What Is Customer Relationship Marketing?

Customer Relationship Marketing is all about building customer relationships that increase customer retention and growing customer value through strategies and communications driven by optimising customer data and insight. It is based on the idea that a brand using their knowledge about a customer can create a deeper emotional bond which results in increased order value or frequency.

Customer Relationship Marketing is about getting, growing and keeping customers by enhancing engagement across all touch points to build deep, lasting and profitable relationships. It involves segmenting and targeting customers with relevant communications to create strong brand engagements. It must have content driven by customer wants, needs and interests with the right balance of emotional and rational messaging.

It is about building long term relationships rather than just seeking single transactions to increase customer lifetime value (CLV). A customer is not just a sales target, they are people, just like you or I and respond better if you treat them as such. Understanding the differences between the kinds of customers you have and the relationship they want or have with your brand is essential to making sure you know how to engage with them.

And just like our own circle of friends or acquaintances, how we engage, will be based upon our depth of relationship. Customer Relationship Marketing, like personal relationships, requires understanding and hard work. You need to get to know the customer in order that your CRM activity can be targeted, relevant, add value and avoids meaningless contact. Through on-going interactions with customers, the brand can learn how they want to be treated making it progressively more convenient and beneficial to deal with the brand.

Why Does Customer Relationship Marketing Matter?

Marketing efforts to reach new customers and win them over can be costly. Maintaining existing customers through Customer Relationship Marketing, however, can be highly cost-effective. With higher repeat purchase and customer retention numbers, the costs of customer acquisition decrease, providing you with a higher ROI in your overall marketing activity.

By building long-lasting, profitable relationships, existing customers will be purchasing more over time than new customers, they spend more per visit and tend to purchase more expensive products or services. Acquiring new customers can be profitable but getting them to buy again will benefit the business more. Repeat purchase is the key step towards creating high-value customers. It is significantly cheaper to get existing customers to buy again than finding new customers. In fact, the probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is only 5-20%.

Every time a customer re-purchases, the likelihood of them coming back and becoming a loyal customer will increase. So, whilst only 32% of first purchasers will make a second purchase, 53% of customers that make a second purchase will make a third.

Customer Relationship Marketing is not a targeted email or a triggered activity from your website. It is a carefully orchestrated ongoing programme of interactions developed to optimise the lifetime value of your customers to your business.  It requires you to focus your thinking around the customer groups that you serve. Getting this right will mean you grow your share of wallet with each customer and reduce the chances of them spending elsewhere or leaving you altogether. 

The focus of Customer Relationship Marketing should be developing a relationship rather than the number of initial sales generated. Sales will come as a result of building the relationship. So, you need to ensure you are measuring Customer Relationship Marketing properly. To do this you will need long-term customer level sales, retention and loyalty tracking broken down by different customer segments or key demographics. In addition to transactional measures, you should also look to track at a customer level things like brand perception or likelihood to recommend your brand to a friend.

Customer Relationship Marketing is one of the most important keys to achieving customer-centricity.

Further Reading

If you would like to read more about how to develop a customer relationship marketing program, then read this article that offers 10 tips on the do's and don'ts of customer relationship marketing.