How Marketing Practices Are Changing: Customer Relationship Marketing (CRM)

Introduction

The marketing and business environment have been changing. The competition in the in the marketing is more aggressive and competitive in all business sectors. The travel and tourism industry is facing aggressive competition. The airlines have to improve service, customer service, promotions, performance and reliability in order to retain main customers and deliver high customer satisfaction (Zineldin 2006, p. 430-437). British Airways improves its service quality, staff performance and in-flight entertainment to retain potential customers and differentiate itself from low cost airlines. It also sends out the seasonal and sales promotions that relate or similar to the interest of each individual customer through electronic mails (Martinsons 2006, p. 337-340)
The retail market industry develops many marketing scheme in order to find what customers are looking for to be able to deliver customer satisfaction (Zineldin 2006, p. 430-437). For example, Tesco introduced Tesco Club Card to allow customers to collect points when they shop at any Tesco outlet. The actual reason behind club card scheme is to help Tesco to find out the important information about valuable customers. Every time that customers use the card to collect points, Tesco marketers will be able to find out the personal information such as how many children the customers have or what types of shampoo and which brand of dog food they normally purchase. With this information, the marketers can then send out the right promotional offers such as coupons to the customers, who are likely to come back to shop at Tesco again (Brink et al 2006, p. 15-25).
According to both examples, it can be assumed that it is important for the companies to focus on building a long-term relationship with profitable customers, especially in the market where competition is aggressive (Brink et al 2006, p. 15-25). This study is aiming to examine the importance of customer relationship marketing (CRM). The study will analyze and critique the customer relationship issues. Also the paper will give the reflective summary of a variety of different sources of information regarding the CRM issue.

Definition of CRM

Kotler (2003, p. 52) claimed that companies in these days focus on electronic marketing. They are becoming more skilful in customer relationship marketing and database marketing (Harwood & Garry 2006, p. 107-111). Customer relationship marketing can facilitate companies in order to offer excellent real time customer service by improving and developing a relationship with each value customer through the effective use of individual account information, which can be conducted by the use of computer and database technology (Martinsons 2006, p. 337-370).
It can be assumed that CRM is the approach practiced by companies in order to grow and maintain the valued customers. Dibb and Simskin (2001, p. 40) stated that customer relationship marketing adopts the uses of technology-enhanced customer interaction to form appropriate marketing offers design to raise the on-going relationship with individual customers with an organization’s target markets. They defined the CRM as
“The processes inherent in managing on-going customer relationship – particularly database, technology and communication tools – have led to a growth within marketing of customer relationship marketing. Database advances and direct marketing, in particular, have led to a focus on customer retention, share of the customer’s purchasing, the database as a device for managing direct communications and the integrated use of channels.”
(Dibb & Simkin 2001, p. 40-41)
According to Smith (2006, p. 87-93), the customer relationship marketing is the coherent application of the up-to-date knowledge about individual customers to product and service design that is communicated together in order to improve and develop a non-stop and long-term relationship between customer and companies or sellers, which is communally valuable. The emphasis of the customer relation marketing is on the share of the individual’s purchasing rather than the share of the overall market (Smith 20056, p. 87-93).
Dibb & Simkin (2001, p. 40-41) said that customer relationship marketing develops the on-going relationships with the customers by focusing on maintaining the links between marketing, quality and customer service among the customer markets, influences, referral, employee recruitment, suppliers and internal markets within the business. The companies must focus on customer retention and encourage repeat buying through an on-going responsive dialogue. The concentration is on obtaining more sales from the existing customers through the effective marketing activities rather than marketing programs designed to attract the new customers (Brige 2006, p. 24-33). There are several ways that the companies can do to maintain and retain the potential and valued customers. These methods will be discussed in the following section.

Develop Effective Customer Relation Marketing

As stated in the definition of customer relationship marketing in the previous section, it can be concluded that customer relationship marketing involves with using developing a relationship with each valued customer through the effective use of individual customer information accounts, which is managed by computer database (Kotler 2003, p. 52-53). The companies or sellers can customize market offerings, services, programs, message and media based on what they know and learn about each individual customer (Brink et al 2006, p. 15-25).
According to Lipka (2006, p. 95-100), the successful and winning companies in the term of customer relationship marketing must be very productive in gaining, acquiring, keeping and growing the numbers of customers. The companies that drive for success in improving the customer relationship marketing must improve and develop the value of their customer base by practice exceptionally well in customer strategies (Harwood & Garry 2006, p. 107-111). Harwood and Garry (2006, 107-111) claimed that when companies are concerning about developing customer relationship marketing, they must practice the flowing customer strategies effective. The customer strategies are as follows:

1. First important step that the companies should take is reducing the rate of customer defection (Harwood & Garry 2006, p. 107-111).
2. The companies should increase the prolonged existence of the customer relation
3. The companies should enhance the growth potential of each customer through the cross-selling and up-selling strategies (Blois & Ivens 2006, p. 352-365). The companies can do this by offering the products and services that might be in the interest of the valued customers. For example, the Eurostar the leading European train offers the customers the choices of hotels, car hire and travel insurance when customers purchase the train tickets to Paris or other destinations online. This is because its computer database can customize the details of the individual customers that want to go to Paris and then offer some products that may interest the travellers (Eurostar 2006).
4. The companies should also making low profit customers more profitable or terminating them as the companies cannot go after everyone, so they should concentrate on their target markets (Lipka 2006, p. 95-100). For example, Ryanair concentrate on customers that want cheap air travel. The service quality and performance may not be as good as luxurious traditional airlines. Most customers travelling with Ryanair are more concerning about getting there not the traditional in-flight services (Ryanair 2006)
5. The companies that attempt to develop strong customer relationship marketing should also focus on unequal effort on high value customers (Lipka 2006, p. 95-100).

One-to-One Marketing

Lipka (2006, p. 95-100) described one-to-one marketing as the segment of one or the customer centric marketing. There are some of the basis concepts of customer relationship marketing produced by Pepers and Rogers (1993, p. 51) in their book entitled ‘The One to One Future.’ They claimed that there are several key differences between mass marketing and the one-to-one marketing. Pepers and Rogers used a four-step framework for one-to-one marketing, which will be analyzed as bellow:

1. The companies that attempt to develop longevity customer relationship marketing should identify their views and customers and the companies should not go after everyone, but focus on their target markets (Pepers and Rogers 1993, p. 18-19).
2. The companies should single out the customers in the terms of their needs and demands and their value to the companies (Pepers and Rogers 1993, p. 18-19). For the customer value, companies should spend more effort on their most valuable and potential customers. The customer value is approximate as the net present value of all future profits coming from purchases, margin levels and referrals, less customer-specific serving costs (Pepers and Rogers 1993, p. 18-19).
3. The companies that aim to gain high success in building customer relationship marketing should interrelate with the individual customers in order to develop and improve the learning and understanding about the individual needs and to build stronger customer relationships (Pepers and Rogers 1993, p. 21).
4. The companies that strive to achieve the high customer relationship marketing should also customize products, services and message to each customer (Pepers and Rogers 1993, p. 21-22).

The one-to-one marketing is a more recent extension of the customer relationship marketing, depending on a dialogue with individual customers (Pepers and Rogers 1993, p. 18). The success of the one-to-one marketing depends on using technology to gain communication, a continuous dialogue leading to a learning relationship, an understandable incentive for such a dialogue, acknowledging the privacy of the customers and other demands on the customers’ time (Mitussis et al 2006, p. 572-589).
Pepers and Rogers (1993, p. 20) stated that the good point of the one-to-one marketing is that it allows the relationships between customers and companies to be developed. This side of relationship marketing is presently more commonly defined and referred to as the customer relationship management that adopts the technology-enhanced customer interrelation to build and shape the suitable marketing offers to individual customers in order to strength the relationship and encourage repeat buying behaviour (Brige 2006, p. 24-33).

Customer Databases Marketing and Customer Relationship Marketing

The important point of customer relationship marketing is to know more about the customers and in order to know them the companies have to collect the information of the individual customers and store it in a customer database and then they have to practice the database marketing. Kotler (2003, p. 53) defined the customer data base as

Martinsons (2006, p. 337-340) claimed that the development of the customer databases, the decreasing costs of obtaining, storing and using the information help companies to improve the better information systems technology. The effort to build on-going relationship with the existing customers helps leading the companies to increase and grow the numbers of loyalty customers. The databases advances have helped the companies to identify which customers that they need to keep and indicate which customers have on-going loyalty. These are the customers that the companies should treat specially than others (Zineldin 2006, p. 430-437).
The quality of the information in the databases allows specially made product and marketing communications package to be specified in order to attract and appeal to the individual customers (Harwood & Garry 2006, p. 107-111). Numbers of researches have found that companies use the captured information about the individual customers to improve and develop the effective and successful database marketing – the process of building, maintaining and using the customer database and other databases such as products, suppliers and resellers for the purpose of contacting, transacting and building relationships (Martinsons 2006, p. 337-340). The companies are particularly focusing heavily in developing direct marketing techniques and we-based communication (Seeman & O’Hara 2006, p. 24-34). The promotional developments have facilitated the more accurate and timely delivery of the customized message to the valuable customer of the companies (Martinsons 2006, p. 337-340). For example, Going Place sends out the discount vouchers to customers that normally buy city break package tours by suing the database to generate the information of the customers, so they can send out the right discount vouchers to the potential travellers who are likely to respond to the promotions (Seeman & O’Hara 2006, p. 24-34).

Conclusion

It can be concluded that the advances of the data collection and management allow the companies to record, track and respond to the needs and wants of each individual customers. The impact of this type of development in building customer relationship marketing on the market segmentation theories and concepts is potentially significant. In these days, the companies can deceptively target the individual needs of customers in the markets that they previously couldnot satisfy the requirement of that segment or group. The term of one-to-one marketing has been adopted to explain this type of development in the market.