Introduction to Customer Relationship Management
What CRM really means
Customer Relationship Management is a strategy for building profitable, long-term customer relationships, supported by processes and technology. The exam tests whether you can separate the three: strategy (whom we serve and how), process (lifecycle stages and workflows) and technology (the software). A workable definition: CRM is the combination of people, process and technology used to understand and manage customer relationships across the whole lifecycle.
Core rules and concepts
- Operational CRM covers front-office work: sales force automation, service ticketing, marketing automation.
- Analytical CRM uses customer data to segment, score and predict.
- Collaborative CRM connects channels and partners - email, chat, dealer portals.
- Lifecycle: acquire → onboard → grow → retain → win back.
- Customer lifetime value (simple form) = average order value × purchase frequency per year × years retained. For profit CLV, subtract cost to serve.
- Relationship marketing aims at retention; transactional marketing aims at the single sale.
Worked example
A Bhubaneswar cable operator has 12,000 subscribers paying ₹250 a month with an average tenure of four years. Simple CLV = 250 × 12 × 4 = ₹12,000 per subscriber. The firm spends ₹1,200 to acquire a subscriber and ₹300 a year to serve them. Acquisition cost is recovered in under five months, so a ₹200 retention offer is easily justified.
Traps that cost marks
- Defining CRM as 'software' or 'a customer database' - it is a strategy first.
- Reporting CLV without stating the formula or the period.
- Treating every customer as equally valuable instead of segmenting by value.