Customer Relationship Management (CRM): Meaning and Steps for Reducing Customer Defection Rate

Customer relationship management is a combination of policies, processes and strategies implemented by an organization to unify its customer interactions and provide a means to track customer information. It involves the use of technology in attracting new and profitable customers, while forming tighter bonds with existing ones.

Customer relationship management pulls together, analyzes and provides easy access to customer information from all these various touch points. It helps to assess the value of individual customers, identify the best ones to target and customize the company’s products and interactions to each customer.

The purpose of customer relationship management is to enable a company to better service its customers through the introduction of reliable service, automated processes, personal information gathering and processing and self-services. It attempts to integrate and automate the various customer serving processes within a company. It can be done through the use of multiple communication channels (phone, WAP Wireless Application Potential, Internet etc.)

Customer relationship management involves three general areas of business. They are as follows:

1. Marketing information system: It provides information about the business environment, including competitors, industry trends, and macro environmental variables.
2. Sales-force management system: It automates some of the company’s sales and sales-force management functions. It keeps track of customer preferences, buying habits, and demographics, and also sales staff performance.
3. Customer service system: It automates some service requests, complaints, product returns, and information requests.

Steps for Reducing Customer Defection Rate

In order to reduce or control the defection rate of the existing customer, the marketing companies need to follow the following steps:

1. Define measurement basis for retention rate: For reducing customer defection rate, first of all, the measurement basis for retention rate should be defined. For a newspaper, renewal rate is a measure of retention. For college, it is admission in second year after completing first year.
2. Analyze causes of defection: For reducing customer defection rate, the reasons for defection should be analyzed. The major reasons for defection can be poor service, poor products, high price, inconvenient distribution etc.
3. Calculate loss of profit: Customer defection results in loss of profit. Profit loss from lost customer should be calculated in terms of life time value of lost customers.
4. Introduce anti-defection measures: For reducing customer defection rate, the company should introduce anti-defection measures such as extra benefits and services that add value.
5. Find out cost of reducing defection rate: The cost of anti-defection measure such as extra benefits or services should be calculated. The cost should be less than benefits of reducing defection rate.
6. Listen to customers: Customer feedback is essential for reducing defection rate. Exit interviews of customers can also be useful. Complaints and suggestions should be carefully handled.

---

You may also like:

• Meaning and Concept of Quality Control

• Project Management Model

• Benefits of Project Management

• Characteristics of Project Management

• Distribution: Meaning, Importance and Objectives

• Meaning of Contract and Contract Out: A new tool of New Public Management (NPM)

---