Customer relationship management: a silent strategy that determines customer loyalty in the digital era
Behind it all lies a strategy that operates consistently and systematically, known as customer relationship management
Have you ever felt known by a brand not as a buyer, but as an individual with specific needs and habits? Without you realizing it, that experience wasn't just a coincidence.
Behind it all lies a strategy that operates consistently and systematically, known as customer relationship management. In today's world, when customers are presented with so many choices, many companies strive to build emotional connections with their customers, and they are the winners.
Imagine you've just purchased a product from a certain company. A week later, the company offers cashback on that purchase, right on your birthday. They even ask about your experience using their product.
Not just once, but repeatedly via email, certain applications like live chat, and text messages. What's really going on?
On closer inspection, this isn't just a typical marketing strategy, as I've discussed in many of my other articles. It's a concrete action of the company's customer relationship management program.
The critical question is, is the relationship with customers only about the transaction and then the end? Or are there other strategies for creating long-term customer engagement?
This is where the concept of customer relationship management becomes crucial and crucial. It's not just a database-based technology, but rather a modern business philosophy oriented toward building long-term customer loyalty.
In this post, I will discuss in depth what customer relationship management really is, according to experts and my personal experience as a business owner.
What is Customer Relationship Management?
Essentially, customer relationship management, or CRM for short, is a technology-based, persuasive approach for companies. This approach is more individualized and aims to build emotional relationships between customers and the company.
Data from customer interactions is recorded in a digital system, which is then processed into new insights that support business decisions.
Essentially, CRM is a combination of processes, technology, and human resources. These three complement each other to create customer lifetime value and customer experience.
Therefore, we can say that CRM is a crucial foundation for companies that want to survive longer amidst increasingly fierce competition.
As the digital age advances, today's customers expect a quick response from a company to every complaint or need. Company management should never ignore this, as it could become a source of disaster and negative rumors spread by word of mouth.
Customer Relationship Management in the AI Era
It's undeniable that artificial intelligence (AI) is developing rapidly. Almost all tasks can be performed with the help of AI. This situation has led me to conclude that AI poses a threat, as discussed in the article "Beware of AI Robots Replacing Human Work."
Regardless of whether it's a threat, AI developments are also changing the way companies implement customer relationship management. Modern CRMs are no longer simply about recording data; they can also predict customer needs based on their behavioral patterns.
A study published in the Journal of Business Research revealed that the use of AI in CRM increases personalization accuracy by up to 35% and has a direct impact on customer satisfaction.
The shift in consumer behavior, which demands fast, personalized, and consistent service, has become a top priority in implementing customer relationship management. Several economic experts have expressed similar sentiments in their research.
Expert Perspectives on Customer Relationship Management
CRM, according to Francis Buttle, a professor of Customer Relationship Management, is a core business strategy that integrates internal and external processes to generate value for customers and, in turn, provide a competitive advantage for the company.
From this professor's perspective, we can conclude that CRM is not just a technology-based strategy, but rather a holistic business strategy that encompasses the entire organization.
So, what components do we need to prepare for implementing CRM?
Essential Components of Customer Relationship Management
CRM doesn't operate independently; it requires the support of several essential components to be effective:
Customer Data and Information
The customer database is the heart or core of CRM. It includes various personal information about the customer, such as contact information, purchase history, preferences, and online transaction behavior. This data is then analyzed to create segmentation, personalization, and predict future customer needs.
I've observed this practice in many modern retail stores, such as Alfamart or Indomaret. When paying for groceries at the cashier, we're offered membership with the lure of product discounts. Once we accept membership, we're asked for our name and contact number.
CRM Technology and Systems
The use of technology is mandatory for companies implementing a CRM strategy, given that the customer data collected falls into the category of big data. This is especially true if customer interactions involve multiple channels, such as email, social media, or mobile applications, requiring state-of-the-art technology.
This technology will help automate marketing processes, monitor customer service, and optimize communication processes. For this reason, a company needs to be more selective in choosing high-quality web hosting. I've discussed this in the article on the characteristics of the best and highest-quality web hosting.
Processes and Human Resources (HR)
CRM cannot operate solely on technology. It requires trained personnel to manage customer data effectively. This trained workforce includes a service team tasked with responding to customer interactions and a marketing team responsible for executing transactions based on customer preferences.
Reasons Why Modern Businesses Need CRM
There are several rational reasons why many leading companies today are implementing CRM strategies in their efforts to grow their businesses, including:
Increasing Customer Loyalty
Various empirical studies have shown that implementing customer relationship management has a positive impact on customer loyalty.
For example, in a study at PT Ritra Cargo Indonesia, implementing a CRM strategy was proven to significantly increase customer loyalty through customer satisfaction. The contribution of CRM to loyalty reached more than 65%.
Improving Customer Satisfaction
The business philosophy teaches us that the customer is king, a crucial concept that should be the lifeblood of any company.
Because customer satisfaction surveys are not excessive, many companies conduct them. These surveys can be direct or indirect.
In my personal experience, having frequently made transactions through the Tokopedia marketplace, these customer satisfaction surveys are visible in product reviews. Once the item arrives, a notification will appear asking for a rating and comment.
Improving Customer Retention
This is an effort or strategy undertaken by businesses to retain loyal customers. The hope is that they will continue to use the product by making repeat purchases over the long term.
The reason is that it can be more cost-effective for companies. Acquiring new customers can be five times more expensive than maintaining existing ones.
Practical Experience Implementing CRM in the Business World
In practice, many MSMEs and digital businesses in Indonesia are beginning to experience the tangible impact of customer relationship management. Businesses that record all interactions with their customers show a graphical increase in customer retention compared to businesses that focus solely on promotions.
This narrative aligns with the findings of various studies that consistently implemented customer relationship management can build long-term customer trust.
For example, research conducted by Emaluta, Isnalita, and Soewarno on Gojek users in Indonesia revealed that customer relationship management applications successfully increased customer satisfaction, which mediates customer loyalty.
Similarly, research focused on Bank Mandiri, published in the CERED Indonesia journal, showed that CRM implementation at the Bank Mandiri Padangsidimpuan branch showed a significant positive relationship (43.9%) with customer loyalty.
Customer Relationship Management Working Mechanism
For those of you who want to implement this customer relationship management strategy, there are several steps we must follow:
Customer Segmentation
We then select and sort the collected customer data. We group the data based on specific criteria, such as age, purchase history, and online behavior.
Personalized Communication
Using the processed data that has been grouped, the next step is to build personalized communications. For example, offering special promotions on their birthdays, recommending new products based on purchase history, and responding quickly to customer inquiries.
Marketing Process Automation
With advances in AI, the automated task of responding to customer questions and complaints can now be addressed. I personally respond to customers using the WhatsApp Business app, which has an auto-response feature.
So, when a customer asks a question, I automatically receive an immediate answer, prepared in advance.
Challenges in Implementing Customer Relationship Management
Despite the significant benefits, implementing a CRM strategy is not without its challenges. These challenges include:
1. Cost and Technology Investment:
Implementing a sophisticated CRM system will require a significant investment. For MSMEs with limited capital, this is a serious issue, requiring a better solution.
My advice as a business owner is to implement this on a small scale first, like I did with the WhatsApp Business feature.
2. Human Resources Skills:
It's undeniable that implementing a sophisticated technology-based CRM will require a highly skilled workforce. Their tasks range from data processing to interacting with customers.
3. Data Integration:
This section relates to the previous point. Combining data from online and offline sources can be a complex technical challenge. It requires people with above-average IT competencies.
The Future of Customer Relationship Management
Along with technological advances like artificial intelligence (AI) and machine learning, the role of customer relationship management continues to evolve.
New ideas that we initially thought were difficult to execute can now be easily implemented with the help of AI robots. For example, predicting customer behavior, assisting with sharper segmentation, and tailoring messages in real time. Using the data we provide to the AI, the AI robot will immediately process it and provide the best possible answers.
Conclusion
Simply put, customer relationship management is a crucial strategic concept for businesses in today's digital age because:
- It helps businesses build long-term relationships with their customers.
- It increases customer satisfaction, loyalty, and retention.
- It enables companies to use data to make informed marketing decisions
Therefore, in the midst of increasingly fierce business competition, companies that successfully implement customer relationship management effectively will gain a competitive advantage that will drive their business growth.
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ECONOMIC AND BUSINESS