Customer Relationship Management Revised Date: 2/8/2012 Chapter 8 Customer Relationship Management

Learning Outcomes Define CRM. Describe the role of CRM. Describe the importance of having CRM functions. Evaluate different buyer behaviour amongst online customers Describe techniques for acquiring, retaining customers and cross-and up-selling using new e-Business tools. Identify technology solutions for CRM.

A scenario….

Another scenario…

Online CRM scenario…

What is CRM? An approach to building and sustaining long-term business with customers A key element in e-Business. Why??? CRM comprises of four marketing activities: Customer selection Customer acquisition Customer retention Customer extension

What is CRM? Figure 9.1 The four classic marketing activities of customer relationship management (source: Chaffey, 2009)

Marketing applications of CRM A CRM system supports the following marketing applications: Sales force automation (SFA). Sales representatives are supported in their account management through tools to arrange and record customer visits. Customer service management. Representatives in contact centers respond to customer requests for information by using an intranet to access databases containing information on the customer, products and previous queries. Managing the sales process. This can be achieved through e-commerce sites, or in a B2B context by supporting sales representatives by recording the sales process (SFA). Campaign management. Managing ad, direct mail, e-mail and other campaigns. Analysis. Through technologies such as data warehouses and approaches such as data mining, which are explained later in the chapter, customers’ characteristics, their purchase behavior and campaigns can be analyzed in order to optimize the marketing mix.

What is E-CRM? Definition by Chaffey (2009): What to manage? Web site for customer development and to encourage purchase. Managing email list Applying email marketing Data mining Using personalization and mass customization facilities Online customer service such as FAQ, Chat, Call center etc. Online service quality to encourage repeating buyers Managing multi-channel customer experience Using digital communication technologies to maximize sales to existing customers and encourage continued usage of online services

Benefits of e-CRM Targeting more cost-effectively Achieve mass customization of the marketing messages Increase depth, breadth and nature of relationship A learning relationship can be achieved Lower cost

Permission marketing Customers agree to be involved in an organization’s marketing activities, usually as a result of an incentive Godin (1999) suggests that dating the customer involves: Offering the prospect an incentive Using the attention to teach Reinforce the incentive Offer additional incentive Use the permission to change customer behavior towards profit Opt-in and Opt out.

Figure 9.2 A summary of an effective process of online relationship building

Customer Profiling Information that can be used to segment a customer. Type of information such as: Product interest Demographics Role in buying decision Pepper and Roger (1999) proposed IDCC framework Customer identification – using cookies or log on Customer differentiation Customer interaction Customization

Conversion Marketing Using marketing communications to maximize conversion of potential customers to actual customers and existing customers to repeat customers Agrawal et al. (2001) scorecard: Attraction Conversion Retention

Figure 9.3 Multi-channel conversion model

The Online Buying Process Five different types of web users Directed information-seekers Undirected information seekers Directed buyers Bargain hunters Entertainment seekers

Differences between B2B and B2C buyers Market structure Nature of the buying unit Type of purchase Services: low-volume, high-value Product : high-volume, low-value Type of buying decision Communication difference

Marketing Communications for Customer Acquisitions Characteristics: From push to pull From monologue to dialogue From one-to-many to one-to-some or one-to-one From one-to-many to many-to-many From ‘lean-back’ to ‘lean-forward’ The medium changes Increase in communication intermediaries Integration remains important

Figure 9.4 Online and offline communications techniques for e-commerce

Figure 9.5 Variation in UK media consumption in hours (bars) compared to percentage media expenditure (squares) Source: Compiled from EIAA (2005) and IAB (2005)

Figure 9.7 An example of effectiveness measures for an online ad campaign

Figure 9.8 Percentage who consider the different information sources as important when researching/considering a product or service Source: BrandNewWorld: AOL UK/Anne Molen (Cranfield School of Management)/Henley Centre, 2004

Online marketing communications Search-engine marketing (SEM) Search-engine optimization Frequency of occurrence in body copy Number of inbound links Title HTML tag Meta-tag Alternative graphic text Paid search marketing

Online marketing communications 2. Online PR Communicating with media online Link building Blogs, podcasting and Really Simple Syndication (RSS) Managing brand on third-party sides ex. Google alert. Creating a buzz or viral marketing ex. Generating word of mouth or link.

Online marketing communications

Online marketing communications Figure 9.9 Search engine results page showing the two main methods for achieving visibility Source: Screenshot reprinted by permission of Google, Inc

Online marketing communications Figure 9.10 The affiliate marketing model (note that the tracking software and fee payment may be managed through an independent affiliate network manager)

Online marketing communications Online partnerships Affiliate marketing Online sponsorship Figure 9.10 The affiliate marketing model (note that the tracking software and fee payment may be managed through an independent affiliate network manager)

Online marketing communications Interactive advertising E-mail marketing ex. E-newsletter, opt-in email. Viral marketing ex. Email, blogs, facebook.

Figure 9.11 E-mail response figures Source: Epsilon Interactive

Customer retention management Has two distinct goals To retain customers of the organization To keep customers using the online channel

Personalization & Mass Customization Both can be used to tailor information Use opt-in email to deliver information , add value to the product and remind customer about it. Use dynamic variables such as: Customer preferences The date or time Particular events The location

Online Communities A customer-to-customer interaction delivered via e-mail groups, web-based discussion forums or chat Choices of developing community for B2C Purpose Position Interest Profession

Customer extension Deepening the relationship with the customer through increased interaction and product transactions

Customer extension Advanced online segmentation Identify customer lifecycle groups Identify customer profile characteristics Identify behavior in response and purchase Identify multi-channel behavior Tone and style preference

Figure 9.16 Customer lifecycle segmentation

Types of CRM applications Ideal CRM system will support multi-channel communications or the customer preferred channel Figure 9.18 An overview of the components of CRM technologies

Summary The objective is to increase customer loyalty in order to increase profitability. CRM aimed to improve customer service at every level. Marketing communication focuses on acquisition-retention-extension customers. This include the use of traditional mass-media technique and specialized online techniques.

Tutorial 8 Define e-CRM. Describe the concepts of personalization and mass customization. How these two concepts can benefit an online enterprise. Describe a technique that can be used to retain customers. Why customer loyalty is importance to online businesses?

References Google Image, http://www.google.com accessed on 13 April 2011. Chaffey, D., (2007, 2009), E-Business and e-Commerce Management, 3rd and 4th Edition, Prentice Hall.