Transcript BUILDING RELATIONSHIPS VIA E

BUILDING RELATIONSHIPS
VIA E-MARKETING
Dr Ilias Santouridis
Assistant Professor of Applied IT
TEI of Larissa
Greece
29/03/2006
Building Relationships via
E-Marketing
1
WEAKNESSES OF TRADITIONAL
MARKETING
 Marketing theory:


stuck in its ‘futile search for laws, regularities and
predictability’, using approaches (e.g. the marketing mix)
better suited to marketing’s ‘golden age’
proved very restrictive for industrial and services
marketing
 Customers are viewed as either:


manipulation and exploitation targets and passive
recipients of messages or
one half of a controversial or adversarial relationship
29/03/2006
Building Relationships via E-Marketing
2
DEFINING RELATIONSHIP
MARKETING (1)
 British CIM definition of marketing:

“The management process of identifying,
anticipating and satisfying customer
requirements profitably”
 Early RM definition (Berry, 1983):

“The marketing approach aiming at attracting,
maintaining and enhancing customer
relationships”
29/03/2006
Building Relationships via E-Marketing
3
DEFINING RELATIONSHIP
MARKETING (2)
 Nonetheless…



RM aims at profit and is not guided by altruistic
sentiments
NOT ALL RELATIONSHIPS ARE
PROFITABLE (e.g. research shows that 50% of
a retail bank’s customers are unprofitable)
Unprofitable customers can be either:
De-selected (i.e. dumped) or
 Subsidised by profitable customers

29/03/2006
Building Relationships via E-Marketing
4
DEFINING RELATIONSHIP
MARKETING (3)
 Refined RM definition (Gronroos, 1994):

“The marketing approach aiming to identify and
establish, maintain and enhance and, when
necessary, terminate relationships with customers
and other stakeholders, at a profit so that the
objectives of all parties involved are met;and this
is done by mutual exchange and fulfillment of
promises”
29/03/2006
Building Relationships via E-Marketing
5
CUSTOMER LIFE-CYCLE (1)
Offensive
marketing
Customer
acquisition
Customer
base
Defensive
marketing
29/03/2006
Customer base as a
leaky bucket
Customer
retention
Building Relationships via E-Marketing
6
CUSTOMER LIFE-CYCLE (2)
(Dissolution)
Partners
Relationship marketing
Commitment
Members
Advocates
Expansion
Clients
Transactional marketing
Repeat customers
29/03/2006
Exploration
First-time customers
Prospects
Awareness
Suspects
(Based on Dwyer et al,
1987)
Building Relationships via E-Marketing
(Based on Kotler,
1997)
7
RELATIONSHIP DRIVERS
FINANCIAL DRIVERS
Customer retention vs
acquisition costs
Customer lifetime value
Customer switching
costs
Relationship marketing
Risk, Salience and
Emotion
Trust and
Commitment
Perceived need for
closeness
Customer satisfaction
PSYCHOLOGICAL DRIVERS
29/03/2006
Building Relationships via E-Marketing
8
KNOWING YOUR CUSTOMER (1)
 Not all customers contribute equally to the firm’s
profit
 The consequences of losing a profitable customer
may be very significant, whereas the loss of a nonprofitable customer may be beneficial
 Constant effort must be made to calculate:


The customer’s contribution to the profitability of the
relationship
The costs of building and maintaining the relationship
29/03/2006
Building Relationships via E-Marketing
9
KNOWING YOUR CUSTOMER (2)
PROFIT CONTRIBUTION
High
Low
POTENTIAL High
1
29/03/2006
2
3
4
5
6
Low
7
8
1
2
3
4
5
6
7
8
Large share of big wallet:
Retention strategy
Small share of big wallet:
Key target
Small share of small wallet:
Discourage
Large share of small wallet:
Reactive strategy
Building Relationships via E-Marketing
10
CORE FIRM RELATIONSHIPS (1)
 Firm relationship types:




Customer partnerships
Internal partnerships
Supplier partnerships
External partnerships
29/03/2006
Building Relationships via E-Marketing
11
CORE FIRM RELATIONSHIPS (2)
CUSTOMER PARTNERSHIPS
 Customer – Supplier relationship remains
the core issue of RM
BUT IT DIFFERS SINCE…
 The focus is not on what you can do to your
customer but on what you can do for your
customer and what you can do with your
customer
29/03/2006
Building Relationships via E-Marketing
12
CORE FIRM RELATIONSHIPS (3)
CUSTOMER PARTNERSHIPS
 Company prosperity remains the long-term
aim of RM
 RM strategies as an answer to the shift of
balance of power from producer to
consumer
 Developing relationships with customers
may be an effective way of building
competitive advantage, since it is difficult
to be replicated by competition
29/03/2006
Building Relationships via E-Marketing
13
CORE FIRM RELATIONSHIPS (4)
INTERNAL PARTNERSHIPS
 Internal marketing definition:

“A way of enabling an organisation to recruit,
motivate and retain customer-conscious
employees in order to boost employee retention
and customer satisfaction levels” (Clark, 2000)
29/03/2006
Building Relationships via E-Marketing
14
CORE FIRM RELATIONSHIPS (5)
INTERNAL PARTNERSHIPS
 RM implies empowering the employees and
breaking down the organisation’s functional
barriers leading to:



The generation of organisation-wide market
intelligence
Dissemination of that intelligence across
departments
Organisation-wide responsiveness to it
29/03/2006
Building Relationships via E-Marketing
15
CORE FIRM RELATIONSHIPS (6)
SUPPLIER PARTNERSHIPS
 Vertical relationships: all or part of the
supply chain is integrated through
component suppliers, manufacturers, and
intermediaries
 Horizontal relationships: organisations at
the same point in the distribution channel
(including competitors) cooperate for mutual
benefit
29/03/2006
Building Relationships via E-Marketing
16
CORE FIRM RELATIONSHIPS (7)
SUPPLIER PARTNERSHIPS
 Partnering foundation:
Partners share proprietary data and processes
used in decision making
29/03/2006
Building Relationships via E-Marketing
17
CORE FIRM RELATIONSHIPS (8)
EXTERNAL PARTNERSHIPS
 Industry collaborations are formed by competitors
from the same market sector
 It should be a ‘win-win’ relationship if it is to
succeed
 The main objectives may include:




Effectiveness and efficiency of distribution channels
Servicing or other support facilities
Market sector growth
Market sector dominance
29/03/2006
Building Relationships via E-Marketing
18
CORE FIRM RELATIONSHIPS (9)
EXTERNAL PARTNERSHIPS
 External collaborations are formed by firms from
different market sectors, bringing different skills,
competences and assets
 The main objectives may include:



To take advantage of a new sector (e.g. web portals
owned by media and retail stores)
To improve the total package offering (e.g. airlines and
car rental companies)
To promote existing sector differentiation (e.g. TV
companies and football teams)
29/03/2006
Building Relationships via E-Marketing
19
E-MARKETING SITUATION
Consumers
B2C
TO
•Organisationsites
(Dell, Amazon)
•Consumer marketplaces
(Kelkoo.com,
Shopsmart.com)
Business
B2B
•Organisationsites (Dell)
•Business marketplaces
(CommerceOne
,
VerticalNet)
C2C
•Auctions (QXL,E Bay)
•Consumer reviews
(Bizrate.com,Deja.com)
C2B
•Customer bids:
(LetsBuyit.com,
Priceline.com)
Consumers
Business
FROM
29/03/2006
Building Relationships via E-Marketing
20
E-MARKETING OBJECTIVES
 Sell – using the internet as a sales tool
 Serve- using the internet as a customer
service tool
 Speak – using the internet as a
communications tool
 Save – using the internet for cost reduction
 Sizzle – using the internet as a brandbuilding tool
29/03/2006
Building Relationships via E-Marketing
21
E-BUSINESS FRAMEWORK
E-Business
Upstream supply chain
Supplier
Interm
ediaries
Organisation
(In-side)
Buy-side e-business and e-models
29/03/2006
Downstream supply chain
Interm
ediaries
Customer
Sell-side e-business and e-models
Building Relationships via E-Marketing
22
SUPPLIER RELATIONSHIPS
E-MODELS (1)
 Internet technology can be used to facilitate
an organisation in areas such as:




Purchasing (E-Procurement)
In-bound logistics
Stock management
Re-ordering
29/03/2006
Building Relationships via E-Marketing
23
SUPPLIER RELATIONSHIPS
E-MODELS (2)
 The organisation can create extranets to open up
certain aspects of its business to selected suppliers
to build an ‘extended enterprise’
 A great facilitator towards that direction is the
integration of the partnering organisations IT
systems
 This sharing of information and goals move the
partners from independence to interdependence
29/03/2006
Building Relationships via E-Marketing
24
INTERNAL RELATIONSHIPS
E-MODELS (1)
 The organisation intranet can:




Replace cumbersome paper-based systems
Create ‘responsive knowledge workers’
Lead to better decisions
Support employee ‘just-in-time learning’
processes
29/03/2006
Building Relationships via E-Marketing
25
INTERNAL RELATIONSHIPS
E-MODELS (2)
 Examples of organisation intranet IT tools:





File management systems
Document management systems
Workflows
Timesheet
Message boards
29/03/2006
Building Relationships via E-Marketing
26
CUSTOMER RELATIONSHIPS
E-MODELS (1)
 Maintaining online customer relationships is
not an easy task:

“That’s what’s so scary about customer retention
in the online space. We’ve created this
empowered, impatient customer who has a short
attention span, a lot of choices, and a low barrier
to switching” (Laurie Windham, 2001)
29/03/2006
Building Relationships via E-Marketing
27
CUSTOMER RELATIONSHIPS
E-MODELS (2)

The IDIC approach for using the web to form and
build relationships with customers (Pepper and
Rogers, 1998):
1.
2.
3.
4.
29/03/2006
Customer Identification: identify each customer on
their first and subsequent visits
Customer Differentiation: build profiles to segment
customers
Customer Interaction: online interactions (e.g.
customer enquiries, tailored product)
Customer Communications: personalisation or masscustomization of content or emails according to
segmentation
Building Relationships via E-Marketing
28
CUSTOMER RELATIONSHIPS
E-MODELS (3)
 The marketer must continuously measure the
success of customer relationship drivers with
metrics such as:



Order fulfilment: % that ship on time exactly as
the customer specified
Product performance: frequency of problems
experienced by customers
Post-sale service and support: % of problems
solved on the first visit
29/03/2006
Building Relationships via E-Marketing
29
CUSTOMER RELATIONSHIP
MANAGEMENT (1)
 Customer Relationship Management
(CRM) definitions:



A continuous performance initiative to increase
a company’s knowledge of its customers
The capabilities of a company to build profitable
relationships with loyal customers
A system designed to impact your customers so
they’ll be satisfied and maintain long
relationships with you
29/03/2006
Building Relationships via E-Marketing
30
CUSTOMER RELATIONSHIP
MANAGEMENT (2)
 CRM database: a database used to hold and
analyse customer information, thereby
helping create strategies for marketing
 A database stores:


Historical data (e.g. names, addresses, responses
to offers, recency, frequency, amount and
category of purchases)
Predictive data used to indicate customers’
future behaviour (e.g. type of house and
business, past behaviour)
29/03/2006
Building Relationships via E-Marketing
31
CUSTOMER RELATIONSHIP
MANAGEMENT (3)
CAUTION!
 Data captured for data’s sake does not make a
good database
 The important question is :what will you do with
the data?
 “Without a corresponding marketing programme,
database marketing should not be introduced”
(Rohner, 2001)
29/03/2006
Building Relationships via E-Marketing
32
CUSTOMER RELATIONSHIP
MANAGEMENT (4)
 It is of utmost importance that the database is
kept updated and maintains its integrity
 Databases can become ‘dirty’ due to:



Incorrectly captured data
Change of customer information
Data duplication
29/03/2006
Building Relationships via E-Marketing
33
CUSTOMER RELATIONSHIP
MANAGEMENT (5)
Acquisition
Retention
Extension
•Promotion
•Incentives
•Services
•Profiles
•Customer
service
•E-mail
•Extranets
•Personalisation
•Community
•Promotions
•Loyalty
•E-mail
•Direct
e-mail
•Learning
•Onsite
promotions
29/03/2006
Building Relationships via E-Marketing
34