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Chapter 9 Customer Relationship Management

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Learning objectives Outline different methods of acquiring customers via electronic media; Evaluate different buyer behaviour amongst online customers; Describe techniques for retaining customers and cross- and up-selling using new media.

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Issues for managers What is the balance between online and offline investment for customer acquisition? What technologies can be used to build and maintain the online relationship? How do we deliver superior service quality to build and maintain relationships?

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Forecasts

Gartner (www.gartner.com)
$25 billion spent on CRM 2002 $50 billion by 2005 Yet 70% of CRM projects fail

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What is CRM?
You have a job interview for Centrica (AA, British Gas, Goldfish) working in the CRM team www.theaa.co.uk, www.house.co.uk How would you explain the terms:
CRM e-CRM

Why does Centrica have a CRM function?

Why is CRM different? What are benefits of this approach?

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E-CRM a definition
E-CRM is: Applying Internet and other digital technology (web, e-mail, wireless, iTV, databases) acquire and retain customers (through a multi-channel buying process and customer lifecycle) by improving customer knowledge, targeting, service delivery and satisfaction

to

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Marketing applications of CRM

A CRM system supports the following marketing applications: 1. Sales force automation (SFA). Sales representatives are supported in their account management through tools to arrange and record customer visits. 2. Customer service management. Representatives in contact centres respond to customer requests for information by using an intranet to access databases containing information on the customer, products and previous queries. 3. Managing the sales process. This can be achieved through ecommerce sites, or in a B2B context by supporting sales representatives by recording the sales process (SFA). 4. Campaign management. Managing ad, direct mail, e-mail and other campaigns. 5. Analysis. Through technologies such as data warehouses and approaches such as data mining, which are explained further later in the chapter, customers characteristics, their purchase behaviour and campaigns can be analysed in order to optimize the marketing mix.
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Three phases of customer relationship management

Figure 9.1 Three phases of customer relationship management

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A summary of an effective process of online relationship building

Figure 9.2 A summary of an effective process of online relationship building

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From old media to new media

1. From push to pull. 2. From monologue to dialogue. 3. From one-to-many to one-to-some and one-to-one. 4. From one-to-many to many-to-many communications 5. From lean-back to lean-forward. 6. Form of tools changes. 7. Increase in communications intermediaries. 8. Integration remains important.
See diagrams in chapter 8 also on media characteristics
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Offline and online communications techniques for e-commerce

Figure 9.3 Offline and online communications techniques for e-commerce

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Evaluate the effectiveness of the tools with AIMRITE

Audience: can the target audience be reached?
Impact: can message get through the clutter? Message: is message communication effective? Response: is responding easy (direct/indirect)? Internal management: can the tools be managed readily by agency or internally? The End Result: What are the response rates, costs and returns?
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AIMRITE Online advertising

Positive features Negative features

Audience Impact Message Response Information management End Results

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The relationship between banner ads and destination sites

Figure 9.4 The relationship between online ads and destination sites
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Skyscraper to microsite example

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Standard landing page

http://www.norwichunion.com/products/ insurance/travel/single_annual_travel.htm
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Online ads - effectiveness

Brand the first frame Brand top of skyscrapers Ditch Click here! High contrast Use < 15 ad elements Use large logos Include a human face
www.avantmarketer.com

Instruct, not hope Evolve, not cycle Flash, not GIF (Rich media) Use large ad formats
www.lemonad.com

But remember, the 6X rule from www.atlasdmt.com: CTRs vary 6 times more on placement than creative
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AIMRITE Search engine marketing

Positive features Negative features

Audience Impact Message Response Information management End Results

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Search engine marketing

Premium Sponsorships (Position:CPM)

Adwords select(PPC)

Position: CPC and CTR

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1 Search engine registration

What is it? Timely submission of domain names, especially campaignspecific names to key search engines. The issues: 1. Representation. Are you registered on the main search engines? Do you check continuously? 2. Time to register. Plan ahead and make use of paid inclusion services to ensure that campaign-specific URLs can be found when your campaign goes live.

3. New search engines. Search engines change in popularity are you listed with the latest ones?

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2 Search engine optimization (SEO)

What is it? Improving your competitive position in the search engine results listings. The issues: 1. Its not just meta-tags. Ignored by most search engines keyword frequency in body copy, <title> tags, headings and links are much more important. 2. Doorway pages. Creating special pages optimised for different product-related keywords and search engines is a key technique for high listings. 3. Its a continuous process. Search engine algorithms, popularity and competitor activity all change, so to stay competitive, SEO demands continuous attention (Use an agency).
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Search engine indexing

Figure 8.14 Stages involved in creating a search engine listing (Chaffey et al., Internet Marketing) Marketing Insights Limited 2004

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3 Search engine advertising (PPC)

What is it? Keyword-based, paid for placements or sponsored links to increase your prominence (Position based on bid). The issues: 1. SEO is not enough. Increasingly, SEO alone does not give sufficient visibility in many search engines. Paid placements are necessary to ensure visibility. 2. Is your PPC effective? As with any campaign, there are more and less effective approaches. Case study shows that by rationalising PPC, sales per day were doubled, while the cost per click was halved. 3. Its a continuous process. Competitor activity varies, so automated bid management tools need to be used to optimise the bids, with frequent reviews of strategy effectiveness (www.gotoast.com, www.bidbuddy.co.uk).

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Overture / Freeserve ad options

Bid: 1.50 Bid: 1.32 Bid: 1.31

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AIMRITE Affiliates and links

Positive features
Audience Impact Message Response Information management End Results

Negative features

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Link building
Affects Page Rank or link popularity in Google
Type primary keywords into Google Use link:site name or Optilink to find referrers Beat them: in number AND reputation (referring text)

A structured link-building programme will reap benefits both in terms of visitors and enhanced Google listings. Reciprocal links are free, but are mainly practical for intermediaries. Online PR is another form of link building. Is this neglected?

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Affiliates
What are they? A commission based arrangement where referring sites (publishers) receive a commission on sales by merchants.
Affiliate networks such as Trade Doubler have over 400,000 companies across Europe. Used for financial services and travel as well as retailers. MFI derives 8% of its online revenue from affiliates Affiliates help expand reach through niche sites

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AIMRITE E-mail marketing

Positive features
Audience Impact Message Response Information management End Results

Negative features

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Why e-mail marketing?

Higher response rates Shorter campaign creation Faster response Shorter overall cycle time Lower costs
More precise targeting Multiple messages to convert More detailed testing and measurement
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Example e-mail rented list

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Example e-mail house list

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Example e-mail multi-message campaign

Figure 8.17 Example of a campaign structure for an e-mail campaign.

From Chaffey et al. Internet Marketing. Supplied by UK-based e-mail marketing specialists Harvest Digital (www.harvestdigital.com) Marketing Insights Limited 2004

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Reasons why businesses do not buy supplies online

Figure 9.5 Reasons why businesses do not buy supplies online

Source: DTI (2002)
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The simple buying process

Figure 9.6 The simple buying process

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Online behaviours
Directed information seekers. Will be looking for product, market or leisure information such as details of their football clubs fixtures. This type of user tends to be experienced in using the web and they are proficient in using search engines and directories. Undirected information seekers. These are the users usually referred to as surfers, who like to browse and change sites by following hyperlinks. This group tends to be novice users (but not exclusively so) and they may be more likely to click on banner advertisements. Directed buyers. These buyers are online to purchase specific products. For such users, brokers or cybermediaries who compare product features and prices will be important locations to visit. Bargain hunters. These users want to use the find offers available from sales promotions such as free samples or prizes. Entertainment seekers. Users looking to interact with the web for enjoyment through entering contests such as quizzes.
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Responses to question: How did you find the product website you used to research a purchase?

Figure 9.7 Responses to question: How did you find the product website you used to research a purchase?
Source: DoubleClick (2003b)
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RS Components web site (www.rswww.com)

Figure 9.8 RS Components web site (www.rswww.com)

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Schematic of the relationship between satisfaction and loyalty

Figure 9.9 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, MarchApril 1994. Copyright 1994 by the Harvard Business School Publishing Corporation, all rights reserved.

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Personalisation on Silicon.com (www.silicon.com) for an IT manager audience

Figure 9.10 Personalization on Silicon.com (www.silicon.com) for an IT manager audience

Used with permission from CNET Networks UK Ltd. 2001, all rights reserved
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Permission marketing

Interruption marketing
To promote we must compete with many marketing messages and cut into what the customer is currently doing.

Permission marketing
Give customers the option to receive information if they feel it will be of value to them.

Opt-in
Incentivise

Opt-out
www.permission.com
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What exactly is permission marketing?

Seth Godin: www.permission.com
B2B Example: www.microstrategy.com

Key features:
Opt-in Based on initial incentive Opt-out Continue incentives through time to:
Learn more about customer Tailor product offerings Sell more
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Permission marketing vs SPAM

Figure 9.11 Reactions to permission marketing vs SPAM

Source: DTI (2000)
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IDIC

Source: Chaffey et al. (2003)

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Cisco site feedback options (www.cisco.com)

Figure 9.12 Cisco site feedback options (www.cisco.com)

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Overview of the components of CRM technologies

Figure 9.13 An overview of the components of CRM technologies

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