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3.5 The Customer led E-Business

 

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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 3

The E-Retailer Commerce 

 

 

Chapter Three E- Retailer Commerce

3.1 Introduction
3.2 The E-Commerce Opportunities, Barriers and Challenges
3.2.1 SWOT
3.2.2 Opportunities and benefits
3.2.3 Barriers and Treats
3.2.4 Challenges
3.3 E-Retailing
3.3.1 Online Retailing
3.3.2 Requirements and elements for E-Retailer commerce
3.4 Agents, intelligence agents and technology
3.5 The Customer led E-Business
3.6 The E-Retailer site development process and project management
3.6.1 The E-Retailer Web development process
3.6.2 Team and skills
3.7 The E-Retailer and Promotion
3.8 Competitive Intelligence and Market Research on the Internet
3.9 Summary

 

 

3.5

The Customer led E-Business

 

Companies must be flexible, fast, and creative to stay competitive in the online world.
E-Retailer commerce presents the company with significant opportunities and challenges. Those companies that are prepared to address the resulting organisational impacts will position themselves in front of their competitors.

 

Becoming a customer driven company requires adopting emerging business models in a time frame never experienced before. In this new digital world, the most valuable and scarce source of capital that companies need to succeed is not financial or structural but human capital. That means the human assets in terms of employee competence and motivation.When it comes to improving customer relationships through human performance, the biggest challenge is how to do it predictably, measurably and to scale.

 

Earlier retailers knew all their customers personally. They knew their preferences and what was happening in their lives. Armed with this knowledge, retailers were able to react quickly and market to each customer individually. They were able to build friendships interacting with their customers.

 

Along the way of growing chains and building malls and promoting self-service, many retailers lost touch with their customers. Recognizing the value in customer loyalty, retailers are now seeking to reclaim personal relationships with their customers both online as offline.
E-Retailer commerce is helping with organisational change as structures and cultures are no longer bound by geographic, functional or even time constraints. The movements toward creating virtual organisations, which draw on global resources to serve each customer individually, force companies in rethinking of exactly how an organisation should operate.

According to Boston Consulting Group (2000) companies are making basic mistakes by preparing and doing E-Commerce.

 

As senior executives push their organizations to respond to the challenge of e-commerce, many are making a basic mistake. They focus on the admittedly critical task of getting the new online organization up and running. However, they neglect to make the changes in and linkages to the off-line businesses that are necessary for the online business to work. As a result, they never openly challenge the legacy mindset governing the core business. This mindset, either overtly or covertly, eventually undermines the online effort.

 

According to The Emerging Digital Economy (1997) report the following questions are important when a company should managing the impact of e-business on the company’s people and organisation:

 

  • What do a company need to do to involve people and transform the organisation into an e-business enabled, customer- focused environment?
  • How do a company retain existing staff while gaining new skills/capabilities and attracting new talent?
  • What knowledge management tools does e-business provide to help a company collect key information and disseminate it throughout the organisation? How can e-business help a company measure gains in productivity and the effectiveness of their employees?

 

 

 

Retailers that understand and take advantage of E-Business opportunities realise the need to mix elements of technology, process and management to move the retailer forward. An E-Business initiative succeeds when it reflects an alignment of all elements. If one part is ignored, the entire project is at risk.

Retailers need to ask the following questions about technology and the other key elements: (Acxiom, 2000)

  • What mix of technologies will best execute a company’s e-business plan? Will those technologies integrate smoothly with a company’s legacy systems? If not, what do a company do?
  • Do a company take a go-slow approach with a small technology experiment, or do a company dive in with a full-blown program? Is a company cooping along while its competition speeds ahead?
  • Does a company’s infrastructure mesh with e-business imperatives? That is, can a company’s distribution system handle around the clock orders, is its sales organisation in tune with the new approach, and can a company integrate customer information from electronic and other channels?
  • How do a company protect itself from security and compliance risks?
  • Is the technical staff trained in the new approaches, and can they communicate e-business approaches to non-technical parts of the organisation?

 

 

 

All these questions are essential for succeeding with the transformation to an E-Business.

 

A customer-oriented organisation should have its eye on customer data and its emerging role in the company. Companies who have tapped into the power of their data to create market knowledge, to cut costs and boost profitability, and to improve operational efficiency has a much higher opportunity to succeed in the new digital world.

 

After years of focusing on implementing back-office applications, companies have realised the importance of the front office. Front office applications include sales force automation, call centers, help desks, and customer care. Together, they make up what is commonly known as Customer Relationship Management (CRM).

 

Building strong, lasting customer relationships is critical to success. In fact, given that customers today have more choice and businesses more competition, building customer trust, loyalty and retention are proving far more important and profitable to the bottom line than attracting new customers. And customer relationship management is the key.
While many retailers are seeking new ways to leverage customer relationships, a major hurdle remains and it has to do with point of view. Many retailers view customers from the inside out (who are the customers who own my products) instead of from the outside in (how do customers experience their relationship with my entire company). To truly understand and manage relationships with the customers, a retailer must understand their total experience with the company, not just their experience with one of the products. A retailer must move from a product-centered view of the customer to a customer-centered view.

 

Internet is dramatically changing the way retailers and their customers interact. Customers are using Internet to get information, to obtain support and to make purchases.

They make contact with companies through TV, radio and print advertising, via web sites, the phone, and e-mail, and through relationships with sales people at retail outlets or via direct sales programs.

 

 

This multitude of touchpoints presents both tremendous opportunities as well as significant challenges.

  • How does the E-Retailer build trust when there isn’t a human point of contact?
  • How do the E-Retailer generate, capture, analyse and then act on customer information to build better relationships and increase the lifetime spending of the customers?

 

 

 

KPMG (1999) is of the opinion that most Australian companies have not made the necessary technical investments and cultural changes required to succeed with customer relationship management. This is not something special for Australian companies, the story is more or like the same in most countries.

 

The KPMG Consulting study has found:

  • An alarming 72 per cent of corporations cannot even identify customers at risk of defection, and the few that can, generally rely on low-tech methods such as customer satisfaction surveys.
  • Only 10 per cent felt they were extremely effective at measuring customer satisfaction.
  • One-third of survey respondents has deployed sales force automation software, while 40% per cent use data warehouse analysis tools.
  • Just over half have begun using call centers to communicate with clients, while the vast majority still depends heavily on traditional methods such as customer surveys. 

 

 

 

Garner Group (1999) see “…CRM as an issue of strategy rather than technology. Cultural and process issues are at least as important to clients’ success as the choice of technology”

 

According to a report “Transform Customer Knowledge into Strategic Advantage” there are three problems commonly plague even the most advanced data-driven companies in their efforts to create and use a quality customer knowledge base and they are: (Axiom, 2000)

  • Data quality
  • Accessibility

 

 

 

Today’s methods are likely to be outdated within a matter of months or years, as new data matching technology coupled with real-time global data transmission revolutionise the enterprise. These technologies will enable companies to realise:

 

  • 24/7 real-time data access;
  • Reduced costs with freshest, just-in-time data;
  • Rapid integration, even for very large databases;
  • Faster consolidation of systems during a merger or acquisition;
  • Easier sharing of resources for partner marketing;
  • Merging prospect files and suppressing selected customer segments;
  • Better list hygiene;
  • Push updates to data files; and
  • On-demand data from other applications.

 

 

 

To create value from an enterprise’s shared data assets, companies need to understand and communicate the urgency of becoming facile with customer data usage.

 

According to Acxiom (2000) the following four key competencies should be developed in every company

  • Multiplying marketing productivity
  • Coordinating customer contact
  • Operational efficiency
  • Improved decision-making

 

 

One important decision a company has to take is what kind of amount they will spend to acquire customers. The customer acquisition cost is the total cost a company spends on advertising and marketing promotions divided by the total number of new customers obtained through that spending.

 

The table below compares the acquisition costs of various companies and company types. (Internet Customer Acquisition Costs, 1999)

Company/Business Acq. Cost Source, Date
Amazon.com $29 Fortune, 02/01/1999
Ameritrade $178 Fool.com, 05/26/99
DLJ Direct $185 Fool.com, 05/26/99
E*Trade $257 Fool.com, 05/26/99
Credit Cards $50-$75 Fortune, 08/03/98
Mortgage Lenders $100-$250 Fortune, 08/03/98
Various E-Commerce Sites $34 ComputerWorld, 10/12/98.

As seen some companies are willing to spend hundreds of dollars to acquire a customer, while others spend around $30 and others not in this table spend virtually nothing at all.

“Many Internet e-commerce companies are spending over 40% of their revenues on marketing costs, extraordinarily high compared to the 14.2% of revenues spent by traditional department stores and 7.2% for specialty stores” (Internet Customer Acquisition Costs, 1999)

If  retailers want to succeed as a customer-led E-Business they should not just, but also do the following things: (Anderson Consulting, 2000)

 

Not just: But also:
Creating a web site Defining and implementing a meaningful distinctive Internet presence
Enabling new virtual channels Re-architecting the overall delivery model in alignment with the business strategy
Automating customer service Dramatically repositioning the customer-value proposition and quickly scaling initial success to grow and defend significant market territory
Developing or acquiring new skills Transforming the capabilities of the organization to be relevant in the eEconomy and making that presence culturally, socially and economically relevant in a diverse global market
Launching a stand-alone Internet business Re-evaluating the organization’s entire business model

 

 


Table 3.5 To be successful in E-Business

 

Privacy and security are the two main reasons why people are not interacting or buying online.  Here are some advises to help avoid this situation and enable the E-Retailer to build a trusting relationship with the E-Customers:

  • Privacy Policy and Statement.
  • Secure Transactions.
  • Seal of Approval/Certification
  • Staying Informed

 

 

If the E-Retailers want to be a customer led E-Business they should also try to follow certain rules. Here are some:

 

Customer Service Personalisation
  • Respond quickly to e-mail
  • Create a place for discussion
  • Track customers’ visits
  • Give customers access to «live» information
  • Treat customers like individuals

 

  • Understand needs, wants, and desires
  • Learn what makes customers feel comfortable
  • Collaborative filtering good when limited data available
  • Rules-based personalization good when significant data available

 

 

According to a new survey from the Unite States by a company called Netsmart, the top two turnoffs for visitors are poor navigation and a slow site. 87 per cent said they left sites that had poor navigation and 84 per cent said that they left because sites were too slow. In contrast, only 56 per cent said they left because the site’s content was boring. (The Australian, 17/8-99)

 

The E-Retailer web sits must present the right information. It is what the company is trying to communicate to visitors, which is important. However, as with most forms of communication, the way information is presented is more important than what is in it.

 

If the E-Retailer web site does not get the basics right, It will fail. Having a user arrive only to click away because they can’t find what they want or because the site is too slow to download is the ultimate failure. “It’s hard to believe companies that say they’re customer-focused, then confuse customers with undifferentiated products, waste their time with duplicate sales pitches, or fill their mailboxes with untargeted direct mail.” (The Australian 20/7-99)

 

“Technology starts to resolve such problems by helping organisations track, co-ordinate and target contact with customers. But businesses need to do a better job of cultivating customer trust and loyalty by applying the principles that make personal relationship strong, to business relationships.” (The Australian 20/7-99)

These days the number of channels that companies use to communicate with their customers is multiplying fast. There’s the familiar face-to-face contact, direct mail, faxes and phones, and increasingly, companies are interacting with customers through web sites, e-mail. telemarketing-based call centers, and multi-channel contact centers. The proliferation of channels for marketing, sales and post-sales support and the spread of real-time interactivity technology are significantly changing the nature of company relationship with customer.

 

One has to understand the total customer’s experience from two perspectives:

  • One is to understand the total customer and all aspects of their lives.
  • The other is to understand the total experience the customer has with the E-Retailer, every time they interact with it through every touch point.

 

 

Only those companies that understand which customers merit a relationship, what those customer value, how they want to be related to and how they can do business with these customers competitively are likely to achieve the customer loyalty that improves profitability.

 

Three qualities help make this happen: (The Australian 20/7-99)

  • Companies need a much deeper understanding of what customers are looking for.
  • Customers are more likely to respond to companies that try to relate to their personal values and everyday lives.
  • A company that respects its customers listens to them and responds to what they say. At a basic level, a successful personalisation strategy means asking customers when, or even if, they would like to receive communications from the company, and if they do, how they’d like to receive it. Respect also means companies should defer to customer wishes concerning the use of their personal information, and keep those commitments. 

 

 

 

The customer is now the central focus of every successful e-business. Internet marketers no longer make decisions by guessing at customers’ wants and needs. Here are some proven Web-based methods for the E-retailer, who continuously listening to the E-Customer:

 

  • Help-Page Feedback
  • Traffic Analysers.
  • Customer Surveys
  • Live Chat.

 

 

The customer intelligence tools described above are just the beginning of a new generation of technologies devoted to listening to customers.

 

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