MB 12 – 01 : E-CUSTOMER RELATIONSHIP MANAGEMENT AND SUPPLY CHAIN MANAGEMENT 1.1

Q1: Explain the evolution of CRM?

CRM is a natural and a predictable extension of how marketing and sales has evolved over the years, in many ways and is coming to a full circle.
In the past, the corner store and door-to-door sales forces served customers. The corner stores were small, intimate, and provided one-on-one service to their clientele. The door-to-door salesperson was the other face of the company and the personal relationship established by the sales person was the key to success. This model provided, through personal interactions, an intimacy and knowledge about the customer and developed customer loyalty and trust.
Stage 1: Mass Marketing
The age of mass marketing replaced the intimacy of a direct sales force in many organizations. Centralized large-scale production, wide geographic distribution, and one-way communication on a grand scale created a tremendous variety of easily available, affordable goods. This put pressure on the relatively inefficient corner store and door-to-door models. Over time, the local corner store gave way to the supermarkets, malls, and mega stores of today. While society has benefited from the cost efficiencies of these arrangements, something was lost in the bargain. That loss was the sense of connection customers had with the local storekeeper – personalized service.
Mass marketing was enabled through technological improvements in TV, Radio and the printed press, all of which created simple and powerful means to communicate a company’s message to millions of people at once. Marketing major goal was to push product and create brand recognition. The main measure of success for this business strategy was market share.
Stage 2: Target Marketing
In the mid 1980’s, with advancement in technology and refinement in direct mail and telemarketing, another approach to communicate directly with the customer evolved. The use of Information System Technology allowed the selection of specific (“targeted”) customers via mail or telephone.
Unlike mass marketing, targeted marketing had the advantage of potentially receiving a direct response from a customer. The general strategy was to unearth potential customers by canvassing large numbers. Response rates became the central metric in gauging success, with response rates of two to three percent being considered successful. Market share still remained the primary measure of business success. Target marketing recognized the need to interact more with customers, albeit at a very superficial level. There was a lack of specific data as it relates to responses from the targeting means resorting “averages” for response rates, customer purchases and other data.



Nonetheless, target marketing was a significant step in the evolution to today’s CRM in that it moved the relationship between producer and consumer one more step towards a personal interaction. Obviously, mass marketing has not vanished, nor have sales forces or telemarketing efforts. In many companies, all of these techniques are still used in combination but with no cohesive overall plan between them, This leads to confusion as customers receive multiple, uncoordinated messages through separate channels.
Stage 3: Customer Relationship Management
CRM is the next step in the evolution, and it moves us back towards developing an intimacy with today’s customer, using today’s tools, and maintaining our mass production and distribution systems. It recognizes that the equation that yields trust and loyalty from a customer had two variables.
The first variable is information and analysis (knowledge): one has to know what the customer wants, needs and values.
The second variable is the need for interactivity and personal contact and the way in which the customer wants to be contacted.
The success of a customer-centric business strategy is measured not only by “share-of-market” but also, by “share-of-customer”.
In the following figure, the four quadrants represent approaches that combine relative measures of knowledge about a customer and interactivity with that customer.


The knowledge scale is a measure of what is known about the customer’s behavior and values. This is the informational and analytical part of equation.
Interactivity is the measure of dialogue with a target customer, from one-way communications at the low end to full interactivity at the upper end. This represents the personal contact and interaction part of the equation.

Advantages of CRM over Traditional Mass-Media Marketing
Customer Relationship Management has several advantages over traditional mass-media marketing, It:
• Reduces advertising costs
• Makes it easier to target specific customers by focusing on their needs.
• Makes it easier to track the effectiveness of a given campaign.
• Allows organizations to compete for customers based on service, not prices.
• Prevents overspending on low value clients or under spending on high value ones.
• Speeds the time it takes to develop and market a product (marketing cycle).
• Improves use of the customer channel, thus making the most of each contact with the customer.