School of Business Administration

School of Business Administration
Chapter 4 Consumer Behavior, Online Market Research, and Customer Relationship Management Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA USA

Learning Objectives Describe the factors that influence consumer behavior online. Understand the decision-making process of consumer purchasing online. Describe how companies are building one-to-one relationships with customers. Explain how personalization is accomplished online. Discuss the issues of e-loyalty and e-trust in EC.

Learning Objectives (cont.)
Describe consumer market research in EC. Describe CRM, its methods, and its relationship with EC. Explain the implementation of customer service online and describe its tools. Describe Internet marketing in B2B, including organizational buyer behavior.

OPENING VIGNETTE : Ritchey Design Learns about Customers
The Problem Ritchey Design, Inc. is a relatively small designer and manufacturer of mountain bike components Sells its products to distributors and/or retailers, who then sell them to individual consumers Its 1995 Web site was more a status symbol than a business tool

Ritchey Design Learns about Customers (cont.)
Visitors could get information on Team Ritchey or find out where Ritchey products were sold, but that was where the site’s usefulness ended. It did not give customers all the information they wanted It did not enable the company to gain insight into its customers’ wants and needs

The Solution In late 1995, Ritchey reworked the Web site so that the company could hear from its customers directly set up customer surveys on the site offered visitors who answer the surveys a chance to win free Ritchey products visitors enter their names and addresses and then answer questions about the company’s products

Web Trader software automatically organizes and saves the answers in a database and is used to help make marketing and advertising decisions Questions are changed to learn customers’ opinions about any 15 new products Ritchey develops Saves $100,000 on product development per year An online catalog educates retailers and consumers about the technological advantages of Ritchey’s high-end components over competitors’ parts Visitors browse the product catalog that includes detailed descriptions and graphics of Ritchey’s products

The Results ritcheylogic.com sells only team items such as t-shirts, bags, water bottles, and other gear directly to individuals online The company does not sell bike parts to individuals directly online because it wants to maintain its existing distribution system Dealers can place orders on the site

The site is basically used in B2C EC only for the basic activities in Internet marketing: communicating with customers conducting market research delivering advertising

What we can learn … Illustrates the benefits a company can derive from changing its Web site from a passive one to one with interactivity Interactive Web site allows the company to: learn more about its customers (CRM) educate customers use the site for customer service advertisement (chapter 5) collaboration with business partners (chapters 6 – 8)

End of the Case

4.1 Learning about Consumer Behavior Online
Model of consumer behavior online independent (or uncontrollable) variables Personal characteristics Environmental characteristics intervening or moderating variables Market stimuli EC systems decision-making process dependent variables (Buyer’s decisions) Companies today operate in an increasingly competitive environment. Therefore, they treat customers like royalty as they try to lure them to buy their goods and services. Finding and retaining customers is a major critical success factor for most businesses, off-line and online. One of the keys to building effective customer relationship is an understanding of consumer behavior online. The purpose of a consumer behavior model is to help vendors understand how a consumer makes a purchasing decision. If a firm understands the decision process, it may be able to influence the buyer’s decision, for example, through advertising or special promotions.

Exhibit 4.1 EC Consumer Behavior Model
Personal Characteristics Environmental Characteristics Age Gender Ethnicity Education Lifestyle Psychological Knowledge Values Personality Social Cultural/community Other: legal, institutional, governmental Independent Variables Market Stimuli Buyer’s Decision Price Brand Promotions Advertising Product quality Design Buy or not? What to buy? Where (vendor)? When? How much to spend? Decision Probes Intervening (vendor- controlled) Variables EC Systems Dependent Variables (Results) Logistics Support Technical Support Customer Service Payments Delivery Web design and content Intelligent agents Security

Learning about Consumer Behavior Online (cont.)
Independent variables Personal characteristics (demographic variables) Age, gender Ethnicity, education Lifestyle, knowledge Value, personality Environmental variables Social variables Cultural/community variables Institutional, governmental variables What are most-cited reasons for not making purchase? (next slide) Environmental variables Social variables – family members, friends, coworkers, Internet communities (chatting) Cultural/community variables – difference in countries, locations (city, urban etc.) Institutional, governmental variables – government regulation, legal constraints, and situational factors N

What are most-cited reasons for not making purchase?
Shipping charges (51%) Difficulty in judging the quality of the product (44%) Can’t return items easily (32%) Credit and safety concerns (24%) Can’t ask questions (23%) Take too long to download the screen (16%) Delivery time (15%) Enjoy shopping offline (10%) According to Forrester Research only 1.9% of online consumers have actually had an unfavorable experience. It is interesting to note that the more experience people have with Internet shopping, the more likely they are to spend more money online. N

Learning about Consumer Behavior Online (cont.)
Intervening (moderating) variables variables are those that can be controlled by vendors Dependent variables: the buying decisions customer makes several decisions “to buy or not to buy?” “what to buy?” “where, when, and how much to buy?” Intervening (moderating) variables offline environment: price, brad, promotions, advertising, quality physical environment: display in stores, logistics support, technical support, customer service. Five adoption stages of online buying: -- awareness, interest, evaluation, trial, and adoption N

Decision-making Process
Intelligence Is there a problem? Design What are the alternatives? Choice Which should you choose? Implementation Is the choice working? Source: Simon, H. The New Science of Management Decisions, Prentice Hall, 1977

synthesis COMPLEXITY GOAL Decision by Objectives conflict intuition
Logic tradeoffs Analysis GOAL Objectives/ Perspectives H.R. Technology Marketing Finance Measurement Alternatives synthesis Justifiable Recommendation Improved Communication Well Established Process Best Overall Alternative

4.2 Consumer Decision Making Process
Roles people play in the decision making process Initiator Influencer Decider Buyer User

Consumer Decision Making Process (cont.)
Five (5) phases of the generic purchase decision model: need identification information search evaluation of alternatives purchase and delivery after-purchase evaluation Do not assume that all consumers’ decision making will necessarily proceed in this order. Some of them may be combined. need identification -- when a consumer is faced with an imbalance between the actual and the desired states of a need. 2. information search -- catalogs, advertising, promotions, and reference groups influence DM 3. evaluation of alternatives -- evaluate and negotiate terms and compare alternatives 4. purchase and delivery 5. after-purchase evaluation -- services and evaluation of the usefulness of the product N

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 This is the second (2) phase: information search -- catalogs, advertising, promotions, and reference groups influence DM N

Consumer Decision Making Process (p.135; cont.)
(Consumer DSS) Each of the phases of the purchasing model can be supported by both CDSS facilities and Internet and Web facilities.

(I) (II) (III) (cont.) N The model is divided into three parts:
Three stages of buyer behavior pricing, shipping and finance flow of data and the decisions that support EC. (III) N

4.3 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 The matching process is based on what a company knows bout the individual user. The knowledge is referred to as a user profile.

Detailed transaction/ Behavior Data Collected
Exhibit 4.5 The New Marketing Model - One-to-One Marketing and Personalization in EC [1] Customer Receives Marketing Exposure [2] Customer decides on marketing medium for response Marketing/Advertising Chose to Best Server/Reach Customer “Four P’s” (Product, Place, Price, and Promotion) Updated Uniquely to Customer Customer Relationships [3] Customer makes purchase decision [4] Detailed transaction/ Behavior Data Collected Customer Profile Based on Behavior; Customer Segmentation Developed Database Update {…} Source: Linden, A. Management Update: Data Mining Trends Enterprises Should Know About, Gartner Group, 2002

Personalization in EC (cont.)
Major strategies used to compile user profiles Solicit information directly from the user Observe what people are doing online cookie Build from previous purchase patterns Perform marketing research Solicit information directly from the user -- ask the user to fill in a questionnaire or by conducting an interview with the user Observe what people are doing online -- cookie (is one of the most controversial issues in EC) Build from previous purchase patterns Perform marketing research -- via data mining technique Once a customer profile is constructed, a company matches the profile with a database of products, services, or contents. The actual matching process is usually done by software agent.

Personalization in EC (cont.)
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

Collaborative Filtering in EC (cont.)
A personalization method that uses customer data to predict, based on formulas derived from behavioral sciences, what other products or services a customer may enjoy; predictions can be extended to other customers with similar profiles Why? How? Why? Once a company knows a consumer’s preferences (e.g., what music they like), it would be useful if the company could predict, without asking, what other products or services this consumer might enjoy. -- through, collaborative filtering -- use customer data (profile) to infer customer interest in other products or services.

Collaborative Filtering in EC (cont.)
Variations of collaborative filtering: Rule-based filtering Content-based filtering Activity-based filtering Legal and ethical issues in collaborative filtering Invasion-of-privacy issues Permission-based personalization tools to request customer permission

Customer Loyalty in EC (cont.)
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 One of the major objectives of 1-1 marketing is to increase customer loyalty. It costs a company between five to eight times more to acquire a new customer than to keep an existing one. E-tailer: a) acquire a new customer: >=$100 (Amazon.com >=$15) b) keep an existing customer (Amazon.com $2 - $4) Discuss it with Porter’s model (switching cost and others) Any company’s goal is to increase customer loyalty and the Web offers ample opportunities to increase loyalty.

Initial Trust Model Trust Disposition to Trust Cognitive Processes
Propensity to Trust Cognitive Processes Demographic Dissimilarity Trust Trusting Intention Trusting Beliefs Note: Bold items were included in McKnight et al.’s (1998) Initial Trust Model. Italicized items are constructs tested within current study. Institution-based Trust Procedural Justice

Trust in EC (cont.) Trust in EC
Trust: The psychological status of involved parties who are willing to pursue further interaction to achieve a planned goal Trust is influenced by many variables Culture EC computing environment (security etc.) EC infrastructure Trust in particularly important in global EC transactions due to the difficulty in taking legal action in cases of a dispute or fraud and the potential for conflicts caused by differences in culture and business environments.

Exhibit 4.6 The EC Trust Model
Trust certificates, seals Vendor evaluation (BBB) Product evaluation Free samples Return policy Privacy statement Co-branding, alliances Education efforts by vendor stressing the use of security, size and financial resources Simplicity of shopping Navigation, Web design Seller Trust in internet merchant Competency EC Trust Benevolence Trust in internet as shopping channel Reliability Understandability Trust in business and regulatory environments Security/payment Business culture Consumer protection Effective law Demographics, previous experience, personality, cultural differences Peers success stories Referrals Source: Lee, Matthew K.Q. and E. Turban, “A Trust Model for Consumer Internet Shopping,” Vol. 6(1), M.E. Sharpe, Inc., 2001

One-to-One Marketing and Personalization in EC (cont.)
How to increase EC trust between buyers and sellers trust is determined by: degree of initial success that each party experienced with EC and with each other well-defined roles and procedures for all parties involved realistic expectations as to outcomes from EC

One-to-One Marketing and Personalization in EC (cont.)
Issues in personalization brand recognition security mechanisms help solidify trust disclose and update latest business status and practices to potential customers and to build transaction integrity into the system guarantee information and protection privacy through various communication channels

4.4 Market Research for EC Goal of market research is to find information and knowledge that describes the relationships among: consumers products marketing methods marketers

Market Research for EC (cont.)
Aim of marketing research is to: discover marketing opportunities and issues establish marketing plans better understand the purchasing process evaluate marketing performance develop advertising strategy How? On the WEB, the objective is to turn browsers into buyers. Market research includes gathering information about topics such as the economy, industry, firms, products, pricing, distribution, competition, promotion, and consumer purchasing behavior. How? surveyors -- questionnaires, telephone, direct mail, -- focus groups (selected individuals)

Market segmentation: The process of dividing a consumer market into logical groups for conducting marketing research, advertising, and sales Why? How? Market research tools data modeling data warehousing (data mining) Why? -- Markets can be segmented in order to formulate effective marketing strategies that appeal to specific consumer groups How? By geographic (region), demographic (age, occupation etc.), psychosocial (social class, lifestyle), cognitive, affective, behavioral (attitude, benefits sought) A company can separate even millions of customers into smaller segments and tailor its campaigns to each of those segments. With data mining, businesses can look at consumer buying patterns to slice segments even finer. This is not an easy process, and it requires considerable resources and computer support.

Conducting market research online faster and more efficient than off-line methods accesses a more geographically diverse audience large studies done much more cheaply not well developed at this time Telephone surveys can cost as much as $50 per respondent – too expensive for a small company that needs several hundred respondents.

What are we looking for in EC online research? personal profile that helps marketers explain and predict online buying behavior Major factors that are used for prediction are: product information requested, number of related s, number of orders made, what products/services are ordered, and gender. Typical questions that online market research attempts to answer are: What are the purchase patterns for individuals and groups (segmentation)? What factors encourage online purchasing? How can we identify those who are real buyers from those who are just browsing? How does an individual navigate – check information first or go directly ordering What is the optimal Web page design? Online market research provides marketing organizations with greater ability to understand the customer, the market, and the competition. It can identify early shifts in product and customer trends, enabling marketers to identify products and marketing opportunities and to develop those products that customers really want to buy.

Data Mining Examples A telephone company used a data mining tool to analyze their customer’s data warehouse. The data mining tool found about 10,000 supposedly residential customers that were expending over $1,000 monthly in phone bills. After further study, the phone company discovered that they were really small business owners trying to avoid paying business rates *

Other Data Mining Examples
65% of customers who did not use the credit card in the last six months are 88% likely to cancel their accounts. If age < 30 and income <= $25,000 and credit rating < 3 and credit amount > $25,000 then the minimum loan term is 10 years. 82% of customers who bought a new TV 27" or larger are 90% likely to buy an entertainment center within the next 4 weeks.

Online market research methods Web-based surveys Online focus groups Hearing directly from customers Customer scenarios Tracking customer movements Transaction log A record of user activities at a company’s Web site Clickstream behavior a pattern of customer movements on the Internet; and, what the customer is doing there Online research methods range from 1-1 communication with specific customers ( ) to moderated focus groups conducted in chat rooms to questionnaires. According to a survey by GIT, more than 40% of the information people place on such questionnaires is incorrect. Therefore, appropriate design of Web questionnaires and incentives for true completion are critical for the validity of the results. Online focus groups – may be costly and slow Customer scenarios – situations that describe the customer’s needs and the manner in which the product fulfills the needs. Tracking customer movements – to learn about customers by observing their behavior rather than by asking them questions (using cookies, web bugs, and spyware – privacy issue; next slide)

Cookies, Web Bugs, and Spyware Web bugs: Tiny graphics files embedded on messages and in Web sites that transmit information about the user and their movements to a Web server Spyware: Software that gathers user information, through an Internet connection, without the user’s knowledge Analysis of B2C clickstream data The clickstream data can be maintained in a clickstram data warehouse for further analysis. However, it is fairly difficult to analyze transaction logs or clickstream data.

Limitations of online market research too much data may be available: need business intelligence to organize, edit, condense, and summarize it accuracy of responses loss of respondents because of equipment problems ethics and legality of Web tracking Online shoppers tend to be wealthy, employed, and well educated The lack of clear understanding of the online communication process and how online respondents think and interact in cyberspace Business intelligence – a solution/process to automate the process by using data warehousing and data mining. Another important issue concerns 1) the lack of clear understanding of the online communication process and 2) how online respondents think and interact in cyberspace. Web-based surveys typically have a lower response rate than surveys, and there is no respondent control for public surveys. Anonymous respondents: 1) more truthful in their opinions, 2) loss of valuable informaiton about the demographics and characteristics, 3) security of information transmitted Future trends: 50% of all market research will be done on the Internet. National telephone suverys will be the subject of research methodology folklore in 10 years (or 20 years). How to overcome this problem – outsource its market research needs.

4.5 CRM and Its Relationship with EC
Customer relationship management (CRM) recognizes that customers are the core of a business and that a company’s success depends on effectively managing its relationship with them. Customer relationship management (CRM): A customer service approach or process that focuses on building long-term and sustainable customer relationships that add value both for the customer and the company A business strategy to select and manage customers to optimize long-term value Why there are so many definitions? -- CRM is new and still new evolving. -- it is an interdisciplinary field, so each discipline defines CRM differently CRM requires a customer-centric business philosophy and culture to support effective marketing, sales, and service processes.

CRM and Its Relationship with EC (cont.)
Types of CRM Activities Operational Typical business functions involving customer services, order management, invoice/billing, or sales and marketing automation and management Analytical Activities such as capture, store, extract, process, interpret, and report customer data to a user then analyzes them as needed Collaborative Deal with all necessary communication, coordination, and collaboration between vendors and customers

Classification of CRM programs Loyalty program Prospecting Save or win back Cross-sell/up-sell and ? e-CRM: Customer relationship management conducted electronically e-Service vs. e-CRM Classification of CRM programs -- Loyalty program: increasing customer loyalty,e.g., frequent-flyer points -- Prospecting: intend to win new, first-time customers -- Save or win back: try to convince customers not to leave or, if they have left, to rejoin -- Cross-sell/up-sell: offer complementary products (cross-sell) or enhanced products (up-sell); others (bundle-sell, replacement-sell) eCRM also includes online process applications: segmentation and personalization. The use of Internet, Intranet, and extranets made customer services, as well as services to partners (PRM) much more effective and efficient than it was before the Internet. Data -> eCRM -> marketing, sales and customer services -> success/failure -> measured/modified -> further elevate customer expectation In the world connected by the Internet, eCRM has become a requirement for survival, not just a competitive advantage. eCRM covers a broad range of topics, tools, and methods, ranging from the proper design of digital products and services to pricing and loyalty programs.

Scope of CRM Foundation of service Customer-centered services Value-added services Services: Foundation of service: minimum necessary services, e.g., site responsiveness (how quickly and accurately the service is provided), site effectiveness, order fulfillment Customer-centered services: the services matter the most to customers, eg. Order tracing, configuration and customization, and security/trust. Value-added services: extra services, eg. Dynamic brokering, online auctions, online training and education CRM

Extent of service Customer acquisition (prepurchase support) Customer support during purchase Customer fulfillment (purchase dispatch) Customer continuance support (postpurchase) Customer service should be provided throughout the entire product life cycle. Customer acquisition (prepurchase support): a service strategy that reflects and reinforces the company’s brand and provides information to potential customers to encourage them to buy Customer support during purchase: provides a shopping environment that consumer sees as efficient, informative, and productive Customer fulfillment (purchase dispatch): timely delivery; including keeping the customer informed about the fulfillment process, especially if there are any delays Customer continuance support (postpurchase): information and support help maintain the customer relationship between purchase

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 The major benefit of CRM is the provision of superior customer care through the use of Internet and IT technologies. Companies try to gain competitive advantage over their competitors by providing better CRM. Limitations: it is not easy to justify the expense of CRM.

Case 4.2 Online Weekend in Florence: A Customer Service Success Story (p.150)
Questions 1. List the site’s critical success factors 2. Relate the case to e-loyalty and trust 3. How can this business grow and contend with competitors without any advertising budget? 4. Enter waf.it and identity additional customer service features

CRM implementation issues Steps in building EC strategy focused on: the end customer systems and business processes that are designed for ease of use and from the end customer’s point of view efforts to foster customer loyalty (the key to profitability in EC) Actions to take: Deliver personalized services Target the right customers Help the customers do their jobs Let customers help themselves Streamline BP that impact the customers ‘own’ the customer’s total experience by providing every possible customer contact Provide a 360-degree view of the customer relationship Many of these steps are valid both for B2C and B2B EC. In B2B, CRM is known as PRM (Partner Relationship Management)-

Five factors required to implement a CRM program effectively: Customer-centric strategy Commitments from people Improved or redesigned processes Software technology Infrastructure Customer-centric strategy: start from corporate level Commitments from people: the more commitments from people across the corporation to the transformation of business strategy, the more likely the CRM implementation will succeed Improved or redesigned processes: it is inherently difficult to identify the processes that need to be involved and frequently redesigned when implementing CRM Software technology: appropriate CRM packages to meet specific corporate CRM needs as well as to enable integration with legacy enterprise applications such as the ERP Infrastructure: network setup, storage, data backup, computing platforms, and Web servers. However, only effective corporate infrastructure integration can provide solid support for the CRM implementation.

Focus on e-Business Applications
Knowledge Management/Business Intelligence E-Commerce E-Customer Relationship Procurement Network Trading Network E-Channel Management Businesses & Consumers (CRM) Businesses (PRM) M:1 M:N 1:N E-Portal Management E-Business, E-Services SCM/ERP/Legacy Appls

Justifying customer service and CRM programs Metrics: Standards of performance; may be quantitative or qualitative (see next slide) Two major problems arise when companies try to justify expenditures for customer service and CRM programs. Most of the benefits of CRM are intangible, substantial benefits can usually be reaped only from loyal customers (both online and offline) High cost of acquiring customers render many customer relationship program unprofitable during their early years. Only in later years, when the cost of retaining loyal customers fails and the volume of their purchases rises, do CRMs generate big returns. Therefore, companies must be very careful about determining how much customer service to provide.

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 Response time: hours or real-time (using intelligent agents) Site availability: 24/7 Download time: no more than 20 seconds Timeliness: Security and privacy: sufficient privacy statements On-time order fulfillment Return policy: having a return policy increases customer trust and loyalty Navigability

4.6 CRM Applications and Tools: Delivering Customer Service in Cyberspace
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 CRM apps are customer service activities designed to enhance customer satisfaction. Customer-centric EC systems: EC marketer must respond by providing the best, most powerful, and innovative systems and software.

CRM Applications and Tools (cont.)
Classifications of CRM applications Customer-facing applications Customer-touching applications Customer-centric intelligence applications Online networking and other applications Source: The Patricia Seybold Group (2002)

1. 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 help desks, sales force automation, field service automation Autoresponders (‘infobot’ or ‘ on demand’): Automated reply systems (text files returned via ), which provide answers to commonly asked questions ON DEMAND. Sales force automation (SFA): Sales people constitute the major contact point with customers (both individuals and businesses). Software that automates the tasks performed by sales people in the field, such as data collection and its transmission. The more information they have available, the better (quicker, more accurate) service they they can provide to customers. Field service automation: Field service employees, such as sales rep, are on the move, and they interact directly with the customers. Providing service employees with automation can increase customer service.

Customer Intelligence
Exhibit 4.9 CRM Applications Customers Customer systems The Customer Experience Customers Sellers Customer- Touching Systems Users Self-service Customer support E-Commerce Campaign Management Customer- Facing Systems Integration Contact Center Sales Force Automation Field Service Automation Customer Intelligence Integration Back Office Systems Seller Suppliers Supplier Systems

Exhibit 4.10 Intelligent Agents in Call Centers
Call Center Agent Customer Service E-Commerce Server Web Guide Agent EC Agent Internet Customers Web Server Product Database Messenger Agent Sales Rep Agent Autoresponse Direct Sales and Marketing Mail Server

2. 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 Customer-touching applications are those where customers use computer programs rather than interacting with people. Personalized Web Pages: Companies can efficiently deliver customized information such as product information and warranty information when the customer logs on to the personalized page. Not only can a customer pull information from the vendor’s site, but the vendor can also push information to the consumer. E-Commerce Applications: 1) customers may perform self-service support tasks such as order status and history inquiry, returns processing, 2) it provides convenience to many customers and also saves them money, thus increasing their satisfaction. Campaign Management: CM apps automate marketing campaign activities such as online ad planning and analysis. They present offers to targeted leads, prospects, and customers on demand, on a schedule, or in response to business events thru direct mail, , a contact center, field sales, and Web touch points. Web Self-Service: The Web environment provides an opportunity for customers to serve themselves -- Self-tracking: (e.g., tracking system from Dell or FedEx -- Self-configuration and customization: build-to-order (order <-link-> production)

3. Customer-centric applications Data reports Data warehouse A single, server-based data repository that allows centralized analysis, security, and control over the data Data reports: managers and analysts can view and analyze based on raw or processed CRM-related information. Data warehouse: DW can be effective CRM tools if they contain the following information: Customer information used by all operational CRM apps and by possible analytic apps (customer scores) Information about the company’s products and services and the channels thru which it offers them, Information about company’s marketing, sales, and services initiatives and customers’ responses to them Information about customer request and the company’s responses Information about customer transactions

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 Analytic apps process a warehouse’s data, whereas reports merely present that information. Their output should enable a company to improve the operational apps that deliver customer experience in order to achieve the CRM objectives (forecast) of customer acquisition and retention.

4. Online networking and other applications Forums Chat rooms Usenet groups newsletters Discussion lists They support communication and collaboration among customers, business partners, and company employees. Forums: offer users the opportunity to participate in discussions as well as to lead forums on a “niche” topic Chat rooms: 1-1 or M-M real-time conversations Usenet groups: collections of online discussions, grouped into communities newsletters: offer the opportunity for readers to write in, particularly in “Let us hear from you” sections Discussion lists: a redistribution tool thru which an is sent to one address and then is automatically forwarded to all the people who subscribe to the list

4. Online networking and other applications (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 Mobile CRM -- Done by use of the wireless infrastructure and /or mobile and wearable devices -- Giving mobile workforces the same power to interact with customers as they have on the desktop significantly expands a company’s ability to build successful customer relationship. -- The major objective is to provide customer service faster and more conveniently.

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 Intelligent agents: Autoresponders: the answer may be correct in only 80%, but the saving to the company and the instant reply may justify such an answer. Smarter agents are coming that know what they can or cannot answer. Even human are not 100% accurate.

Case 4.3 American Airlines Offers Personalized Web Sites (p. 157)
Questions 1.What are the benefits of the personalized pages to American Airlines? 2. What role do intelligent agents play in the personalization process?

4.7 Internet Marketing in B2B
Organizational buyer behavior number of organizational buyers is much smaller than the number of individual buyers transaction volumes are far larger terms of negotiations and purchasing are more complex B2B marketing is completely different from B2C marketing. Major differences also exist between B2B and B2C with respect to the nature of demand and supply and the trading process. Organizations buy large quantities of direct materials that they consume or use in the production of goods and services and in the company’s operations. They also buy indirect materials (PCs, delivery trucks, and office supplies) to support their production and operations processes.

Internet Marketing in B2B (cont.) redraw

Internet Marketing in B2B (cont.)
Methods for B2B online marketing Targeting customers contact all of its targeted customers individually when they are part of a well-defined group affiliation service (Amazon.com) advertising Electronic wholesalers intermediary sells directly to businesses, but does so exclusively online Traditional (off-line) B2B marketers use the following methods: trade shows, advertisements in industry magazines, , paper catalogs, and salespeople that are not effective in the digital world. How will B2B reach its potential customers in the e-world? Affiliation program: Affiliates put a banner of another vendor (Amazon.com or CDNow) on their sites. A company pays a small commission every time when the affiliation company ‘drives traffic’ to its site if the customer makes a purchase.

Other B2B marketing services Digital Cement provides corporate marketing portals that help companies market their products to business customers National Systems tracks what is going on in an industry BusinessTown provides information and services to small businesses, including start-ups Vantagenet offers free tools that help increase traffic to a company’s Web site

Affiliate programs Placing banners on another vendor’s Web site Content alliance program in which content is exchanged so that all can obtain some free content Infomediaries Online data mining services Affiliation program: Affiliates put a banner of another vendor (Amazon.com or CDNow) on their sites. A company pays a small commission every time when the affiliation company ‘drives traffic’ to its site if the customer makes a purchase. Marketing managers need to understand their customers’ shopping behavior in order to optimally advertise or approach customers in the future. Traditional B2C retailers: POS -> valuable marketing info. Online environment: the potential of the information can only be realized if the clickstream data can be analyzed and mined to produce useful knowledge that can be used to improve services and marketing efforts. Such B2C and B2B intermediaries are called infomediaries. Infomediaries start by processing existing information until new, useful information is extracted from it. Purpose: B2B vendors use the information from infomediareis to identify likely buyers with much greater precision than ever before – leading to increased sales and drastically reduced marketing expenses.

Managerial Issues Do we understand our customers?
What do customers want from technology? How is our response time? How do we measure and improve customer service? Is CRM for real? Do we have to use electronically supported CRM? Should we use intelligent agents? Who will conduct the market research? Are customers satisfied with our Web site? Can we use B2C marketing methods and research in B2B?

Summary Essentials of consumer behavior.
The online consumer decision-making process. Building one-to-one relationships with customers. Online personalization. Increasing loyalty and trust. EC customer market research. CRM, its technologies, and EC connection. Implementing customer service online. B2B Internet marketing and organizational buyers.

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