What is e-CRM?

The interactive nature of the web combined with e-mail communications provides an ideal environment in which to develop customer relationships, and databases provide a foun­dation for storing information about the relationship and providing information to strengthen it by improved, personalized services. This online approach to CRM is often known as ‘e-CRM’ or ‘electronic customer relationship management’, and it is on this we focus in this chapter. Although Figure 9.1 refers to the whole customer lifecycle, typically it is used to refer to customer retention and extension activities.

It is difficult to state where CRM ends and e-CRM starts, since today they both make extensive use of digital technology and media. This is what Chaffey and Smith (2008) say:

What is e-CRM? Customer Relations Management with an ‘e’? Ultimately, E-CRM cannot be separated from CRM, it needs to be integrated and seamlessly. However, many organ­isations do have specific E-CRM initiatives or staff responsible for E-CRM. Both CRM and E-CRM are not just about technology and databases, it’s not just a process or a way of doing things, it requires, in fact, a complete customer culture.

More specifically, we can say that important e-CRM challenges and activities which require management are:

• Using the web site for customer development from generating leads through to conversion to an online or offline sale using e-mail and web-based information to encourage purchase;
• Managing e-mail list quality (coverage of e-mail addresses and integration of customer profile information from other databases to enable targeting);
• Applying e-mail marketing to support upsell and cross-sell;
• Data mining to improve targeting;
• With a web site with personalization or mass customization facilities to automatically recommend the ‘next-best product’;
• Providing online customer service facilities (such as frequently asked questions, callback and chat support) that help achieve conversion to sale (these can be triggered automatically so that visitors to a site who show high intent or distress through multiple page visits can be prompted to enter a chat session or a callback (staff resources may limit offering these to all site visitors);
• Managing online service quality to ensure that first-time buyers have a great customer experience that encourages them to buy again;
• Managing the multi-channel customer experience as customers use different media as part of the buying process and customer lifecycle.

To help understand the scope of e-CRM, you may also find Figure 8.1 useful. This summarizes different marketing activities that need to be completed by an online retailer, structured according to customer acquisition, conversion and retention activities.

Sharma and Sheth (2004) have stressed the importance of a trend from mass marketing to what is now widely known as ‘one-to-one’ or ‘customer-centric marketing’ (although many would regard this as a tautology since the modern marketing concept places the customer at the heart of marketing activity). They note that e-channels can have advantages in terms of delivering relevant messages and offers to customers at relatively low cost. It can also be used to support customization of products. These authors give the example of the Dell model where each PC is manufactured and distributed ‘on demand’ according to the need of a spe­cific customer. This is an example of what they refer to as ‘reverse marketing’ with the change on marketing execution from product supply to customer need. Another aspect of this trans­formation is that online, web marketers can track the past and current behaviours of customers in order to customize communications to encourage future purchases. This approach, which is another aspect of reverse marketing and also a key concept with e-CRM,
can be characterized as ‘sense and respond communications’. The classic example of this is the personalization facilities provided by Amazon where personal recommendations are pro­vided. Companies can also arrange triggered or follow-up e-mail activity after a customer event such as a quote (as used by insurer MORE TH>N, www.morethan.com) or an aban­doned shopping basket (as used by Tesco.com) to encourage purchase.

1. 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. Through doing this mar­keting can be improved as follows.

• Targeting more cost-effectively. Traditional targeting, for direct mail for instance, is often based on mailing lists compiled according to criteria that mean that not everyone contacted is in the target market. For example, a company wishing to acquire new affluent consumers may use postcodes to target areas with appropriate demographics, but within the postal district the population may be heterogeneous. The result of poor targeting will be low response rates, perhaps less than 1 per cent. The Internet has the benefit that the list of contacts is self-selecting or pre-qualified. A company will only aim to build relation­ships with those who have visited a web site and expressed an interest in its products by registering their name and address. The act of visiting the web site and browsing indicates a target customer. Thus the approach to acquiring new customers with whom to build relationships is fundamentally different, as it involves attracting the customers to the web site, where the company provides an offer to make them register.
• Achieve mass customization of the marketing messages (and possibly the product). This tailoring process is described in a subsequent section. Technology makes it possible to send tailored e-mails at much lower costs than is possible with direct mail and also to provide tailored web pages to smaller groups of customers (micro-segments).
• Increase depth, breadth and nature of relationship. The nature of the Internet medium enables more information to be supplied to customers as required. For example, special pages such as Dell Premier can be set up to provide customers with specific information. The nature of the relationship can be changed in that contact with a customer can be made more frequently. The frequency of contact with the customer can be determined by customers – whenever they have the need to visit their personalized pages – or they can be contacted by e-mail by the company according to their communications preferences.
• A learning relationship can be achieved using different tools throughout the customer lifecycle. For example, tools summarize products purchased on-site and the searching behaviour that occurred before these products were bought; online feedback forms about the site or products are completed when a customer requests free information; questions asked through forms or e-mails to the online customer service facilities; online questionnaires asking about product category interests and opinions on competitors; new product devel­opment evaluation – commenting on prototypes of new products. Online facilitates learning about customer needs as shown by Box 9.1.
• Lower cost. Contacting customers by e-mail or through their viewing web pages costs less than using physical mail, but perhaps more importantly, information only needs to be sent to those customers who have expressed a preference for it, resulting in fewer mail-outs. Once personalization technology has been purchased, much of the targeting and communications can be implemented automatically.

2. Permission marketing

To understand the thinking and practice behind e-CRM, it is useful to relate it to the con­cept of permission marketing since this has been a driving force for investment in CRM. ‘Permission marketing’ is a term coined by Seth Godin. Godin (1999) notes that while research used to show we were bombarded by 500 marketing messages a day, with the advent of the web and digital TV this has now increased to over 3,000 a day! From an organization’s viewpoint, this leads to a dilution in the effectiveness of the messages – how can the com­munications of any one company stand out? From the customer’s viewpoint, time is seemingly in ever-shorter supply, customers are losing patience and expect reward for their attention, time and information. Godin refers to the traditional approach as ‘interruption marketing’. Permission marketing is about seeking the customer’s permission before engag­ing them in a relationship and providing something in exchange. The classic exchange is based on information or entertainment – a B2B site can offer a free report in exchange for a customer sharing their e-mail address which will be used to maintain a dialogue, while a B2C site can offer a newsletter with valuable content and offers.

From an e-commerce perspective, we can think of a customer agreeing to engage in a relationship when they agree by checking a box on a web form to indicate that they agree to receiving further communications from a company. This is referred to as ‘opt-in’. This is preferable to opt-out, the situation where a customer has to consciously agree not to receive further information. You may recall from Chapter 4 that in many countries data protection laws requiring opt-in before customers receive communications and mandatory inclusion of opt-out have now been introduced in an attempt to stop spamming. Effectively, the law is mandating permission marketing as best practice!

The importance of incentivization in permission marketing has been emphasized by Seth Godin who likens the process of acquisition and retention to dating someone. Godin (1999) suggests that dating the cus­tomer involves:

1. Offering the prospect an incentive to volunteer.
2. Using the attention offered by the prospect, offer a curriculum over time, teaching the consumer about your product or service.
3. Reinforce the incentive to guarantee that the prospect maintains the permission.
4. Offer additional incentives to get even more permission from the consumer.
5. Over time, use the permission to change consumer behaviour towards profits.

Notice the importance of incentives at each stage. The use of incentives at the start of the relationship and throughout it are key to successful relationships. As we shall see in a later section, e-mail is very important in permission marketing to maintain the dialogue between company and customer.

Figure 9.2 summarizes the process of permission marketing in an online context. It shows how different methods are used to drive visitors to a web site (1); incentives are then used to profile the customer (2). Subsequent e-mail communications (3) and direct mail (4) are used to encourage repeat visits to the web site for future purchase or to learn more about the customer and increase the information in the profile (5).

An allied concept to permission marketing is a movement that originated in the USA in 1999, known as the Cluetrain manifesto (www.cluetrain.com). The Cluetrain relates to man­agers at a large organization who are unable or unprepared to listen or respond to the clues from empowered customers demanding better service and response. Clues might include high churn, rising complaints and the success of more responsive competitors. An idea of the thinking of this movement is that push marketing is inappropriate. The authors, Levine et al. (2000), say

Conversations among human beings sound human. They are conducted in a human voice. Most corporations, on the other hand, only know how to talk in the soothing, humorless monotone of the mission statement, marketing brochure, and your-call-is-important-to-us busy signal. Same old tone, same old lies. No wonder networked markets have no respect for companies unable or unwilling to speak as they do. Corporate firewalls have kept smart employees in and smart markets out. It’s going to cause real pain to tear those walls down. But the result will be a new kind of conversation. And it will be the most exciting conver­sation business has ever engaged in.

It is apparent that the Cluetrain manifesto is encouraging managers to adopt new technol­ogy such as Web 2.0 collaborative applications to enable employees of an organization to interact with and listen to their needs in a responsible way. Such techniques include online support forums and online surveys which enable customers to give instant feedback on problems with service quality.

3. Customer profiling

To engage a customer in an online relationship, the minimum information that needs to be collected in an online form such as in Figure 9.2 is an e-mail address. This was an initial approach taken by the Peppers and Rogers site (www.1to1.com). What we really need, par­ticularly for B2B sites, is a qualified lead that provides us with more information about the customer to help us decide whether that customer is a good prospect who should be tar­geted with further communications. For B2B this could mean a visit by field sales staff or a follow-up e-mail to arrange this. The Peppers and Rogers site has now been updated to reflect this approach.

To continue the relationship it is essential to build a customer profile that details each customer’s product interest, demographics or role in the buying decision. This will affect the type of information and services delivered at the retention stage. For the customer to give this information a company will have to offer an incentive, establish trust and demonstrate credibility. Profiling is also important for selection – to identify potential customers who are likely to be profitable and offer appropriate incentives. Data protection and privacy law sets constraints on what can be collected from the customer, as described in Chapter 4 (p. 209).

Peppers and Rogers (1999) have applied their work on building one-to-one relationships with the customer to the web. They suggest the IDIC approach as a framework for using the web effectively to form and build relationships. ‘IDIC’ represents the following:

1. Customer identification. This stresses the need to identify each customer on their first visit and subsequent visits. Common methods for identification are use of cookies or asking the customer to log on to a site.
2. Customer differentiation. This refers to building a profile to help segment customers. Characteristics for differentiating customers are described in Chapter 4 (p. 201).
3. Customer interactions. These are interactions provided on-site, such as customer service questions or creating a tailored product.
4. This refers to personalization or mass customization of content or e-mails according to the segmentation achieved at the acquisition stage. Approaches for personal­ization are explained in the section on customer retention management.

Note that although we are suggesting it is vital to capture the registration information, this should not be too ‘up-front’ since studies reported by Nielsen (2000) show that having to register acts as a barrier to entering sites. So the advice is to delay customer registration as late as possible.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).