Value Added

be noted that the relationship is developed with strategically significant customers, and hence it is necessary for

the organisation to determine the nature of the significance. Traditionally this would be done by determining

the value of the customer to the organisation, but other criteria that can be used include whether a customer

serves as a benchmark for other customers or whether the customer inspires change in the supplier (Buttle,

2002).

The implementation of CRM is regarded as desirable by organisations due to the benefits that accrue

from these strategies among their customers, such as greater loyalty and resulting profits. The focus of a CRM

strategy is the acquisition, retention and overall customer profitability of the specific group of customers.

• Acquisition of customers: this refers to the need of organisation to find new customers for their

products. This means they are required to develop strategies to attract potential customers to purchase

the product. The cost of attracting a new customer is estimated to be five times the cost of keeping a

current customer happy (Kotler, 1997).

• Retention of customers: organisations also need to focus on existing customers in order to ensure that

they continue purchasing and continue supporting the product. Organisations can increase their

profitability by between 20% and 125% if they boost their customer retention rate by 5 percent (Peck,

Payne, Christopher & Clark, 2004).

• Profitability: Customer profitability reflects the financial performance of customers with respect to all

the costs associated with a transaction (Gordon, 1998). Profitability in the case of CRM is determined

in the light of the lifetime value of the customer to the organisation, taking account the income and

expenses associated with each customer and their respective transactions over time (Gordon, 1998).