managing customer relationships on the internet

MASTER’S THESIS Department of Business Administration and Social Sciences Division of Industrial Marketing and e-Commerce CONTINUATION COURSES Supervisor: Tim Foster 2005:02 PB • ISSN: 1653 - 0187 • ISRN: LTU - PB - EX - - 05/2 - - SE Muhammad Ali Khan Muhammad Amer Shahzad 2005:02 PB Social Science and Business Administration Programmes Managing Customer Relationships on the Internet ACKNOWLEDGEMENTS I ACKNOWLEDGEMENTS This thesis is a part of our program; Masters in E-Commerce at Division of Industrial Marketing at Luleå University of Technology. It is written in autumn 2004-05. It was very interesting to learn this way of study, when we were acting in a new way, with the websites to find the answers or our questions. Thanks GOD! We have done it. We would like to thank our supervisor Tim Foster, without the guidance and supervision of whom, we might not be able to write this thesis in time. He encouraged and pushed us, in a right direction, to finalize it. We learnt much from our supervisor, during classed and during his supervision. We would also like to thank our opponent, whose criticism gave us an opportunity to see our work in another way and to improve it. At the end we are very thankful to our friends who helped us during this process of learning and writing, and our parents who always encouraged and supported us to be innovative in our life. Luleå University of Technology, January 2005 __________________ ______________________ Muhammad Ali Khan Muhammad Amer Shahzad ABSTRACT II ABSTRACT ‘Virtual exchange’ is bringing buyers and sellers together electronically rather than having to go to a physical market place. The Internet is affecting every facet of business life, obliterating current business models. It is becoming increasingly clear that stalled or failed CRM projects are often the result of companies lacking a thorough understanding of what CRM initiatives entail. The purpose of our study is to find out that how customer relationships are being managed (CRM) on the Internet. Our research explores, describes and begins to explain, how the most successful airlines of the world are satisfying their customers by providing services through their websites. How the companies are describing online environment for their customers. Is it user friendly and meeting their requirements of customers or not. In our study, we have used individual case analysis for each company and cross case analysis for both companies. Our finding concerns with the contents and their customer services, provided on the websites of airlines. The contents match with theory mostly, but there are still some to implement by them. They are much efficient in providing online services but still they need to provide complete shipping information and money back guarantee. Companies should use chat functions for customer’s immediate interactions, whether cookies are better option. That’s why companies are spending billions of dollars to process information of their customers for CRM on internet. Finally, implications for theory, managers and future research are described. TABLE OF CONTENT III TABLE OF CONTENT 1 INTRODUCTION………………………………………………… ……… 1 1.1 Background……………………………………………………………………1 1.2 Problem Discussion………………………………………………….……… 4 1.3 Research Purpose & Questions……………………………………………… 5 1.4 Outline of Thesis………………………………………………………………6 2 LITERATURE REVIEW…………………………………………………… 8 2.1 The Online Environment…………………………………………………… 10 2.1.1 Key Quality Factors in Website Design…………………………10 Clarity of purpose……………………………………………… 10 Design………………………………………………… ……….11 Accessibility and speed……………………………………… …14 Content………………………………………………………… 15 2.1.2 Determinants of Successful Webs ite Design………….…………17 Page Loading Speed…………………………………………… 17 Business Content…………………………………………………18 Navigation Efficiency……………………………………………19 Security………………………………………………………… 20 Marketing/Customer Focus………………………………………21 2.1.3 APID Model Pro posed…………………………………… …… 21 Attracting……………………………………………………… 22 Informing………….…………………………………………… 23 Positioning……………………………………………………….24 2.2 Customer Services………………………………………………………… 25 2.2.1 Framework of Customer Services……………………………….25 Pla cing Order…………………………………………………….26 Payment Option………………………………………………….27 Shipping Information…………………………………………….28 Returns………………………………………………………… 28 Interactive Services………………………………………………29 Web Policy……………………………………………………….30 2.2.2 Dimensions of Internet Service Quality…………………………31 Performance…………………………………………………… 32 Access……………………………………………………………32 Security………………………………………………………… 32 Sensation…………………………………………………………32 Information………………………………………………………33 2.2.3 Benefits of e-CRM………………………………… ……………33 Improved Customer Satisfaction…………………………………33 3 CONCEPTUAL FRAMEWORK………………………………………… 36 RQ1 How can the online environment be described? 36 RQ2 How are the customers served in this online environment? 38 Emerged Frame of Reference……………………………………………………39 TABLE OF CONTENT IV 4 METHODOLOGY…… ………………………………………………… 40 4.1 Purpose of Research………………………………………………………….40 4.2 Research Approach………………………………………………………… 41 4.3 Research Strategy…………………………………………………………….41 4.4 Data Collection Method…………………………………………………… 42 4.5 Sample Selection…………………………………………………………… 43 4.6 Analysis of Data…………………………………………………………… 43 4.7 Quality Standards…………………………………………………………….44 5 DATA PRESENTATION……………………………………………………46 5.1 Case 1: Britishairways.com………………………………………………….46 5.1.1 How can the online environment be described? 46 5.1.2 How are the customers served in this online environment? 49 5.2 Case 2: Singaporeair.com……………………………………………………50 5.2.1 How can the online environment be described? 51 5.2.2 How are the customers served inthis online environment? 53 6 DATA ANALYSIS………………………………………………… …… 56 v 6.1.1 Within-Case Analysis of Britishairways.com…….…………… 56 6.1.2 Within-Case Analysis of Singaporeair.com……….…………….58 6.1.3 Cross-Case Analysis………………………………….… ……….60 6.2 How are the customers served in this online environment? 63 6.2.1 Within-Case Analysis of Britishairways.com……….………… 63 6.2.2 Within-Case Analysis of Singaporeair.com…………….……….65 6.2.3 Cross-Case Analysis…………………………………… ……….67 7 FINDINGS AND CONCLUSIONS………………………………………… 70 7.1 How can the online environment be described? 70 7.2 How are the customers served in this online environment? 71 7.3 Implication for managers…………………………………………………….73 7.4 Implications for theory……………………………………………………….73 7.5 Imp lications for further research…………………………………………… 74 REFERENCES…………………………………………………… …………… 75 APPENDIX A – OBSERVATION CHECKLIST…………………… …… ……….81 APPENDIX B – www.britishairways.com 84 APPENDIX C – www.singaporeair.com …………………….…….…………… 85 TABLE OF CONTENT V LIST OF FIGURES Figure 1: Outline of Thesis………………………………………………………………6 Figure 2: Conceptual Model for a quality website…………………………………… 9 Figure 3: Attributes which affect the effectiveness of a commercial Website………22 Figure 4: Preferred Methods of Customer Contact………………………………… 30 Figure 5: An emerged frame of reference…………………………………………… 39 LIST OF TABLES Table 1: Customer Service Components………………………………………………26 Table 2: Dimensions of Internet Service Quality…………………………………… 31 Table 3: Research Question One………………………………………………………37 Table 4: Research Question Two………………………………………………………38 Table 5: How online environment is described in britishairwas.com and singaporeair.com – cross case analysis…………….…………………… …61 Table 6: How britishairwas.com and singaporeair.com serve customers in online environment – cross case analysis……………………………….………… 68 INTRODUCTION 1 1 INTRODUCTION This chapter provides background information of Customer Relationship Management and the virtual Customer Relationship Management that will then be followed by a problem discussion. Finally the chapter will end with the purpose of study, the research questions and the outline of thesis. 1.1 Background Customer Relationship Management (CRM) is a comprehensive set of processes and technologies for managing the relationships with potential and current customers and business partners across marketing, sales, and service regardless of the communication channel. The goal of the CRM is to optimize customer and partner satisfaction, revenue and business efficiency by building the strongest possible relationships and at an organizational level. Successful CRM requires a holistic approach to every relationship with the entire organization sharing and contributing to that view. (Greenberg, 2001) CRM is a comprehensive business and marketing strategy that integrates technology, process and all business activities around the customers (Anton, 1996; Anton and Hoeck, 2002). The concept of RM spread like wildfire during the 1990s. In its wake followed first 1to1, then CRM. The last two concepts represent the same basic thinking; together with less known designations the y re brands for offerings from various consultants. Today, CRM is the most frequently used term, but as late as 1998 it was only one of several acronyms that fought for attention. RM is the broader, overriding concept. CRM and 1to1 do not deal with networks but focus on the customer-supplier interaction (Evert Gummesson, 2002) CRM is the values and strategies of relationship marketing – with particular emphasis on customer relationships – turned into practical application (Evert Gummesson, 2002). CRM is a process designed to collect data related to customers, to grasp features of customers, and to apply those qualities in specific marketing activities (Swift, 2001). CRM is not a new concept. In fact, CRM has continuously existed from the past. However, CRM has recently become the focus of attention. Because, 1) The relationship with customers is newly recognized as a key point to solidify competitive power of a company; 2) As companies procure large volumes of data related to customers, they can perform customer management more easily and efficiently using data warehousing, data mining, and other information technologies; 3) The Internet has opened up a new medium for business and marketing, and we can express customer actions in online into data. In other words, the scope of data to analyze behaviours of customers is extended, and the environment for one-to-one marketing has been enhanced. (Ahn, 2001) CRM technologies can be divided into three functional categories, operational CRM, analytical CRM, and collaborative CRM. (Trepper, 2000) INTRODUCTION 2 Operational CRM category includes customer-facing applications that integrate front-, back-, and mobile offices, with the purpose to increase the efficiency of customer interactions. (Trepper, 2000) This involves automating business operations processes, such as order management, customer service, marketing automation, sales- force automation, and field service. In order to succeed employees must have the right skills and the company must have a customer-centric focus. (Lawrence et al, 2001) Analytical CRM category involves applications that analyze customer data generated by operational tools. (Trepper, 2000) The data is often stored in a data warehouse, which can be described as a large repository of corporate data (Dyche, 2002). The data stored in the data warehouse shall give the company information that will allow them to provide value to their customers. Hence, it is crucial to capture the right data, a process that must be accomplished with great customer care and understanding (Newell, 2000). A Data Warehouse is more detailed described below. Collaborative CRM category focuses on facilitating interaction between customers and companies (Trepper, 2000). One-way communication must be replaced by two-way communication, where the customer gets involved early with issues affecting their future purchase behaviour (Lawrence et al, 2001). In other words, Collaborative CRM involves any CRM function that provides a point of interaction between the customer and the supplier. For example, technologies, such as electronic communication, are used to facilitate relevant, timely, and personalized interaction with the customers (Greenberg, 2001). In some organizations, CRM is simply a technology solution that extends separate databases and sales force automation tools to bridge sales and marketing functions in order to improve targeting efforts. Other organizations consider CRM as a tool specifically designed for one-to-one (Peppers and Rogers, 1999) customer communications, a sole responsibility of sales/service, call centers, or marketing departments. CRM is not merely technology applications for marketing, sales and service, but rather, when fully and successfully implemented, a cross- functional, customer-driven, technology-integrated business process management strategy that maximizes relationships and encompasses the entire organization (Goldenberg, 2000). A CRM business strategy leverages marketing, operations, sales, customer service, human resources, R&D and finance, as well as information technology and the Internet to maximize profitability of customer interactions. For customers, CRM offers customization, simplicity, and convenience for completing transactions, regardless of the channel used for interaction (Gulati and Garino, 2000). CRM technology applications link front office (e.g. sales, marketing and customer service) and back office (e.g. financial, operations, logistics and human resources) functions with the company’s customer touch points (Fickel, 1999). A company’s touc h points can include the Internet, e-mail, sales, direct mail, telemarketing operations, call centers, advertising, fax, pagers, stores, and kiosks. Often, these touch points are controlled by separate information systems. CRM integrates touch points around a common view of the customer (Eckerson and Watson, 2000). INTRODUCTION 3 CRM is defined as an acquisition and retention of customers and the resulting profitability (Menconi, 2000; Nykamp, 2001). Customer retention is cheaper and more profitable than customer attraction. As Inc. magazine reports, the customer acquisition cost per single transactions for online retailers ranges from $100 for amazon.com, to $245 for fashion retailers such as bluefly.com, to $500 for furniture.com (Inc. Tech 2001, 2001). Furthermore retention contributes to the creation of reputation, which also lowers customer acquisition costs. Reputation is an intangible asset, which modern corporations explicitly manifest in the form of brand advertising. CRM is used to manage and increase the value of B2C relationships. But while the implementation of CRM helps to acquire and retain customer, it also has increased operational costs. Managing customer relationship is expensive and cumbersome especially where cross-divisional communications are required to link customer needs to fulfilment channel. Web-based CRM uses the Internet to integrate and simplify customer related business processes, reducing costs of customer facing operations and increase the interactivity and self-service of the customers. (Web Associates, 2000) While the objective of CRM remains the same, the development of information and communication technology allows for a significant increase in the scale and scope of customer services. The e-CRM is defined as the application of information and communication technology to increase the scale and scope of customer services. It’s imperative that a company’s various divisions share a single view of customers, and project a single view of company back to the customer. So, e-CRM systems need to be designed fundamentally from a customer’s perspective, and with a holistic approach to integrated lead generation, lead conversion and customer fulfilment process. Brent Frei, president and CEO of Onyx software, provide this caution for e-CRM; “e- CRM is the customer facing Internet portion of CRM. It includes capabilities like self- service knowledge bases, automated email responses, personalization of web content, online product bundling and pricing and so on. E-CRM gives Internet users the ability to interact with the business through their preferred communication channel, and it allows the business to offset expensive customer service agents with technology. So the value is largely one of improved customer satisfaction and reduced cost through improved efficiency. However an e-CRM strategy deployed alone can also backfire and actually result in decreased satisfaction. If the customer’s interactions through electronic channel are not seamlessly integrated with those taking place through traditional channels, the customer is likely is to become frustrated. Also, if the basis for the content being served up to the customer doesn’t consider all the data gathered by the rest of the business, the customer is likely being served in a wrong way. Therefore, it’s imperative that e-CRM be installed in conjunction with traditional CRM and that the two are tightly integrated. Otherwise the value of e-CRM might actually be negative” (Paul Greenberg, 2004). With the involvement of the Internet in CRM, its functions have been changed a lot. By using the Internet, CRM becomes more interactive. Customers are actually transacting with the companies. The new customer- facing products and services can be implemented INTRODUCTION 4 more quickly. Besides, the customers served are actually world-wide. Here comes e- CRM. Companies’ adoptions of e-CRM are slow but success rates are high due to its complexity (IT-Analysis.com, 2001). Some recent CRM packages integrate the speech- enabled specific application functions which embrace customer support, order management, and sales force automation or modules within individual applications. These products are provided by companies such as Siebel Systems, Oracle, and SAP. 1.2 Problem Discussion Implementation of e-CRM has resulted in increased competitiveness for many companies as witnessed by higher revenues and lower operational costs. Managing customer relationships effectively and efficiently boosts customer satisfaction and retention rates (Reichheld, 1996a, b; Jackson, 1994; Levine, 1993). E-CRM applications help organizations assess customer loyalty and profitability on measures such as repeat purchases, money spent and longevity. CRM applications help answer questions such as "What products or services are important to our customers? How sho uld we communicate with our customers? What are my customer's favourite colours or what is my customer's size?" In particular, customers benefit from the belief that they are saving time and money as well as receiving better information and special treatment (Kassanoff, 2000). (Injazz J. Chen, Karen Popovich) E-CRM was developed on the basis that customers vary in their needs, preferences, buying behaviour, and price sensitivity. Therefore, by understanding customer drivers and customer profitability, companies can better tailor their offerings to maximize the overall value of their customer portfolio. Reichheld (1996) has documented that a 5 percent increase in customer retention resulted in an increase in average customer lifetime value of between 35 percent and 95 percent, leading to significant improvements in company profitability. Without a clear e-CRM strategy, it is difficult to determine and coordinate the organizational changes needed for e-CRM to be successful long term. E-CRM strategy is based on an understanding of how the customer wants to do business with the firm, rather than how the firm wants to do business with the customer. E-CRM strategy development, therefore, must be a joint process between the customer, suppliers and the seller. Sinc e, many businesses are using the Internet to expand their reach, improve customer service and develop and maintain closer relationships with their customers. For example, customer relationship management (CRM) software enables marketers to offer online interactions that are customizable to the individual customer, allowing online marketers to better match their offerings and the online experience to consumers’ needs, wants and preferences, even in markets with millions of prospects and customers. Thus, a successful Web site can be instrumental in its impact on the relationship effectiveness of a firm and significantly add to the bottom line. Yet, in order to determine what constitutes a successful Web site, it must be able to understand how users perceive and utilize it. [...]... telephone or by instant messaging on- line The use of FAQ should satisfy customers and deter them from using customer service, but the ability to contact a person heightens the feeling of confidence in the Website ( Ibid) For the category on- line resources the KQFs refer to the products and services offered on the Website, with a focus on the Website's ability to provide sufficient information for customers... crops up when the discussion gets to data gathering and customer specific information being accumulated is privacy (Sterne, 2000) Online customers are concerned about their information privacy because they do not have the ability to control the access others have to personal information on the web anonymity is valuable and regarded as describable for many online shopers as one of the most powerful methods... how the Internet is used as a strategic tool in e-CRM Based on the above purpose, the following research questions would be posed in order to address the purpose: Research Question 1: How can the online environment be described? Research Question 2: How are the customers served in this online environment? 5 INTRODUCTION 1.4 Outline of Thesis This study contains seven chapters We are at the end of the. .. information on warranties and guarantees should be made available to the customer either during the selection process or when purchasing an item One of the most irritating factors for customers shopping on- line is to find that the item they have requested is not available If they are informed of this whilst choosing the product (i.e the informatio n on stock availability is real-time) they may well continue... same rules to the company’s email capability as they do to the phone, the fax, and the copy machine Responding to a customer comment, question, or complaint via e- mail requires the same care used when responding over phone and in writing (Cleaver, 1999) Frequently Asked Question (FAQ): FAQ’s is a place of introduction It provides the fundamental and lets the casually curious as well as the internet hunter-seeker... not be published if the company is not planning to keep the FAQ page fresh The pointer of the FAQ must be on the homepage as a stand-out-button so people can easily find the FAQ on the web (Sterne, 2000) Interactive chat function: Online text chatting provides real time communication between customers and suppliers Those who are not able to get an answer online have the option to contact a service representative... design of the Website, which ends up looking amazing but actually causes frustration because customers have difficulty in finding what they are looking for According to Ody (2000), the main reasons why customers go onto the Internet is to find information or buy a product or service with an emphasis on convenience and speed Ziff- Davies (2000) points out that the concept of the Internet has raised customers'... information privacy Information privacy is the ability of individual to control the access that others have to their personal information Online shoping allows business on the market space to collect much more detailed consumer behaviour information than it is possible from most business on the market place (Hoffman, Novak & Peralta, 1997) Security Policy: According to Collins (1998) one of the problems... describes us the background and problem discussion with purpose of our research and two research questions The contents of the rest of the chapters are described below the figure 1 Introduction 2 Lit erat ure Review 3 Conceptual Framework 4 Methodology 5 Data Pres entat ion 6 Data Analys is 7 Findings & Conclus ions Figure 1: Outline of Thesis Source: Created by author 6 INTRODUCTION The second chapter... call for 24-hour accessibility If the task is to find the right answers in a database, the solution is to let the customers for it themselves (Sterne, 2000) 2.2.1 Framework of customer services The Internet can be used to provide consistent and comprehensive product and customer service information This benefits the consumer by providing more non-sensory information than is possible to provide in brick-and- . finding concerns with the contents and their customer services, provided on the websites of airlines. The contents match with theory mostly, but there are still some to implement by them. They. traditional channels, the customer is likely is to become frustrated. Also, if the basis for the content being served up to the customer doesn’t consider all the data gathered by the rest of the. enhance customer satisfaction to the extent that the customers will return. (1) Ease of use (the design of the Website); (2) Customer confidence (how the Website inspires trust by the customer) ;