Advantages and disadvantages of CRM

CRM has been defined by Peppers et al. (1992) as a way of developing the relationships with customers in order to achieve competitive advantage and sustain the growth of the business in the long-term. Essentially, CRM is a way of gathering and processing information in order to understand customers’ needs and behaviours so that customers can be retained within the business through the creation of  loyalty and trust (Chambers et al., 2010). Consequently, the focus of CRM seems to be on creating value for the business by retaining existing customers in the long-term (Winer, 2001).

The main advantages of CRM are:

–        The business learms what the needs of its customers are and can organise their operations accordingly. The goal is to provide the products/services they expect and maximise effectiveness and efficiency of the operations

–        It allows organisations to see how customers’ needs evolve overtime and adjust their operations accordingly

–        CRM can increase customer retention, favour repeated purchases, increase profit and improve the quality of the products/services provided

–        It supports planning and control activities, since they are a way of reconciling supply and demand (Ibid.). In this respect, CRM can be used to analyse current trends, forecast future trends and monitor the evolution of the demand overtime.

–        CRM can help creating unique and exclusive relationships with single customers or group of customers. This have a positive, psycological effect on customers who feel considered and listened to.

Disadvantages of CRM are:

–        It seems to be mainly focused on retantion of existing customers rather than on the acquisition of new ones

–        Legal aspects (e.g.: privacy) and ethical issues should be considered during its implementation

–        It may lead organisations to discriminate group of customers. More profitable customers may enjoy better treatments and conditions than occasional customers. This may damage the image of the company

Surely, CRM represents a marketing approach to build solid and long lasting relationships with individual customers (Jackson qtd. in Parvatiyar et al., 2001). Through the use of CRM technologies and techniques, organisations focus on the active involvement of customers rather than on the manipulation of their perceptions in regards of their needs and behaviours (McKenna qtd. in Parvatiar et al. 2001). Therefore, the idea of CRM mainly concerned with the retention of existing customers comes from the fact that they represent the primary source of information on which building a CRM strategy.

However, CRM along with the application of marketing techniques, can also serve to attract new customers. I think for example at market segmentation: through the analysis of the consumer habits of existing customers, organisations can define trends, behaviours and needs of the specific market segments to which these customers belong. Therefore, changes in the products/services or in the operations aimed at satisfying different segments can actually lead to the acquisition of new clients. Existing customers will provide information to reach the specific market segments to which they belong as we can assume consumers within the same segments have similar needs and habits.

 

References

Chambers, S., Johnston, R. and Slack, N. (2010) Operations Management. Sixth Edition. Harlow. Pearson Educational Limited.

Parvatiyar, A. and Sheth, JN. (2001) Customer Relationship Management: Emerging Practice, Process and Discipline. Journal of Economic and Social Research, 3(2): 1-34. Online at <http://jesr.journal.fatih.edu.tr/CustomerRelationshipManagement.pdf> [accessed 27 April 2013]

Peppers, D. and Rogers, M. (2010) Managing Customer Relationships: A Strategic Framework. New Jersey. John Wiley & Sons. Online at <http://books.google.de/books?id=Dd2jIx-dtCgC&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false> [accessed 23 April 2013]

Winer, R. (2001) A Framework for Customer Relationship Management. California Management Review, 43(4): 89-105. Online at <http://gvoss.cox.smu.edu/CRM.pdf> [accessed 25 April 2013]

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