Unit 7.2
Defining Customer Relationship Management (CRM)
Learning Objectives
By the end of this chapter, you will be able to:
- ✅ Define CRM as both a strategy and a system.
- ✅ Identify the primary goals of CRM: acquire, retain, and increase profitability.
- ✅ Explain the importance of the "360-degree customer view."
- ✅ Describe the phases of the customer lifecycle that CRM supports.
What is CRM? The Core Idea
Customer Relationship Management (CRM): A business strategy and supporting information systems designed to manage and nurture interactions with current and potential customers.
⚡ It's a Philosophy, Not Just Software! The software is a tool that enables a customer-centric strategy.
The Two Sides of CRM
1. The Strategy 🧠
- A customer-first business philosophy.
- Focuses on building long-term, profitable relationships.
- Guides how every department interacts with customers.
2. The System 💻
- The technology that enables the strategy.
- Software for collecting, storing, and analyzing customer data.
- Examples: Salesforce, HubSpot, Zoho CRM.
🎬 Watch: CRM Is a Strategy
⚠️ Why Many CRM Projects Disappoint
- Software first, strategy later: the firm buys a tool without deciding how it wants to treat customers.
- Staff don't use it: salespeople see data entry as extra work.
- Dirty data: duplicate and outdated records make the "single view" wrong.
- One department only: sales uses it, service doesn't, so silos remain.
🎯 The Primary Goals of CRM
1. Acquire
Manage leads and track the sales pipeline to convert potential customers more effectively.
2. Retain
Improve customer satisfaction and loyalty through better service and personalized interactions.
3. Increase Profitability
Identify high-value customers and focus efforts to maximize their Customer Lifetime Value (CLV).
Interactive: CRM Goal Classifier
Click each scenario card to reveal which CRM goal it represents.
Why Retention Matters 📊
Acquiring a new customer is almost always more expensive than keeping an existing one.
Fact: It can be 5 to 25 times more expensive to acquire a new customer than to retain an existing one.
Customer Lifetime Value (CLV): CRM helps analyze data to predict the total profit a customer will generate for your business over their entire relationship.
🎬 Watch: Customer Lifetime Value
Interactive: CLV Calculator
CLV = Average Purchase Value × Purchase Frequency (per year) × Customer Lifespan (years)
Supporting the Customer Lifecycle
CRM systems are designed to manage interactions across every phase of the customer journey.
Marketing
Engaging prospects & generating leads.
Sales
Converting leads into paying customers.
Service
Providing support & ensuring satisfaction.
Interactive: Lifecycle Phase Activity Matcher
Select an activity chip, then click the correct phase header to place it. Green = correct, red = wrong phase.
🔄 The Customer Lifecycle: Five Stages
- Reach: the person first hears of you (an ad, a friend, a search).
- Acquire: they show interest and become a lead.
- Convert: they make a first purchase.
- Retain: they keep buying because service and value are good.
- Loyalty / advocacy: they recommend you to others.
Marketing leads stages 1–2, Sales stage 3, Service stages 4–5, and CRM tracks the customer through all of them.
🧪 Quick Activity: Name the Lifecycle Stage
- A student sees a coaching centre's poster at a bus stop. → Reach
- She fills in the "free demo class" form online. → Acquire
- She pays for the three-month course. → Convert
- She signs up for the next level after good results. → Retain
- She brings two friends to the centre. → Loyalty / advocacy
The Problem: Information Silos
Before CRM, customer data was scattered across different departments, creating a fragmented view.
Marketing Team
Campaign data
Sales Team
Purchase history
Service Team
Support tickets
Result: No one had a complete picture of the customer's journey.
The Solution: 🔍 The 360° Customer View
A CRM system breaks down silos by creating a single, central database.
360-Degree View: A complete, unified profile of a customer's entire history and interactions with the company, accessible to everyone.
- Sales knows about recent support issues.
- Marketing knows about purchase history for better targeting.
- Service knows about the customer's value and past interactions.
Interactive: Build the 360° Customer View
Click each department tile to reveal what data it contributes to the unified 360° customer profile.
🧮 Worked Example: One Guest, One Screen
Illustrative: a Pokhara trekking agency. A returning guest emails about a new trek.
| Source | What the 360° profile shows |
|---|---|
| Marketing | Came from a travel blog link in 2024; opens monsoon-discount emails |
| Sales | Booked Annapurna Base Camp 2024; paid in full early |
| Service | Complained once about a late jeep pickup; resolved with a refund |
| Guide notes | Vegetarian; prefers small groups |
The reply: a small-group, vegetarian-friendly Mardi Himal trek, with a guaranteed pickup time. Without the 360° view, staff would start from zero.
🔐 The 360° View and Privacy
A full customer profile is valuable, and sensitive.
- Consent: collect only what customers agree to, for a stated purpose.
- Access: not every employee needs every field (e.g. payment details).
- Accuracy: customers should be able to correct their data.
- Law: Nepal's Individual Privacy Act, 2075 (2018) protects personal data and limits its use without consent.
Practical Application: CRM in Nepal
Scenario: A Nepali Bank (e.g., Nabil Bank)
- Acquire: Tracks online loan applications and assigns a relationship manager to follow up with promising leads.
- Retain: A teller sees a "high-value customer" alert in the CRM and can offer them priority service or personalized advice.
- 360° View: A loan officer can see the customer's savings account balance, past support calls about the mobile app, and their investment portfolio, all in one screen, before a meeting.
💄 Real Case: Sephora's Beauty Insider
Since 2007, cosmetics retailer Sephora has run a free loyalty programme, Beauty Insider.
- Members earn points and move up tiers as they spend more (a "retain" and "increase profitability" goal).
- Purchase history is shared between the website, the app and the store, so staff can see what a member bought before.
- The data powers personalised product suggestions and birthday gifts.
🎬 Watch: How Loyalty Schemes Work
💬 Discuss: Do They Know You?
- Name a business (shop, bank, app) that treats you as a known customer. What does it remember?
- Name one that doesn't. What goes wrong?
- Where's the line between "helpful" and "creepy"?
Key Takeaways
- Philosophy First: CRM is a customer-centric business strategy, enabled by technology.
- The 3 Goals: The core objectives are to acquire, retain, and increase the profitability of customers.
- Unified View: The "360-degree view" is CRM's most powerful benefit, breaking down information silos.
- Full Lifecycle Support: CRM manages the entire customer journey from marketing to sales to service.
Interactive: CRM Knowledge Check (1/2)
Answer all 4 questions, then check your score.
1. CRM stands for Customer Relationship Management. Which best describes it?
2. According to research, acquiring a new customer is approximately how much more expensive than retaining one?
Interactive: CRM Knowledge Check (2/2)
Answer all 4 questions, then check your score.
3. The "360-degree customer view" in CRM primarily solves which problem?
4. Which of the following is NOT one of the three primary CRM goals?
Exam Practice 📝
Short answer
- What is customer relationship management (CRM)?
- What is a 360-degree view of the customer?
- List the stages of the customer lifecycle.
Exam Practice 📝 (continued)
Long answer
- Explain the concept and goals of CRM and how it manages the customer lifecycle.
- Discuss the importance of a 360-degree view of the customer, with an example from a Nepali business.
Revise the answers in the full note.
Image & Video Credits
Images
- Sephora Store at Toronto Eaton Centre: Justin Tung, CC0, via Wikimedia Commons
- Customer lifecycle diagram: course author (original), CC BY 4.0
Videos (YouTube)
- Mariano J. Doble, "CRM as Ongoing Strategy, Part I: CRM is a Strategy NOT a Technology" (2012; 160–250 s)
- Data Science Dojo, "What is Customer Lifetime Value (CLV)?" (12–92 s)
- MrBrownCS, "Cambridge Nationals I.T.: Loyalty Schemes" (0–90 s)
Thank You
Any questions?
Next Up: Unit 7.3 - Operational CRM Systems