Customer Relationship Management CRM The Heart of Marketing

Customer relationship management has become the marketing buzzword of the past two decades with business-to-business firms jumping in, many without really being certain of what they hope to achieve from it, and oftentimes being disappointed with the results.

Gummesson (2004) describes CRM as "the values and strategies of relationship marketing with particular emphasis on customer relationships- turned into a practical application." CRM has become a necessity to successfully and profitability manage customers and a firm’s relationship with them, with the market reaching a value of approximately $11.5 billion in 2002. (Xu et al. 2002). However, despite this large spending it is estimated that 70% of CRM implementations fail. (Xu et al. 2002). There are a number of reasons for these failures, such as a failure to implement it throughout the organisation and resistance from employees. But in some cases the buyer-seller relationship does not merit a collaborative-style relationship; the customer may only require a transactional relationship. It is because of this reason than I believe that CRM does not always have to constitute the heart of B2B marketing.

Many firms adopt CRM technologies because it is what their competitors are doing, without clarifying exactly what they hope to achieve from it. Many do not realise that they are already undertaking basic CRM practices, without the use of expensive systems such as Oracle or Siebel. Gummesson (2004) points out that the behaviour of the classical industrial salesman in many successful companies was the same that is advocated in relationship marketing, CRM and key account management such as working in the long term, not evaluating customers in terms of profit per year, aiming for the ‘share of the customer’ and not market share. IBM were doing this in the 1960’s, long before the term CRM was being used.

In the 1980’s successful Japanese firms proved to be leaders in modern management techniques with strong relationships with suppliers, allowing them to produce products of a higher quality and a faster rate than their American and European counterparts. (Ehret, 2004) Their business model focused on economies of scope, as opposed to economies of scale. Industrial firms realised they needed to manage buyer-seller relationships in order to manage cross-functional and cross-organisational processes that would allow them to become more flexible.

Today’s CRM systems are vast multi-functional systems that allow firms to manage multiple elements of relationships with their customers. Xu et al. (2002) offer the four characteristics of CRM as: