CRM: The Philosophy

Marketing practitioners and scholars have strongly recommended striving for close
relationships with customersOver the years many organizations have been compelled to accept this conclusion.
Most notable among these are the beliefs that existing customers are more profitable because
the acquiring and attracting of new customers is expensive, and that it is less costly to upsell
or cross-sell products or services to current customers . One of the most important studies conducted in this field is
by Reichheld and Sasser (1990), which showed the large impact on profitability of small
increases in customer retention rates, which made the marketing community more
conscious of the need to manage customer relationships in the long term as well as prior
to the first sale.


In addition, more studies have shown that the cost of retaining current
customers is lower than the cost of acquiring new ones (Blattberg and Deighton 1996,
Filiatrault and Lapierre 1997) and that economic benefits of high loyalty are important,
and in many industries it is this which determines the differences between companies
(Reichheld 1996).
The objective of customer relationship management is to unite and join information
technology and business processes in a fashion that enables the firm to acquire new
customers, retain existing customers, and maximize the lifetime value of its customers
(Peppard, 2000). Most importantly, CRM allows firms to differentiate customer
treatments based on specific customer needs and preferences. Additionally, financial
metrics that are centred on customers allow firms to segregate those customers that the
firm should be keeping from those it should be willing to lose (Dyche, 2001), enabling
micro-management of profitability.
The huge number of CRM initiatives carried out reflects both the complexity and
elusiveness of the CRM concept. While the number of CRM initiatives is growing fast,
scholarly published material on CRM principles is rather limited. Panda (2003) argues

that Berry (1983) formally introduced the term customer relationship management to
literature. Several ideas of relationship marketing had, however, emerged much earlier,
such as the one provided by John Arndt (1979), who noted the tendency of firms engaged
in business-to-business marketing to develop long-lasting relationships with their
important customers and their key suppliers rather than focus on discrete exchange and
named them “domesticated markets”.
In recent years, customer relationship management has been expanded to include an
integrated perspective on marketing, sales, customer service, channel management,
logistics and technology for engaging in customer satisfaction. Practitioners are calling it
customer relationship management (CRM) and are interested in all aspects of interactions
with customers to maintain a long-term profitable relationship with them.
After reviewing the literature, some of the definitions used to define CRM are as follows:
• Bob Thompson (2001, crmguru.com) defined CRM as follows: “Customer
relationship management (CRM) is a business strategy to select and manage the
most valuable customer relationships. CRM requires a customer-centric business
philosophy and culture to support effective marketing, sales and service
processes. CRM applications can enable effective customer relationship
management, provided that an enterprise has the right leadership, strategy and
culture.”
• Chen et al. (2003, p.682 ) wrote that: “CRM is a cross-functional, customerdriven,
technology-integrated business process management strategy that
maximizes relationships and encompasses the entire organization”

• “CRM is a strategy to identify and attract profitable customers, tying them to the
company or product by efficient relationship marketing to guarantee profitable
growth. CRM offers a great platform for the acquisition of new customers in
addition to gaining customer satisfaction and loyalty. Additionally, existing
customer relationships can be used to drive sales via up or cross-selling. The most
“valuable” customers especially need to be identified, attracted and retained”
(Kracklauer et al., 2001, p. 516).
In addition, Imhoff (2001, p 434) provided some variations on the meaning of CRM. A
representative set of these definitions is summarized in the following list:
• CRM is the set of systems, processes and organizations that profitably drive
customer loyalty.
• CRM is the strategic view that integrates how we want the business to relate to
the customers, specifically seen through technologies available to support that
view and make it come alive by integrating people, processes, culture and
attitude.
• CRM is the management of the relationship so that the partnership with the
customer grows, flourishes and remains healthy over time.
• CRM is building customer loyalty, not merely relationship management, using a
360-degree view of the customer.
• CRM is the set of business processes and practices that directly addresses the
relationships between key customers and the principal organization.

• CRM is the 360-degree view of the customers and their transactional activity with
the company.
An analysis of the above different definitions shows, they all have common concepts of:
customer focus (customer satisfaction, loyalty and retention), technology, knowledge
management, change management and leadership.