ACCA Performance Management (F5) Certification Practice Exam

What is the primary objective of a Customer Relationship Management (CRM) system?

1. To acquire new customers

2. To increase profitability

3. To retain existing customers

4. To improve service quality

The correct answer is: To retain existing customers

The primary objective of a Customer Relationship Management (CRM) system lies in its focus on retaining existing customers. Effective customer retention is crucial for sustainable business growth because it generally costs less to retain existing customers than to acquire new ones. A well-implemented CRM system provides businesses with valuable insights into customer behavior, preferences, and feedback. This data allows organizations to personalize their communications and offerings, thus enhancing customer satisfaction and loyalty. By emphasizing customer retention, a CRM system helps businesses build long-term relationships with their clientele. This in turn can lead to repeated sales, increased customer lifetime value, and positive word-of-mouth referrals. Consequently, the high priority placed on maintaining existing customers ultimately contributes to greater profitability and overall business success. While acquiring new customers, increasing profitability, and improving service quality are important elements of a business strategy, they are often viewed as subsequent benefits that can arise from successful customer retention efforts. A strong focus on existing customers enables businesses to create a loyal customer base that will contribute to various aspects of the organization's performance.