Customer Relationship Management

What it does:
CRM systems track the buying preferences of individual customers and market your products to them accordingly.

Its other names:
CRM

Where it comes from:
CRM systems are a logical outgrowth of earlier IT systems that tracked orders from individual customers. From those systems, it was a logical next step to use the information gathered about those customers to continue to market to them in a more focused way.

Summary:
CRM analyzes buying patterns of current customers and automates ongoing marketing to them.

Case study: Amazon.com utilizes advanced CRM systems:

- When a customer searches for a book on a particular topic, Amazon.com's CRM systems "recommend" other books on that same topic or by the same author for the customer to consider.
- To strengthen the relationship with customers, Amazon.com sends an e-mail notification when orders have been shipped.
- Amazon.com's CRM system utilizes fuzzy logic to recommend products to current customers. If a certain customer has bought a gardening book, for example, next spring he or she will receive future e-mails that recommend new books on gardening - and possibly books on other topics that gardeners have been shown to buy.

CRM systems can analyze what customers have bought in the past and predict future purchasing patterns. This is called predictive modeling, and it can be customized to predict customer behavior for nearly any type of product or industry.

What else you need to know:
It is sometimes illogical to use a customer's past purchasing activities to predict what he or she might buy in the future. The fact that one customer buys an Italian cookbook, for example, does not mean that he or she will want to buy a dozen more. Yet the fact that CRM markets to customers through the Internet and e-mail communication makes it economical to deliver marketing communications to a large number of consumers anyway. Sending an e-mail to 50,000 of your customers is just as economical as sending one to 500. The best approach is to implement a system that can be fine-tuned to market more strategically to your client base.