Market Segmentation and Customer Relationship Management

Running Head: MARKET SEGMENTATION AND CRM
Market Segmentation and Customer Relationship Management
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MARKET SEGMENTATION AND CRM 2
Customer Relationship Management (CRM) is a strategy that an organization uses to
manage its interactions, connection, and relationship with its existing and potential customers in
order to enhance customer satisfaction and increase profitability (Kumar, 2010). CRM is
facilitated by a CRM software which stores customers’ data such as profile, products preference,
buying history, and communication messages, in order to give the organization a clear image
about the customer for purposes of improving how the organization relates with the customers.
The main objectives of CRM are; enhancing customer satisfaction, increasing customer base,
boosting sales, and improving business efficiency (Kumar, 2010).
Customer base segmentation which is also known as market segmentation is the
marketing strategy of grouping customers into discrete groups of customers with similar needs,
demands, and characteristics (Wedel & Kamakura, 2012). The factors that determine the
grouping of a customer in a particular market segment include; buying patterns, geographical
location, occupation, age, among others. The main aim of market segmentation is to create a
market mix that commensurate with the expectations of a customer in a particular market
segment (Reimann, Schilke, & Thomas, 2010).
Market segmentation is useful in Customer Relationship Management since it helps the
organization managers to put people with almost similar interests together, and address their
needs as a group, thus reducing cost (Menzly & Ozbas, 2010). Market segmentation boosts CRM
through the provision of customized promotion information, therefore, making the customers
feel that the product suits the best. Proper segmentation of the market will help the organization
to maintain a good relationship with their customers through regular product improvement in
order to meet the changing needs of a particular market segment.

MARKET SEGMENTATION AND CRM 3
Many international companies have adopted market segmentation in their operations.
BMW automobile company has segmented its market depending on the level of income of its
customers. It provides cheap vehicles to the low-income earners and luxury vehicles such as
BMW X6 to the affluent customers (Avery, Bergsteiner, 2011). Alpe d’Huzes can segment its
customers based on their varying motivation, behavior, age and Income. Therefore it should
provide activities which match the interest of the different market segments.
Resource allocation in CRM plays a pivotal role in influencing the achievement of CRM
objectives. Assuming that Alpe d’Huzes has a budget of $100,000 for the next year, the
resources can be allocated among the three main objectives of CRM as follows.
In order to achieve customer satisfaction, Alpe d’Huzes should allocate 25% ($2500) of
the resources. 30% of this money will be used to finance the establishment of an efficient
communication channel that will provide a connection between the organizations and the
customers. 20% will be used to acquire and maintain a good database to keep customers records.
10% will be used in offering personalized promotional messages to customers. 10% will be for
regular activity development. 30% will be used to hire qualified human resource to handle the
customers.
In order to achieve increased customer base, Alpe d’Huzes should allocate 40% ($40000)
of the resources. 50% of this money will be used in advertisement and promotion. 20% will be
used in doing market research so as to know the various motivation interests of different
potential customers and then do market segmentation. 30% will be subjected into hiring qualified
human resource and adopting good technology to do marketing.