Term Papers on Customer Relationship Management (CRM)

Term Paper Title	Customer Relationship Management (CRM)
# of Words	2210
# of Pages (250 words per page double spaced)	8.84

Customer Relationship Management (CRM)

In this essay, I will begin by presenting the concept of Customer Relationship Management (CRM). Within this, I will discuss in detail the work of Reinartz and Kumar, as well as other influential writers, in order to provide broad theoretical underpinning to my analysis. Following on from this, I will critically assess the extent to which the implementation of an eCRM system can provide an organisation with a source of unique competitive advantage. I will use real life examples to demonstrate my points where appropriate and I will be using academic literature to provide the theoretical foundations to my arguments. [1]

Turban defines CRM as “the entire process of maximising the value proposition to the customer through every interaction – online and traditional – the customer has with a company” (2002: 879).

Similarly, according to Vowler (1999) CRM is concerned with “using data about customers to ensure a company offers an optimal product proposition, prices the product to meet specific customer expectations, and tailors all aspect of service quality such that every point of contact from initial enquiry to post-purchase service is perceived by the customer as a ‘seamless’ service” (Chaston, 2001: 101).

Both of these definitions are customer-oriented, in the sense that they imply that CRM should be beneficial to the customer. But within a business world (both online and traditional) where profitability is the bottom-line, the following explanation of CRM is more fitting.

Handen defines CRM as “the process of acquiring, retaining and growing profitable customers”. He goes on to incorporate the need for customer-fulfilment also by stating that CRM “requires a clear focus on the service attributes that represent value to the customer and that create loyalty” (2000: 8).

There are four types of CRM, according to Handen (2000). “Win Back or Save” is the process of convincing a customer to stay with the organisation when he or she wishes to leave, or convincing them to rejoin once they have left, and “Prospecting” is the effort to win new, first-time customers. Both of these would come under the heading of acquisition. “Loyalty” refers to preventing customers from leaving, and would therefore be categorised as retention. And finally, extension would relate to “Cross Sell/Up-Sell” as it involves attempting to increase the amount of money the customer spends with you, by identifying complementary products or services that the customer might potentially like to purchase.

I will focus on an in depth analysis of the retention aspect, as this is the area that clearly relates to the link between customer loyalty and profitability. However, I will also briefly discuss the idea of customer acquisition and customer extension, as this will provide a contextual framework to the focus of my discussion.

Firstly, customer acquisition. According to Hoffman and Novak (2000) customer acquisition is one of the biggest challenges facing on-line companies today. E-tailers are finding that it takes a great amount of marketing expenditure to attempt to set themselves out from the crowd, inspire Web shoppers to visit their sites, and then get them to actually make a purchase. However, Hoffman and Novak comment that for businesses, “their average customer acquisition cost is higher than the average lifetime value of their customers” (2000: 179). Therefore, those companies that will be able to bring their customer acquisition costs down to earth will have the best chance to thrive and gain a competitive advantage. Those that haven't will inevitably be unable to survive in the face of competition.

With reference to Hoffman and Novak (2000), their research findings show that CDnow, the music e-tailer was one of the first to develop a multifaceted, integrated customer acquisition strategy that reflects a sophisticated understanding of the economics of an on-line business. Integration was achieved through a combination of online (“affiliate” or “associate” marketing programs...

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