4.4 E-Retailing, relationship, customer focus and customer experience

 

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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

 

 

 

4.4

E-Retailing, relationship, customer focus and customer experience

 

4.4.1 The E-Retailing and relationship

As bandwidth and creativity continue to grow on the Internet, Web site interactivity will become just that: more interactive.
Advances in animation, 3-D/virtual reality, audio, video, and databases will allow marketers to present
a different interactive Web experience for each individual user.
Interactivity will become more purposeful, rather than being flashy.
It will go beyond the purpose of attracting users, to engaging users.
It will help customers bond with the site and the company.
With the goal of getting users to visit your site more often and stay longer, interactivity can be the key.

Now more and more companies are using interactivity technologies like web chat,
intelligent agents and interactive recommendation systems to help their users find what they need on their web site. (Allen, 1999)

 

For most companies, building strong customer relationships in an era of intense competition represents a significant challenge. But today, even the nature of customer relationships and the rules of competition are changing. The advancing digital economy is placing the customer squarely in control by providing access to extensive information. Customer expectations around speed, service and quality continue to rise, while customer loyalty grows increasingly uncertain.

Acquiring customers is not only important as a near-term revenue driver. Gathering a database of the E-Customers provides the longer-term opportunity to cross-sell new products and services and create superior customer loyalty by providing valuable and targeted information.

For example, Amazon.com sends customers e-mails when a new book is released by their favorite author, and CDnow alerts customers to new album releases. Customers are able to respond on the fly by launching into the sites and making a purchase. Barnes and Noble has launched a service that suggests books based on knowledge of what the customer has already read and liked or disliked. Importantly, the strength of that advice is based upon feedback not only from that specific customer but also from a large sample set of other customers.
Large databases can be leveraged to identify patterns and offer smart recommendations / products to customers in a very targeted manner. Hence, the more customers that an
E-Retailer acquires and receives feedback from, both through buying behavior and structured feedback, the better the customer service that retailer can provide.

 

The value of customer relationships will grow exponentially in the future, creating perhaps the strongest barrier to entry for potential competitors. The figure below is showing that four customer focused steps drive success:

 

IMG_6350cr

Source: Birch, Gerbert and Schneider (2000:112)

Figur 4.3 The E-Retailer’s success spiral

 

The creation of superior databases, built upon repeat inquiries and strong customer retention, will sow the seeds for the E-Retailers will dominate the 21st century, in terms of brand awareness, revenue generation, and operating efficiency. “Customers now have an unprecedented ability to seek out new vendors via the web. As consequence, customer loyalty can no longer be assumed.”(IBM, n.d.)
According to (Lawe, n.d.), IBM’s Director of Worldwide Marketing for Customer Relationship Management

 

Amazon.com has set the standard not just for the Internet, but for the brick-and-mortar world as well.”
As a result, he says, customers expect responses in two or three minutes, not two or three days.
They expect virtually limitless selections — available now, this minute.
And e-mail that is not answered within 24 hours is considered grievously slow,
not because customers’ needs are necessarily more pressing than they once were,
but because customers have received nearly instantaneous responses from the likes of Amazon.com,
and have come to demand them from all businesses as a matter of course.

 

According to a 1999 analysis by Bear, Stearns, and Co., each lost customer costs an average of 12 times as much to replace, as it would have cost to retain the customer in the first place.

 

Jupiter data shows that because of their commitment to building a lifetime relationship, online ventures such as Amazon.com and E*Trade now secure 60 percent or more of their revenues

from repeat customers, while struggling E-Retailers less focused on customer relationship

management receive 30 percent or less from ongoing customer relationships.

 

The need to focus on the value of a customer relationship is well accepted and pretty obvious.
It is often surprising therefore to find that not all organisations calculate Customer Lifetime Value on a regular basis.
We also find that many organisations do not use LTV calculations to build their business cases to invest in,
implement, and measure customer relationship strategies, such as e-commerce, loyalty programs, retention campaigns, etc. (Starratt , 2000)

In a survey about CRM the result was: (Allen, 1999)
  • 70% said, «Very important to my company»
  • 13% said, «Not important to my company»
  • 17% said, «Moderate importance to my company»

 

 

It takes two to create a friendship. Retailers have to get to know their customers and listen to their concerns in order to establish the trust necessary for a strong, loyal, long-lived friendship.  At this moment, hundreds of E-Retailers are trying to capture loyalty. E-Retailers understand the concept of repeat business and want to do what they can to get it. Both online and offline stores, from Amazon.com to WalMart, use a variety of tactics to get to know their customers’ habits.  Statistics indicate that profits can be increased by 25-125 percent just by retaining 5 percent more customers. With that in mind, it’s no wonder that loyalty, guest, and personalised programs are becoming big business. They all share the same basic goal of capturing market share and gaining repeat business. Smart retailers should be looking at these programs as a way to turn their customers into friends.

 

4.4.2 Personalisation

E-Customers now have more choices available to them than ever before. To ensure a company’s product or service becomes and remains their preference, the E-Retailer must make certain that the value it provides outstrips that of the competition. It’s no longer a matter of simply satisfying the E-Customers. E-Customers’ needs must be exceeded to ensure their loyalty. Personalisation is now expected by E-Customers, and it is requisite that a company understands their specific, individual needs. This is accomplished by harvesting data at vital customer touchpoints, and by bringing products and services together into personalised solutions that meet their needs and intentions better than competitive alternatives. The E-Retailer can in that way gain the trust and loyalty of valued customers.

 

The Web is rapidly developing methods to help customers choose wisely.
Personalised online advice lets customers locate the best options for themselves.
An impersonal assortment of products and services can turn from a headache into a resource.
Even better, choice assistance can help the customer discover his or her own tastes.
By combining established techniques from market research with capabilities that fit the new medium,
Web marketers are designing Systems and Web sites that provide valuable choice assistance on a wide range of product categories.
Online choice assistance takes a set of products, tries to determine an individual’s taste and needs,
and makes recommendation. If this recommendation is accurate and trusted, it creates value and loyalty. (Hanson, 2000: 186)

 

 

The concept is simple, recognising a customer when they walk through the door or sign-on to a web site allows the retailer to tailor the shopping experience for each customer. By recognizing each shopper as a unique individual with their own tastes, needs and desires, retailers can establish friendships and create customer loyalty.

 

Where does the information come from to personalise the shopping experience? Is the E-Retailer using it wisely? Is there any need for customers to be concerned about being known as a unique individual instead of one of countless, and nameless, purchasers?

The information to personalise can come from different sources. When customers become members or order from the E-Retailer web site, or when they sign-up for frequent shopper cards, information is collected. It frequently includes name and address. Sometimes salary history, social security, driver’s license, marital and family data is collected. Then as the customers make purchases, their purchase history is added to the database.  Even E-Retailer web site that may not directly ask for personal data, might track the «clickstream», the clicks, time spent per page, items selected, but abandoned, and similar information all in order to find out more about their customers and their behavior. The clickstream data becomes a useful resource for data mining tools that predict gender, age, income, preferences, and a customer’s willingness to purchase.

 

Both customisation and personalisation systems can help you present tailored information to your web users.
There is a distinct difference between these two techniques.
Customization is used when you want customers to create a customized view of your web site.
When a web site allows you to create a view by selecting from a pre-defined list of categories and items,
without any personal information from you, this is customization.
Personalization actually requires a user to reveal information,
either actively through building a personal profile, or passively through the used of
web tracking, cookies or online transaction information. (Allen, 1998)

 

Customisation is under direct user control, the user explicitly selects between certain options. Example: The Weather Channel http://www.weather.com/ . Personalisation is driven by the computer which tries to serve up individualised pages to the user based on some form of model of that user’s needs, example personalisation: Amazon.com’s recommendation center http://www.amazon.com/exec/obidos/recommendations-center/

 

One of the problems with personalisation on the Web is that it is hard to do. That’s not just because the technology is new, but also because it takes a while to build up any base of information about a particular customer, without which it is impossible to personalise anything.

 

Nielsen (1998) is the opinion:

Web personalization is much over-rated and mainly used as a poor excuse for not designing a navigable Web site.
The real way to get individualized interaction between a user and a Web site is to present the user
with a variety of options and let the user choose what is of interest to that individual at that specific time.
If the information space is designed well, then this choice is easy,
and the user achieves optimal information through the use of natural intelligence rather than artificial intelligence.
In other words, I am the one entity on the world to know exactly what I need right now.
Thus, I can tailor the information I see and the information I skip so that it suits my needs perfectly.

 

Good personalisation requires the system to know a lot about the user. In addition to the privacy issue, this also is in direct conflict with the paradox of the active user. Web users are extremely impatient and want to get something useful out of a site immediately, they don’t want to spend time setting up complex personalisation features.

 

According to Nielsen (1998) rather than spending extensive resources on personalisation, Web designers should:

  1. run usability studies
  2. structure the site according to the user’s view of the world
  3. write content that is optimized for the online medium

 

 

 

Berst (n.d.) describes the following four big mistakes made by web sites that offer personalised content:

  1. Too hard to get started. For instance, My Yahoo! requires the user to fill in several pages of registration information.
  2. Too hard to fine tune. Most personalised news services require the user to go through a long process over and over again to «teach» the system what they like.
  3. No serendipity. Many personalised services give the user only what they specifically request. In reality, viewers also need recommendations, surprises and new ideas.
  4. No standards. The W3C is finishing a new privacy specification, called Platform for Privacy Preferences Project or P3P that should create a single, standard way to identify the user. Right now, though, all have to re-enter all their information each time, for each site.

 

 

 

Here are a few of some basic measures E-Retailers can use to determine if personalisation is achieving the desired results:

  • Increased site registration, particularly for personalisation services. Since customers need to sign up for this type of services, the E-Retailer can easily tell the popularity of the service by how many sign up to the service relative to all of the web visitors.
  • Increased conversion of browsers to buyers, monitor any trends in increased buying by registered customers.
  • Increased repeat purchase. Through personalisation the E-Retailer could see an increase in the number of orders placed by customers. The E-Retailer could also see an increase in the average order size (i.e., higher revenue per transaction) in general and per customer. This can be attributed to the ability for personalisation to make recommendations and to cross sell (i.e., suggest additional related products based on the product being purchased). This will translate into increase profitability per transaction and per customer. (i.e., increased revenue from a single transaction cost).
  • Increased satisfaction through feedback mechanisms, provide ways for customers to give the E-Retailer specific opinions about the personalisation service, and involve them in the process of building the system. No one knows better on what is useful to buyers than buyers themselves.
  • Decreased costs of selling and servicing the E-Customer. The E-Customers use the web site for «self service» before calling the E-Retailer. Personalisation provides a good system for self-service on the web site.

 

 

 

General web personalisation systems can make recommendations to E-Customer s based solely on their own online profile. The online profile is based on their personal information, transactions and click stream data. In that way the E-Retailer can make recommendations to that particular customer based on the E-Customers unique needs. Going one step further, there are web personalisation systems that predict the buyer’s next purchase based on their own data and transaction history and/or data from other buyers who have similar interests. These personalisation systems use a technique called «collaborative filtering.» Collaborative filtering software will use data collected from all customers to find patterns based on statistics and other data analysis techniques.

 

 

4.4.3 Create a great customer experience


“The Web is so hard to use that millions of customers will be loyal to companies who create a good customer experience.” (ZD Studios, 1999)  Recent Creative Good research found that over 40 percent of online job applicants couldn’t figure out how to apply online. Another study found that 62 per-cent of online shoppers had given up at least once while looking for products, and 42 percent had turned to traditional channels to make their purchase.

 

According to the report “The root of the Net’s problems – and the solution – is the customer experience. The Web isn’t primarily about technology, or “usability,” or “design,” or even “permission marketing.” The key driver of online success, or failure, is the customer experience”

 

If an E-Retailer could build a great customer experience and make it easier and quicker for customers to buy the conversion rate (the ratio of buyers to shoppers) will raise.

A good customer experience allows customers to accomplish their goals quickly and easily.

 

Creative Good’s research, as well as research from other firms, has identified these key criteria in the online buying decision:

  • Security,
  • Navigation,
  • Selection,

 

 

 

Further the E-Customer wants e-shopping to be:

  • Quick: No one wants to wait unnecessarily.
  • Easy: If they can’t buy, they won’t buy.

 

 

That means the E-Customer does not want the customer experience to be slow or difficult.

The E-Customers concerns about security are derived from the customer experience as like navigation. For an E-Customer to feel secure and well the solution is a better customer experience, including posted guarantees and security policies including the elements necessary for good navigation.

 

“If a Web site creates a good navigation experience – that is, if it allows customers to achieve their goals quickly and easily – the site will be a comfortable, familiar environment in which customers are more likely to use their credit cards.” (ZD Studios, 1999)

 

According to the report the Web has certain unique qualities compared with off-line commerce, which have a strong influence on the customer experience: (ZD Studios, 1999)

 

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  • The technology barrier, lowered switching costs, and serious limitations.
  • Unique to the Web: Technology Barrier
  • Every major customer technology has a basic level of ease-of-use, allowing customers easily to gain value from the product.

 

Further there are five levels of complexity for the E-Customer in the online world:

  1. Operating system: opening and closing windows, menus dialog boxes, clicking “Start” to shut down, etc.
  2. TCP/IP: running Dial-Up Networking to call the ISP, retrying if necessary, etc.
  3. Browser: bookmarks, history file, Back/Forward/Home/Reload buttons, etc.
  4. HTML: links, graphics, frames, forms, tables, etc.
  5. Add-ons: cookies, plug-ins, Java, Javascript (all of which have their own error messages, liable to appear at any time), the familiar DNS error, ad banners, etc.

 

 

 

Unlike the Web, off-line commerce has high switching costs. Consider these switching costs in off-line businesses:

  • Store location or hours
  • Aesthetic “feel” inside the store
  • Personal relationships

 

 

These switching costs are irrelevant online. Store location and hours are the same on any e-commerce site.  Aesthetic “feel” is hardly a consideration, given the limitations of the medium.  And truly personal relationships are non-existent in a fully automated experience.

Even differentiators like product selection and price are increasingly irrelevant on the Internet,

as products sold online become commodities and most sites off the same choices.

 

The Web is a uniquely constrained medium.
The reality of the Web today is that most customers have slow modems, small monitors,
and relatively little Net experience, in such an environment,
it’s not the most advanced technology that wins. Instead, sites
that build a customer experience within the Web’s constraints will succeed. (ZD Studios, 1999)

 

The following three strategic steps can greatly improve the customer experience on a site.

  1. Identify the customers’ goals and your goals.
  2. Commit the organisation to building a great customer experience.
  3. Monitor the customer experience.

 

Some people mistakenly believe that the customer experience is a simple question of navigation or usability. It’s dangerous to create a customer experience just on the basis of these two factors. While navigation and usability are both important, there are many other important aspects in the customer experience.

 

Rules for a good customer experience according to the study: (ZD Studios, 1999)

  • Clear, concise wording
  • Quick page download
  • Appropriate page width
  • Simple page design
  • Few, and small, supporting graphics
  • Large graphics only when good for the customer
  • Jargon-free language
  • A good search
  • Easy navigation

 

 

Formula for a bad customer experience according to the report:

  • Error messages
  • Long instructional text
  • Excessive technology
  • Fatal errors
  • Distracting screen elements
  • Typographical errors
  • Excessive or inaccurate search results
  • Basic Web errors

 

 

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