Customer Relationship Management (CRM)

Of all the acronyms you’ll encounter in marketing—like B2C, CPC, or CTR, to name a few—one of the most important is CRM. It stands for customer relationship management, and it's what keeps your business viable in the long term.

CRM Defined

CRM is the strategic managing of interactions with potential and established customers. The quality of these interactions determines the quality of your customer relationships, which in turn determines whether you have a robust customer base or are constantly looking for new business.

The term can refer to any aspect of the relationship management process, but people most often use it to reference particular systems and technologies. These are the tools that collect and analyze consumer data so that it can be useful to marketers.

Why consumer data matters

It's no secret that personalization is an important tool in marketing. In 2018, Epsilon produced a study showing that:

• 80% of customers would rather do business with a company that personalized its shopping experiences
• 75% of people think it's “very cool” when they get personalized offers
• 90% of consumers find personalization either very or somewhat appealing

Data revealed that people who find personalization “very appealing” are more likely to be repeat customers—defined here as making more than 15 purchases from a company during a calendar year.

Similarly, the lack of personalization can negatively affect customers' perception of a company. According to a 2019 research report:

• 63% of consumers expect personalization as a service standard
• 78% of customers believe there is a lot of room for improvement for companies when it comes to delivering personalized services

If you don't have the data that lets you target your marketing to individual contacts, your customer relationships will suffer.

Data and CRM: The perfect pair

You can't personalize your service if you don't know anything about the people you're serving. But you can't physically knock on your customers' doors and speak to each one individually, either. That’s where CRM can help.

Collecting data

Consumer data collection usually takes 1 of 3 forms:

1. Direct customer surveying
2. Customer behavior tracking
3. Interpretation of existing studies or external data

Behavior tracking is one of the most effective methods in customer relationship development. When you collect data that tells you what people do when they're on your website or social media pages, a CRM tool can classify shoppers into interest groups or demographic profiles.

Interpreting data

If you had to do all of this processing and aggregating yourself, you wouldn't have any time left to run your business. Fortunately, CRM systems and tools can scan through the data you collect and pull out what's important. These data snippets let your system create customer groups known as segments.

A segment is a group of customers that shares 1 or more qualities. For example:

• Demographic segments are based on characteristics like age, gender, income level, and occupation.
• Geographic segments are based on customers' home location. Boundaries may be as broad as a nation or as narrow as neighborhoods within a city.
• Psychographic segments are based on shared characteristics at a psychological or emotional level. Examples include values, beliefs, interests, and motivations.
• Behavioral segments are based on how customers interact with a brand, from purchase patterns to loyalty.

Any of these segment types can be useful to a marketing team. When you group customers according to particular qualities, you can create campaigns that feel personalized.

Applying data

To picture how this works, imagine your company wants to create separate promotional programs for a few specific types of customers:

• Repeat browsers
• Recent first-time buyers
• Lapsed customers
• Loyal shoppers

Your CRM strategy collects behavioral data and classifies customer information based on the number of purchases and the date of the customer's last purchase. You can then create promotional offers that are geared toward each group and send them to the appropriate people.

The same process would apply if you wanted to create campaigns for particular store locations, age groups, or preferred product types. The possibilities are endless!

The benefits of CRM

Because CRM systems increase the relevance of marketing campaigns, they improve customer engagement and help build loyalty. This is the relationship element of "relationship management."

CRM systems also automate the execution of your strategies to save you time and money. For example, if you want to send out email campaigns based on promotions in your brick-and-mortar stores, a CRM system can trigger those emails based on customer location. This means you won’t need to spend your valuable time manually organizing spreadsheets by town or state.

And it doesn't stop there. Let’s say that a customer takes action on those emails and orders an item to pick up at your store. Your CRM can trigger an automated “Thanks for picking up your order” email with an invitation to a customer satisfaction survey, a coupon for a discount on a future purchase, or a link back to review the item on your product page.

What makes a CRM system effective?

A CRM system allows you to collect, organize, and analyze your customer data in ways that make your job easier. It needs to be able to:

• Provide a central hub where sales and customer service professionals can access customer data
• Connect smoothly with your marketing channels for effective personalization
• Organize campaigns based on specified criteria
• Track how audiences are interacting with a campaign and how individual customers are progressing through the pipeline
• Aggregate existing customer information to help you identify high-potential new markets

Every company's needs are different, so you should make sure that your CRM integrates with the tools that you are already using. And remember: CRM is designed to help you grow, so a system is only as useful as the highest level of growth it can support.

Start building stronger customer relationships

Personalized marketing doesn’t have to be difficult. CRM can help you create segments that target specific groups of customers based on their interests, demographics, behavior, and more. That way you can communicate with your entire audience while still making your marketing unique for every customer. Read how Mailchimp's free CRM for small business compares to the competition.