E(lectronic)-Business

International Management and E(lectronic)-Business Customer relationship management (#5) guhr@iwi.uni-hannover.de # 1 Lecturers IWI Prof. Dr. Michael H. Breitner Tel.: (0511) 762 4901 Mail: breitner@iwi.uni-hannover.de Surgery: Tuesday 3-6 pm a.o.a. Tel.: (0511) 762 4979 Mail: guhr@iwi.uni-hannover.de h@i i ih Surgery: on appointment Dipl.-Ök. Lubov Lechtchinskaia Tel.: (0511) 762 4983 Mail: lechtchinskaia@iwi.uni- hi i i i hannover.de Surgery: Wednesday 2-5 a.o.a. # 2 1

Basic Books E-Business ( www., Stud.IP) E-Business and E-Commerce Management Dave Chaffey Prentice Hall; 4 th edition 2009 ISBN: 978-0273719601 What approach to e-business strategy should you follow? How much do you need to invest in e-business? Which processes should be your priorities? Relevant chapter for today: Chapter 9: complete # 3 Topic today () Customer relationship management # 4 2

Introduction Customer relationship management (CRM) Sou urce: Dave Chaffrey, E-Business and E- Com mmerce Management, 4 th Edition, Mark Insights Limited 2009 keting Figure 1: The four classic marketing activities of customer relationship management # 5 What is e-crm? E-CRM is: Applying to by Internet and other digital technology (web, e-mail, wireless, itv, databases) acquire and retain customers (through a multi-channel buying process and customer lifecycle) improving customer knowledge, targeting, service delivery, and satisfaction Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 6 3

Benefits of e-crm Using the Internet for relationship marketing involves integrating the customer database with web sites to make the relationship targeted and personalized. Targeting more cost-effectively. Achieve mass customization of the marketing messages (and possibly the product. Increase depth, breadth and nature of relationship. A learning relationship can be achieved using different tolls throughout the customer lifecycle. Lower cost. # 7 The differences between CRM and e-crm Source: Shan L. Pan/Jae-Nam Lee, Using E-CRM for a unified view of the customer. In: Communications of the ACM April 2003/Vol. 46, No.4 # 8 4

E-CRM key applications Source: Shan L. Pan/Jae-Nam Lee, Using E-CRM for a unified view of the customer. In: Communications of the ACM April 2003/Vol. 46, No.4 # 9 The online buying process Searching behaviours: Approaches to finding information vary from directed to undirected. Five different types of web users who exhibit different searching behaviour according to the purpose of using the web are: Directed informationseekers, undirected information-seekers, directed buyers, bargain hunters and entertainment seekers. Differences between B2C and B2B buyer behaviour: Market structure Nature of the buying unit Type of purchase Type of buying decision Communication differences. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 10 5

The importance of trust Customers are looking for cues of trust. These cues can include: brand familiarity, site design, the type of content, accreditation and recommendations by other customers. Eight main drives of trust. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 11 Online and offline communications techniques for e-commerce Source: Dave Chaffrey, E- Marketing Insights Limited -Business and E-Commerce Management, 4 th Edition, d 2009 # 12 6

Different communications characteristics of traditional and new media (1) Eight key differences: From push to pull Push media: Communications are broadcast from an advertiser to consumers of the message who are passive recipients, i e.g. traditional media such as print, TV. Pull media: The consumer is proactive in selection of the message through actively seeking out a web site, e.g. the web. From monologue to dialogue Interactivity : The medium enables a dialogue between company and customer. From one-to-many to one-to-some and one-to-one One-to-many: Traditional push communications. One-to-some : Tailoring and targeting messages to different segments and/or different audiences. One-to-one: e.g. personalized messages. From one-to-many to many-to-many communications Customers can interact with other customers via web sites or in independent communities # 13 Different communications characteristics of traditional and new media (2) Eight key differences: From lean-back to lean-forward New media = lean forward media in which the web site usually has the visitor`s undivided id d attention. ti The medium changes the nature of standard communications tools such as advertising Communication via the new media is differentiated from communication using traditional media in four different ways: Communication style, social presence, control of contact and content. Increase in communications intermediaries Marketer needs to select the most appropriate of this of sites which customers visit to drive traffic to their web site. Integration remains important Combine and integrate new and traditional media according to their strength. Support mixed mode buying. Inbound communications to a company need be managed. # 14 7

Search engine marketing (SEM) (1) Search engines: Provide an index of content on registered site that can be searched by keyword. Directories or catalogues: Provide a structured listing of registered web sites and their function in different catalogues. How does Google work? Crawling Indexing Ranking and scoring Query request and results serving Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 15 Search engine marketing (SEM) (2) Search-engine optimization (SEO): A structured approach used to improve the position of a company or its products in search-engine natural or organic results listings for selected key phrases. Each search engine has its own evolving algorithm with hundreds of weighting factors truly only known to the search engineers they employ, fortunately there are common factors that influence search engine ranking. These are, in approximate order of importance: Frequency of occurrence in body copy Number of inbound links (page rank) Title HTML tag, e.g. (<title>e-business iwi.uni-hannover.de<title>) Meta-tags: keywords meta-tag, e.g. <meta name = keywords content= E- Business, E-Commerce, > or description meta-tag, e.g. <meta name = description content= Your guide to E-Business iwi.uni-hannover.de > Alternative graphic text # 16 8

Online PR Online PR: Maximizing favourable mentions of your company, brands, products or web sites on third-party web sites which are likely to be visited by your target. Communicating with media online Link building key activity fro search engine optimization. A structured activity to include good-quality hyperlinks to your site from relevant sites with a good page rang. Blogs, podcasting and RSS (Really Simple Syndication) Online communities and social networks Managing how the brand is presented on third-party sides Creating a buzz online viral marketing Figure: Online PR categories and activities. Source: Dave Chaffrey, E-Business and E- Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 17 Online partnerships Affiliate marketing: A commission-based arrangement where an e-retailer pays sites that link to it for sales, leads (CPA-based) or less commonly visitors (CPCbased) Online sponsorship: the linking of a brand with related content or context for the purpose of creating brand awareness and strengthening th brand appeal in form that is clearly distinguishable from a banner, button, or other standardized ad unit. (Ryan and Whitemann, 2000) Figure: The affiliate marketing model. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 18 9

Interactive advertising Media multiplier or halo effect: The role of one media channel on influencing sale or uplift in brand metrics. Commonly applied to online display advertising, where exposure to display ads may increase clickthrough rates when the consumer is later exposed to a brand through other media, for example sponsored links or affiliate ads. It may also increase conversion rates on destination site through higher confidence in the brand or familiarity with the offer. The purpose of interactive advertising: o Delivering content o Enabling transaction o Shaping attitudes o Soliciting response o Encouraging retention Interactive ad targeting options: o On a particular type of site (or part of site) o To target a registered user`s profile o At a particular time a day or week o Online behaviour Interactive ad formats Media planning deciding on the online/offline mix of advertising # 19 E-mail marketing Outbound e-mail marketing: where e-mail campaigns are used as a form of direct marketing to encourage trial and purchases and as part of a CRM dialogue; Inbound e-mail marketing: where e-mails from customers such as support enquiries are managed. These are often managed today in conjunction with chat and co-browsing sessions. Opt-in e-mail options for customer acquisition Three main options for a-mail marketing: Cold e-mail campaign Co-branded e-mail Third-party e-newsletter Figure: E-mail response figures, Source: Provided by SmartFOCUS Digital (www.smartfocusdigital.com), an e-mail service provider that send e-mails to UK and European organizations such as publishers and retailers # 20 10

Customer retention management Two distinct goals: 1. To retain customers of the organization (repeat customer). 2. To keep customers using the online channel (repeat visits). Figure : 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 # 21 Personalization and mass customization Personalization: Delivering individualized content through web pages or e-mail. Personalization can be achieved through several dynamic variables including: o the customers`preferences o the date or time o particular events o the location. Mass customization: Delivering customized content to groups of users through web pages or e-mail. Collaborative filtering: Profiling of customer interest coupled with delivery of specific information and offers, often based on the interests of similar customers. # 22 11

Online communities Community: A customer-to-customer interaction delivered via e-mail groups, web-based discussion forums or chat. Depending on the market sector, an organization has a choice of developing different types of community for B2C, and communities of purpose, position, interest and professions for B2B. Eight question organizations should ask when considering how to create a customer community: What interests, needs or passions do many of your customers have in common? What topics or concern might your customers like to share with each other? What information is likely to appeal to your customers`friends or colleagues? What other types of business in your area appeal to buyers of your products and services? How can you create packages or offers based on combining offers from two or more affinity partner? What price, delivery, financing or incentives can you afford to offer to friends which your current customers recommend? What types of incentives or rewards can you afford to provide customers who recommend friends who make a purchase? How can you best track purchases resulting from word-of-mouth recommendation from friends? # 23 Typical problems in community-building Typical problems in community-building are: Empty communities: Community without any people. Silent communities: Community is not a community if the conversation flags. Solutions: Seed the community and make it select. Critical communities (only negative comments) Also remember the lurkers (people p who read the messages but do not actively contribute) # 24 12

Techniques for managing customer activity and value Tactics and objectives to increase activity levels can be set for: Increasing number of new users per month and annually through h promoting online services to drive visitors to the web site. Increasing % of active users. Decreasing % of dormant users. Decreasing % of inactive users. The main retention metrics that shows the impact on profitability are: Repeat-customer conversion rate Repeat-customer base Number of transactions per repeat customer Revenue per transaction of repeat customer Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 25 Lifetime value (LTV) modeling (1) Lifetime value (LTV): Lifetime value is the total net benefit that a customer or group of customers will provide a company over their total relationship. Lifetime value analysis enables marketers to: Plan and measure investment in customer acquisition programms Identify and compare critical target segments Measure the effectiveness of alternative customer retention strategies Establish the true value of a company`s customer base Make decisions about products and offers Make decisions about the value of introducing new e-crm technologies. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 26 13

Lifetime value (LTV) modeling (2) Four main types of customers are indicated by their current and future value: Bronze: Do not have development potential and are typically unprofitable (A,B) or have potential for growth (C). Silver: Are targeted with customer extension offers. Gold: Are extended where possible although these have relatively little growth potential. Platinum: Are the best customers. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 27 Improving online service quality (1) In the virtual world customer service is a key difference between brands. Dimensions of service quality on which customers judge expected and delivered service-quality levels are (1): Tangibles: The physical appearance and visual appeal of facilities. Reliability: The ability to perform the service consistently and accurately. Responsiveness: A willingness to help customers and provide prompt service. (slide 29) # 28 14

Improving online service quality (2) Dimensions of service quality on which customers judge expected and delivered service-quality levels are (2): Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence. The following actions can be suggested to achieve assurance in an e- commerce site: Provide clear and effective privacy statements. Follow privacy and consumer protection guidelines in all local markets. Make security of customer data a priority. Use independent certification bodies. Emphasize the excellence of service quality in all communications. Empathy: Providing caring, individualized attention. In an e-commerce context there are three stages appropriate to managing the process. Understanding expectations. Setting and communicating the service promise. Delivering the service promise. # 29 Advanced online segmentation and targeting techniques The segmentation and targeting approach used by e-retailers is based on five main elements which in effect are layered on top of each other. The number of options used, and so the sophistication of approach, will depend on resources available, technology capabilities and opportunities afforded by the list: Identify customer lifecycle groups. Identify customer profile characteristics. Identify behaviour in response and purchase. Identify multi-channel behaviour (channel preference) Tone and style preference. Figure: Customer lifecycle segmentation. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 30 15

Technology solutions for CRM Database: heart of delivering CRM applications. E-mail: to manage of the inbound, outbound and internal communications managed by e-crm systems. Workflow system: used for automating CRM processes. Three main types of customer data held as tables in customer databases for CRM are typically: Personal and profile data Transaction data Communications data Technical issues for companies selecting e-crm systems are: Type of applications Integration with back-office systems The choice of single-vendor solutions or a more fragmented choice Data quality # 31 Types of CRM applications Three core needs for the customer: to find more information about a product to place an order to receive post-sales support Applications must be provided to support each of these needs. Employee will have applications requirements to support the customer and the sales and marketing objectives of the organization: sales force automation to place an order support system and knowledge base Figure: An overview of the components of CRM technologies. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 32 16

Integration with back-office systems Existing legacy systems appear at both the applications and database. Integration of legacy systems is a vital part of deciding on and implementing CRM systems. Think about the ideal situation of an organization, the key issues in deciding on and designing a system to support CRM; it would be: A single customer-facing and employee-facing application that supports all the communication channels. A single integrated database such that any employee has total visibility about a customer From a single vendor for ease of implementation and support. Figure: An overview of the components of CRM technologies. Source: Dave Chaffrey, E-Business and E-Commerce Management, 4 th Edition, Marketing Insights Limited 2009 # 33 Data quality It can be suggested that for data quality to be managed successfully, the following are important: Establish a business owner Optimize quality on capture Continuously improve quality Work towards a single view of customer Adopt a data quality policy # 34 17

Short summary (1) The objective of customer relationship management (CRM) is to increase customer loyalty in order to increase profitability. CRM is aimed at improving all aspects of the level of customer service. In order to fully understand how a unified view of the customer can be achieved through the strategic use of e-crm, we must make a distinction between the terms CRM and e-crm. The traditional CRM has limitations in supporting outside multichannel customer interactions that combine telephone, the Internet, email, fax, chat, and so on. Unlike the traditional CRM, the current e-crm solution supports marketing, sales and service. Integration between CRM systems and Enterprise Resource Planning (ERP) systems is becoming more common. E-CRM applications have the power to create an enormous amount of value by allowing companies to collect, organize, and disseminate a wealth of customer information. In an e-commerce context, acquisition refers to gaining new customers to a company and converting existing customers to online services. To enable an online relationship it is important to profile customers to find out their needs and expectations and obtain an opt-in e-mail agreement to continue the dialogue. # 35 Short summary (2) Communications techniques to achieve acquisition, retention and extension include traditional online mass-media techniques and specialized online techniques such as search engine registration, link-building, e-mail marketing and banner advertising. Techniques for customer retention include the use of extranets, online communities, online sales promotions and e-mail marketing. Knowledge of online buyer behaviour, and in particular, the different needs of the customer through different stages of the buying decision can be used to improve customer relationship management. Customer service quality is important in achieving loyalty and a framework can be used to consider how to use the Internet to achieve this. Technology solutions for CRM are aimed at providing interaction between employees and customers across multiple communications channels with all customer information stored in a single database to provide complete visibility of the customer by employees. Managers look to minimize the number of solutions partners they work with to achieve these goals. Specific technology application requirement for CRM are sales-force automation (contact management) and call centre applications which integrate workflow to manage queries and a knowledge base from which queries can be reviewed. # 36 18

Thank you for your attention! # 37 19