Customer Relationship Management
Customer relationship management, commonly known as crm, is part of a late 20th-century systematic shift in the structure and strategies of corporations. It is, says Dale Renner, ceo of Seisint, a data-mining business, something that encompasses “identifying, attracting and retaining themost valuable customers to sustain profitable growth”. crm is a way of designing structures and systems so that the company is focused on providing consumers (profitably) with what they want, rather than on making products that it, the company, thinks they might want.
In particular, it involves a restructuring of the company’s information technology systems and a reorganisation of its staff. It is heavily dependent on a technique called data warehousing, a way of integrating disparate information about customers from different parts of the organisation and putting it together in one huge it “warehouse”. With data warehousing, for example, any employee who enters a customer’s name into a central computer can come up with details of all the transactions that have been carried out with that customer.
This is contrary to the product-oriented way in which most firms grew up, when divisions and business units were built around products and product groups. It was not then unusual for each group to have its own accounts department, its own it unit and its own marketing team. People who worked for these vertically integrated silos were often competing as much against other silos within the same organisation as against outside rivals in the marketplace. Their loyalty to their silo frequently blinded them to the wider interests of the company as a whole. crm is about putting structures and systems in place that cut across the vertical lines of the traditional firm and focus on individual customers.
With vertical silos, customers could be approached by the same firm in several different product guises over a short period. No one bit of the firm would know what any other bit was doing at any particular time. The phrase “the customer is king” was first coined long before it was true. Only towards the end of the 20th century, when advances in technology and widespread market deregulation put enormous new power into the hands of consumers, did it begin to stop sounding hollow.
Two things in particular brought home to companies the need to make themselves more customer-oriented. First, some terrible mistakes were made because of the blinkers imposed by the old productsilo approach. For example, market share was the goal and the yardstick of such structures. Yet when ibm was king of the mainframe computer market, it understood just in time that 100% of a market that was rapidly shrinking would soon be 100% of nothing. Instead of focusing on the mainframe computer market, ibm should have been focusing on what its customers really wanted. This was not mainframe computers as such, but rather the power to process information electronically. Academics have called this different concept of a market “a market space”. Children’s playtime is a market space. A doll is a product, an object.