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4.3 CRM

 

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The E-Business, the E-Customer, their Relationship and Interactivity

 

 

KunnskapskildenE-Business –
E-Business, E-Customer, Relationship and Interactivity

 

Dissertation
The E-Business, the E-Customer,
their Relationship and Interactivity 

Jan Vig 

Dissertation  av Jan Vig om E.Business, E-Customer, Relationship and Interactivity  (286 sider) i forbindelse med Masterstudie i Information Technology and Communication Juni 2000.

 

The E-Retailer Business, the E-Customer,
their Relationship and Interactivity

Table of Contents

Chapter One Introduction to the study

Chapter Two Business in Cyberspace

Chapter Three E- Retailer Commerce

Chapter Four E-Customer, Relationship and Interactivity

Chapter Five A Successful Case study – Amazon.com

Chapter Six The Future, Critical Success Factors, E-Business Strategy, Results and Conclusion

Appendix

 

 

Chapter 4

The E-Customer, the Relationship and Interactivity 

 

 

 

Chapter Four E-Customer, Relationship and Interactivity

4.1 Introduction 108
4.2 The E-Customer 111
4.2.1 The E-Customer 111
4.2.2 The E-Customer and Benefits 113
4.2.3 The E-Customer behavior 114
4.2.4 The E-Customer and shopping 121
4.2.5 The E-Customer and shopping agents 123
4.2.6 The E-Customer and privacy 126
4.3 One-to-One Marketing and CRM 130
4.3.1 CRM 130
4.3.2 History One-to-one Marketing 132
4.3.3 Current Situation 133
4.3.4 Why is One-to-one marketing important today? 135
4.3.5 One-to-one marketing, trends and technology 136
4.3.6 One-to-one marketing tools 138
4.3.7 Benefits of One-to-one Marketing/CRM 138
4.3.8 Arguments against One-to-one marketing 140
4.3.9 Examples on One-to-one marketing 141
4.3.10 Implementing One-to-one marketing 143
4.4 E-Retailing, relationship, customer focus and customer experience 145
4.4.1 The E-Retailing and relationship 145
4.4.2 Personalisation 148
4.4.3 Create a great customer experience 152
4.5 The Customer led E-Retailer Web Site 155
4.6 Summary

 

 

 

4.3

One-to-One Marketing and CRM

 

4.3.1 CRM

As the Web technology continues to evolve and mature, so do the applications that companies make available on their Web sites. One area that has continued to make advances is integrating databases with Web sites to tailor content to meet the needs of each individual.

One type of application that is quite popular is Customer Relationship Management (CRM). While managing the customer relationship sounds great, it turns out that it is hard to define. For some people CRM is just enhanced customer service, but the benefits of CRM are much greater than that.
Andersen Consulting (n.d.) defines CRM as:  «the practice of identifying, attracting and retaining the best customers to generate profitable revenue growth.»

A more specific definition of CRM comes from the Closing the Loop Consortium (n.d.)
Customer Relationship Management (CRM) is all about building a meaningful, long term one-on-one dialogue with your customers. By helping you to better understand and anticipate your customer’s behavior CRM helps you acquire new customers, retain existing ones and most importantly, identify your most profitable prospects so that their value can be maximized over time.
CRM involves tuning all of a company’s sales and marketing efforts so that each customer is provided with the information and responses needed to make the best customers feel comfortable continuing to do business with you. In other words, creating a loyal customer committed to a long-term, profitable business relationship with the E-Retailer

 

Customers are looking for ways to get more value from the products they buy, share with other customers their experiences, and be able to buy additional products.

 

A few of the type of applications companies can do today with their Web site includes:

 

  • Recall their personal profile and tailor the Web site more to each individual’s interests
  • Learn the customer’s new needs
  • Recommend products based on their needs, profile, and previous purchases
  • Highlight special products, features, or benefits based on each customer profile
  • Handle complex customer service needs with a «knowledge base»
  • Tailor the sales copy based on the prioritized importance of each buying motive
  • Provide a moderated sharing of customer ideas and suggestions through personalised e-mail sent to customers based on the individual interests and product purchase history

 

 

This is a «one-to-one» approach to CRM that treats each customer as an individual, and can be accomplished with commercial Web database products today much easier than it was even a couple of years ago.

This dissertation sees CRM and One-to-one marketing as:

A complete process of building a relationship with the customer, listen to them and get a two ways communication,
integrating dynamic dialogue into the way  the E-Retailer communicate, capture responses and actually analyse them
and get the idea that contacts are the opportunity to really talk to the customer and to create new value with them.

 

In this dissertation One-to-one marketing and CRM will be used interchangable.

 

4.3.2 History One-to-one Marketing

 

Is One-to-one marketing a brand new concept?

Many years ago a lot of small villages had owners of stores, who knew everyone in the village. He knew exactly who liked what and who bought what at regular intervals. This was One-to-one marketing.

 

However, when the village was growing, he lost tracks of his customers’ personal needs and preferences. So he bought a computer and created a database to track what a customer bought and at what prices. He was a successful a pioneer of One-to-one marketing.

 

Businesspeople have always searched for economical ways to create a One-to-one relationship with each of their prospects and customers. Today, the challenge is doing that through the Internet.

 

In 1991 the book “Relationship Marketing” from Regis McKenna came out, where it was pinpointed how important it was for the companies to become more customer oriented and less product oriented in their way to do marketing. The aim was to get a targeted and interactive dialog with the customers.

 

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The most important conclusions from the book:

  • knowledge-based marketing
  • owning the market
  • experience-based marketing
  • adaptive marketing

Peppers &  Rogers (1993 -97) wrote the book ”The One-to-one Future” in the time of database marketing. Some key concepts using the Internet were:

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  • customer individually dialog
  • law of repeat purchases
  • share of customers
  • customer retention versus acquisition

To implement these concepts we use interactive communication.

 

The most important parts of the “Enterprise One-to-one” (Peppers & Rogers, 1997-99) are:

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  • The new competitive rules
  • Convenience
  • The learning relationship

 

 

The E-Retailer has to find out what the customer needs through interaction and feedback, meet these needs by customising the products or service, remember the specifications and continue interaction and feedback to learn more about the customer’s individual needs and keep the customers satisfied so the company do not lose them to the competitors.

 

 

4.3.3 Current Situation

Internet has opened a new era of industrialisation. It provides the immediate avenue for interaction or two-way communication between buyer and seller. This avenue of interaction provides marketer the opportunity to understand their customers even better. This will hence make it possible for manufacturers to tailor to individual needs. Hence developing one-to-one marketing.

The Internet should not be thought of as a mass market. Mass markets assume the existence of a homogenous buying population. The Internet of today is anything but homogenous. It is filled with individualists who are proud of their uniqueness and promote their eccentricity to the extreme. Mass markets often assume a uniform type of behavior. (Yesil, 1997: 108-109)

 

Up till now a lot of companies has focused on internal processes of the organization.

In a lot of cases, these efforts have failed. With that in mind, tomorrow’s opportunities increasingly will revolve around the enhancement of externally focused processes, especially those covering the relationships that companies have with their customers. One that finds strategic advantage through the development of a learning relationship with the customer.

 

From this perspective, the key to success is the knowledge that companies acquire and apply. As individual customers provide information about their preferences and needs, companies learn how to serve them more effectively. Companies give them exactly what they want, when they want.

 

The more time a customer spends providing a company with information, the better his service will be and the less inclined he/she will be to seek out the services of a competitor. New information technologies are making and will make these kinds of relationships ever more sensible and cost-effective.

 

The new paradigm is one-to-one rather than mass. It focuses on getting a greater share of each customer’s business rather than a greater market share.

 

The learning relationship accomplishes two things simultaneously. It helps us learn more and more about what a customer wants. The second advantage is that the more we understand this customer, the better able we are to meet that customer’s needs better than anyone else can.

We are going through a period of extraordinary market transition. Customers increasingly want products and services to be custom designed to meet their personal needs. They don’t, however, simply desire more choice. In other words: They want what they want when they want it.  New technology is a vital aspect of this customer service revolution.

Many businesses  “envision a One-to-one relationship with customers and members in their future. But, how well do they know their customers’ right now today? How many of them buy the companies products or services? Who are the top 10 customers? “

“By what measure? Largest dues payers? Long-time member? Most frequently heard from? What’s the measure of success when it comes to marketing the company? What’s the measure of success when it comes to knowing the company’s best customer? Is it market share? Is it gross revenues? How about purchases of products or services? What do the company know about the top five customers? When did they last purchase a service or product from the company?” (Kerry,1997)

 

At the Peppers & Rogers group they practice One-to-one marketing by telling their members why they should be a member: (Sterne, 1999:217-218)

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  1. You’ll receive our free e-mail newsletter weekly.
  2. You can participate in the ongoing discussion groups.
  3. You can add companies looking to buy or sell 1:1 products and services to the 1:1 Directory.
  4. The site will change to match your interests and preferences.
  5. We’ll take special interest in your contributions to the community discussions, the 1:1 Directory, and our collection of 1:1 examples.

 

4.3.4 Why is One-to-one marketing important today?

It is the end of a mass production era. The techniques used by successful E-Retailer web sites to generate repeat traffic are those that build a community among members of their E-Customers. The reason that one-to-one web marketing techniques have proven to generate more revenue is individuals now want to be seen and treated as individuals and many are prepared to pay for this. They are better educated and informed; able and willing to make their own decisions. Furthermore they want to belong to a community and one-to-one web marketing satisfies those needs. “When done well, the community provides an interaction between the social need that compels individuals to participate in a community and the value proposition that meets a given business objective. Its win-win formula contributes to its success.”(Rockwell, 1998:115-116)

 

Competition has been harder.  All companies are promoting value for money, quality, durability, etc.. It is difficult to differentiate products. In many businesses, 20% of the customers provide 80% of the profits. Gaining new customers is expensive. “It costs 5 times more to acquire a new customer, than to retain a current customer.» (Passprivilege.com, n.d.)

To be able to close lifetime relationships with existing customers can produce great profits. The Internet provides a new delivery possibilities whereby the ordinary customer can easily provide feedback either consciously or sub-consciously.

 

4.3.5 One-to-one marketing, trends and technology

Customization is a growing Web trend. A Forrester Research report stated, «As the general content of the Web gets broader, individuals will cease aimless surfing activity and gravitate toward sites that deliver products and services customized to their needs.» As the WWW grows, surfers will do less aimless surfing and more portal surfing.  That is, surfers will be more inclined to go to a few select sites for their Web needs. By personalizing your visitor’s experience, you can take advantage of this early trend. Companies can start by tailoring the Web site’s content to an individual visitor’s preference and user profile. (Web Tomorrow, 1999)
One of the hottest trends in Web marketing today are the use of basic database technology to deliver customised Web pages, and the use of personalisation systems to deliver a true one-to-one experience for the Web audience. The best Internet marketing strategies integrate many different media and technologies. Marketers need to keep abreast of the latest emerging Internet Technologies and understand how they work and can be integrated to meet customers needs.

Internet, interactive TV, web-TV, kiosks, fax, e-mail, voice mail, personal data assist, mobile phones, smart phones, etc. all allow personal messages and encourage customer feedback and at a time and a place that suits the customer.  Customer information system, rules based systems, e-commerce systems, data mining tools, component based IT systems, enterprise repositories, object technology systems to mention a few.

 

But these new technologies can do far more that simply provide new distribution channels to customers, or to support relationship management. Interactive mediums, together with the support technologies outlined, can help the businesses to do One-to-one marketing.

 

In marketing terms the new more interactive technologies as Java, JavaScript, Dynamic HTML, Active X, XTML etc. will help marketers with relationship marketing, improving dialogue with stakeholders, personalised marketing, providing customer selected content which specifically meets their needs and improving response rate and customer service. Databases will be live, where users can access up to date information in real time on the web, and generally improve database connectivity will provide a strategic advantage to companies as well as marketing benefits, such as improved customer service and reduced administrative costs.

 

3D (VRML) enables virtual reality 3D environments to be visualised on the Web allowing the customer to interact with objects in those environments and link to other objects and web pages. The customer can navigate around the car for instance, clicking on objects in a car etc. Future applications of 3D technologies could be in creating new shopping environments on the Web.

 

But one-to-one marketing is more than technology.  There is a need to manage the customers, not just the company’s products. The company must take products to customers, not expect customers to come to the products. Protecting privacy is important. Threatening privacy destroys trust and discourages collaboration. It requires that all parts of the organisation that deal with or supports customer services, to be truly customer focused, treating each as an individual. We have information capabilities, communication capabilities and production capabilities that we didn’t used to have, All of those make for a powerful, exponential improvement in the way we can relate to customers.

 

The real benefits that Internet-based technologies will provide in the near term are linking trading partners in a supply chain and automating business processes to make their transactions more efficient, including delivery services such as Federal Express offering electronic tracking services to business customers, and retailers such as Wal-Mart hooking up over private or public networks to the inventory and ordering systems of suppliers. (Maddox, 1998:12)

 

4.3.6 One-to-one marketing tools

There are a number of personalisation techniques that are being used successfully to motivate people to return to an E-Retailer web site time and time again.  When implemented properly, one-to-one web marketing techniques can be entertaining, informative, and engaging while they build relationships on the web site.

 

According to Allen, Kania, and Yaeckel (1998) the One-to-one marketing tools include

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  • One-to-one Web interactivity
  • One-to-one Web site personalization
  • One-to-one interactive discussion communities
  • One-to-one push
  • One-to-one presentation, collaboration, and audio/video conferencing
  • One-to-one Web advertising and promotion
  • Integrating One-to-one with other marketing systems and processes.

 

4.3.7 Benefits of One-to-one Marketing/CRM

 

  • Higher Profits. One-to-one Marketing concentrates on those 20% or even 10% of customers who are the companies most profitable. By providing tailored products/services to meet particular needs, companies make comparative shopping difficult and shift the focus from price to benefits. It aims for lifetime share of customer, not a share in an often static and crowded market.
  • Lower Costs. As mentioned earlier the costs of acquisition of a new customer is far higher than that of retaining an existing customer.
  • Market Exploitation. One-to-one marketing differentiates the company from the competition. Customers tell the company about their unmet needs as well as their most pressing problems. Customers, with whom the company has a depth of relation, provide a rich source of new ideas that can also be exploited with other customers or with new prospects.
  • Personalising and tailoring a web site make it easier for the companies customers to do business with the company. Creating an online communities provide a one-to-one experience between the company and the prospects and customers.
  • Other arguments for One-to-one marketing. When one-to-one marketing is combined with mass customization we have a very powerful synergy that provides a true competitive advantage.

 

“The smartest companies are starting to use technology to lock in customer loyalty. Every time a customer accesses their technology, they learn as much as they can about that customer through systems that treat the customer in a more targeted and individual fashion.” “As the system gets to know the customer, it becomes more and more convenient for the customer. If the customer attempts an informational transaction with a competitor’s system, the experience will seem prohibitively inconvenient.” (Comtec.Com, n.d.)

 

Interactive tools and databases make the Internet the ideal medium for one-to-one marketing. Every organisation now has the capability to be like the small village grocer and treat the customers in a customised way as they did years ago.

E-Commerce is making it possible to utilise potentials, which up till now has been unused.

  • The potential of immediate access
  • The potential of individualisation
  • The potential of rationalisation
  • The potential of volume

 

 

 

4.3.8 Arguments against One-to-one marketing

 

  • Customer needs. The intention of one-to-one marketing is good, but people want to browse around and try new things. Shopping not only fills a need, but also must be an experience.
    Each individual customer’s needs and wants may change every day. However, if we find a stable segment structure, the needs and preferences of each segment don’t change. That’s why segment targeting is right instead of one-to-one. This is an argument against one-to-one because one-to-one marketing needs each customer’s stable needs and preferences to predict his/her future needs and preferences.
  • Segmentation/targeting. The customers’ needs and preferences are not totally different from each other. If companies are able to group them into segments and treat them at the segment level, the companies marketing strategy shall be more effective.
    A company has probably not the capability to provide customised products or services to each of their 5.000 customers. Probably a company isn’t flexible enough with the product or service to fit each customer’s customized needs.
  • Technical difficulties. Technically, we are far from one-to-one marketing. Most of the companies have not conducted market segmentation. One-to-one marketing is the extreme case of segmentation: each customer forms a segment. While most of the companies have never segmented the customers, suddenly, they should go one-to-one.One-to-one marketing actually is the process of estimating and predicting customer’s behavior. Even with the most advanced statistical technique, we are unable to predict every customer’s choice behavior.Up till now we have only seen grocery stores creating huge databases to track customers’ preferences and purchase behavior It is probably a reason for that. Only if the customers purchase the same products/services frequently and repeated, a company is able to collect enough data to understand each customer’s needs and shopping behavior. These conditions are also the necessary condition for one-to-one marketing. Grocery store database shall be the best database for one-to-one marketing. Before we see grocery stores adopt one-to-one marketing strategy fully, we are unlikely to see it somewhere else.On the Internet, cookie might be the original source of online one-to-one marketing concept. Here we have to do with a lot of difficulties in the data collection process. Some browsers don’t accept cookies. Many people reject cookies all the time. It is impossible to identify most visitors if they access to the web site through a dial-up access. A company needs a lot of analytical muscle to quantify the information and predict what each customer needs.
  • Privacy
    “The key to getting customer information is to get it without violating respect for the customer. It’s a fine line. You want the information, but you want to ask for it in a way that is acceptable to the customer” (Yesil, 1997:107)People are afraid of the World of Orwell. Today a lot of companies already have problems getting their customers to send in warranty registration cards, fearing that they will get more junk mail and that their privacy will be violated. Suppose we enter a clothing store, there is someone meeting use with the dress we exactly want to find in the store. Suppose we go to a bookstore and find that the books we want are already wrapped waiting for use. Everyone knows exactly what we want before we enter the store. How do we feel a life in this way?
  • Costs
    To build up and maintain a customised database on a one-to-one relationship is too costly.
  • Different arguments
    One-to-one marketing means passive surfing and shopping. It violates the culture of the Internet. We could therefore see one-to-one marketing as not welcome

 

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4.3.9 Examples on One-to-one marketing

According to a survey of 25 top online merchants by New York market researcher Jupiter Communications, 40% say they have begun to offer personalised features, with 93% saying they will within a year.” “Customization at 25 customer E-commerce sites boosted new customers by 47% in the first year–and revenues by 52%. Even at a cost of $50,000 to $3million for the personalization software, along with computers to store the customer profiles, personalization generally pays for itself within a year. (Businessweek, 1998)
Music retailer Cdnow Inc. lets customers get a page designed just for the E-Customer with music suggestions based on our stated preferences, past purchase, and ratings on artists and CD now. Cdnow has seen immediate benefits in customers’ interest.

 

Amex has seen card member spending in Europe go up by 15% to 20% year over year since including individualized selling messages. When the customers comes to Amex web site, Amex knows who they are and what products the customer uses.

 

Publishers are able to gather information about their visitors from registration, contents, surveys and other methods. This information builds profiles on visitors that can be used to target commercial advertising to these visitors or target the visitors with personalised messages.

 

Companies, which sells outdoor equipment over the Internet can through one-to-one marketing software tag them with a cookie that indicates that the customer bought a tent for instance over the summer. When the winter comes and the companies have something additional concerning tent in stock, they may move the inventory by targeting specific ads to everyone who bought tents.

 

Portal site as Excite Inc. says people who use personalization come back five times as often as others and view double the number of pages. They also tend to stick around when they come.

 

Buy a book at online retailer Amazon.com, and the next time the E-Customer visits the site, the opening screen will welcome him back by name. Amazon knows his reading taste and suggests new books that meet his tastes by using recommendation software that analyses his previous purchases, plus any ratings he has made on other books. And it will remember him personal information so he can buy a book with a single mouse click.

 

Surf over to portals Yahoo Inc. and Excite. Click on lists of what the E-Customer wants to see and do on the Net, and type in some personal information. My Yahoo! or My Excite page displays his name and personal E-mail box news he requests sports statistics, stock statistics etc.

 

Dell Computer Corp., for instance, has created some 1,500 customised home pages for its best customers so they get direct access to corporate-specified personal computers, negotiated discounts, and records of orders and payments.

 

Pointcast knows how to personalise our screen saver.

 

Grocery stores have the best database for one-to-one marketing.

 

Microsoft has been restructured into five groups oriented around customers needs, rather than the product focus that governed the company since its creation.

 

A personalised web experience is critical. By offering personal recommendations, which can change after every purchase and every visit, all the companies hope to get people to keep coming back.

 

4.3.10 Implementing One-to-one marketing

 

Companies in all industries today are faced with rising customer disloyalty and shrinking margins. But some firms are enjoying surprising successes by focusing on individual customers, using technology to create long term, individualised, one-to-one relationships. However “implementing an effective One-to-one marketing strategy requires a sophisticated customer intelligence system”. (Forrest, 1999:88)

 

According to Peppers & Rogers (1998) there are four key steps in implementing a one-to-one marketing program. A company must be able to:

  • Identify the customers, Who are the must valuable customers?
  • Differentiate them one from another, it’s important to know which customers are
    most valuable, and which are least valuable. Rank the customers by this variable, and allocate different strategies to different tiers of customers.
  • Interact with them. Drive more and more of the interactions with customers into more cost-efficient media, such as the Web, point-of-purchase (for retailers), or EDI. The company must concentrate on acquiring more useful information during every interaction, information that can help the company make decisions or implement new strategies with respect to the customers.
  • Customise some aspect of its product or service to meet the customer’s individual needs.

 

According to Seybold (1998:2) the lifetime value of a companies customers will increase in direct proportion to how easy the company can make it for the customers to do business with the company.

It is eight critical success factors. They are:

  • Target the right customers
  • Own the customer’s total experience
  • Streamline business processes that impact the customer
  • Provide a 360 grade view of customers relationship
  • Let customers help themselves
  • Help customers do their jobs
  • Deliver personalised service
  • Foster community

 

 

Some advises from Cisco to improving online business.

  • I you’re not adding value for the customer, don’t bother.
  • Know who your target audience is.
  • Combine traditional marketing and new media to promote the site. (Maddox, 1998:42)

 

Download Dissertation

 

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