Customer Retention Marketing

By Jamey Dalke

What is Customer Retention Marketing (CRM)?

Is Customer Relationship Marketing Profitable?

What is Customer Retention Marketing (CRM)?

According to http://www.jimnovo.com/home/Customer-Retention-gt.htm, Customer Retention Marketing is a “tactically driven approach based on customer behavior.” The theory behind it is that if the business is able retain its customers, it will succeed.A strong relationship exists between customer satisfaction and profitability.It is then necessary for service organizations to make certain that they are practicing CRM.

CRM is a theory that has been around for a very long time, but has just resurfaced again in the last few years.It reminds me of the different fads that teenagers go through.Bell-bottoms were popular in the 60’s and now they have been again for the last few years.

Relationship Marketing

Customer Retention Marketing is an offspring of Relationship Marketing.According to the text, Relationship Marketing, it has the following eight components:culture and values, leadership, strategy, structure, people, technology, knowledge and insight, and process.The goal of Relationship Marketing is to align all these aspects of a company with its chosen customers.It is important to note that the explanation of these eight components will apply mostly to companies marketing to or through other businesses.

Culture and Values.It is important to understand the similarities and differences between cultures for each company at the very beginning.This will ensure that the relationship between the two companies will be an enduring one.

Leadership.Before committing to Relationship Marketing, the leadership from each company must understand the real meaning of a relationship.

Strategy.Each company involved needs to make sure the strategy is aligned and be sure that they both understand the direction of the other.Over time, this means that the supplier must become very familiar with its customer’s customer.

Structure.Companies that reorganize frequently, without strategic context and rationale, often have difficulty defining a winning strategy.So it is important for companies to make sure that their structure is strong.

People.“People are key to any relationship.”However, the people need to be productive and effective to make the relationship a good one.Front-line people need to be able to understand the customer and be able to communicate with them.

Technology.Businesses should use technology to give the customer a better memory of the company.Giving them the communications options they want will help them repeat the buying experience.

Knowledge and Insight.The key to this section is to know the customers, know the customers, and know the customers.A lot of businesses keep databases on their customers and use it to their advantage.It is important to spend a little money to do this.

Process.It would be beneficial for the business to focus its processes around existing customers, giving them the value they want and communicating with them as if they wish to be demanded by the company (Gordon, 1998).

How do businesses use CRM?

According to the website, http://www.crm2001online.com/Index1g.html, “The right CRM solution can fundamentally change the organization’s profitability, customer satisfaction, and retention.”So, many businesses use CRM to gain just that, profitability, customer satisfaction and retention.Doing this isn’t always the easy part.A lot of times the right CRM solution for one company doesn’t always work for another.It has to be the right mix for the right company.In order to ensure that a company has the right CRM mix, they must attend industry seminars to gain the appropriate skills and information necessary to attain the right level of CRM.

According to the website, http://www.crm2001online.com/Index1g.html, there are seminars that industries have to train them on CRM.These seminars are practical case study based seminars.Industry visionaries give detailed insights into how the business can benefit from the CRM revolution.Topics covered include: ecrm, mobile data, call centre, knowledge management, sales & marketing automation, marketing database, contact management, field service management, data warehousing, marketing strategy and many others.

In my opinion, not only the owners and managers of the business should attend these seminars, but also a few of the actual salespeople.This will mean that there is a contact from each department of the business represented and therefore, if any questions arise about CRM, the person can go to the representative who attended in their area and ask.

Another way for businesses to find out information about CRM is on the website, http://www.destinationcrm.com/.Here, businesses can sign up for a free e-newsletter giving them up-to-date information on the latest information on CRM training.This would benefit them tremendously.Not only that, they can also create their own effective communications tool online to ensure that their employees are successfully communicating with each other and the customers.

According to the book, The Customer Marketing Method, there are several steps to implementing CRM with Customer Marketing in a business.They are:

1.Make a Customer Pyramid – This is defining who they customers are, gathering the behavior variables for them, and then decide on the segment border.

2.Keep Project Management Simple – This is simply creating a steering committee to control and oversee the process.

3.Conduct a Parameters Workshop – This is simply to decide on what information you have and need to have on the customers and where to find it.

4.Conduct Interviews with a Selection of Customers – This will include several stages.First of all, select a sample of 10 to 20% of the customers.Second, construct a customer interview questionnaire.Third, interview the customer selection.The reason to only interview a sample of the customers is :

a.To get a view of current customer satisfaction levels and identify areas that need improvement.

b.To determine the customer acceptance of the questionnaire so that it can be edited.

c.To test the effectiveness of the various ways you can interview the customers i.e. face to face, by telephone, in writing, and via email.

5.Diagnose the Value of the Customers – In other words, diagnose the value of the customer profitability.The financial people in the business can figure the Customer-base Accounting or CBA.If this number is good they will be excited that the Marketing department is doing the right thing.

6.Diagnose the Behavior of the Customers – In this phase, a business can link the actual customer behavior and the information on factors that affect that behavior. Then, it will be easy to calculate the potential of individual customers and prospects.After this is complete, it will be necessary to set specific goals and plans to meet those goals.

7.Diagnose the Satisfaction of the Customers – Interviewing the customers enables the business to improve their products, services and customer relationship processes.There are critics of the customer interview method.They argue that the interview may fall short on statistical reliability.

8.Diagnose the Customer Focus – The easiest way to do this is to ask the people who work on the floor who deal with customers every day what the customer’s complaints etc. are.They will be the ones who can help management decide on how to do things better.

9.Make Decisions – This is the stage where it is necessary to decide what needs to be done.Getting CRM advice from experts, like from the website, http://www.jimnovo.com/home/Customer-Retention-gt.htm, is an excellent idea.

10.Start With a Customer Marketing Kick-off – This is a staged event where the whole business can begin to reach the following objectives.

a.Realize the importance of customers.

b.Begin the Customer Marketing Rollout, ie. what objectives and steps will be taken.

c.Figure out the results of the customer satisfaction survey.

d.Invite everyone to participate.

e.Demonstrate management commitment to improving customer relationships.

11.Have a Customer-Based Business Planning Workshop – This will bring people from top management, sales management and marketing management to decide on company goals.

12.Have Customer Team Workshops – This step is key to implementing CRM in your company.It consists of working with the customer team to discuss the customer marketing in the business.

13.Monitor Rollout Results – It is important to monitor the results vs. the plans the business has made (Curry, 2000).

Is Customer Relationship Marketing Profitable?

It is indeed true that big databases are expensive to develop and maintain.Different organizations like Wal-Mart have spent literally hundreds of millions of dollars on their technology to develop and maintain their database (Gamble, 1999).In most marketing texts, it is known that acquiring customers is much more expensive than keeping them.Figures of between 5 times as much and 7 times as much are quoted (Kotler, 1997).Thus, it is much more important to retain the customers you have than try to acquire new ones.In other words, Customer Relationship Marketing is profitable.

According to Gamble, Stone and Woodcock (1999), the benefits of customer relationship marketing are usually in one or more of the following areas:

1.Closer relationships with customers.

2.Improvements in customer satisfaction.

3.Financial benefits ensue.

Gamble, Stone and Woodcock (1999), also say that managers need to ensure that the customer relationship marketing philosophy follows the procedures listed below.

1.Obtain measures of retention.

2.Find out why customers are lost.

3.Calculate the lost profit.

4.Multiply that by the number of retrievable customers who are lost.

Therefore, it is in my opinion, that Customer Relationship Marketing is profitable.Businesses are crazy for not incorporating some sort of the customer relationship models.With all of the available resources and the Internet, it is almost crucial for businesses to develop one.As was stated earlier, it is more expensive to acquire customers than to retain them, so why not develop a plan?

References

“Destination CRM, All Business Leads Here.”http://www.destinationcrm.com/

“Turning Customer Data into Profits with a Spreadsheet.”http://www.jimnovo.com/home/Customer-Retention-gt.htm.

“Welcome to CRMonline 2001.”http://www.crm2001online.com/Index1g.html.

Curry, Jay.The Customer Marketing Method.The Customer Marketing Institute BV, 2000.

Gamble, Stone and Woodcock..Up Close and Personal?Kogan Page Limited, 1999.

Gordon, Ian.Relationship Marketing.John Wiley and Sons, Canada, 1998.

Lowenstein, Michael W.Customer Retention.ASQC, 1995.

Biography

Name:Jamey Dalke

I am working towards a Marketing certification on my teaching certificate.

Currently, I teach Business and Marketing classes at McPherson High School

Page last updated:August 1, 2001

Comments welcomed by or Jamey Dalke.