Why Electronic Customer Relationship Management?

Read this section which discusses the importance of e-CRM and identifies types of CRM within organizations: operational, analytical, sales-force automation, and collaborative. The cycle of CRM identifies customer problems, provides solutions, and focuses on maintaining that customer relationship.

Customers are the most important stakeholders in a business’s success. Without customers purchasing goods or services, most businesses would not have a revenue stream. But it can be difficult to shift from realizing this important fact to implementing it into day-to-day business decisions and strategy.

A successful relationship with a customer is based on meeting (and exceeding) their needs. It involves determining what problems the customer has and providing solutions to those problems.

Maintaining a good customer relationship is critical to business success. The costs associated with acquiring a new customer are far higher than what it costs to maintain an existing customer relationship. Investing in customer relationship management (CRM) should increase business revenue.

The CRM cycle starts with determining what problems potential customers might have and then presenting solutions to those problems. Solutions are implemented, and ongoing service maintains the customer relationship.

Let's look at two people booking an overseas holiday. One is a 23-year-old recent graduate who is visiting Argentina for three months with a friend; the second is a 38-year-old mother of two young children planning a family holiday to Thailand. If both walked into a travel agency, the travel agents would make judgments on their dress and appearance to determine how they will help each customer book their holiday (and how much commission they will earn in return). The travel agent will ask questions to try to sell additional services to these two customers. For the 23-year-old, additional services might include travel insurance that covers extreme-sports activities and a calling card that allows her to call home from anywhere in the world. For the 38-year-old, additional services could include babysitting services included in a hotel reservation.

When the two travelers are seated at their computers, human travel agents cannot make snap judgments based on appearance or to try to sell additional services based on the type of traveler they see. Of course, you no longer have the overhead costs of a travel agency and agents. However, Web technology allows for similar, and often superior, judgments and sales opportunities.

For example, both travelers probably began researching their trips using a search engine. Creating landing pages tailored to different types of searches provides an opportunity to tailor the products presented to each traveler.

Technology also allows an online business to interact personally with a Web visitor and provide information they may not get from a travel agency—unbiased reviews from other customers. The business should use technology to treat different customers differently.

Web technology allows the company to make and test customer-related marketing decisions relatively quickly, and adjust them as needed.

For example, in 2002, Jeff Bezos of Amazon.com launched free shipping for orders over $99 in value. The offer was advertised as being for a limited time only: the time limit enabled Amazon to test the effect of the offer on its bottom line and retract it if necessary. Over the months, Amazon.com dropped the order threshold for free shipping. Today, U.S. Amazon.com orders over $25 ship for free. However, free shipping does not mean priority shipping, so orders can still be delivered in a shorter period of time—for a delivery fee.

Electronic customer relationship management (e-CRM) uses technology in a number of ways to cement CRM into the way organizations conduct themselves. Once a business shifts its focus to consumer needs, it will find that all these technologies feed each other. However, the fundamental principle of e-CRM is to remember that technology should be used to enable customer relationships, not replace meaningful relationships.


Why is knowing what keywords purchasing customers use helpful for CRM?

First, the data collected online should be used to build meaningful profiles of potential customers, and information should be used to foster relationships. Web analytics tools gather a wealth of data that can inform customer relationships, from search keywords used to reach a Web site, to navigation paths on a Web site. It is even possible to capture this kind of information about specific customers when they purchase or subscribe on a Web site. Without the customer knowing, the company can capture and store the referral source of their visit, their navigation path, and their order or registration details for future use.

CRM software enables businesses to manage all customer and lead information across all departments in a centralized place. No matter whom a customer speaks to within a business, all employees can access the same information recorded over time—a 360-degree view of the customer. This means that any time someone inside the organization looks up the customer, he can see every interaction the organization has had with the customer, what previous queries have been raised, and how these have been solved in the past.

CRM software also enables businesses to automate much of the sales cycle, which frees salespeople to spend time creating personal relationships where it matters—with potential and existing customers.

Technology has also changed the ways customers can contact companies. Customer relationships are no longer driven by telephone call centers: companies use blogs, Twitter, e-mail, and instant messenger (IM) as customer-service channels, both pre- and post-sale.

Customer-centric and Customer Driven

It is one thing to place the customer at the center of an organization’s planning and execution of business plans and another to have customers driving the direction of a business. Many new, Web-based businesses rely on customer-driven business for their business to succeed and actively encourage customers to take the lead and add value to the business. Social media services such as Flickr, Delicious, and Twitter are examples of services that are user-driven rather than user-centric. They provide tools that enable users to make the service their own, often by allowing outside developers access to create supplementary services.

Savvy organizations provide tools to customers to drive their business, passing on tasks to customers that the organization might have ordinarily performed. For example, many airlines now allow travelers to check in online prior to arriving at the airport. Although they are giving travelers convenient tools and increased options when it comes to checking in, the airlines are also outsourcing the check-in process to their travelers. As more travelers select to check themselves in, staff costs for airlines are reduced. The travelers are doing the job for free.

Types of CRM in Organizations

CRM should infuse every aspect of a business in the same way marketing should infuse every aspect of a business, but it is useful to look at different ways to implement CRM.

Operational CRM refers to the most obvious channels that relate to customers: the front end of a business and its customer service. From a Web technology point of view, operational CRM informs the Web site a customer sees, as well as their entire online user experience. Technology also enables effective customer service, from providing numerous contact channels to presenting technology that records all customer contacts.


Data mining is the analysis of large volumes of data to determine patterns, correlations, relationships, and trends in the data.

Analytical CRM analyzes the data a business collects to determine information about customers to inform sales and marketing decisions. Data mining is a crucial step to effective CRM. Web analytics and conversion optimization are part of the CRM process. You can use the data collected about the nature of visits to your Web site to make informed decisions about where to focus attention based on customer behavior. You can analyze use past customer purchasing behavior to predict future behavior and use data to segment customers and tailor communications.

For example, Amazon.com uses the purchase history of a customer to recommend future purchases to that individual. A customer who has bought several cookbooks will receive offers for other popular cookbooks. Amazon.com also uses the purchase behavior of customers who bought the same book to recommend books based on similar customers’ preferences. This process is called collaborative filtering.

Sales-force automation uses CRM software to manage sales cycles and collect customer sales data. The software enables businesses to track leads, schedule transactions and communications with potential and existing customers, and generate detailed reporting on the sales process. There are several software providers, such as Salesforce.com.

Collaborative CRM refers to a process that combines customer data across all facets of a company. For example, a company can use queries that are regularly submitted to the technical support or customer service arm of a business to inform Web site updates (updating content on the Web site to address a query that is regularly submitted) and inform product development.

Instead of various departments collecting their own customer data and using it in isolation, data are collaborated so all channels can make informed decisions based on the entire customer experience.

Key Takeaways

  • A successful relationship with a customer is based on meeting or exceeding their needs.
  • Maintaining good customer relationships is critical to the success of a business, as costs for most new relationships are more expensive than maintaining existing relationships.
  • The cycle of CRM starts with determining what problems potential customers may have and then presenting solutions to them.
  • Online businesses can use technology to interact personally with a Web visitor. Customers can get unbiased reviews from others online.
  • Today, blogs, Twitter, e-mail, IM, and CRM channels drive pre- and post-sale customer relationships, rather than telephone contact centers.
  • There are several types of CRM in organizations: operational, analytical, sales-force automation, and collaborative CRM.


Creative Commons License This text was adapted by Saylor Academy under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License without attribution as requested by the work's original creator or licensor.

Last modified: Wednesday, January 15, 2020, 9:20 AM