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Critical Analysis: Effectiveness Of Customer Relationship Management Initiatives On Customer Loyalty

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  • Purpose: The Purpose of this research paper is to understand the Effectiveness of CRM initiatives on the customer loyalty and retention.
  • Research Implications: This paper provides a preliminary understanding of the CRM marketing initiatives on the customer loyalty in the long run. Future research should use alternative methods, and verify and elaborate the findings.
  • Findings: “In the past, many companies took their customers for granted. Customers often did not have any alternative suppliers, or the other supplies were just as poor in a quality and services, or the market was growing so fast that the company did not worry about fully satisfying its customers. A company could loses 100 customers a week, but gain another 1000 customers and consider its sales to be satisfactory. Such a company, operating on a ‘ leaky bucket’ theory of business, believes that there will always be enough customers to replace the defecting ones.“

“Customer retention programs can be a powerful tool in the arsenal of CRM. Customer retention is important to most companies because the cost of acquiring a new customer is far greater than the cost of maintaining a relationship with a current customer.”

“For many firms, customer profitability is skewed in such a way that losing the most profitable customers has a very serious effect. In many banks, for example, the top 30 percent of customers (when ranked by profitability) can make up 100–150 percent of total customer profitability. That’s right the bottom eighty percent of customers may provide no profitability or, worse yet, destroy 50 percent of profitability.”

  • Originality/Value: This paper talks about how the Customer Relationship affects the customer base and leads to customer loyalty and retention.
  • Keywords: Customer loyalty; customers retention; automobile sector; customer preference; customer satisfaction.


“Because of recent changes in a business environment, that is; increases in customer turnover and decrease in profitability, the company in all branches have come to understanding that the relations with customer are one of the most important assets which they possess. As a result they pass from focused on a product and a brand – the focused marketing approaches to the approach focused on the client . Really, retention of customers and restorative of their loyalty is very effective, but difficult method for increase in success of the company. Also, in medium-term competitive fight it is necessary to support and increase customer loyalty. Loyalty as a behavioral fact arises due to the fact that the customer perceives all the benefits that the product provides him.

On the road to profitability, companies are looking for a better marketing strategy. There are many marketing strategies. Some companies have transactional relations with consumers: they are focused on single purchases, don’t keep in contact with the clients and try to reach a big flow of consumers. Other companies argue that the grade of the attitude between buyers and sellers is much more important than the net number of contacts. This strategic route relates to the concept of customer relationship management (CRM). Basically, CRM is an ‘integrated approach to relationship management, focusing on customer retention and relationship development’. As a business strategy, it began to emerge in 1999. Customer relationship management (CRM) is the process of contraction and maintains of the favourable relations with customers, by affording products which are valuable to customer and build satisfied customers. CRM is the way that companies create relationships with customers in order to maintain customer loyalty . CRM emphasizes the significance of long-term relations with customers and increasing their loyalty and allegiance to a company. It offers various storage strategies and recommendations for creating customer loyalty.

The correlation between customer satisfaction and CRM is not from simple. Enlarged customer satisfaction is one of the CRM’s faiths. Customer satisfaction has become the declared goal of all business areas. In the settings of the service, customer satisfaction reports desirable result of the service encounters, which includes an assessment of whether the service meets customer needs and expectations. The importance of the concept of satisfaction is manifested in its alignment with customer loyalty, retention and profitability of the company. Increased customer satisfaction can lead to increased consumer loyalty and lead to an increase in the company’s market share.

Development of relationships with customers:

  • Relationship Management.

CRM, along with the launch of the product and service policy, are the programs of long-term cooperation of the company with customers. Within the framework of the organization, the fulfillment of this task includes the elaboration of two components: ‘external’ and ‘internal’. Within the external component, the company develops loyalty programs and sales promotion. Under the loyalty program, it is necessary to understand the long-term client project, which is aimed at increasing the client’s attachment to the company for account tangible material and emotional values, as well as to increase the profitability of the company. It is proposed to distinguish two groups‟ loyalty programs:

  • · bonus programs: rewarding customers for profitable behavior for the company (use of additional services, intensity of treatment, recommendations, etc.);
  • · additional services: a set of services focused on individual customers or specific segments.

Customer retention:

  • Motivation for mutually beneficial relationships.

The motivation of customer consists in the presentation of informing the customer on them so that the last had had a desire in transaction on maintenance in his receiving. Motivation helps the customer to feel the difference between the present and the desired state to realize the need to complete the transaction. Particularly relevant is the time to make a positive impression on the customer, to inspire confidence and to place him to himself.

  • Stimulating mutually beneficial relationships.

For each subsequent request for assistance in obtaining a service to the company, the client may be provided with various types of additional services, or provision of services for obtaining a product at a discount, or granting other privileges to such a customer.

Customer service

“Great service is about attitude. And a service attitude leads to a richer quality of life, not only in the commercial sector” (Leonard Berry).

Customer service is one of the important component of customer relationship management. Companies only know the strength and drawbacks with the results of provided customer services. Different service company promote the mantra TLC; think like customer while designing their service interactions. Due to mishandling on how customer think, many service company results miss opportunities to become truly excel-lent. Understanding customer psychology at a deeper level can help company to provide excellent services.

Loyalty Programs

Customer loyalty program seek to set customers bond to a company by offering additional encouragements. In a small business informal loyalty programmers may take in from of giving treat as a way of thanking to a regular customers periodically. Consumers are loyal to several brand while rejecting others, sometimes describes as polygamous loyalty. In such instant the marketing goal becomes one of the strengthening the customer preference for brand x over brand y. Marketers need to check three psychological effects to assess the potential of loyalty programme to alter patterns of behavior; brand loyalty verses deal loyalty where marketer should focus on loyalty programmers that directly supports the value of the product instead of creating difference between brand loyalty versus deal loyalty, several elements combine to determine a loyalty programs to value customer should anlaysed and marketers should focus on solution to send customer indicating progress towards reaching particular milestone and promoting the rewards that might be forth coming when that point is reach on time. Customer loyalty programs reinforce loyalty by rewarding frequent users.

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Obviously, in order to successfully implement a strategy that is aimed at the customer, it is necessary for the company to carry out interrelated organizational transformations that include changes in the structure of the company, a review of its business processes, service and the transformation of the corporate culture. All this activity must be subject to a single goal of the company.

Benefits of customer relationship management

The reasons that companies have adopted customer relationship management because it can improve productivity across the perfect range of key marketing functions: detecting prospects, acquiring customers, developing customers through cross-selling and up selling, managing customer migration, serving, retaining, and increasing customer loyalty and win back defectors. Many organizations have realised the benefits of customer relationship management as retaining and pleasing the right kind of customers, gaining repeatedly purchasing customers and increasing profitability.

CRM is a technology or software that helps track data and information about the customers to enable better service. Customer relationship management help to acquire profitable customers, to be focus on enterprise customers as a key to competitive advantage. It helps to retain profitable customers longer, win back profitable customers and eliminate unprofitable customers. Companies can upsell additional products in a solution, cross-sell other products to customers, referrals, and word of mouth benefits and reduce service and operational cost.

Customer retention as a key to business performance

Customer retention has more impact on profit than market share, economies of scale and other variables that are considered to provide complete advantages for a firm. While acquisition strategies are necessary to fill the pipeline with customers to counter inevitable attrition, it should be remembered that customer equity is more dependent on customer retention than customer acquisition. For most firms, improving customer retention can lead to very significant increases in profitability. Customer retention strategies work best when industry retention levels are high and there is a significant step in the Company’s customer base. Only five percent increase in retention can increase a company’s profitability to over 85percent. Customer retention strategies are profitable not only because of the increased revenue from loyal customers but also, because of the reduced costs of serving long-time customers.

Research Objectives

  • To study the impact of CRM initiatives on customer loyalty
  • To analyze the factors which positively and negatively influence customer loyalty
  • To suggest measures to enhance CRM initiatives

Review of Literature

  • Impact of customer relationship management (CRM) on customer satisfaction and loyalty: A systematic review(2015)

In this study, we review literature on Customer Relationship Management (CRM), focusing specifically on the impact of the CRM on customer satisfaction and customer loyalty. CRM is a set of practices that organizations adopt to maintain and increase their customer base.

  • Customer Relationship Management and Customer Retention in the Amica Restaurant at Valmet Oy Ltd. (2003)

The aim of the thesis was to increase the understanding of customer retention by investigating a service company able to improve their customer retention through customer relationship management. Companies may choose to apply different parts of customer relationship management to their businesses through technology and other means of communication with their customers, various training programs, and other resources devoted towards the employees of the company.

Evaluating the past and present behaviour makes it possible for the company to adopt the most effective business strategy.

Significance and Importance

CRM Nowadays is considered as an important business strategy, in the changing marketing trends and high-edge competitions. Customer Loyalty is directly proportional to high profitability and Market power of the organization. Various strategies are used by the organisation to retain their customers via loyalty programs, club systems, preferential customers, etc.

Many companies are increasingly adopting customer relationship management as means to take their competitive advantages. The firms are under a tremendous pressure to adjust quickly to rapid changes in a marketplace with re-goods to customer, technology and market function. Customers are not only becoming more value conscious but also less loyal and less service level oriented and less tolerant. Consequently, markets are becoming more fragmented, making differentiation more difficult and completion instant. This change is driving companies to become customer centric and shifting their marketing function from product based to customer based.”

Limitation of the Study

The study is not exploratory as it relies only on secondary sources like online journals, articles, websites, et cetera.


Loyalty of consumers provides the company with many advantages. First, the loyal consumer is less sensitive to the actions of competitors, so it is not so easy to entice. Secondly, a loyal consumer is inclined to recommend a company to which it is loyal or, at least, to speak positively about it when asked. Thirdly, such a consumer will always forgive the company some inaccuracies in the work and remain its client. Thus, it is really necessary to develop customer loyalty. Several years ago, marketing strategies were focused on attracting new customers, but recently the focus has shifted to preserving the existing ones, forming their loyalty and loyalty to the enterprise. The reason for these changes is the recognition that long-term relationships with customers are economically viable; because they guarantee regular purchases, they require less marketing costs for each customer and, because of the recommendations of loyal customers, their number increases. This document examines the impact of CRM on customer loyalty through mediating satisfaction customer factor. The concepts of satisfaction and loyalty and ways of their influence were studied, as well as its elements and sources. According to the research results, customer loyalty is determined by a high level of satisfaction. The customer perceives all the advantages provided by the company. The CMR significantly impact on the satisfaction and as we now satisfaction creates the loyalty of customers. When the companies have the stronger CRM strategy, it means that they have the higher satisfaction and loyalty.


  1. Javalgi, R.G., Martin, L.C. & Young, R.B. (2006), “Marketing research, market orientation, and customer relationship management”, a framework and implications for service providers. Journal of Service Marketing, 20(1), 12-24.
  2. Adele M., Edhi J.,” The Impact of CRM strategy and social CRM on customer loyalty’, International Conference for Emerging Markets, January 22, 2015.P. 182-190.
  3. Beltman, E. P. 2013, Customer Relationship Management. Edinburg Gate: Pearson Education limited
  4. Bennett, R. & Rundle-Thiele, S., (2002). A comparison of attitudinal loyalty measurement approaches. Journal of Brand Management, 9(3), 193-207
  5. Bharadwaj, A.S. (2000). A Resource-Based perspective on information technology capability and firm performance: An Empirical Investigation. MIS Quarterly, 24(1), 169-196.
  6. Arezu Ghawami, The Impact of CRM on Customer Retention, 2006
  7. Marianne Chisos, Effective tips for Customer Retention Strategies in CRM, Tech Funnel, July 12, 2018.
  8. Dalla Pozza I., Goetz O., Sahut J.M., Implementation effects in the relationship between CRM and its performance, Journal of Business Research, Volume 89, 2018

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Critical Analysis: Effectiveness Of Customer Relationship Management Initiatives On Customer Loyalty. (2022, September 27). Edubirdie. Retrieved February 3, 2023, from
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Critical Analysis: Effectiveness Of Customer Relationship Management Initiatives On Customer Loyalty. [online]. Available at: <> [Accessed 3 Feb. 2023].
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