Customer relationship marketing (CRM) aims to enhance Customer Lifetime Value (CLV), engagement, loyalty, and customer alignment while simultaneously lowering costs to achieve greater return on investment.
CRM, in contrast to traditional marketing, prioritizes the development of a customer profile, comprehension of customer desires and requirements, and the provision of an elevated standard of customer service that consistently benefits the customer over immediate sales.
What is relationship marketing
Customer relationship management supports customer relationship marketing. Consider customer relationship marketing as a strategy and customer relationship management as the implementation. The latter can be employed to fulfill the former.
In order to have a better understanding of these concepts, we can analyze the definition of each, their stages, and examples for each one. As stated by Techopedia, customer relationship marketing encompasses the process of constructing client relationships, fostering customer loyalty, and enhancing brand value through marketing strategies and activities.
The main point to remember is that relationship marketing is a strategy that emphasizes the long-term customer relationship instead of just a one-time transaction. Its main focus is to guarantee customer satisfaction in the long run rather than solely aiming for a swift sale.
Levels of relationship marketing
Relationship marketing can be classified into four stages when considering the thought process in sequential order.
- Establish the initial relationship. This stage is also called “exploratory,” better known as the first step in the customer acquisition process. It includes initial activities and conversations to determine if a customer and company are a good fit for each other’s needs. Consider it the first impression whether that’s on social media or at an event.
- Get to know each other. The “basic” stage takes the customer relationship a step further. A company attempts to prove to potential customers that they understand their needs, sharing helpful resources and communicating the value of their product/service perhaps via an email marketing campaign or other inbound marketing efforts.
- Develop a deeper relationship. A potential customer shouldn’t stay in the “basic” stage too long. Multiple departments need to become involved in this, the “collaborated” stage, and work together to nurture the customer relationship.
- Become committed partners. The “interconnected” stage means that your company has forged a connection with your customer that’s hard to break. Departments are working together to create a seamless experience. Customers completely trust your company and are incentivized to stick around for the long-term.
Levels of customer relationship management
Customer relationship management involves the management of potential and existing customer relationships. This process includes the collection and analysis of customer data and is facilitated by the use of customer relationship management software.
as follows: 1. Identification and acquisition of customers. 2. Development and cultivation of customer relationships. 3. Retention and loyalty building. 4. Recovery and re-engagement of lost or inactive customers.
- Collect data. Insert contact and business information into a CRM.
- Analyze data. Automatically pull into insightful reports about customers.
- Develop customer strategies. Use the data to create things like personalized campaigns.
- Act on strategies. Make the customer’s life better based on what you know about them.
Benefits of customer relationship marketing
The benefits of both concepts align with each other. By implementing a CRM system, the objectives set by customer relationship marketing can be achieved. Similarly, when customers are satisfied and engaging with a company, it leads to an increase in data input into the CRM tool, which ultimately enhances customer management.
- Build strong relationships with current and potential customers. By implementing relationship marketing strategies, you up the loyalty of your customers and demonstrate that you view them as a relationship, not a transaction.
- Improve customer retention. The better you understand potential and existing customers and can solve their pain points, the more likely they’ll stick around.
- Increase the chance of quality referrals. When customers are happy, they’re more likely to refer your business. And according to one source, referral leads convert 30% better than leads generated from other marketing channels.
With these advantages considered, try out various tactics of relationship marketing.
The four stages of CRM
Customer acquisition
Customer acquisition is deemed important by Hubspot as it involves the attraction, onboarding, and conversion of new customers, contributing to the growth and profitability of a business. Additionally, it serves as a means to demonstrate the worthiness of a business for investment from external parties such as investors, influencers, and partners.
In 2022, as interactive digital technologies continue to advance, enabling data tracking and AI marketing on an individual customer level, there are various essential measures marketers can adopt to enhance customer relationships and achieve favorable business outcomes through acquisition strategies. These measures comprise:
- Building a strong brand identity
- Delivering excellent customer experiences
- Educating your customers
- Delivering special rewards/perks
- Gathering useful feedback (via data, customer-generated content, reviews, etc.)
- Leveraging storytelling as marketing3
The primary goal of customer acquisition is to inspire customers to take action by effectively guiding them through the stages of awareness, consideration, and decision in the customer decision journey, thus transforming strangers into brand advocates.
After acquiring a customer, it is important for your team to guide them through a sequence of actions that will enable them to become familiar with your brand, engage with your brand, and ultimately become loyal patrons, thus boosting the overall lifetime value of the customer.
When customers are satisfied with your business, they can help you gain more customers by engaging in word-of-mouth marketing (WOM), which is a form of cost-free marketing for your brand. By speaking positively about your brand in their everyday conversations with people they know, happy customers have the ability to influence them to become loyal customers as well.
Customer retention
If you want to save money for your business, it is important to develop strong customer relationships that result in repeat transactions. Acquiring new customers is costly and the cost is estimated to be five to seven times higher than retaining current customers.
– Every business should understand its own customer retention rates and how to improve them to achieve long-term profitability. – Customer retention rates are crucial for the overall success of a business as they help in building bigger profits in the long run. – Understanding and enhancing customer retention rates is essential for businesses to drive long-term profitability and overall success.
- Attaining new customers often costs more than retaining current customers
- Loyal customers tend to be valuable repeat customers
- You can cross-sell and upsell to existing customers
- Retained customers can refer new customers to your business
The Customer Retention Rate (CRR) is frequently regarded as a significant performance metric in present-day marketing. This is due to the fact that it indicates the crucial role of a company’s capability to keep its current customers, which is essential for achieving success in both the short and long run.
The positive update is that CRR can be measured and its calculation can be properly understood and utilized through a reputable master’s program in marketing. Generally, CRR is assessed weekly, quarterly, monthly, and/or annually, but it can be computed at any time to assess your business’s performance in this specific domain.
The following steps are used to calculate CRR.
- Identify the time frame you want to study
- Collect the number of existing customers at the start of the time period (S)
- Find the number of total customers at the end of the time period (E)
- Determine the number of new customers added within the time period (N)
The comprehensive CRR formula appears as follows step by step: CRR equals ((E-N) divided by S) multiplied by 100.7.
The objective of customer retention is not simply to have people interact with your business or brand once. Instead, it involves establishing relationships that can be maintained and further utilized repeatedly. Hence, it is ideal to strive for a high CRR rate. Successful businesses usually aim for a CRR that surpasses 85%.
Higher per-customer profits over time can be achieved by having a lower churn rate, which is a regular and measurable process of customer loss and acquisition in a business, according to the definition by Merriam-Webster.
Customer expansion
Customer expansion refers to the systematic process of increasing the value derived from existing customers, leading to their increased expenditure on your products and services over time. Effective customer expansion endeavors yield cost-efficient benefits, resulting in revenue growth for your company and mutually advantageous outcomes for both the company and the customer.
There are several well-liked methods for increasing customer expansion.
- Upselling: Gets customers to spend more by upgrading to a premium product or service that is of a higher level. Be careful not to upsell too soon as it may be seen as a “cash grab” that can drive down your brand’s reputation in the eyes of customers.
- Cross-selling: Selling customers a related product or service
- Add-ons: Customers buy enhancements and additional functions or features for a previous purchase. Add-ons only work if the customer has an existing base product or service
By analyzing the data you have gathered from customers and sales transactions, you can identify which products/services to introduce for customer expansion in a strategic manner that will yield the best possible outcomes for your company’s growth objectives.
Customer reactivation
Marketo, a provider of high-quality automated marketing tools since 2008, defines customer reactivation (or re-engagement) as a method to reconnect with customers who have previously shown interest, made a purchase, or engaged with your company but have become inactive or disengaged.
By following a step-by-step thought process, the text below can be rephrased while retaining the original meaning: “Generating positive outcomes, effective campaigns focused on reactivating customers can produce:”
- Greater customer revenues
- Stronger customer relationships
- Reduce the cost of customer acquisition
- Customer intelligence that can be used for a competitive advantage
Modern marketing programs that are highly regarded offer commonly-used reactivation methods that can be acquired through online master of marketing programs.
- Emails
- Direct mail
- Social media engagement
- Webcasts/webinars
- Outbound telemarketing
- Mobile initiatives
- Display/paid media channel initiatives (though a data onboarding company and/or DMP/DSP service
- Email-display retargeting campaigns (that lead to digital display ads in web browsers)5,10
In order to effectively re-engage customers, Marketo suggests using a short series of personalized emails that utilize unique customer identifiers/date instead of sending just one email.
Marketo recommends sending emails with subject lines stating the exact dollar amount of a discount offer as they are twice as likely to generate interest. Emails that have a personal tone and mention missing the customer are also effective. It is advised to send these emails in short intervals and before 180 days of customer inactivity have passed.
Make sure to make the reactivation process for your dormant customers as easy and effortless as possible by having a pre-established step-by-step process in place before initiating your remarketing efforts.
To ensure that your reactivation emails are successfully delivered to the sender and to maximize your return on investment (ROI), utilize an Email Change of Address (ECOA) service. This service is designed to locate customers at their currently preferred email addresses.
