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Literature Review

Traditional CRM Perspective

With its origins in sales management systems, customer relationship management (CRM) has been espoused as the means of creating loyal and profitable customer relationships (Wyner, 1999). In particular, Gray and Byun (2001) state that the potential benefits of adopting CRM can be an improved ability to retain and acquire customers; a greater share of the customers’ lifetime consumption value; and greater service quality without commensurate cost increases.

Peppers, Rogers and Dorf (1999) assert that there are four underlying principles to effective customer relationship management. First, firms must be able to identify customers individually and capture information on their consumption behaviours. Second, firms must be able to differentiate between good and bad customers on the basis of predictors such as lifetime customer value. They must then use the data that they capture on customers to identify the most attractive segments, and focus only on those customer segments that are able to deliver the greatest financial return. Third, firms must interact with customers. They need to establish a dialogue with their customers to ensure that they are kept abreast of changes in their preferences, using the information acquired to strengthen and increase customer loyalty. Lastly, firms must customize and cater service delivery to meet the customers’ personal preferences.


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