information from supply chain modules to the customer interface in real-time. These tools can help in determining feasibility, profitability and delivery dates while understanding the constraints of the entire supply production and logistics chain across multiple channels and enterprises.

Increases retention of existing customers through improved sales, service and support

CRM applications document all post-close service and support related interactions with customers, record customer requests and collect feedback from a variety of communication channels and use the information to anticipate the demand for service and technical assistance and maximize customer satisfaction and retention while maximizing customer service staff.

The goal is to ensure greater customer loyalty. CRM provides capabilities for providing online support information, online product registration to an electronic help desk, self-service support logging and tracking and integration with call centres.

Identifies Cross-selling and up-selling opportunities

CRM can help in identifying opportunities for cross-selling and up-selling of higher value-added services to the existing customers, based on their past purchasing behaviour.


CRM Software Selection

Installing a good CRM software package is the cornerstone of any customer relationship management program. Without good CRM software, gathering and storing the multitude of details gained about a customer from each interaction would be very difficult.

Small business CRM software has gone ahead in leaps bounds in recent years, with several top quality packages now available to choose from. Prior to beginning the search for good CRM software technology, however, there are a few basic features you should seek in a potential CRM package:

Basic Functions

The CRM software should manage data relating to both individuals and companies and it should also provide time management features.

As most businesses use Microsoft Office, including Outlook, the CRM package should offer seamless integration with MS Office and/or fax software, as the ability to compose letters, faxes and email without leaving the CRM software is vital.

Recognised CRM Software Supplier

Do your research. Make sure your proposed CRM software supplier is recognised in the industry and has a solid backing with reputable customer testimonials and reliable 24/7 technical support.

360 Degree Customer View

It is important to know which people work for the same company; who said, emailed or wrote what to whom, and when. These details need to be a single click away. Does the CRM package you are considering provide this 360-degree view?

Seamless Connectivity

These days it is becoming more and more common for a growing business and its mobile workforce to utilise networked access to a central database, to mobile phones, and to PDAs. You need to ensure your CRM software package supports all the connectivity required by your company.

Managing Campaigns

In order to optimize your business marketing dollars, tracking of marketing campaigns and measuring their performance is critical. You will need a CRM package that provides this function. · Managing Leads: If you want sales opportunities to become closed sales, tracking leads is of prime importance. Make sure you select CRM software that provides lead tracking.

Data Transfer

Unless you are starting a business from scratch, you will probably need to import information from the previous software. Make sure you will be able to import directly, instead of spending hours processing the data through an intermediate stage or even worse, manually.

You will also need the ability to export data in order to exchange information with businesses that might use another CRM software package.

External Support

To get the most from any CRM package, you will find tips from fellow users, industry-specific templates, plug-ins to be vital. Make sure the package you are considering is well-known and supported.

CRM gurus Dr Martha Rogers and Don Peppers say that practising good CRM means you need to develop a one-to-one learning relationship with each customer, over four stages:

  • Identification
  • Differentiation
  • Interaction
  • Interaction

Causes of CRM Failure

Some of the causes of CRM failure are mentioned below:


How Can I Use CRM in My Business?

The table below displays the types of information you can collect with a CRM system, along with the questions that the information can help answer:

Type of InformationQuestions
Customer profile• Who are they?
• Are they a business or a person?
• Where are they located?
• If they are a business, how big are they?
• If they are a business, what do they do?
• Why do they need your product?
• How do they communicate with you?
• Do they have an account?
• How long have they been a customer?
Customer buying profile• How often do they buy?
• When do they buy?
• Is there a pattern to their buying habits (e.g., seasonal)?
• How much do they buy at one time? Overtime?
Customer buying preferences• What do they buy?
• Do they always buy the same thing?
• Why do they buy it?
Customer service profile• What kinds of problems/issues do they encounter?
• What is the current status of their issues?
• How many open tickets are there?
• How many cases have been resolved?

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