CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management



Customer Relationship management

Introduction

Customer Relationship Management (CRM) is about introducing the right product to the right customer at the right time through the right channel to satisfy the customer's evolving demands; however, most existing CRM practice and academic research focuses on methods to select the most profitable customers for a scheduled CRM intervention. The tools and technologies of data warehousing, data mining, and other customer relationship management (CRM) techniques provide greater opportunities than ever before for today's companies to establish and sustain long-term relationships with their customers (Sun, 2006; Winer, 2001). The ultimate goal is to transform these relationships into greater profitability by improving the effectiveness of CRM programs, increasing customer loyalty and purchase probability, and lowering the cost of serving, thereby increasing profitability. Realizing the increasing importance of customer orientation, companies from all types of industries are exploring relationship building as a promising means of differentiation, competition, and revenue-growth opportunities.

In addition, contemporary practice of CRM has been integrated into every step of the marketing process—telemarketing, advertising, transaction, service, and survey. Furthermore, the traditional process of mass marketing is being challenged by the new approach of interactive marketing (Blatter & Deighton, 1991; Haeckel, 1998) or one-to-one marketing (Peppers, Rogers, & Dorf, 1999). Companies focus on the depth of each customer's needs and endeavour to establish a long-term relationship with each customer.

Most of the current CRM practices are campaign centric in the sense that they focus on methods to select the most desirable customers for a scheduled CRM intervention; however, by definition, CRM should be customer-centric, This requires the company to develop the right interventions for the right customer at the right time through the right channel to meet the customer's need. To achieve this, the company needs to develop detailed customer knowledge, follow the development of each individual customer, and adopt CRM interventions that are relevant to the status and preference of each individual customer. These steps help build a stronger one-on-one relationship. The resulting CRM solutions should be an integrated sequence of multisegment, multistage, and multichannel CRM decisions with the goal of maximizing the total customer lifetime profit.

Adaptive Learning and Proactive CRM

Adaptive Learning

For CRM to be customer-centric, the first necessary step is to learn about the evolving needs and preferences of individual customer. Based on accrued information on customer history as well as the feedback obtained from the last executed CRM decision, the company should be able to continuously learn and improve the accuracy of its knowledge on each individual. To be more specific, the ideal learning should have the following properties: (a) The accrued information is used to continuously update the company's knowledge of the customer's preferences; (b) the company's strategic decision is adapted according to the updated knowledge; and as a result, (c) the company can revise its belief in the next period based on successful and unsuccessful interactions with the customer. We term this type of learning “adaptive learning.” Adaptive learning offers the company the opportunity to learn about ...