The idea is to integrate all these systems together so that the organisation can manage its customers. There is no doubt that CRM can be a major factor in achieving competitive advantage. It could be argued that there are three prongs to a CRM approach: strategy, marketing, and IT. Well, let's look at the evidence - as we intimated earlier, customers do not owe loyalty to you. Frederick Reichheld discovered that 15-40% of customers who say they are satisfied with a company defect each year. Ninety-eight per cent of unhappy customers never complain, they just switch to another supplier. Similarly, it has been estimated that it costs five to seven times more to find a new customer than it does to keep a current one.
CUSTOMERS TOTALLY SATISFIED
It is also noteworthy that "totally satisfied" customers are six times more likely to re-purchase over one or two years than "satisfied" customers. K.R. Bhote noted that a 5% reduction in customer defection can result in profit IS CRM FOR EVERYONE? 53 rises of between 30 and 85%. Increasing customer retention by 2% is the equivalent to cutting operating expenses by 10% (K.R. Bhote, Beyond Customer Satisfaction to Customer Loyalty). A research programme by Bain and Co. concluded that a 5% increase in customer retention can result in a doubling of profits. Research by the Direct Mail Information Service shows that mailing to existing customers achieved response rates 50% higher than mailing to people who had made enquiries to the company in the post and then lost contact (that is, lukewarm contacts). Finally, when mailing to rented lists (cold contacts) the return was only one- third of the return gained from existing customers. Nine per cent achieved more than a 30% response rate, and 4% more than a 50% response.