CRM -- Evolution
CRM began in the early 1990s when academics and consultants promoted the idea that marketing practice should focus upon identifying and serving the organization's best customers and prospective customers.
Frederick Reichheld's work at Bain and Company (published in The Loyalty Effect, 1996) suggested that differences in the performance of insurance brokers were better explained by examining customer loyalty and retention than by market share, unit cost and scale. He argued that customers become increasingly profitable over time because:
- customer spending tends to accelerate over time
- satisfied customers make referrals
- loyal customers are less price sensitive1
CRM was the logical extension of long-term efforts by companies to keep up with ever changing buyers, markets and competitors. These challenges intensified with the explosion in the use of PCs and the Internet in the 1990s. The economy surged, everyone had more information at their fingertips, and customer expectations rose rapidly. 2
New technologies have enabled firms to implement CRM by:
- providing greater individual customer insight
- allowing firms to effectively respond to individual requirements
- integrating the business processes of the firm around individual customers3
The CRM architecture consists of:
- Operational CRM, also known as front-office, involves the areas where direct customer contact occurs (call center, email, direct sales, etc.) The majority of CRM products fall into this category
- Analytical CRM, also known as back-office or strategic CRM, involves understanding the customer activities that occurred in the front office. Products in this category include data warehouses and business intelligence applications.4
1 Knox, Simon, et al. Customer Relationship Management. Oxford: Butterworth Heinemann, 2003.
2 Bligh, Philip, and Douglas Turk. CRM Unplugged. Hoboken: John Wiley & Sons, 2004.
3 Knox, Simon, et al. Customer Relationship Management. Oxford: Butterworth Heinemann, 2003.
4 Dyche, Jill. The CRM Handbook. Boston: Addison-Wesley, 2002.
