EDITORIAL

CustomerRelationshipManagement
CompetitivenessImprovementTool*
JovanZubovi,IvanaDomazet,InstituteofEconomicSciences,Belgrade,Serbia
KEYWORDS:CRM,Competitiveness,Customer,Strategy,Companies
JEL:L21,D91,M11
*OriginalpaperwaspreviouslypublishedonInternational Scientific Conference Contemporary Challenges of Theory and
Practice in Economics Management and Marketing under Globalization, under title CRM (Customer Relationship Management): A factor of global competitiveness improvement, COBISS.SR-ID 512030562

ABSTRACT:OntheglobalmarketcompetitivenessofSerbiancompaniesisataverylowlevel.Ac
cording to Global Competitiveness Report 20072008 Serbia was ranked 91. Leading country is USA,
whereastheUKhadlostthesecondandfelltoninthposition.ThecriteriaonwhichGlobalCompetitiveness
Reportranks131worldcountriesarecreationofbusinessstrategiesandaqualityofbusinessenvironment1.
Competitiveness increase of local companies should be assessed through holistic concept which targets on
coremicroandmacroenvironmentindicatorsimprovement,aswellasbyadoptinganewbusinessphiloso
phy strategic management and innovation. Development of CRM (Customer Relationship Management)
conceptisoneofthetoolswhichsignificantlyinfluenceraiseofcompetitivenessandmoreeffectivecreationof
businessstrategies.

Introduction
In modern market economies, along with development of information technology, internet
anddatabasesoftware,thepriorityofbusinessactivitiesisbecomingatwowaycommunication
betweencompaniesandproduct/serviceconsumers.CustomerRelationshipManagementisonerela
tively new concept which, as a result of changein management,strategic business planning and
personalisedcustomerservice,isbeingconstantlydeveloped.
Developmentofnewinformationtechnologiesshiftsbusinessoperationsfrompushprod
uctstrategytopullcustomerstrategy.Thischangewillresultinchangeofcustomerpositionin
thevaluechain.Customersasthecompanymainassetarebecomingmoresophisticatedandde
mandingintheirbuyingbehavior.ForthatreasonitisimportanttoanalyzemainfactorsofCRM,
astheycansignificantlyincreasecompanycompetitiveness:
o

Customerselection

Customeracquisition

Customerretention

Customergrowth

Transaction marketing is based on pushing customer so as to make transactions faster and

easier.Unlikethat,thenewmarketingandmanagementrelationshipconceptinsistsonestablish
ingcommunicationwitheverysinglecustomerevenwhenthetransactioniscompleted.Useofthe
CRMconcepthelpsthecompanyingainingoncompetitiveadvantage.
AccordingtoresearchmadeinEUduring2006,companieswithoutCRMconcept:
o

inaveragelose50%oftheircustomersinfiveyears

have65%oflostcustomersleavingbecauseofunsatisfactoryserviceandcommunica
tion

WorldEconomicForum

Volume40Autumn20071

havethecostofacquiringanewcustomerfivetimeshigherthanthecostofretaining
theoldone

CompaniesthathaveadevelopedCRMconcept:
o

Growalmost60%fasterthantheircompetitorswithoutCRM

Increasetheirmarketshareby6%yearly

Chargetheirproduct10%higher

HaveROI(returnoninvestment)atthelevelof12%

By5%increaseofcustomerloyaltygrowprofitsby25%85%.

CRMConcept
Customerrelationshipmanagement(CRM)isanewmanagementstrategywhichfocuseson
longtermrelationshipwithcustomers.Thisconcepthassomesimilaritiestorelationshipmarket
ingconcept,butwithsignificantdifferences.UnlikerelationshipmarketingCRManalyzesmorein
depth the relationship with customers. It covers all activities starting with creation of organiza
tionalstructureandotherdevelopmenttools(businessculture,etc)uptospecificprogramsforset
upoflongtermrelationship.Inrelationshipmarketingfocusismoreonfinalizationandspecific
programsofsettinglongtermrelationship(communicationchannels,offeradapting,loyaltypro
grams,etc).
CRM concept defines capability, methodology and technology which can enable company
adopttheprocessofimprovingcustomerrelationship.ThepurposeofCRMistoenablemoreef
fectiveandefficientfulfillmentofcompanygoals,throughmoreanalyticalreviewofcustomerreal
needs.
CRM is focused on creating and retaining long term relationship with customers. Even
thoughmarketofferssomecommercialCRMprogrampackagessupportingCRMstrategy,itisnot
technologyonitsown.CRMisratherastrategicchangeintheorganizationphilosophytowards
emphasis on customer. These program packages include software and hardware that will help
automate CRM system. In such a system output of CRM is not only information, but it is rather
complete support for decision making and market analysis. Successful CRM strategy cannot be
installed in a company overnight and integrated with other software packages. The changes are
necessaryatalllevels,includingcompanypolicy,employeestraining,marketingsystems,informa
tionmanagementetc.ThismeansthatallcompanyactivitiesmustcomplywithprinciplesofCRM.
TheefficiencyofCRMprocess,whichhastobeintegratedthroughmarketing,saleandrela
tionshipwithcustomersassumes:
o

identifyingfactorswhichcontributesuccessfulrelationshipwithcustomers,

developmentofcustomerrelationshippolicies,

developmentofaprocesswhichsatisfiescustomers,

definingkeyfactorsthatinmostadequatewayhelpsolvepotentialcustomerprob
lems,

suggestingsolutionsforcustomercomplaintsaboutproduct/service,

salesfollowupandcustomersupport.

InestablishingCRMconceptinacompany,itisveryimportanttopreciselyanalyze:keyas
pects of business operations; information we offer to customers; customer financial background;
effects of CRM segments. Important task is also to gain detailed information about companys

20072EconomicAnalysis

prime (loyal) customers. Nevertheless very important aspect in CRM system implementation is
identifyingandeliminatingunnecessaryinformation.Insuchaconcept,wecandefineCRMasa
businessstrategyaimingtobalanceincomeandprofitontheonesidewithcustomersatisfaction
and value added on the other side, where some tasks need to be measured: customer behavior,
processesandtechnologies.
BasicstructureofCRMcomprisesthreesegments:
o

Operationalcorebusinessprocesses(marketing,sales,services)

Analytical support for customer satisfaction analysis and implementing business

policiesandtechnologies

Cooperative keep contact with customers using phone, fax, internet, mail, direct,
etc.

Forsuccessfuldevelopmentofcustomerrelationshipcompanyhastocombinecertaintasks:
o

Knowledge(understandingmarketsandcustomers)

Targeting(directionandadaptationofproduct/service)

Sales(gainingcustomers)

Service(maintainingcustomers)

Planning and development of strategy, organization, implementation and control of CRM

processisveryimportant.ForthatreasonwecanreviewCRMconceptas:
o

Strategydevelopment

Informationanalysis

Identifyingneeds(understandingcustomers,theirneedsandwants)

Definingchange(corporaterevolutionfromreactivetoproactiveapproach)

Futurebuilding(creatingofbusinessandtechnicalcompanystructurewhich

willdeliverexpectedvaluetocustomers)

MeasuringresultsandupgradeofCRMsystem.

CustomerRelationshipManagementcombinesbusinessstrategyandtechniqueinorderto
identifyandgaincustomers,andretainlongtermrelationshipwiththembycreationofadded
value, which comes as a result of interaction between company and customers. It also includes
knowledge of strategic management and Internet technologies. The purpose of this concept is to
identifyopportunitiesforcreationandretainingofprofitablerelationshipwithcustomers.
TheCRMasastrategicsetofactivitiesbeginswithadetailedanalysisofcompanyorganiza
tionalstrategy,anditendswithmeasuringofshareholdersvalue.Competitiveadvantageisakey
successfactorofCRM,whichatthesametimegeneratesvaluebothforcustomerandforthecom
pany.CompetitiveadvantageisgeneratedbyusingCRMprinciplesofcreation,developmentand
retention of relationship with precisely targeted groups of customers. Once set, this relationship
hasbeenoptimizedforcustomers,corporateprofitabilityandstakeholdersvalue.Allthesemake
CRMhighlypositionedontheprioritylistoftodayscorporateagendaanditiscloselylinkedwith
useofITthatareneededforimplementationofstrategicmarketingrelationshipwithcustomers.

ObjectivesandMethodsofCRMConceptImplementation
The acronym CRM is often regarded as Customer Relationship Marketing, since in both
casestheemphasisismadeonrelationshipbetweenthecompanyandcustomers.TheCRMcon

Volume40Autumn20073

ceptisamongmostimportantsegmentsofstrategicplanning,whichhastoberegardedasmarket
ing and promotional mix, but it has to include integrated marketing communication. In case of
marketing,theexpertsveryoftenuseonly4Pconcept(Product,Place,Price,Promotion),anddi
minishtheroleofthestrategywhichhastohelpgeneralmanagerleadthecompanyinstrategic
andfunctionalmannerusingCRMconcept.2
ThesuccessofsynergyeffectofCRMconceptinacompanydependsonfulfillmentof2crite
ria:
1. Conceptualcompanystrategyisbasedonebusinessandcustomization,andithas
individualapproachtoeverycustomer
2. Technical use of ICT, standardization, marketing automation, data management,
companymanagementandanalysis
TheCRMmethodassumescombinationof:
o

Strategicvision

Corporateunderstandingofcustomervaluesusingmultichannelenvironment

UseofappropriatemanagerialinformationandCRMsoftware

Highlevelofoperations,highlevelofexpectationfulfillmentandtheeffectofsatis
faction3

WhenintroducingCRMconcept,companygoalsare:managecustomerlifecycle,increaseof
incomeandprofit,aswellassatisfactionofcustomerneeds,henceachievinghighestlevelofloy
alty. The analysis of gathered information in every single transaction and interaction (purchase,
supportandotheractivities)byusingthismultidimensionalverticalandhorizontalapproachen
able company to gather widespread information about the customer, out of which the company
will create a database for future Customer strategy and individual approach. Nevertheless we
cannotregardCRMfromtechnologyaspectasITsolutionwhichwillhelpuscreateduniquecus
tomer database and develop it. The technology influences communication and communication
influencesrelationshipwithcustomers.Knowingthegoals,whicharenotonlytosatisfycustom
ers,butaswellthestakeholders,wecanviewtheCRMastheIntegratorofMarketingCommuni
cation(especiallyinPR).
Ecommerce,etradeandegovernmentarethefieldsofelectronicbusinessapplication.They
useresourcesfromeconomicscienceaboutfundamentalknowledgefromdifferentareasofmar
ketingandsalesmanagement,whereasInterneteconomicshassignificantinfluenceonchangein
Internet marketing environment. Transition from traditional to electronic business bears certain
levelofriskinmarketadaptation.

EBusinessandCRMStrategicApproach
Ebusinessincludesonlinecommunicationandbusinesstransactions,etrade,financialand
other services over internet, as well as all other activities in business that require computer net
work.Ebusinessisexchangeofinformationoverelectronicmediainthemarket.PrefixEbecamea
communicationchannel.
Throughout the Web there are tens of millions of potential customers that companies can
reach(inSerbia,potentialnumberofcustomersistensofthousandsofcustomers,sincedevelop
ment of IT is slower, and there is significant resistance for new technologies). Those companies
2

Salls(2003),p.156.
Payne(2004),p.56.

20074EconomicAnalysis

usingtheWebaremorepowerful,competitiveandprofitablethantheonesnotusingadvantages
oftheWeb.Inallareasofebusinessnewservicesaretobeoffered,amongwhicharethesoftware
packages, created for customer relationship management ECRM. To make successful relation
shipwithcustomers,companiesneeddatabaseswhichcollect,connectandintegrateinformation
about the customers, and make two way communications with them. Such a database enables a
companytocreatespecificsetofmarketingactivitiesfortargetedcustomer.
Reasonwhyacompanyneedstounderstandacustomeristohavetheabilitytomeettheir
needs. To know what their preferences are, we need to establish two way communications with
them.Wehavetounderstandalltheirspecificwantsregardingtheproduct/servicequality,design,
color,shapeandotherpreferences,soastobeableadaptouroffertothosepreferences.Allinfor
mation about the customer are integrated into database which facilitate individual approach to
customers.Databaseoffersdataabouteverycustomerwhicharethebasisformarketingplanning
anddirectmarketingDatabaseMarketing.4
IntroductionofCRMsoftwareinacompanycreatescompetitiveadvantage,winsovercom
petitionandopensforeignmarkets.ThisisnotallwhatCRMmayoffer.Todaywehavetoantici
pate what is necessary to change and apply in a company, in order to become a system which
walkstogetherwiththeneedsofmoredemandingglobalmarket.Thekeystepistopersuadeall
stakeholdersinthecompanytoacceptCRMandregarditasinvestmentintofuture.
StrategicframeworkofCRMisinteractionof4relatedandfunctionallyconnectedbusiness
processes:
1. Formulatecompanystrategy
2. Createvalue/offerperceptyourcustomerandunderstandvalues
3. Integrate by multichannel sales force, PR, phone, direct marketing, ecommerce,
mobilesalesetc.
4. Evaluatecampaignsuccessresultsanalysis
IntegratedCRMprocesseshavethesynergyeffectglobalsuccessisgreaterthanthesumof
singe processes effects. It is important to view CRM as integrated set of activities which enables
improvementofcompanyoperationsthrough:
o

identifying,understandingandsuccessfulcommunicationwithcustomers

targetedsalesofproduct/servicetonewandexistingcustomers

development of new attractive offers, price discounts and marketing programs cre
atedforcustomers

retentionandshareofvaluewithmostprofitablecustomers,sincesatisfiedcustomer
becomesaloyalcustomer

Customersatisfactionisnoteasytomeasurebyyesorno.Wehavetooffercustomers
scale from 110. The ones which rate you average (56) are not loyal, and your competition may
attract them. But the ones which rate you 10, are not only satisfied customers, they will recom
mendyoutoothers,ifyouaskthemso.Differentlevelsofrelationshipintensitybetweencompany
andcustomermaybeshownlike:5
o

Suspectlatentbuyeris thepersonwhomaybeyourpotentialbuyer (wehaveonly

his/hernameorcookieleftoninternetsite)

Prospectpotentialbuyeristhepersonyouhaveregisteredassomeonewhomayneed

FilipoviandKosti(1999),p.112.
Cottle(2000),p.98.

Volume40Autumn20075

yourproduct/service,andwhoisabletopayforit(unfortunately,noteveryonewho
needsyoumayaffordyou)
o

CustomerBuyeristheweakestonrelationshipscale.Registereduserisabuyer,since
he/she has used some of your services, like free downloads, but is still not regular
buyer.Onsatisfactionscaleis56,andisactivelysearchingforreplacement.Loyalty
isverylow,closetozero

Clientisnormalonrelationshipscale.Clientsuseyourserviceandaccordingtoit
theygivefeedback,lookingforadviceandhelp.Clientshavethebuyinghabit.Their
satisfactionis78onscale.Thismeansthatyoumayaffordtolosecontactornotto
satisfythemonce,andtheywillgiveyouanotherchance.Eventhoughrelationship
withclientdependsonmarketingactivitiesofcompetitors

Cheerleadersadvocatesarehighestonrelationshipscale.Theywillnotonlyhelpyou,
theywillsellforyou.Theywilltalkaboutyoutotheirfriendsandbusinesspartners
andsendyouretheirclientsifyouaskthemso.

Wehaveidentifiedfourtypesofstrategicallysignificantcustomers(SSC)6:
o

Highlifetimevaluecustomer,

Benchmarkstheothercustomerscopyhim/her,

Inspirationsbuyersthatcausechangesinthecompany,findnewusages,

Comewithnewideas

Costmagnetsthecustomerswhoabsorbdisproportionalhighleveloffixcostand
inthatwayenableothercustomerstobemoreprofitableforthecompany

Thebestbuyersdeservethebesttreatment.Ifyoutreatyourbestcustomersthesameway
likeallothers,theywillsoonbehavethesameway,whichisnotgoodbusinessmanner.Thetask
formarketersistoidentifysignificantcustomersandtoretaincontinuousindividualcommunica
tionwiththem.Inordertogetappropriateandmeasurableresponsemarketingmanagerhastobe
trainedtocreatecustomerknowledgeoutofhundredsofnonrelateddatacollectedfromdiffer
entcompanydivisions.

Conclusion
TheCRMsolutionsaredesignedinthatwayastoofferknowledgeneededfordevelopment
andimplementationofsmartcustomerprofitmaximizationstrategies,andatthesametimeto
create company competitive advantage. By analyzing CRM technologies we can understand our
clientsinordernottoreactwhentheproblemappears,buttoproactivelyfindhiddenopportuni
tiesforgrowingcustomerwants.
The key success factor of CRM concept is for the company to anticipate customer expecta
tions.Toreachthatgoal,theplatformforcommunicationwithcustomers,gatheringandanalysis
ofdatahastobemade.Withinwebsites,specializedstatisticalsoftwarepackagesenableoverview
and storage of data collected from answers on many different questions. In that way, company
maykeeptrackoncustomerbehaviorandtheirspecificinterestfields.
Companygoalistopersuadepotentialcustomerstobuy,prepay,register,answertheques
tionnaires and generate recommendations, which all together create competitive position for the
company. Potential customers, more like the company, have their goals needs satisfaction and

Marii(2002),s.212.

20076EconomicAnalysis

understanding,aswellasthestrategiesofreachingthosegoals.Companyabilitytopersuadepo
tentialcustomerstorealizeplannedactionistheresultofeffectivenessofCRMstrategy.Theproc
ess in which customer becomes and remains real buyer, who improves company operations by
his/herloyalty,isbasedonassuredprincipleswhichincludeanalysis,artofcommunication,CRM
conceptandfundamentalknowledgeofeconomics.

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Cottle,W.(2000),ProfessionalsGuidetoTargetMarketing,HarcourtProfessionalPublishing,SanDiego.

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Domazet,I.(2007),Operativnimenadmentfaktorunapredjenjakonkurentskepoyicijepreduzea,zbornikEkonomsko
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Filipovi,V.andKosti,M.(1999),Marketingmenadment,Institutzamenadment,Beograd.

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Marii,B.(2002),Ponaanjepotroaa,Savremenaadministracija,Beograd.

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Milievi,V.(2002),InternetEkonomija,Fakultetorganizacionihnauka,Beograd.

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