E-Commerce Customer Relationship Management Pesewa Presentations

Learning Objectives Identify the key features of the Internet audience Discuss the basic concepts of consumer behaviour and purchasing decisions Understand how consumers behave online Describe the basic marketing concepts needed to understand Internet marketing Identify and describe the main technologies that support online marketing Identify and describe basic e-commerce marketing and branding strategies Explain how online market research is conducted Consider the function and practice of effective CRM

Online Activities

What drives consumer behaviour? Five stages in the consumer decision process: awareness of need search for more information evaluation of alternatives the actual purchase decision post-purchase contact with the firm How do we use this information?

Decision-Making Process

e-Business: drivers and inhibitors Drivers and Inhibitors toward e-business Drivers: Inhibitors:

Life-Cycle (SDLC) Approach VISION Phase 1: Business Planning Phase 2: Infrastructure Technology Phase 6: Maintenance Enhancement WWW Phase 3: Design Phase 5: Fulfilment Phase 4: Marketing

Gartner’s Model of Customer Interaction: http://www.gartner.com Website and marketing “What criteria determine who will be our most profitable customers?” “How can we acquire this customer in the most efficient / effective way? “How can we keep this customer for as long as possible?” “How can we increase the loyalty and profitability of this customer?” Customer Extension Retention Selection Acquisition Relationship Marketing Gartner’s Model of Customer Interaction: http://www.gartner.com

Understand your customers Lewis & Lewis (1997) identify 5 basic types of Internet users Directed information seekers: searching for timely, relevant, accurate information on a topic or topics Undirected information seekers: classic “web surfer” user who follows a random interest-driven path through the web following links at random or where their interest is captured briefly Bargain hunters: seeking free items, trial samples and giveaways Entertainment seekers: browsing online entertainment, games, music, streaming audio or video Directed buyers: hard-core shoppers online; they know what they want and where to find it and buy it

Online Retailing: 8 Cs Content: Is it a compelling offering to the Customer? Convenience: How easy is the site to navigate and use? Customer Care: Extent to which the organization shows a commitment to Customers (Terms & Conditions, Privacy, etc) Community: Cybercommunity as integral part of Customer experience (e.g YouTube) Communication: Where Customer can opt into a conversation with the organization, and expect to receive a useful exchange of information Connectivity: Site-to-site connectivity (useful and meaningful links) and User-to-site connectivity (speed of access, navigability, site design, etc) Customisation: Basic form of relationship marketing where site recalls previous transactions and Customer may be able to control what (s)he sees Concern for Customers (and Customer concerns): Relates to understanding Customer fears, inhibitors and distractions (e.g. security, trust, 128-bit data encryption, etc) Jones et al, 2001

Customers’ Characteristics How can you segment them?

What do they want from your site? Return to consumer decision-making process:

How do they behave online?

What do they do / look for?

What do they buy?

How do they find you?

What entices them to buy?

What do we need to offer?

What do we need to offer? In my opinion: Customer Service

Not Products, but BRANDS

Customer Relationship Management CRM: Customer Relationship Management. Strategy used to learn more about customers' needs and behaviours in order to develop stronger relationships with them. Good customer relationships are at the heart of e-business success. There are many technological components to CRM, but it is wrong to think of CRM in primarily technological terms. CRM is a strategic process that helps firms understand their customers’ needs better Indicates how those needs can be best met, and improve profitability Strategy depends on bringing together information about customers and market trends so that products and services can be marketed and sold more effectively. CRM seeks to build long-term relationship with customers

CRM Tools Many software companies offer CRM solutions, including: IBM [IBM.com] SAP [sap.com] NetSuite [NetSuite.co.uk] Goals of CRM: providing services and products that are exactly what customers want (need?) offering better customer service cross selling and upselling products more effectively helping sales staff close deals faster retaining existing customers and discovering new ones Derived from cio.com

CRM Strategy For effective CRM, an organization must first understand who its customers are and what their value is over a lifetime. Company must then determine what the needs of its customers are and how best to meet those needs. For example, many financial institutions keep track of customers' life stages in order to market appropriate banking products like mortgages or Investment Trusts to them at the right time to fit their needs. Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used. One company, for instance, may interact with customers in a number of different ways: mail campaigns, Web sites, brick-and-mortar stores, call centres, mobile sales force staff and marketing and advertising efforts. CRM systems link up each of these. Data flows between operational systems (like sales and inventory systems) and analytical systems that look for patterns. Analysts then comb through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed.

Basic Marketing Strategies Marketing: The strategies and actions firms take to establish a relationship with a consumer and encourage purchases of products and services Internet marketing: Using the Web, as well as traditional channels, to develop a positive, long-term relationship with customers, thereby creating competitive advantage for the firm by allowing it to charge a higher price for products or services than its competitors can charge Firms within an industry compete with one another on four dimensions: Differentiation Cost Focus Scope Marketing seeks to create unique, highly differentiated products or services that are produced or supplied by one trusted firm (“little monopolies”)

Internet Marketing Technologies Web transaction logs [http://www.netmechanic.com/news/vol4/promo_no11.htm] Search Engine Submission (absolutely essential): Need to tell the world that you exist! Cookies and Web bugs [http://www.eff.org/Privacy/Marketing/web_bug.html] Databases, data warehouses, and data mining Collaborative Filtering (e.g. Amazon.com) Advertising networks Customer relationship management (CRM) systems [but remember that it is not just about technology] Organizational Resources: http://www.emarketingassociation.com/ http://www.marketingtoday.com/emarketing/index.htm http://www.emarketinganswers.com/ http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1075384972 http://hk.solutions.yahoo.com/emarketing/whyyahoo_main.htm http://searchenginewatch.com/

Revolution in Internet Marketing Three broad impacts: Internet has broadened the scope of marketing communications Internet has increased the richness of marketing communications Internet has greatly expanded the information intensity of the marketplace

Unique Aspects of e-Marketing

Web Transaction Logs Built into Web server software Records user activity at a Web site WebTrends a leading log analysis tool Can provide treasure trove of marketing information, particularly when combined with: Registration forms – used to gather personal data Shopping cart database – captures all item selection, purchase and payment data

Example Web Logfile (4 seconds)

Marketing Use of Log Data

Cookies Cookies: small text file that Web sites place on a visitor’s client computer every time they visit, and during the visit as specific pages are accessed. Cookies provide Web marketers with a very quick means of identifying the customer and understanding his or her prior behavior Location of cookie files on computer depends on browser version

Typical Cookie File (Netscape)

Web Bug Tiny (1 pixel) graphic files embedded in e-mail messages and on Web sites Used to automatically transmit information about the user and the page being viewed to a monitoring server SPYWARE! Often included with freeware and shareware. Contains executable files (programs) that can obtain passwords, credit card data and other private material from client computers on networks Some also include aspects of Trojan Horse software http://www.spywareguide.com/ http://www.webopedia.com/TERM/s/spyware.html

Social Issue: Should Web Bugs be banned Marketers claim Web bugs are innocuous; privacy advocates say, if so, why are they hidden Different types include clear GIF, executable bugs and script-based executable bugs Privacy Foundation guidelines for Web bug usage: Should be visible and labelled to indicate function Should identify name of company that placed it Should display disclosure statement if clicked Should be able to opt-out Network Advertising Initiative (NAI) calls them Web beacons, and have issued their own guidelines Currently, no government regulation

Databases and Data Warehouses Database: Software that stores records and attributes Database management system (DBMS): Software used to create, maintain and access databases SQL (Structured Query Language): Industry-standard database query and manipulation language used in a relational databases Relational database: Represents data as two-dimensional tables with records organized in rows and attributes in columns; data within different tables can be flexibly related as long as the tables share a common data element Data warehouse: Database that collects a firm’s transactional and customer data in a single location for offline analysis by marketers and site managers

Relational DB View of Customers

Data Mining Set of analytical techniques that look for patterns in data of a database or data warehouse, or seek to model the behaviour of customers Types include: Query-driven – based on specific queries Model-driven – involves use of a model that analyses key variables of interest to decision makers Rule-based – examines demographic and transactional data of groups and individuals at a Web site and attempts to derive general rules of behaviour for visitors Collaborative filtering – behavioural approach; site visitors classify themselves into affinity groups based on common interests; products are then recommended based on what other people in the group have recently purchased

Data Mining & Personalisation

Advertising Networks Best known for ability to present users with banner advertisements based on a database of user behavioural data DoubleClick best-known example Ad server selects appropriate banner ad based on cookies, Web bugs, backend user profile databases

How Advertising Network Works

CRM System Repository of customer information that records all of the contacts that a customer has with a firm and generates a customer profile available to everyone in the firm with a need to “know the customer” Customer profiles can contain: Map of the customer’s relationship with the firm Product and usage summary data Demographic and psychographic data Profitability measures Contact history Marketing and sales information

Example of CRM System

Market Entry Strategies For new firms: Pure clicks/first mover Mixed “clicks and bricks”/alliances For existing firms: Pure clicks/fast follower Mixed “clicks and bricks”/brand extensions

Generic Entry Strategies

Establishing Customer Relationship Permission marketing: Marketing strategy in which companies obtain permission from consumers before sending them information or promotional messages (example: opt-in e-mail) Affiliate marketing: Marketing strategy that relies on referrals; Web site agrees to pay another Web site a commission for new business opportunities it refers to the site Viral marketing: Process of getting customers to pass along a company’s marketing message to friends, family, and colleagues Brand leveraging: Process of using power of an existing brand to acquire new customers for a new product or service

Customer Retention Mass market-personalization continuum ranges from mass marketing to direct marketing to micromarketing to personalized, one-to-one marketing One-to-one marketing: Involves segmenting the market on a precise and timely understanding of an individual’s needs, targeting specific marketing messages to these individuals and then positioning the product vis-à-vis competitors to be truly unique

Mass-Market Personalisation

Other Retention Techniques Customization: Changing the product (not just the marketing message) according to user preferences Customer co-production: Allows the customer to interactively create the product Transactive content: Results from the combination of traditional content with dynamic information tailored to each user’s profile Customer service tools include: Frequently asked questions (FAQs) – text-based listing of common questions and answers Real-time customer service chat systems – company’s service representatives interactively exchange text messages with one or more customers on a real-time basis Intelligent agent technology – bots Automated response systems – send e-mail confirmations and acknowledgments (autoresponders)

Net Pricing Strategies Pricing (putting a value on goods and services) an integral part of marketing strategy Traditionally, prices based on: Fixed cost (costs of building production facility Variable costs (costs involved in running production facility) Market’s demand curve (quantity of goods that can be sold at various prices) Price discrimination: Selling products to different people and groups based on their willingness to pay Free products/services: Can be used to build market awareness Versioning: Creating multiple versions of a good and selling essentially the same product to different market segments at different prices Bundling: Offers consumers two or more goods for one price Dynamic pricing: Auctions – establish an instant market price for goods Yield management – Managers set prices in different markets, appealing to different segments in order to sell excess capacity

Channel Management Strategies Channel: Refers to different methods by which goods can be distributed and sold Channel conflict: Occurs when a new venue for selling products or services threatens or destroys existing venues for selling goods Examples: online airline/travel services and traditional offline travel agencies Some manufacturers are using partnership model to avoid channel conflict

Online Market Research Market research: Involves gathering information that will help a firm identify potential products and customers Two general types: Primary research – involves gathering first-hand information using techniques such as surveys, personal interviews and focus groups Secondary research – relies on existing, published information as basis for analysing market

Types of Survey Questions

Popular Research Tools

Marketing Communications What is marketing communications? Two aspects: Branding (statements of “quality, reliability, non-price factors”) Sales (promotion) Promotional aspect : “buy NOW!” Branding aspect: Focus on differentiated benefits of product Online Brand Development and brand reinforcement CRITICAL to business success Develop and sustain competitive advantage Create a climate of TRUST (building guangxi) Create corporate “image” in mind of online visitor Online Advertising A mixed blessing - permission marketing: OK; spam: BAD Try http://www.emarketer.com

Online marketing jargon Please do some online searches for these terms and concepts and build a database (on cards, or whatever), to ensure that you understand the concepts and their importance to e-enabled business operation Banner ad Pop-up Pop-under Button Rich media ad Interstitial ad Superstitial ad Banner swapping Banner exchanges Cross-linking Search engine marketing Placement Paid listing Sponsorship Affiliate marketing Direct e-mail marketing