Customers are the most important asset that any business has. Without enough good customers, no company can survive. A business must attract new customers; and, perhaps more importantly, hold on to its current customers. Why? Because repeat customers are more profitable. It’s estimated that it costs as much as six times more to attract and sell to a new customer than to an existing one. Repeat customers also tend to spend more, and they’re much more likely to recommend the business to other people.
Customer relationship management (CRM) is a widely implemented model for managing a company’s interactions with customers, clients, and sales prospects. Retaining customers is the purpose of customer relationship management, and it is a marketing strategy that focuses on using information about current customers to nurture and maintain strong relationships with them.
The underlying theory is fairly basic. To keep customers happy you: treat them well, give them what they want, listen to them, reward them with discounts and other loyalty incentives, and deal effectively with their complaints. CRM uses technology to organize, automate, and synchronize business processes—principally sales activities in addition to marketing, customer service, and technical support.
The overall goals are to find, attract, and win new customers; to nurture and retain the customers the company already has; to entice former customers back into the fold; and to reduce the costs of marketing and client service. CRM is a company-wide business strategy including customer-interface departments as well as other departments. Measuring and valuing customer relationships is critical to implementing this strategy (Figure 1).