E-commerce Management Strategies

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1 EDITORIAL Custmer Relatinship Management Cmpetitiveness Imprvement Tl * Jvan Zubvić, Ivana Dmazet, Institute f Ecnmic Sciences, Belgrade, Serbia KEY WORDS : CRM, Cmpetitiveness, Custmer, Strategy, Cmpanies JEL : L21, D91, M11 * Original paper was previusly published n Internatinal Scientific Cnference Cntemprary Challenges f Thery and Practice in Ecnmics Management and Marketing under Glbalizatin, under title CRM (Custmer Relatinship Management): A factr f glbal cmpetitiveness imprvement, COBISS.SR-ID ABSTRACT: On the glbal market cmpetitiveness f Serbian cmpanies is at a very lw level. Accrding t Glbal Cmpetitiveness Reprt Serbia was ranked 91. Leading cuntry is USA, whereas the UK had lst the secnd and fell t ninth psitin. The criteria n which Glbal Cmpetitiveness Reprt ranks 131 wrld cuntries are creatin f business strategies and a quality f business envirnment 1. Cmpetitiveness increase f lcal cmpanies shuld be assessed thrugh hlistic cncept which targets n cre micr and macr envirnment indicatrs imprvement, as well as by adpting a new business philsphy strategic management and innvatin. Develpment f CRM (Custmer Relatinship Management) cncept is ne f the tls which significantly influence raise f cmpetitiveness and mre effective creatin f business strategies. Intrductin In mdern market ecnmies, alng with develpment f infrmatin technlgy, internet and data base sftware, the pririty f business activities is becming a tw way cmmunicatin between cmpanies and prduct/service cnsumers. Custmer Relatinship Management is ne relatively new cncept which, as a result f change in management, strategic business planning and persnalised custmer service, is being cnstantly develped. Develpment f new infrmatin technlgies shifts business peratins frm push prduct strategy t pull custmer strategy. This change will result in change f custmer psitin in the value chain. Custmers as the cmpany main asset are becming mre sphisticated and demanding in their buying behavir. Fr that reasn it is imprtant t analyze main factrs f CRM, as they can significantly increase cmpany cmpetitiveness: Custmer selectin Custmer acquisitin Custmer retentin Custmer grwth Transactin marketing is based n pushing custmer s as t make transactins faster and easier. Unlike that, the new marketing and management relatinship cncept insists n establishing cmmunicatin with every single custmer even when the transactin is cmpleted. Use f the CRM cncept helps the cmpany in gaining n cmpetitive advantage. Accrding t research made in EU during 2006, cmpanies withut CRM cncept: in average lse 50% f their custmers in five years have 65% f lst custmers leaving because f unsatisfactry service and cmmunicatin 1 Wrld Ecnmic Frum Vlume 40 Autumn

2 have the cst f acquiring a new custmer five times higher than the cst f retaining the ld ne Cmpanies that have a develped CRM cncept: Grw almst 60% faster than their cmpetitrs withut CRM Increase their market share by 6% yearly Charge their prduct 10% higher Have ROI (return n investment) at the level f 12% By 5% increase f custmer lyalty grw prfits by 25% 85%. CRM Cncept Custmer relatinship management (CRM) is a new management strategy which fcuses n lng term relatinship with custmers. This cncept has sme similarities t relatinship marketing cncept, but with significant differences. Unlike relatinship marketing CRM analyzes mre in depth the relatinship with custmers. It cvers all activities starting with creatin f rganizatinal structure and ther develpment tls (business culture, etc) up t specific prgrams fr setup f lng term relatinship. In relatinship marketing fcus is mre n finalizatin and specific prgrams f setting lng term relatinship (cmmunicatin channels, ffer adapting, lyalty prgrams, etc). CRM cncept defines capability, methdlgy and technlgy which can enable cmpany adpt the prcess f imprving custmer relatinship. The purpse f CRM is t enable mre effective and efficient fulfillment f cmpany gals, thrugh mre analytical review f custmer real needs. CRM is fcused n creating and retaining lng term relatinship with custmers. Even thugh market ffers sme cmmercial CRM prgram packages supprting CRM strategy, it is nt technlgy n its wn. CRM is rather a strategic change in the rganizatin philsphy twards emphasis n custmer. These prgram packages include sftware and hardware that will help autmate CRM system. In such a system utput f CRM is nt nly infrmatin, but it is rather cmplete supprt fr decisin making and market analysis. Successful CRM strategy cannt be installed in a cmpany vernight and integrated with ther sftware packages. The changes are necessary at all levels, including cmpany plicy, emplyees training, marketing systems, infrmatin management etc. This means that all cmpany activities must cmply with principles f CRM. The efficiency f CRM prcess, which has t be integrated thrugh marketing, sale and relatinship with custmers assumes: identifying factrs which cntribute successful relatinship with custmers, develpment f custmer relatinship plicies, develpment f a prcess which satisfies custmers, defining key factrs that in mst adequate way help slve ptential custmer prblems, suggesting slutins fr custmer cmplaints abut prduct/service, sales fllw up and custmer supprt. In establishing CRM cncept in a cmpany, it is very imprtant t precisely analyze: key aspects f business peratins; infrmatin we ffer t custmers; custmer financial backgrund; effects f CRM segments. Imprtant task is als t gain detailed infrmatin abut cmpany s Ecnmic Analysis

3 prime (lyal) custmers. Nevertheless very imprtant aspect in CRM system implementatin is identifying and eliminating unnecessary infrmatin. In such a cncept, we can define CRM as a business strategy aiming t balance incme and prfit n the ne side with custmer satisfactin and value added n the ther side, where sme tasks need t be measured: custmer behavir, prcesses and technlgies. Basic structure f CRM cmprises three segments: Operatinal cre business prcesses (marketing, sales, services) Analytical supprt fr custmer satisfactin analysis and implementing business plicies and technlgies Cperative keep cntact with custmers using phne, fax, internet, mail, direct, etc. Fr successful develpment f custmer relatinship cmpany has t cmbine certain tasks: Knwledge (understanding markets and custmers) Targeting (directin and adaptatin f prduct/service) Sales (gaining custmers) Service (maintaining custmers) Planning and develpment f strategy, rganizatin, implementatin and cntrl f CRM prcess is very imprtant. Fr that reasn we can review CRM cncept as: Strategy develpment Infrmatin analysis Identifying needs (understanding custmers, their needs and wants) Defining change (crprate revlutin frm reactive t practive apprach) Future building (creating f business and technical cmpany structure which will deliver expected value t custmers) Measuring results and upgrade f CRM system. Custmer Relatinship Management cmbines business strategy and technique in rder t identify and gain custmers, and retain lng term relatinship with them by creatin f added value, which cmes as a result f interactin between cmpany and custmers. It als includes knwledge f strategic management and Internet technlgies. The purpse f this cncept is t identify pprtunities fr creatin and retaining f prfitable relatinship with custmers. The CRM as a strategic set f activities begins with a detailed analysis f cmpany rganizatinal strategy, and it ends with measuring f sharehlders value. Cmpetitive advantage is a key success factr f CRM, which at the same time generates value bth fr custmer and fr the cmpany. Cmpetitive advantage is generated by using CRM principles f creatin, develpment and retentin f relatinship with precisely targeted grups f custmers. Once set, this relatinship has been ptimized fr custmers, crprate prfitability and stakehlders value. All these make CRM highly psitined n the pririty list f tday s crprate agenda and it is clsely linked with use f IT that are needed fr implementatin f strategic marketing relatinship with custmers. Objectives and Methds f CRM Cncept Implementatin The acrnym CRM is ften regarded as Custmer Relatinship Marketing, since in bth cases the emphasis is made n relatinship between the cmpany and custmers. The CRM cn Vlume 40 Autumn

4 cept is amng mst imprtant segments f strategic planning, which has t be regarded as marketing and prmtinal mix, but it has t include integrated marketing cmmunicatin. In case f marketing, the experts very ften use nly 4P cncept (Prduct, Place, Price, Prmtin), and diminish the rle f the strategy which has t help general manager lead the cmpany in strategic and functinal manner using CRM cncept. 2 The success f synergy effect f CRM cncept in a cmpany depends n fulfillment f 2 criteria: 1. Cnceptual cmpany strategy is based n e business and custmizatin, and it has individual apprach t every custmer 2. Technical use f ICT, standardizatin, marketing autmatin, data management, cmpany management and analysis The CRM methd assumes cmbinatin f: Strategic visin Crprate understanding f custmer values using multichannel envirnment Use f apprpriate managerial infrmatin and CRM sftware High level f peratins, high level f expectatin fulfillment and the effect f satisfactin 3 When intrducing CRM cncept, cmpany gals are: manage custmer life cycle, increase f incme and prfit, as well as satisfactin f custmer needs, hence achieving highest level f lyalty. The analysis f gathered infrmatin in every single transactin and interactin (purchase, supprt and ther activities) by using this multidimensinal vertical and hrizntal apprach enable cmpany t gather widespread infrmatin abut the custmer, ut f which the cmpany will create a database fr future Custmer strategy and individual apprach. Nevertheless we cannt regard CRM frm technlgy aspect as IT slutin which will help us created unique custmer database and develp it. The technlgy influences cmmunicatin and cmmunicatin influences relatinship with custmers. Knwing the gals, which are nt nly t satisfy custmers, but as well the stakehlders, we can view the CRM as the Integratr f Marketing Cmmunicatin (especially in PR). E cmmerce, e trade and e gvernment are the fields f electrnic business applicatin. They use resurces frm ecnmic science abut fundamental knwledge frm different areas f marketing and sales management, whereas Internet ecnmics has significant influence n change in Internet marketing envirnment. Transitin frm traditinal t electrnic business bears certain level f risk in market adaptatin. E Business and CRM Strategic Apprach E business includes nline cmmunicatin and business transactins, e trade, financial and ther services ver internet, as well as all ther activities in business that require cmputer netwrk. E business is exchange f infrmatin ver electrnic media in the market. Prefix E became a cmmunicatin channel. Thrughut the Web there are tens f millins f ptential custmers that cmpanies can reach (in Serbia, ptential number f custmers is tens f thusands f custmers, since develpment f IT is slwer, and there is significant resistance fr new technlgies). Thse cmpanies 2 Salls (2003), p Payne (2004), p Ecnmic Analysis

5 using the Web are mre pwerful, cmpetitive and prfitable than the nes nt using advantages f the Web. In all areas f e business new services are t be ffered, amng which are the sftware packages, created fr custmer relatinship management E CRM. T make successful relatinship with custmers, cmpanies need databases which cllect, cnnect and integrate infrmatin abut the custmers, and make tw way cmmunicatins with them. Such a database enables a cmpany t create specific set f marketing activities fr targeted custmer. Reasn why a cmpany needs t understand a custmer is t have the ability t meet their needs. T knw what their preferences are, we need t establish tw way cmmunicatins with them. We have t understand all their specific wants regarding the prduct/service quality, design, clr, shape and ther preferences, s as t be able adapt ur ffer t thse preferences. All infrmatin abut the custmer are integrated int database which facilitate individual apprach t custmers. Database ffers data abut every custmer which are the basis fr marketing planning and direct marketing Database Marketing. 4 Intrductin f CRM sftware in a cmpany creates cmpetitive advantage, wins ver cmpetitin and pens freign markets. This is nt all what CRM may ffer. Tday we have t anticipate what is necessary t change and apply in a cmpany, in rder t becme a system which walks tgether with the needs f mre demanding glbal market. The key step is t persuade all stakehlders in the cmpany t accept CRM and regard it as investment int future. Strategic framewrk f CRM is interactin f 4 related and functinally cnnected business prcesses: 1. Frmulate cmpany strategy 2. Create value/ffer percept yur custmer and understand values 3. Integrate by multichannel sales frce, PR, phne, direct marketing, e cmmerce, mbile sales etc. 4. Evaluate campaign success results analysis Integrated CRM prcesses have the synergy effect glbal success is greater than the sum f singe prcesses effects. It is imprtant t view CRM as integrated set f activities which enables imprvement f cmpany peratins thrugh: identifying, understanding and successful cmmunicatin with custmers targeted sales f prduct/service t new and existing custmers develpment f new attractive ffers, price discunts and marketing prgrams created fr custmers retentin and share f value with mst prfitable custmers, since satisfied custmer becmes a lyal custmer Custmer satisfactin is nt easy t measure by yes r n. We have t ffer custmers scale frm The nes which rate yu average (5 6) are nt lyal, and yur cmpetitin may attract them. But the nes which rate yu 10, are nt nly satisfied custmers, they will recmmend yu t thers, if yu ask them s. Different levels f relatinship intensity between cmpany and custmer may be shwn like: 5 Suspect latent buyer is the persn wh may be yur ptential buyer (we have nly his/her name r ckie left n internet site) Prspect ptential buyer is the persn yu have registered as smene wh may need 4 Filipvić and Kstić (1999), p Cttle (2000), p. 98. Vlume 40 Autumn

6 yur prduct/service, and wh is able t pay fr it (unfrtunately, nt everyne wh needs yu may affrd yu) Custmer Buyer is the weakest n relatinship scale. Registered user is a buyer, since he/she has used sme f yur services, like free dwnlads, but is still nt regular buyer. On satisfactin scale is 5 6, and is actively searching fr replacement. Lyalty is very lw, clse t zer Client is nrmal n relatinship scale. Clients use yur service and accrding t it they give feedback, lking fr advice and help. Clients have the buying habit. Their satisfactin is 7 8 n scale. This means that yu may affrd t lse cntact r nt t satisfy them nce, and they will give yu anther chance. Even thugh relatinship with client depends n marketing activities f cmpetitrs Cheerleaders advcates are highest n relatinship scale. They will nt nly help yu, they will sell fr yu. They will talk abut yu t their friends and business partners and send yu re their clients if yu ask them s. We have identified fur types f strategically significant custmers (SSC) 6 : High life time value custmer, Benchmarks the ther custmers cpy him/her, Inspiratins buyers that cause changes in the cmpany, find new usages, Cme with new ideas Cst magnets the custmers wh absrb disprprtinal high level f fix cst and in that way enable ther custmers t be mre prfitable fr the cmpany The best buyers deserve the best treatment. If yu treat yur best custmers the same way like all thers, they will sn behave the same way, which is nt gd business manner. The task fr marketers is t identify significant custmers and t retain cntinuus individual cmmunicatin with them. In rder t get apprpriate and measurable respnse marketing manager has t be trained t create custmer knwledge ut f hundreds f nn related data cllected frm different cmpany divisins. Cnclusin The CRM slutins are designed in that way as t ffer knwledge needed fr develpment and implementatin f smart custmer prfit maximizatin strategies, and at the same time t create cmpany cmpetitive advantage. By analyzing CRM technlgies we can understand ur clients in rder nt t react when the prblem appears, but t practively find hidden pprtunities fr grwing custmer wants. The key success factr f CRM cncept is fr the cmpany t anticipate custmer expectatins. T reach that gal, the platfrm fr cmmunicatin with custmers, gathering and analysis f data has t be made. Within web sites, specialized statistical sftware packages enable verview and strage f data cllected frm answers n many different questins. In that way, cmpany may keep track n custmer behavir and their specific interest fields. Cmpany gal is t persuade ptential custmers t buy, prepay, register, answer the questinnaires and generate recmmendatins, which all tgether create cmpetitive psitin fr the cmpany. Ptential custmers, mre like the cmpany, have their gals needs satisfactin and 6 Maričić (2002), s Ecnmic Analysis

7 understanding, as well as the strategies f reaching thse gals. Cmpany ability t persuade ptential custmers t realize planned actin is the result f effectiveness f CRM strategy. The prcess in which custmer becmes and remains real buyer, wh imprves cmpany peratins by his/her lyalty, is based n assured principles which include analysis, art f cmmunicatin, CRM cncept and fundamental knwledge f ecnmics. Literature 1. Cttle, W. (2000), Prfessinals Guide t Target Marketing, Harcurt Prfessinal Publishing, San Dieg. 2. Dmazet, I. (2007), Operativni menadžment faktr unapredjenja knkurentske pyicije preduzeća, zbrnik Eknmskfinansijski dnsi sa instranstvm, NDE i Eknmski fakultet, Begrad. 3. Filipvić, V. and Kstić, M. (1999), Marketing menadžment, Institut za menadžment, Begrad. 4. Maričić, B. (2002), Pnašanje ptršača, Savremena administracija, Begrad. 5. Milićević, V. (2002), Internet Eknmija, Fakultet rganizacinih nauka, Begrad. 6. Payne, A. (2004), Develping a Strategic Apprach t CRM, Harvard Business Schl, Bstn. 7. Picktn, D. and Brderick, A. (2005), Integrated Marketing Cmmunicatins, Prentice Hall, New Jersey. 8. Salls, M. (2003), Strategic Rle f Marketing, Harvard Business Schl, Bstn. 9. Varagić, D. (2000), Vdič krz raj i paka Internet m@rketinga, Prmetej, Nvi Sad. 10. Wrd Ecnmic Frum (2007) The Glbal Cmpetitiveness Reprt : Vlume 40 Autumn