At Fix & Form, customer relationship management is at the center of what we do. We care about transparent, human-centered relationships. But, what exactly is customer relationship management? Why is it so critical to your business?
Why You Should Think Again About Ditching CRM
Customer relationship management is similar to marketing in that it is arguably one of the most critical aspects of your business, but perhaps the most overlooked piece to intentionally integrate into your strategy. Even more importantly though, 80% of companies profits come from 20% of its customers. What does this mean? Also known as the Pareto Principle, your ideal clients are most likely going to be bringing in the majority of your profit, hence why targeting and obtaining those customers through customer relationship management is critical.
What is Customer Relationship Management
CRM is the process of identifying, attracting, differentiating and retaining customers. CRM allows a firm to focus its efforts disproportionately on its most lucrative clients.
Identifying
The most crucial part of marketing, and business in general, is identifying who your audience is. You are not just collecting names and emails, but rather what they value, how they found you and what their needs are. Identifying your audience can look like organizing customer data, segmenting demographics, buying behavior, customer attributes and buying patterns.
Attracting
Next, is attracting your customers. How do they find you? Social media, word of mouth, reminder emails? Attracting your customers means using your target audience you identified and then transferring that into your marketing strategy. Focus on developing a plan that speaks directly to your audience and builds trust from the first interaction.
Differentiating
Differentiating allows you to segment your customers to allow for more efficient business strategy. While your target audience is very important, understanding that even within the target audience every customer can be different with varying needs is even more important. Customer relationship management is heavily focused on tailoring your services and communication to each type of client, ditching the mass messages for meaningful communication and balancing your efforts on the top 20% of clients with the remaining 80% of new leads.
Retaining
Retaining customers in customer relationship management is the bread and butter. All three previous steps are useless without retention. Retaining your customers means performing follow-ups, feedback loops, and personal check-ins even after the main service is over. Remember, retaining a client is more cost effective than obtaining new ones.
Customer Relationship Management Implementation Outcomes
As you have probably picked up on by now, customer relationship management is not just about collecting emails or sending a thank you for your business here and there. It is about managing the whole customer life cycle. Effectively implementing customer relationship management in your business will lead to multiple positive outcomes that will have you wondering why you didn’t implement them sooner.
Coding
Customers are often coded based on their profitability, which determines how they’re treated. Have you ever called your credit card company for example and felt like you got a faster, friendlier experience? That’s not an accident, but rather CRM in action. Companies like IKEA might give all customers a baseline experience, while a luxury hotel customizes a proposal based on your spending profile, hence the top 20%.
Routing
Routing is another key function where less profitable customers may be directed to automated systems, while high-value clients get live reps right away. For example, think about the difference between calling an electrical company and a premium financial service like Charles Schwab. You are likely to get a much more personable experience with Charles Schwab.
Targeting
CRM also drives targeting, where high-value clients receive special offers, perks, or waived fees. For example, cardholders might be getting surprise upgrades or concert tickets, while others may never hear of these benefits. That is the value of identifying and differentiating that the CRM process can lead to.
Sharing
Finally, sharing is a behind-the-scenes function, where customer data is distributed across departments (and sometimes even sold to partner companies). Even if you’re new to a company, your buying potential may already be known thanks to CRM systems tracking your activity elsewhere. This can be both a positive thing such as having your preferences set so you do not need to ask for them or a negative thing on the customer side such as airlines having customers labeled as disruptive customers.
Limitations of Customer Relationship Management
As with everything, there are limitations to customer relationship management. While the benefits often outweigh the drawbacks, here are a few limitations to keep in mind:
Service Discrimination
One major issue? Customers don’t like being treated unequally even if the logic is driven by data. In industries where service discrimination is common like airlines, banking, or telecom, customer satisfaction is declining and complaints are on the rise. Where’s the line between personalization and discrimination? When systems are built to prioritize “profitable” neighborhoods or customer types, there’s a risk of replicating something akin to digital redlining. Digital Redlining is systematically underserving certain demographics, whether intentional or not. CRM must be used with care and integrity, ensuring it enhances equity and experience, not just efficiency.
Privacy Concerns
There are also growing privacy concerns. Some companies boast about how much they know about their customers, from spending habits to whether you sleep with an eye mask on during flights. Never forget the Target Pregnancy Prediction Case Study, where the business knew a girl was pregnant before her family did. The line between privacy and personalization is also very tight, fueling concerns that can feel invasive rather than helpful.
Quick Change in Habits
While customer relationship management relies heavily on past behavior to predict future value, that isn’t always accurate. A broke college student today might become a high-earning loyal customer tomorrow, but if they’re coded as “low value” now, that relationship may never have the chance to grow.
Want to Learn More?
Interested in learning more about business practices, Fix & Form in general, or connect with us directly? Check out our case studies, schedule an appointment to meet with Fix & Form, or send us a message to connect! We look forward to hearing from you and discovering how we can collaborate to create something amazing together!
