In customer service industries, the acronym CRM means customer relationship management.  CRM software allows companies to record and track every customer service interaction that takes place between a company and its customers.

The philosophy behind the phrase "customer relationship management" refers to the idea that customers have (or should have) an ongoing relationship with business providers.  In other words, purchasing a particular product or service from a company should be seen as one event in a long line of them, not a one-time occurrence.

"Relationship" is precisely the key to understanding CRM software.  Besides keeping customers happy with their current level of interaction with the company, another purpose of using CRM software is to expand business with the same customers.

Using CRM to Increase Revenue

It's a well-known business axiom that it is much easier to gain additional revenue from current customers than finding and converting new customers.  How does a company go about enticing current customers to spend more?  They utilize the information contained in their CRM database.

Perhaps the ultimate example is the "You might also like this ..." or "Customers who bought items in your cart also bought this ..." feature on websites.  Although they're called product recommendation engines, these shopping suggestions are anything but random.  In fact, they are carefully programmed via algorithm.

The program has "learned" over time which combination of items is most likely to result in a sale to people who match your demographic profile.

This same concept can also apply to finding new customers at a significantly reduced cost.  All it takes is some outside facts matched with demographic data and established buying patterns, the results of which are then applied to a particular shopper's information in the CRM database.

 

Example of CRM Database Use In Action

Let's clarify with a simple everyday example broken down piece by piece.  In the following scenario, Pet Supply Stuff and Miss Smith (a Millennial) are just hypothetical case study examples.  Pet Food Processing and its statistics cited below are real.

Fact: Pet Food Processing reports that 31% of Millennials own pets, making them the largest population of animal owners.  50% of this group has both dogs and cats as pets.

Demographic Data/Established Buying Patterns: Miss Smith, an existing customer of Pet Supply Stuff, first ordered natural dog food after placing a call to the company's call center.  She asked questions about the ingredients in a couple brands and made her choice.  

Since the initial call six months ago, she has re-ordered monthly via the Pet Supply Stuff website.  She logs on and places the order manually each time.  Mrs. Smith has not ordered anything else beyond the dog food since becoming a Pet Supply Stuff customer.

 

Using CRM Information to Market Additional Products

Using the information above, customer relationship software for marketing proves its worth.  Knowing that 50 percent of millennial households with pets contain both cats and dogs, it certainly makes sense to ensure that Miss Smith is aware that Pet Supply Stuff also sells cat items.

Maybe she already knows that, but is perfectly happy with her current feline product supplier.  Miss Smith would then be an ideal candidate for exposure to a promotion that says "buy any dog item this month and get 25 percent off a cat item."

How does Pet Supply Stuff get the word out to Miss Smith?  The CRM database also contains customer email addresses.  She is scheduled to be included in the email blast detailing the special promotion.

Miss Smith's customer records indicate that she buys premium dog food.  That means the marketing department can tailor the promo to her even more specifically.  Miss Smith should get a subset of the email marketing campaign which showcases premium cat food brands as examples of the cat items being offered at 25 percent off.

 

Value of CRM Software

Nothing in the above scenario would be possible without a customer relationship management database in place.  Tracking customer interactions provides data that smart businesses use in a strategic manner.  When utilized wisely, a CRM database is an invaluable tool to expand trade and maximize revenue from an existing customer base.