What Is a Customer Relationship?

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on March 29, 2023

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Customer relationship describes the end-to-end process of a business's interaction with its customers.

It encompasses the sales, marketing and support departments of an organization.

In its typical form, the customer relationship process includes:

  • Customer acquisition
  • Product sale and service
  • After-sales support

Taken together, these functions help businesses establish a relationship with customers.

In recent times, customer relationship software has become a popular tool for businesses to reach out to customers.

Sales for CRM software underwent a boom-and-bust cycle at the turn of this century.

The popularity of social networks and increased use of technology in businesses has translated to a reinvention of customer relationship software in recent years.

Understanding Customer Relationship

While the mechanics and tools used to establish a relationship with customers have transformed with time, the principles underlying the concept have remained an integral part of business practice for centuries.

In order to be successful and ensure repeat business, it is essential for businesses to reach out to customers and determine their tastes and preferences.

They use a variety of outreach tactics, ranging from in-person conversations with their salespeople to event sponsorships and flyer distributions, to accomplish this task.

Think about the sales and marketing tactics used by the local grocery store in your neighborhood.

The grocery owner stocks and customizes products based on the neighborhood's makeup and feedback.

For example, they may not include premium or expensive products in a largely middle-class neighborhood.

The owner also maintains communication channels with the neighborhood.

For example, they might send out flyers with information about special offers and promotions.

Or, they might make seasonal changes to product mix and inventory changes based on fast-moving items in their aisles and conversations with customers.

They might attend neighborhood association meetings or subscribe to social media channels.

All of these tactics will help ensure repeat business for the grocery owner.

Benefits of Customer Relationships

A good customer relationship can help build long-term and deep connections between a customer and a business.

It transforms customers into brand ambassadors.

Such ambassadors not only repurchase items themselves but, also, tell their friends and families about it and convert them into new customers.

Good customer relationships are also beneficial lies to the financial bottom line.

They reduce customer churn, or migration of customers, from a service or product.

Repeat customers, in turn, mean cost savings in customer acquisition.

Feedback from customers also helps companies improve products.

For example, if an early customer finds a bug or a flaw in a product, then they can potentially save the company millions of dollars in product recall costs.

Customer Relationship Software

Over the years, as technology has become essential for business processes, customer relationship software has automated many tasks associated with sales and marketing.

CRM software has converted the manual-intensive task of sales data collection from customers into an automated one.

Customer relationship management software tracks and analyzes sales, customers, marketing efforts and customer service issues.

It also stores valuable information on customers to enable personalization of service and streamlines the process of sending and having a conversation with customers.

The first avatar of customer relationship software was database marketing in the early 1980s.

Robert and Kate Kestenbaum are credited with developing the first database marketing tool that used statistical modeling to analyze customer demographics and craft custom messages.

Siebel systems, started by Tom Siebel – an Oracle employee, was the first company to launch a Sales Force Automation (SFA) software that combined database marketing with contact management functionality.

The software enabled quick segmentation of customers and sending of personalized customer messages.

As other companies, including Oracle, followed Siebel into the nascent market, subsequent iterations of the software resulted in the integration of an ever-widening suite of features.

Soon companies were touting CRM tools as a solution to all their customer problems.

But the market for CRM software collapsed with the dotcom bust and the same companies retrenched their IT budgets.

The emergence of CRM software that resided in the IT cloud and incorporated social media functionality heralded a new age for the application.

The CRM software now consists of different modules.

Companies have the option of purchasing modules independently or using them as part of a comprehensive package.

The use of cloud means that it is not necessary to have in-person conversations or invest in an expensive sales team.

Outreach can be performed through email marketing or via video conferencing tools that accommodate multiple customers in a single call.

Companies can also invest in customer support channels to resolve technical and conceptual queries from customers about their products.

Future of Customer Relationship

Technology has transformed customer relationship from a simple sales function to a complex exercise that involves multiple functions and departments.

As technology make greater inroads into business processes, CRM will become even more sophisticated and targeted.

Artificial intelligence will enable hyper-personalization because it enables data gathering at scale and greater predictive power.

Future CRM tactics will not only be based on past business interactions but also on the context of those interactions.

For example, a customer's location at the time of a sale will become an important determining factor in sales and support efforts.

Was the sale made in a mall or was it made at home? Adding a context to the sales matrix will change the way sales are made.

To that end, customer relationships will also become among the key factors driving a convergence between sales and marketing functions, which have long been considered distinct disciplines in a company.

The complicated nature of technology solutions, however, does not mean that the principles underlying customer relationships will change.

At its core, customer relationships are about serving customers in the best possible manner through targeted communication and by soliciting feedback.

Customer Relationship FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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