Strategic importance of CRM,

Discuss the strategic importance of CRM

CRM is described as a comprehensive approach to business management." It uses a database and tools for market creation, as well as a defined sales mechanism, to consolidate and refine all customer-related processes through departments of marketing, sales, customer support, and R&D (research and development). CRM's goal is to provide additional value for both customers and suppliers over the life cycle of a business partnership (West et al., 2015).

The components of a CRM initiative and explain.

Customer experience management programs are categorized into scientific, organizational, communicative, interactive, social, and web elements (CRM). Different targets are pursued depending on the form and use of CRM. In analytical CRM, for example, CRM data is analysed, while in communicative CRM, direct communication with consumers is preferred.

Calculate the customer lifetime value

In order to calculate the CLV, we have to take a detour via the customer retention rate and the customer lifetime.

If we consider that customer Andy goes to a café every morning for three years and is enthusiastic about various delicacies there (Brown, 2000). 

Every year he spends around EUR 1,000 in the café (EUR 3,000 over the entire period). The café in turn spends around 40 EUR per year on customer care for customer Andy therefore 120 EUR over the entire period). In addition, we assume that the discount factor is 5% (0.05).

CLV per year = (3,000 € - 120 €) / (1 + 0.05) x 3) = 914 €

The customer lifetime value, taking into account the cost of maintaining relationships, is EUR 914 for one year (EUR 2,742 for the entire period of three years



References

Brown, S. A. (2000). Customer relationship management: a strategic imperative in the world of e-business. John Wiley & Sons Canada.

West, D. C., Ford, J., & Ibrahim, E. (2015). Strategic Marketing: Creating Competitive Advantage (3rd ed.). Oxford University Press.