CRM/Customer Satisfaction

To win in today's marketplace, companies must be customer-centered - they must deliver superior value to their target customers. They must become adept in building customer relationships, not just building products. Today's customers face a growing range of choices in the products and services they can buy. They base their choices on their perceptions of quality, value and service. Companies need to understand the determinants of customer value and satisfaction.

Customer delivered value is the difference between total customer value and total customer cost. Customers will normally choose the offer that maximizes their delivered value. Customer value and satisfaction are important ingredients in the marketer's formula for success. But what does it take to produce and deliver customer value?

Customer satisfaction is the outcome felt by buyers who have experienced a company performance that has fulfilled expectations. Customers are satisfied when their expectations are met and delighted when their expectations are exceeded. Satisfied customers remain loyal longer, buy more, are less price sensitive and talk favorably about the company. To create customer satisfaction, companies must manage their own value chains and the entire value delivery system in a customer centered way.

Ultimately, marketing is the art of attracting and keeping profitable customers. Yet, companies often discover that between 20 and 40 per cent of their customers are unprofitable. Further, many companies report that their most profitable customers are not their largest customers, but their mid-size customers. The largest customers demand greater service and receive the deepest discounts, thereby reducing the company's profit level. The smallest customers pay full price and receive less service, but the costs of transacting with small customers reduce their profitability. In many cases, mid-size customers that pay close to full price and receive good service are the most profitable.

Customer profitability Analysis [CPA], conducted with the tools of Activity Based Costing, helps companies estimate the amount by which revenues from a given customer over time exceed the company's costs of attracting, selling and servicing that customer and a customers lifetime value is the net present value of the stream of future profits.

Few companies actively measure individual customer value and profitability. The company's goal should not be only to get customers, but to retain them, aiming to ultimately result in high customer equity.

Customer equity is the total discounted lifetime value of all the firms customers – the more loyal customers the higher the equity. Customer relationship marketing provides the key to retaining customers and involves building financial and social benefits as well as structural ties to customers.

Companies must decide the level at which they want to build relationships with different market segments and individual customers, from such levels as basic, reactive, accountable and proactive to full partnership. Which is best depends on a customer's lifetime value relative to the costs required to attract and retain that customer.

CRM plays a key role in helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns with clear goals and objectives, and generate quality leads for the sales team. Craft the right value proposition and institute best processes with proper motivation for employees and training in the art of retaining customers. This is achieved by allowing the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits, identifying the most profitable customers and providing them the highest level of service.

Providing employees with the information and processes necessary to know their customers, understand their needs, and effectively build relationships between the company, its customer base, and distribution partners and studying what products and services are required after doing a thorough survey of what’s available in the market and what is lacking.

The goal of CRM is achieved when the firm has learnt why its customers are not being retained and how its competition is wooing them away and senior management is actively monitoring customer defection metrics.

CRM is best suited to help businesses use people, processes, and technology to gain insight into the behavior of, and to identify high-value customers. This allows a company to create new distribution channels, new pricing models, improved transaction processes, efficient logistics and supply-chain, it helps to track customer satisfaction and retention levels, the development of incentives and metrics to judge.

CRM also leads to improved customer service, it helps in building communities and catalyses collaborative commerce it streamlines sales and marketing processes, improved customer profiling and targeting, reduced costs, and increased share of customer and overall profitability.

The success generated by a well-executed customer relationship program can improve net income and increase market share tremendously as was experienced by Harrah’s Entertainment Inc. a casino in Las Vegas. After launching a loyalty program that pulled all data into a centralized warehouse they were able to identify and target their most profitable customers leading to increase in income of 12.4%

To survive, today's marketing managers cannot think only about selling products and mass marketing, but they have to move towards one-to-one marketing, with messages especially designed to appeal not to a mass audience but to the individual customer.

In the past, many companies took their customers for granted, customers often did not have many alternative suppliers, or the other suppliers were just as poor in quality and service, or the market was growing so fast that the company did not worry about fully satisfying its customers.

Today, outstanding companies go all out to retain their customers. Many markets have settled into maturity and there are not many new customers entering most categories. Competition is increasing and the costs of attracting new customers are rising. In these markets, it might cost five times as much to attract a new customer as to keep a current customer happy, so it is of paramount importance to build loyalty through different levels of marketing. Increasingly, marketing is moving away from a focus on individual transactions and towards a focus on building value-laden relationships and marketing networks.

The goal is to deliver long-term value to customers and the measure of success is long-term customer satisfaction. Relationship marketing requires that all of the company's departments work together with marketing as a team to serve the customer. It involves building relationships at many levels - economic, social, technical and legal - resulting in high customer loyalty.

Strong customer bonds can also be formed through adding financial benefits the example being frequency programs that reward frequent usage, adding social benefits, this is done though individualizing and personalizing each relationship so that the customer feels important, and finally by adding structural ties through long term contract and the like.

Smart companies first capture information and organize it into a data warehouse and then through data mining extract useful information. Relationship marketing is not effective in all situations. Transaction marketing, which focuses on one sales transaction at a time, is more appropriate than relationship marketing for customers that have short time horizons and can switch from one supplier to another with little effort or investment.

The downside to CRM is that it costs a lot and needs for the entire company to be aligned to customer satisfaction, plus not all customers want a relationship. To implement CRM properly a strategy has to be created first and organization changed to match it.