Chapter 9 Customer Relationship Management

Consumer Decision Making Process 5 phases of the generic purchase decision model: need identification information search evaluation of alternatives purchase and delivery after-purchase evaluation

Consumer Decision Making Process (cont.) What? Where? Product brokering: Deciding what product to buy Merchant brokering: Deciding from whom (from what merchant) to buy a product

One-to-One Marketing and Personalization in EC One-to-one marketing: Marketing that treats each customer in a unique way Personalization: The matching of services, products, and advertising content to individual consumers User profile: The requirements, preferences, behaviors, and demographic traits of a particular customer

Major strategies used to compile user profiles Solicit information directly from the user Observe what people are doing online Build from previous purchase patterns Perform marketing research

Cookie: A data file that is placed on a user’s hard drive by a Web server, frequently without disclosure or the user’s consent, that collects information about the user’s activities at a site Customer loyalty Customer loyalty: Degree to which a customer will stay with a specific vendor or brand Increased customer loyalty produces cost savings through: lower marketing costs lower transaction costs lower customer turnover expenses lower failure costs E-loyalty: Customer loyalty to an e-tailer

CRM and Its Relationship with EC Customer relationship management (CRM): A customer service approach that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company E-CRM is: Applying… Internet and other digital technology… (web, e-mail, wireless, iTV, databases) to… acquire and retain customers (through a multi-channel buying process and customer lifecycle) by… improving customer knowledge, targeting, service delivery and satisfaction

Marketing applications of CRM A CRM system supports the following marketing applications: 1. Sales force automation (SFA). Software that automates the tasks performed by sales people in the field, such as data collection and its transmission 2. Customer service management. Representatives in contact centres respond to customer requests for information by using an intranet to access databases containing information on the customer, products and previous queries. 3. 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). 4. Campaign management. Managing ad, direct mail, e-mail and other campaigns. 5. Analysis. Through technologies such as data warehouses and approaches such as data mining, which are explained further later in the chapter, customers characteristics, their purchase behavior and campaigns can be analyzed in order to optimize the marketing mix.

CRM and Its Relationship with EC Extent of service Customer acquisition (prepurchase support) Customer support during purchase Customer fulfillment (purchase dispatch) Customer continuance support (postpurchase)

Three phases of customer relationship management Figure 9.1  Three phases of customer relationship management

CRM - Benefits & Limitations Benefits of CRM Provides: choices of products and services fast problem resolution and response easy and quick access to information Limitations of CRM Requires integration with a company’s other information systems which is costly Difficult to support mobile employees

Five factors required to implement a CRM program effectively: Customer-centric strategy Commitments from people Improved or redesigned processes Software technology Infrastructure

CRM and Its Relationship with EC Web-related metrics a company uses to determine the appropriate level of customer support: Response time Site availability Download time Timeliness Security and privacy On-time order fulfillment Return policy Navigability

The simple buying process Figure 9.6  The simple buying process

Online behaviours Directed information seekers. Will be looking for product, market or leisure information such as details of their football club’s fixtures. This type of user tends to be experienced in using the web and they are proficient in using search engines and directories. Undirected information seekers. These are the users usually referred to as surfers, who like to browse and change sites by following hyperlinks. This group tends to be novice users (but not exclusively so) and they may be more likely to click on banner advertisements. Directed buyers. These buyers are online to purchase specific products. For such users, brokers or cybermediaries who compare product features and prices will be important locations to visit. Bargain hunters. These users want to use the find offers available from sales promotions such as free samples or prizes. Entertainment seekers. Users looking to interact with the web for enjoyment through entering contests such as quizzes.

Schematic of the relationship between satisfaction and loyalty Figure 9.9  Schematic of the relationship between satisfaction and loyalty Source: Adapted and reprinted by permission of Harvard Business Review from graph on p. 167 from ‘Putting the service-profit chain to work,’ by Heskett, J., Jones, T., Loveman, G., Sasser, W., and Schlesinger, E., in Harvard Business Review, March–April 1994. Copyright © 1994 by the Harvard Business School Publishing Corporation, all rights reserved.

IDIC Source: Chaffey et al. (2003)

Overview of the components of CRM technologies Figure 9.13  An overview of the components of CRM technologies

CRM Applications and Tools: CRM applications improve upon traditional customer service by means of easier communications and speedier resolution of customer problems Customer service adds value to products and services It is an integral part of a successful business Classifications of CRM applications Customer-facing applications Customer-touching applications Customer-centric intelligence applications Online networking and other applications

CRM Applications and Tools (cont.) Customer-facing applications Customer interaction center (CIC): A comprehensive service entity in which EC vendors address customer service issues communicated through various contact channels Intelligent agents in customer service and call centers Autoresponders: Automated e-mail reply systems (text files returned via e-mail), which provide answers to commonly asked questions

CRM Applications and Tools (cont.) Customer-touching applications Personalized Web Pages E-Commerce Applications Campaign Management Web Self-Service Activities conducted by users on the Web to provide answers to their questions (e.g., tracking) or for product configuration Self-tracking Self-configuration and customization

CRM Applications and Tools (cont.) Customer-centric applications Data reports Data warehouse A single, server-based data repository that allows centralized analysis, security, and control over the data

CRM Applications and Tools (cont.) Data analysis and mining Analytic applications automate the processing and analysis of CRM data can be used to analyze the performance, efficiency, and effectiveness of an operation’s CRM applications Data mining involves sifting through an immense amount of data to discover previously unknown patterns

CRM Applications and Tools (cont.) Online networking and other applications Forums Chat rooms Usenet groups E-mail newsletters Discussion lists

CRM Applications and Tools (cont.) Mobile CRM the delivery of CRM applications to any user, whenever and wherever needed Voice communication people are more comfortable talking with a person, even a virtual one, than they are interacting with machines. The smile and the clear pronunciation of the agent’s voice increases shoppers’ confidence and trust

CRM Applications and Tools (cont.) Role of knowledge management and intelligent agents in CRM Automating inquiry routing and answering queries requires knowledge Generated from historical data and from human expertise and stored in knowledge bases for use whenever needed Intelligent agents support the mechanics of inquiry routing, autoresponders, and so on

Evaluate the effectiveness of the tools with AIMRITE Audience: can the target audience be reached? Impact: can message get through the clutter? Message: is message communication effective? Response: is responding easy (direct/indirect)? Internal management: can the tools be managed readily by agency or internally? The End Result: What are the response rates, costs and returns?