BAFS Study Notes: Customer Relationship Management (CRM)

Hey everyone! Welcome to your study notes on Customer Relationship Management, or CRM. Don't let the long name scare you! At its heart, CRM is all about how businesses build strong, lasting friendships with their customers.

In this chapter, we're going to explore:

1. Why CRM is super important for any business.
2. What makes customers loyal to a brand (think about your favourite bubble tea shop!).
3. The clever strategies companies use to win your loyalty and keep you coming back for more.

Understanding CRM is crucial because in today's crowded market, making a customer happy isn't just nice—it's necessary for survival! Let's get started.

The Importance of CRM in the Marketing Process

Imagine you run a small café. If a customer comes in every single day, you'd probably remember their name and their usual order, right? You might even give them a free coffee once in a while. That's simple CRM! Now, imagine a huge company like Nike trying to do that for millions of customers. That's where a CRM strategy comes in.

Customer Relationship Management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

So, why is it so important in marketing? Let's break it down.

1. It Helps Businesses Understand Customers Better

CRM involves collecting and analysing data about customers. This isn't about being nosy; it's about understanding what people want.

  • What they collect: Purchase history (what you buy), contact information, preferences (e.g., you prefer window seats on a plane), and any past complaints or queries.
  • Analogy: Think of it as a business keeping a detailed "diary" for each customer. When the customer interacts with the company, they can quickly open the diary and know exactly who they're talking to.

2. It Allows for Personalised Marketing

Once a business understands its customers, it can stop sending generic ads to everyone. Instead, it can create marketing messages that feel personal and relevant.

  • Example: Spotify creates a "Wrapped" summary for you every year and makes personalised playlists like "Discover Weekly". They use your listening data to give you something you'll actually enjoy.
  • Example: A clothing store might email you a special offer on jackets just as the weather in Hong Kong starts getting cooler.

3. It Improves Customer Service

Have you ever called a company for help and had to explain your problem over and over again to different people? It's frustrating! CRM systems prevent this.

  • With CRM, a customer service agent can see your entire history with the company. They know what you've bought, what problems you've had before, and can help you much faster.
  • This makes customers feel valued and understood, not like just another number.

4. It Increases Customer Loyalty and Retention

This is a big one! When customers feel understood, receive personalised offers, and get great service, they are much more likely to stay with that company. Keeping an existing customer is much cheaper and easier than finding a new one.

Key Takeaway

CRM is vital to the marketing process because it shifts the focus from a single transaction (just making one sale) to building a long-term relationship. It helps businesses understand, personalise, serve, and ultimately keep their customers.

What is Customer Loyalty and What Affects It?

Why do some people only drink Coca-Cola, or refuse to buy a phone that isn't an iPhone? That's customer loyalty in action. It’s more than just a habit; it’s a positive feeling and a real commitment to a brand.

Customer Loyalty is when a customer voluntarily and repeatedly chooses to buy from the same company instead of its competitors.

So, what are the secret ingredients that create this loyalty? Let's look at the key factors.

Factors Affecting Customer Loyalty

Here's a simple way to remember the key factors: think "Q-TIPS".

Q - Quality of Products/Services

  • This is the foundation. The product or service has to be good and reliable. If a restaurant's food is terrible, no amount of friendly service will make you a loyal customer.
  • Example: You trust that a Toyota car will be reliable and won't break down easily.

T - Trust and Brand Reputation

  • Customers need to trust the company. This means the company is honest, handles problems fairly, and protects customer data. A single scandal can destroy years of trust.
  • Example: You trust your bank to keep your money safe.

I - Interaction (Customer Service)

  • This is about how a company treats you. Are the staff friendly and helpful? Is it easy to get problems solved? Positive interactions build emotional connections.
  • Example: The helpful staff at an electronics store who patiently answer all your questions can make you want to shop there again.

P - Price and Perceived Value

  • This isn't just about being the cheapest. It’s about value for money. Customers feel loyal when they believe they are getting a fair price for the quality and benefits they receive.
  • Example: UNIQLO is not the cheapest clothing brand, but many customers feel its quality and design offer great value for the price.

S - Satisfaction and Personalisation

  • Did the product meet or exceed your expectations? Do you feel like the company "gets" you? When a company remembers your preferences or makes you feel special, your satisfaction and loyalty grow.
  • Example: Your favourite coffee shop barista remembering your name and usual order.
Key Takeaway

Customer loyalty isn't an accident. It's built on a foundation of Q-TIPS: providing high Quality, earning Trust, having great customer Interactions, offering fair Price/value, and ensuring customer Satisfaction.

Strategies to Enhance Customer Loyalty

Okay, so we know what loyalty is and why it's important. Now, let's look at the specific marketing strategies companies use to build it. Don't worry, these will all seem very familiar!

1. Loyalty and Reward Programmes

This is one of the most common strategies. These programmes give customers a reason to keep coming back by rewarding them for their repeat business.

  • How it works: Customers earn points, stamps, or "stars" for every purchase, which they can later redeem for free products, discounts, or special perks.
  • Examples:
    • YUU Rewards Programme: Collect points at Wellcome, Mannings, IKEA, etc.
    • Airline Miles: Fly with an airline to earn miles for future flight upgrades or free tickets.
    • Bubble Tea Stamp Cards: Buy 9 drinks, get the 10th one free.

2. Excellent Customer Service

Going above and beyond to help a customer can turn a negative experience into a positive one and create a loyal fan for life.

  • How it works: Having a well-trained, friendly, and empowered staff who can solve problems quickly. Offering multiple ways to get help (phone, email, live chat).
  • Example: An online store that offers a "no questions asked" free return policy makes customers feel safe to shop there, increasing their loyalty.

3. Personalised Communication and Offers

This strategy makes customers feel unique and valued, not just part of a crowd. It uses data (from CRM!) to create a one-to-one marketing experience.

  • How it works: Sending birthday discounts, recommending products based on past purchases, or addressing customers by name in emails.
  • Example: Netflix's recommendation engine ("Because you watched Stranger Things...") keeps you engaged by suggesting content tailored to your tastes.

4. Building a Community

This strategy connects customers with each other and the brand, creating a sense of belonging.

  • How it works: Creating fan clubs, online forums, or social media groups where customers can share their experiences and passion for the brand.
  • Example: Lego Ideas is a website where fans can submit their own designs. If a design gets enough votes, Lego might turn it into a real product. This makes fans feel like they are part of the company.

5. Seeking and Acting on Feedback

Loyal customers feel heard. Smart companies actively ask for customer opinions and then actually use that feedback to make improvements.

  • How it works: Using customer satisfaction surveys, suggestion boxes, and monitoring online reviews.
  • Example: A restaurant adds a vegetarian dish to its menu after many customers requested it in feedback forms. This shows they are listening and care about customer needs.
Quick Review Box

Goal: Make Customers Loyal
How?
- Give Rewards: Loyalty programmes (points, stamps).
- Be Nice & Helpful: Excellent customer service.
- Make it Personal: Personalised offers and communication.
- Create a Family: Build a brand community.
- Listen & Improve: Act on customer feedback.

Did you know?

According to business research, it can cost a company 5 to 25 times more to acquire a new customer than it does to retain an existing one. This is why spending money on CRM and loyalty strategies is such a smart investment!