What is customer relationship management (CRM)?

Customer relationship management (CRM) is an all-encompassing term that refers to the strategies and tools companies put in place to manage and evaluate interactions with customers. The term is often used in relation to CRM software, but broadly applies to business processes and philosophies for handling customer relationships.

This guide explains the various key aspects of CRM including understanding customer behavior and the value of data analytics.

Contents

• Customer relationship management – what is it?
• Understanding your customers
• The importance of data for customer relationship management
• Calculating customer lifetime value (CLV)
• What is customer churn?
• Case studies from leading companies
• The future of customer relationship management

Customer relationship management – what is it?

CRM can refer to strategy, process or software, but the primary goal of all three is to improve customer satisfaction, retain existing customers and acquire new clients.

CRM strategies

These are the methodologies or philosophies taken to strengthen customer relationships. Examples include:

• Customer loyalty strategies, such as implementing a rewards or loyalty scheme that gives points for purchases or gifts.
• Customer segmentation, for example collecting customer data to find common trends and preferences for targeting campaigns.
• Relationship building, for example by providing value-added content that offers knowledge that is additional to information about your products and services to engage your audience, such as white papers, podcasts and infographics.

CRM processes

CRM processes refer to the internal structured activities a business might carry out to help build relationships with customers. Unlike CRM strategies, these are systematic, in other words, form part of the company’s core activities and services.

Examples of processes that can help improve customer relationships include:

• Data analytics: Collecting and analyzing data from website forms, queries from customers and meetings with the sales teams helps to identify what customers are interested in to create targeted campaigns.
• Customer onboarding: The set-up process customers go through to start using a product or service. Many people regard this as the most important part of the customer lifecycle, as the success of the onboarding sets the tone for the future of the relationship
• Customer service processes: The steps customers must go through to interact with your company, whether for a query or to raise an issue

CRM software

Software can be deployed to implement the processes listed above, and can be used by sales, marketing and customer service teams. Sales teams can use it to manage their pipelines, track leads and automate processes, while marketers may deploy it to map out customer journeys from inquiry to sale and monitor feedback.

For customer service teams it makes it possible to track and prioritize issues as they arise, record customer feedback and communications from different channels.

Other typical functions of CRM software include:

• Data management: CRM systems collect and store customer data, such as contact information, purchase history, preferences, and communication history, in a centralized database making it simple to access.
• Customer support: CRM platforms can be used to manage customer support inquiries, track issues, and ensure timely responses. This is particularly beneficial for companies that provide customer service across multiple channels. For example, if a customer raises an issue via email, but then wants to follow up with a phone call or via live chat, the platform acts as a hub to keep track of communications.
• Analytics and reporting: Analytics and reporting features help towards making data-driven decisions and measuring the success of customer-related initiatives.
• Customer segmentation: This feature enables the customer base to be segmented into groups according to different criteria, allowing for targeted marketing.

Additionally, CRM software can be used to automate repetitive tasks and workflows, reducing manual work and increasing efficiency.

Tips for selecting the right CRM platform

Selecting the right CRM software is crucial for the success of your CX initiatives. First it's important to identify your specific business needs and goals. Determine what you want to achieve with the software, is it automation, marketing, customer support, analytics, or something else?

Here are five tips to help you make an informed decision:

1. Consider scalability; choose a software that can scale as your business grows, for example one that can accomodate larger amounts of data and users.
2. Choose a platform with an intuitive and user-friendly interface, to avoid the need for extensive training.
3. Ensure the software can integrate with the other tools and systems you have in place, such as email, accounting and e-commerce platforms.
4. Do you need something that can be customized to your needs? If so look for a platform that allows you to create custom fields, workflows and reports.
5. It is also a good idea to read reviews and seek recommendations from businesses in your industry, take advantage of free trials and find out how much the provider offers in terms of training and support.

Some of the best-known CRM software providers are:

• Twillio has recently added a suite of AI capabilities to its CRM platform, designed to help marketers and CX practitioners with customer journey mapping and predictive analytics
• Salesforce is one of the leading providers of CRM software. Its cloud-based platform offers offers forecasting, reporting and sales management tools
• Zendesk offers a customer service and support platform that helps businesses manage customer interactions and support requests. It also has a self-service portal for customers to use themselves.
• Monday.com is easily customizable and is particularly good for managing contact information and enabling communication between teams
• Hubspot has an interface that is user-friendly and robust. It's known for its inbound marketing capabilities and includes features like contact management, email tracking and automation.
• Zoho’s cloud-based CRM is popular for its affordability. Features include lead management, email automation and analytics.
• Oracle Cloud CX is a comprehensive suite of cloud-based applications designed to manage the entire customer lifecycle.

Understanding your customers

Crucial to all forms of customer relationship management is understanding consumer behavior. Whereas once upon a time customers would have to visit a physical store and discuss products with staff, now a significant number of transactions happen online, giving customers more options while increasing expectations and competitiveness.

Customer personas are developed to provide a visual representation of your client base. These can be detailed or high-level, based on your goals and usage of them. They can be used for:

• Customer journey mapping
• Customer service blueprinting
• Designing customer feedback strategies
• Prioritizing improvements along the customer journey

You can develop customer personas based on research, including customer segmentation and market research data. Artificial intelligence and machine learning-based tools can analyze large amounts of customer data and help create personas and customer journeys.

Customer journey mapping helps companies understand who they are designing their services and products for and where the customers’ pain points are.

Every customer journey map begins with defining the behavioral stages customers pass through when interacting with a brand: awareness, interest, consideration, evaluation, purchase and retention or churn.

Quantitative data is gathered at key interaction points at each of these stages to pinpoint the activities that occur. Then customer personas are introduced to create a “lens” by which to view the journey. The priorities and goals of each persona will influence the success of a user journey.
Analyzing this data then enables the company to spot actionable steps that improve the customer experience.

The importance of data for customer relationship management

Collecting and analyzing customer data to inform strategies has been a staple of quality CX for some time. However in recent years there has been less of a focus on monetization of customer data and more on its use for service and product development, as well as addressing customer needs and refining the overall customer experience.

Customer data is now often assessed to uncover insights that can make improvements in customer journey design and the experience of users.
As people are increasingly willing to tell brands what is or isn’t working, business can tap into these insights to tweak certain aspects of their products or services to meet customer demand.

CX expert and author Annette Franz says that the power of data lies in how organizations utilize it to drive decision-making and improve customer experiences. She lists nine ways organizations can make use of it:

• Personalization
• Recommendations
• Product upgrades
• Journey orchestration
• Marketing campaigns
• Brand advocacy
• Relationship building
• Decision-making
• Social media engagement

Watch Lydia Clayton, AVP, Contact Center Operations, Center of Excellence at Cox Automotive, discuss how to leverage data from customer interactions and automation to improve customer operations. 

Calculating customer lifetime value (CLV)

The customer lifetime value (CLV), is a metric that represents the predicted total revenue a business can expect to earn from a customer over the entire duration of their relationship. It is an important metric for assessing the long-term value of acquiring and retaining customers.

The formula to calculate CLV is:

(customer revenue per year) x (duration of the relationship in years) – (total cost of acquiring and serving the customer) = CLV

You can use actual, historical data for this, to determine the CLV of an individual. This can be useful in cases where a customer wants to move to a different provider, as having the calculation can help you assess what you are willing to offer to stop them from leaving.

You can also use predictive analytics tools to forecast the likelihood of churn.

What is customer churn?

Customer churn, also known as customer attrition, is a metric that measures the percentage of customers that stop using a company over a specific period of time. It is calculated using this formula:

(number of customers lost during a period ÷ number of customers at the beginning of the period) x 100 = churn rate (%)

A recent report identified these top reasons for customer churn:

• High expectations
• Customer fatigue
• Strong competition
• Bad experiences
• Confusing or difficult to access information

To address churn effectively, businesses often implement customer retention strategies, such as improving customer service, addressing product issues, and offering loyalty programs to incentivize customer loyalty. Analyzing churn data can help companies identify patterns and make informed decisions to reduce attrition.

Case studies from leading companies

TGI Fridays: Data analysis that informs customer service

Restaurant chain TGI Fridays collects and analyzes data in detail using filtering, segmentation, visualization tools and predictive analysis. By doing so, the business gains clarity on who its customers are, which products they enjoy, the channels they prefer and when they might want to make a purchase.

These insights inform the restaurant’s campaigns so it can provide proactive customer support and engagement.

Operational and behavioral data is gathered onto a unified platform. These data points are then enriched with additional context from other data sources, calculations, profile-matching and sentiment extractions. This all helps TGI Fridays reach conclusions on which combination of channels will be most successful for specific customers, and proactive customer support is provided via social media, email, SMS and TGI Friday apps to increase engagement and repurchase volumes.

SiteMinder: Streamlining internal channels with a CRM platform

International hotel booking platform SiteMinder, which generates US$35bn in revenue each year, was experiencing problems with its open-source Asterisk phone and software system. The system involved four separate servers that were hosted globally in the cloud and were managed by two external companies – one based in the US and one in Thailand. These conflicting time zones exaggerated issue resolution times, especially when SiteMinder’s head office in Australia needed assistance. The brand’s ability to serve its customers was suffering as a result.

The company decided to upgrade its phone channel system, choosing a solution that integrated with its CRM platform to support international employee collaboration and communication with handover notes and messages between its 100 contact center agents.

The phone system’s integration with SiteMinder’s customer web portals also allows agents to screen-share with customers that are logged into SiteMinder products. Agents are empowered to visually guide a customer, while still on the call, to support them with the issues they are experiencing.

The future of customer relationship management

Customer relationship management is changing rapidly due to the impact of AI and machine learning technologies, which are transforming both tools and strategies. CX consultant Colin Shaw believes that this is giving way to a new wave of change altogether called customer science.

This, he says, is the fusion of AI, customer data, and the concept of the behavioral sciences. This will provide customers with an experience that is proactive, “instead of waiting to respond, you are anticipating customers' needs. Over the next ten years, these proactive experiences will be essential in business,” Shaw says.

As well as becoming increasingly data-driven and centered on predictive analytics and automation, there is a trend pointing to CRM becoming ever more omnichannel, allowing businesses to engage with customers seamlessly across various touchpoints such as social media, chat, email, and voice, ensuring consistent, personalized experiences.

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