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CRM - Does theory work in practice?

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CRM- DOES THEORY WORK IN PRACTICE? There is great debate on the use of Customer Relationship Management in practice. There are two differing views and in this discussion document both points will be analysed with use of examples and the relevant theory emphasised by models and frameworks. "CRM is about having a good IT system, therefore, many firms believe they are carrying out CRM when in fact they are not" To answer the validity of this part, there needs to be investigation into the practical use of CRM. Black Horse financial services markets regulated products to the customers of Lloyds bank. Special sales force advise more than half a million customers each year through its high street branches generating more than �140million in premium income. Although there has been a huge increase in public awareness through media coverage for demand for life assurance and retirement provisions, research shows that the majority of the market prefer to interact face to face when taking out pensions. However to enable target markets to be selected and data regarding customers and their background would take days to be accessible. The slow IT system needed to be improved and be user friendly by the marketers of the firm. After careful selection the Viper software was chosen. After a year Black Horse was happy with the system and the ability to quickly interrogate a large amount of information at a customer level. ...read more.


The top 10% of customers for this client are worth 38% of the total value and the bottom 10% made up minus 28% value. The diagram below shows how such a theory can be extremely advantageous in the fields of CRM. * Group A- Offer preferential value , possibly tailored product/service to these customers * Group B- Offer normal undifferentiated product/service * Group C- or the lowest valued customers should either be turned into the higher level customers or be lost as these are seen to be unprofitable clients to the organisation Segmenting by customer value "Marketing and in particular the managing of the buyer-seller interactions, is composed of highly specialist tasks, often crossing business functions. Consequently, organisations must learn to perform their tasks in such a way as to deliver effective customer relationship management (CRM)" The above statement refers to the true essence of CRM. The theory therefore will explain the different parts of the statement and then this will be compared to the two examples and they degrees in which they comply with effective CRM. Theoretical Approach Customer relationship management is a combination of relationship marketing and database marketing. The table below highlights some key differences of this approach to traditional marketing. Relationship marketing Marketing mix Customer retention new customers One to one one to many Mutual advantage make a sale Active contact-interaction one way communication Join problem solving one-way problem solving The theory is that by endorsing a marriage like relationship, both the firm and the customer can prosper. ...read more.


For example: * Conduct market segmentation analysis * Identify likely customers for new and existing product lines * Generate direct marketing campaigns * Track and monitor campaign effectiveness Conclusions Black Horse have used their CRM software solution to help the flow of information regarding their customers. They have failed to make CRM in integral part of the business environment. Instead they have only used this concept in obvious benefitail areas. They are after all mainly concerned with corporate objectives in the short to mid terms but hopefully with further use of their database will begin to identify the need to use CRM in all forms of their business and communicate this through more effective direct marketing and other business functions. Royal & SunAlliance have been more customer focused and have a higher degree of relationship marketing. The dissection of customer value poses very powerful information but must be used to its potential. There have been trends towards using the VIPER sytems by marketers to gain the powerful data, but in practice it is not being spread through all or most of the business. CRM is not only a database solution which assists in segmentation, relationships and loyalty information but very benefitail intangible results to the organisation. It may be optimistic though to assume that companies adopt a thorough CRM ethos. It could be defended that it takes a great deal of time, money and investment to change the environment of the business in most or all of the different areas. ...read more.

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