The Emergence of CRM Practice
The Past:
Looking back at a snapshot history of marketing, we can see the following clear developments and progression over the last four decades:
• 1960’s – the era of Mass Marketing, when Gibbs SR toothpaste began the first marketing of this kind with its black and white campaign.
• 1970’s – saw the beginning of segmentation, direct mail campaigns and early telemarketing (such as publishing)
• 1980’s – where Niche marketing made millionaires of those who were best at it.
• 1990’s – Relationship Marketing. The explosion of telemarketing and call centres, all set up to develop relationships with customers. The recognition of the true value of retention and the use of Lifetime Value as a business case.
In addition to this, a number of key marketing concepts can also be used to see where CRM has developed from:
• Satisfying Needs, Customer Orientation
• The organisation needs to be arranged so that all functions contribute
• Profit must be the consequence of delighting customers (Kotler)
Developing customer relationship has historical antecedents going back into the pre industrial era. Similarly artisans often developed customized produce for each customer. Such direct interaction led to relational bonding between the producer and the consumer. It was only after industrial era’s mass production society and the advent of the middlemen that there were less frequent interactions between producers and the consumers leading to transactions oriented marketing.
The production and consumption factions got separated leading to marketing functions being performed by the middle men and middlemen are in general oriented towards the economic aspects of buying since the largest cost is often the cost of goods sold.
In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include: -
1. The growing de-intermediation process in many industries due to the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end-customers. For example, in many industries such as airlines, banks insurance, software or household appliances and even consumables, the de-intermediation process is fast changing the nature of marketing and consequently making relationship marketing more popular. Databases and direct marketing tools give them the means to individualize their marketing efforts.
2. Advances in information technology, networking and manufacturing technology have helped companies to quickly match competition. As a result product quality and cost are no longer significant competitive advantages.
3. The growth in service economy. Since services are typically produced and delivered at the same institution, it minimizes the role of the middlemen.
4. Another force driving the adoption of CRM has been the total quality movement. When companies embraced TQM it became necessary to involve customers and suppliers in implementing the program at all levels of the value chain. This needed close working relationships with the customers. Thus several companies such as Motorola, IBM, General Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and customers to practice TQM. Other programs such as JIT and MRP also made use of interdependent relationships between suppliers and customers.
5. Customer expectations are changing almost on a daily basis. Newly Empowered customers who choose how to communicate with the companies across various available channels. Also nowadays consumers expect a high degree of personalization.
6. Emerging real time, interactive channels including e-mail, ATMs and call centre that must be synchronized with customer’s non-electronic activities. The speed of business change, requiring flexibility and rapid adoption to technologies.
7. In the current era of hyper competition, marketers are forced to be more concerned with customer retention and customer loyalty.
8. As several researches have found out retaining customers is less expensive and more sustainable competitive advantage than acquiring new ones.
9. On the supply side it pays more to develop closer relationships with a few suppliers than to develop more vendors.
10. In addition several marketers are concerned with keeping customers for life than making one time sale.
11. The globalization of world marketplace makes it necessary to have global account management for the customers.
The Past:
Looking back at a snapshot history of marketing, we can see the following clear developments and progression over the last four decades:
• 1960’s – the era of Mass Marketing, when Gibbs SR toothpaste began the first marketing of this kind with its black and white campaign.
• 1970’s – saw the beginning of segmentation, direct mail campaigns and early telemarketing (such as publishing)
• 1980’s – where Niche marketing made millionaires of those who were best at it.
• 1990’s – Relationship Marketing. The explosion of telemarketing and call centres, all set up to develop relationships with customers. The recognition of the true value of retention and the use of Lifetime Value as a business case.
In addition to this, a number of key marketing concepts can also be used to see where CRM has developed from:
• Satisfying Needs, Customer Orientation
• The organisation needs to be arranged so that all functions contribute
• Profit must be the consequence of delighting customers (Kotler)
Developing customer relationship has historical antecedents going back into the pre industrial era. Similarly artisans often developed customized produce for each customer. Such direct interaction led to relational bonding between the producer and the consumer. It was only after industrial era’s mass production society and the advent of the middlemen that there were less frequent interactions between producers and the consumers leading to transactions oriented marketing.
The production and consumption factions got separated leading to marketing functions being performed by the middle men and middlemen are in general oriented towards the economic aspects of buying since the largest cost is often the cost of goods sold.
In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include: -
1. The growing de-intermediation process in many industries due to the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end-customers. For example, in many industries such as airlines, banks insurance, software or household appliances and even consumables, the de-intermediation process is fast changing the nature of marketing and consequently making relationship marketing more popular. Databases and direct marketing tools give them the means to individualize their marketing efforts.
2. Advances in information technology, networking and manufacturing technology have helped companies to quickly match competition. As a result product quality and cost are no longer significant competitive advantages.
3. The growth in service economy. Since services are typically produced and delivered at the same institution, it minimizes the role of the middlemen.
4. Another force driving the adoption of CRM has been the total quality movement. When companies embraced TQM it became necessary to involve customers and suppliers in implementing the program at all levels of the value chain. This needed close working relationships with the customers. Thus several companies such as Motorola, IBM, General Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and customers to practice TQM. Other programs such as JIT and MRP also made use of interdependent relationships between suppliers and customers.
5. Customer expectations are changing almost on a daily basis. Newly Empowered customers who choose how to communicate with the companies across various available channels. Also nowadays consumers expect a high degree of personalization.
6. Emerging real time, interactive channels including e-mail, ATMs and call centre that must be synchronized with customer’s non-electronic activities. The speed of business change, requiring flexibility and rapid adoption to technologies.
7. In the current era of hyper competition, marketers are forced to be more concerned with customer retention and customer loyalty.
8. As several researches have found out retaining customers is less expensive and more sustainable competitive advantage than acquiring new ones.
9. On the supply side it pays more to develop closer relationships with a few suppliers than to develop more vendors.
10. In addition several marketers are concerned with keeping customers for life than making one time sale.
11. The globalization of world marketplace makes it necessary to have global account management for the customers.