The value of customer relationship management

Relationship marketing or CRM is a way of doing business, a strategic orientation that focuses on keeping and improving the relationship with current customers thus ensuring customer loyalty (Zeithaml & Bitner, 1996).

Customer loyalty creates incremental profits and is impacted by four factors (Lovelock & Wirtz, 2007). One, individuals purchase more as their families grow or as they become affluent. Two, experienced customers make fewer demands on suppliers. Three, positive word-of-mouth recommendations help companies to save on advertising and, four, long-term customers are more likely to pay regular prices, and highly satisfied customers are often willing to pay a premium.

Building customer loyalty starts with ensuring a good fit between the customer’s needs and the company’s capabilities. The emphasis should be placed on value and not just on volume, with a tiered service approach. In other words, not all customers should be targeted with the same level of intensity and the company must be sure to keep all the promises it makes.

A trust relationship will enhance the quality of the relationship and will help to protect the relationship in difficult times (Wong & Sohal, 2002). CRM helps companies to differentiate themselves from their competitors and it helps customers with the evaluation of product quality, satisfaction and purchase intention. Perceived benefits enhance customer loyalty and retention.

However, it is always important that companies take the cost of relationships into account. Remember that the development of a relationship takes time, money and resources. Once the organisation commits itself to a relationship strategy, the expectations of returns from this strategy need to be realistic.

In order to accelerate the returns on investment in relationship strategies, companies make use of CRM systems which could act as an enabler, capturing customer information and delivering it to the various touch points. Using a CRM can result in vast service improvement and increased customer values ( Lovelock & Wirtz, 2007).

Before implementing any relationship-building activities, companies must ensure that they have processes, people, structures and leadership support (commitment from top management to relationship building) in place. Without these aspects, companies will only be able to talk about relationship building but will not succeed in building lasting relationships.

Dr Gerhard van Wyk (PhD), Lecturer: Integrated Marketing Management. Faculty of Management and Leadership at Milpark Business School.

Milpark Business School offers a Post Graduate Diploma in Business Administration, which includes a module on Integrated Marketing Management. For more information contact Milpark Business School or visit Milpark.

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