CRM - A Framework for Customer Relationship Management...

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A Framework for Customer Relationship Management Russell S. Winer T he essence of the information technology revolution and, in particular, the World Wide Web is the opportunity afforded companies to choose how they interact with their customers. The Web allows companies to build better relationships with customers than has been previously possible in the offline world. By combining the abilities to respond directly to customer requests and to provide the customer with a highly interactive, cus- tomized experience, companies have a greater ability today to establish, nurture, and sustain long-term customer relationships than ever before. These online capabilities complement personal interactions provided through salespeople, customer service representatives, and call centers. At the same time, companies can choose to exploit the low cost of Web customer service to reduce their ser- vice costs and offer lower-quality service by permitting only electronic contaa. The flexibility of Web-based interactions thus permits firms to choose to whom they wish to offer services and at what quality level. Indeed, this revolution in customer relationship management (CRM)' has been referred to as the new "mantra" of marketing.^ Companies such as Siebel, E.piphany, Oracle, Broadvision, Net Perceptions, Kana, and others have devel- oped CRM products that do everything from track customer behavior on the Web to predicting their future moves to sending direa e-mail communications. This has created a worldwide market for CRM products and services of $34 bil- lion in 1999, a market that is forecasted by IDC to grow to $125 billion by 2004.' The need to better understand customer behavior and the interest of many managers to focus on those customers who can deliver long-term profits has changed how marketers view the world. Traditionally, marketers have been trained to acquire customers, either new ones who have not bought the product before or those who are currently competitors' customers. This has required CAUFOFysllA MANAGEMENT REVIEW VOL43,NO.4 SUMMER200I 89
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A Framework for Customer Relationship Management EXHIBI T I. Impact of a 10% Improvement in Indicator on the Current Value of E-Commerce Firms Metric Attraction Visitor Acquisition Cost New Visitor Change Conversion New Customer- Acquisition Cost New Customer Conversion Rate New Customer Revenue Change Retention Repeat-Customer Revenue Momentum Repeat-Customer Convei'sion Customer Chum Rate Definition Marketing $/Visitor Increase in the Number of New Visitors. IQ-2Q Marketing J/Customer % of New Visitors Who Become Customers Increase in New Revenue, IQ-2Q Increase in Revenue from Repeat Customers, 1Q-2Q % of Customers Who Become Repeat Customers % of Customei^s Repeating, 1st Half of 1999 Value $5.68 62.4% $250 4.7S6 885% 21.056 30.25^ 55.3% If Improved 10% to $5.11 7Z4% $225 14.7% 98.5% 31.0% 40.2% 65.3% Increase in Value 0.7% 3.1% 0.8% 2.3% 4.6% 5.8% 9,536 6.7% Souree: heavy doses of mass advertising and price-oriented promotions to customers and
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CRM - A Framework for Customer Relationship Management...

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