A framework for web-based ecommerce customer relationship management: Research in progress

A framework for web-based ecommerce customer relationship management: Research in progress Howard Rosenbaum hrosenba@indiana.edu Bin-Yun Huang bihuang@indiana.edu August 9, 2002 http://www.slis.indiana.edu/hrosenba/Pres/ais_02/index.html

I. What is web-based customer relationship management? • Focusing on CRM • Approaches to CRM II. Studying web-based CRM • Method • Findings • A framework for web-based CRM III. Conclusions • Next steps

I. What is web-based customer relationship management? “The Web seems like the perfect place to do customer service. It’s where people go to find answers fast. It provides the basic technology needed to help customers navigate their way through lots of content to the particular piece of information they need. And it’s open seven days a weeks, 24 hours a day. In fact…, Web-based customer service … is one of the biggest business opportunities on the Web.” Gianforte, G. (2001). The Insider’s Guide to Customer Service on the Web: Ten Secrets for Successful e-Servicehttp://www.rightnowtech.com/resource/whitepaper.html

What is web-based CRM? However: “Poor customer service … could cost online retailers millions in lost customers… Customer service is a relationship that begins at the entry to a site and should follow all the way through and after the customer leaves… It costs six times more to get a new customer than to keep an old one, and if … customer support falls down, then companies are greatly reducing their chances of repeat business. In the absence of live sales assistants, who follow you … through a land-based store, customer service is probably 10 times more important.” Mattis, M. (1999). The Devil's in the Details. Business 2.0 May. 113.

What is web-based CRM? From the consumer’s perspective, the perceived risk in e-commerce is greater vis-à-vis purchases that can be made at brick and mortar retail stores. Gaining the consumer’s trust is very important for the e-tailer to reduce the level of perceived risk … Since consumers cannot see the outcomes of their shopping process ahead of time, they will judge an e-tailer based on cues that they encounter as they shop. Krishnamurthy, S. (2000). An empirical study of the causal antecedents of consumer confidence in e-tailers. First Monday. 6(1). http://firstmonday.org/issues/issue6_1/krishnamurthy/index.html

What is web-based CRM? Forrester estimates that by the end of 2002, 50% of customer service will be provided on the Web. According to IDC, Web-delivered customer service … is the fastest growing segment of the [CRM] market: [it] will grow to $14 billion in 2005. Lester, J. (2002). Building an intelligent web-based customer service strategy. http://ecommerce.ncsu.edu/seminar/lester.html Spending on [CRM] management technology will reach USD16.5 billion by 2006, up from USD9.7 billion last year Online customer service contacts will grow from 870 million in 2001 to 4.7 billion in 2006 Jupiter Media Metrix http://www.jmm.com/xp/jmm/press/2002/pr_022602.xml

What is web-based CRM? Ecommerce firms are finding it increasingly difficult to compete on the basis of price and product differentiation They are turning to web-based CRM to grow their customer bases and increase customer loyalty This is important because market researchers claim that many online shoppers are dissatisfied with their ecommerce experiences Our basic question What are these firms doing to improve their relationships with customers?

What is web-based CRM? We offer an empirically grounded framework for web-based CRM that can be used to make sense of the options currently used by ecommerce firms This framework provides a baseline for understanding web-based CRM It suggests several research directions that will deepen our understanding of firm-customer relationships in ecommerce It can also lead to improvements in the online retail experience for consumers

What is web-based CRM? • Approaches to CRM CRM is a long-term enterprise wide strategy intended to increase profitability through a focus on the customer The goals of CRM are to: Effectively and consistently manage prospects and customers, regardless of where the interaction takes place Develop and maintain sustained interactions with customers over time Identify profitable customers, understand their complex needs and align business capabilities to meet those needs

What is web-based CRM? Successful CRM means that all “points of contact” with customers are handled with consistent quality This requires integrating business processes in sales, marketing and customer service The call center or web portal is connected to the organization’s IT infrastructure and new and legacy external delivery channels It also requires a customer database used for data mining, user profiling, and personalization “Customer facing” technology is combined with back office processes, so that appropriate information can be retrieved and updated

What is web-based CRM? Generating demand Communicating about product Post-sale customer service Conducting transaction Fulfilling orders Customer “touch points” Levy, M. (2000). E-volve or die.com. New Riders, p 71

What is web-based CRM? Two views of customer service: the firm It is at the end of the value chain (Porter 1985) The activities needed to keep a product/service working for the buyer after it is sold and delivered A linear process with three phases separated by time Pre-transaction: organizational buy-in and preparation Transaction: minimize time between ordering and receiving the product Post-transaction: customer care A set of activities to win and keep customers over and above assembly and sale activities

What is web-based CRM? Two views of customer service: the customer This is a life cycle model with four stages Assessment: do I need the product/service? Acquisition: how and where can I buy it? Ownership: where the product/service is used Retirement: should I get another one? If the customer engages in another transaction, the cycle begins anew She can be at different stages of the life cycle at any given moment if she has purchased different products from the firm at different times

What is web-based CRM? Firm and customer views of customer service Replacement Customer’s view Ownership Assessment Acquisition Firm’s view Pre-transaction Transaction Post-transaction Time

II. Studying web-based CRM • Method Ebusiness web sites are the primary settings through which interactions between customers and the firm take place A site is an artifact representing the firm to its customers CRM options are embodies in the site’s structure, architecture, and functionality We wanted to get a sense of the range of currently available web-based CRM options Our primary method is content analysis

Studying web-based CRM Keywords, search engines, and sample sites Search engines: Google www.google.com AltaVista www.altavista.com HotBot www.hotbot.com Lycos www.lycos.com Go www.goto.com FAST www.alltheweb.com Sample sites: Computer sales: 32 Software: 24 Cell phone: 30 Designer clothing: 32 Stock trading: 23 Wine: 15 Books: 17 Music CDs: 21 Loans: 28 Online groceries: 19 n = 241 Search terms: “computer sales” “software” “cell phone” “designer clothing” “stock trading” “wine” “books” “music cds” “loans” “online groceries”

Studying web-based CRM The first step generated 241 sites 10 URLs for each search term (excluding non- commercial sites and dead links) 100 URLs for each search engine Redundant links were removed Sites were visited at least twice between 10/2-11/5, 2001 Initial coding scheme was based on a random sample of 20 sites CRM options were coded and the page on which they appeared were downloaded 896 CRM options were found and coded

Studying web-based CRM • Findings Two main characteristics of web-based CRM emerged from the data Social: options varied according to degrees of interactivity and social presence Solitary: low interactivity and low social presence Interactive: high interactivity and high social presence Technical: options varied in modes of communication Asynchronous: gap between sending and receiving messages Synchronous: real time communication

Studying web-based CRM Summary of findings Solitary Interactive Totals Asynchronous 71 (8%) 338 (38%) 409 (46%) Synchronous 477 (53%) 10 (1%) 487 (54%) Totals 548 (61%) 348 (39%) 896 (100%) Across all categories, the most frequently used option was synchronous and solitary The second most frequently used option was asynchronous and interactive The same pattern was found within each retail sector

Studying web-based CRM The average site used 3.5 CRM options Sites Number CRM Instances Instances/site Computer sales 32 106 3.3 Software 24 126 3.7 Cell phone 30 118 3.9 Designer clothing 32 105 3.3 Stock trading 23 75 3.3 Wine 15 58 3.9 Books 17 76 4.5 Music CDs 21 88 4.2 Loans 28 85 3.0 Online groceries 19 59 3.1

Studying web-based CRM Examples of web-based CRM Type of service Examples Solitary/Asynchronous Solitary/Synchronous Interactive/Asynchronous Interactive/Synchronous Mailing lists, newsgroups, listservs, newsletters autoresponders Viewing order status and tracking, viewing shopping carts, help pages/ FAQs, knowledge bases, currency converters, store locators, online tutorials, web broadcasts, online calculators Email, electronic forms, feedback/ survey forms, bulletin /message boards, forums Live talk, chat

Studying web-based CRM A framework for web-based CRM Social Solitary Interactive Visiting alone Responses arrive later Low social presence Others are present Responses arrive later High social presence Asynchronous Technical Visiting alone Responses arrive immediately Low social presence Others are present Responses arrive immediately High social presence Synchronous

III. Conclusions • Next steps Sort categories according to types of firms Are certain types of options more likely to be used in certain market sectors? Are there patterns of co-occurrence in instances of multiple options? Provide richer details about instances in each category Explore genre analysis to anchor the framework more firmly in the literature Test stability and generalizability of the framework with a larger and more varied sample

Conclusions Next, research will proceed in two directions -In front of the interface Studying customers as they use web-based CRM to interact with firms Understanding the role of web-based CRM in trust building and maintenance -Behind the interface Studying firms as they use these options to manage customer relationships Assessing the costs of these options and their impacts on profitability Understanding how they effect work flows in the firms

A framework for web-based ecommerce customer relationship management: Research in progress Howard Rosenbaum hrosenba@indiana.edu Bin-Yun Huang bihuang@indiana.edu http://www.slis.indiana.edu/hrosenba/Pres/ais_02/index.html

A framework for web-based ecommerce customer relationship management: Research in progress