E Commerce5

CUSTOMER RELATIONSHIP MANAGEMENT
Lesson Overview
This lesson discusses how a firm can excel in ecommerce activities.

Its outlines customer acquisition management and customer
retention management.
Expected Learning Outcomes
By the end of this lesson, the learner should be able to:
 Discuss different methods of acquiring customers via electronic media
 Explain different buyer behavior amongst online customers
 Describe techniques of retaining customers.
Customer relationship management (CRM) entails all aspects of

interaction that a company has with its customers, whether it is sales
or service-related. While the phrase customer relationship
management is most commonly used to describe a business-
customer relationship (B2C), CRM systems are also used to
manage business to business to business (B2B) relationships.
Information tracked in a CRM system includes contacts, clients,
contract wins and sales leads and more. CRM is an important
element in ecommerce. Building long term relationships with
customers is key for any sustainable business.
How CRM is Used Today
CRM solutions provides the business with data to help the business
provide services or products that the customers want, provide better
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customer service, cross-sell and up-sell more effectively, close
deals, retain current customers and to better understand who its
customers are. Organizations frequently look for ways to personalize
online experiences (a process also referred to as mass
customization) through tools such as help-desk software, email
organizers and different types of enterprise applications.
The CRM Strategy
Customer relationship management is often thought of as a

business strategy that enables businesses to improve in a number
of areas. The CRM strategy allows a business to do the following:
 Understand the customer
 Retain customers through better customer experience
 Attract new customers
 Win new clients and contracts
 Increase profitably
 Decrease customer management costs
An effective website should have three characteristics.
Magnetic. Acquisition of visitors by promotion and making it

attractive
Sticky. Retention that is keeping customers on the site once they

arrive and encouraging them to engage in revenue generating
activities. The website should also have the capacity increasing the
depth or range of products the customer purchases from such a
company website “customer extension
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Elastic, Persuading customers to return particularly for revenue
generating activities.
CRM is usually undertaken in three phases as indicated in the below
Acquisition Retention Extension
CUSTOMER ACQUISITION MANAGEMENT
In the online context, customer acquisition can have two meanings:

first, it may mean the use of the web site to acquire new customers
for a company as qualified leads that can hopefully be converted
into sales and secondly it can mean encouraging existing customers
to engage in an online dialogue. Before an Organization can acquire
customers through the content on its site, it must develop marketing
communications strategies to attract visitors to the web site.
Marketing Communication for Customer Acquisition
A firm’s management needs to consider the most effective mix of

communication to drive traffic to an e-commerce site. The different
techniques can be characterized as traditional offline marketing
communications or new online communications. The objective of
employing these techniques is to acquire new traffic on an e-
commerce site using different techniques.
There are four main methods of online marketing communications.

They include
1. Search engine registration. Search engine and directories are the

primarily methods of finding information about a company and its
products. Such engines are highly ranked on how well the keywords typed
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in by the searcher match against the same words on the page of a firms
web site and also when the key words entered are included as links.
2. Link building. The traffic of a site will clearly increase with a greater
number of links into it. Efforts to increase the number of links are referred
to as link building.
3. Viral marketing which is a marketing strategy that focuses on spreading

information and opinions about a product or service from person to
person, especially by using unconventional means such as the Internet or
email
4. Banner advertisement is an image-based rather than text-based and is a

popular form of website advertising. The purpose of banner advertising is
to promote a brand and/or to get visitors from the host website to go to the
advertiser's website
Offline Marketing Communication
These methods include print, TV, Radio, and word of mouth
CUSTOMER RETENTION MANAGEMENT
Customer retention is the activity that a selling organization

undertakes in order to reduce customer defections. Successful
customer retention starts with the first contact an organization has
with a customer and continues throughout the entire lifetime of a
relationship. A company’s ability to attract and retain new
customers, is not only related to its product or services, but strongly
related to the way it services its existing customers and the
reputation it creates within and across the marketplace. Customer
retention is more than giving the customer what they expect, it’s
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about exceeding their expectations so that they become loyal
advocates for your brand. Creating customer loyalty puts ‘customer
value rather than maximizing profits and shareholder value at the
center of business strategy’ The key differentiation in a competitive
environment is often the delivery of a consistently high standard of
customer service. Customer retention has a direct impact on
profitability
Customer retention is an outcome that is the result of several

different factors as described below.
1) Customer satisfaction: Research shows that customer satisfaction

is a direct driver of customer retention in a wide variety of industries.
There is a positive association between customer satisfaction and
customer retention, though the magnitude of the association can
vary based on a whole host of factors such as customer, product,
and industry characteristics.
2) Customer delight: Some scholars argue that in today's

competitive world, merely satisfying customers is not enough; firms
need to delight customers by providing exceptionally strong service.
It is delighted customers who are likely to stay with the firm, and
improve overall customer retention. More recently, it has been
argued that customer delight may be more strongly applicable to
hedonic goods and services rather than for utilitarian products and
services
3) Customer switching costs: Switching costs are onetime costs that

customers associate with the process of switching from one provider
to another. Customers usually encounter three types of switching
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costs: (1) financial switching costs (e.g., fees to break contract, lost
reward points); (2) procedural switching costs (time, effort, and
uncertainty in locating, adopting, and using a new brand/provider);
and (3) relational switching costs (personal relationships and
identification with brand and employees). All three types of switching
costs increased customer retention—however, relational switching
costs have the strongest association with customer repurchase
intentions and behavior.
4) Customer relationship management: Acknowledging the social

and relational aspects—especially those embedded in services—it
has been argued that firms can increase retention by focusing on
managing customer relationships. Relationship management occurs
when firms can take a longer-terms perspective, rather than a
transactional perspective to managing their customer base.
However, it should be noted that all long-term customers are not
profitable, and worth retaining; sometimes, short-term transactional
customers can be more profitable for the firm. As such, companies
may have to strategically develop a framework to manage
unprofitable customers
CUSTOMER EXTENSION
Customer extension has the aim of increasing the lifetime value of

the customer to the company by encouraging cross sales. When a
customer returns to a web site this is an opportunity for cross selling
and such offers can be communicated. Direct email is also an
excellent way for informing a customer about other company
products and it is also useful in encouraging repeat visits by
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encouraging new content or promotions. This is also made possible
through an effective after sale service and feedback.
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Further Reading
Choi, S. Y., Stahl, D. O., & Whinston, A. B. (1997). The economics of electronic

commerce. Indianapolis: Macmillan Technical Publ..
Cockrill, M. P., Bryant, W. K., Franklin, D. C., McNeely, M. H., Ryan, T. J., Sweet, A.
P., ... & Malek, T. A. (2018). U.S. Patent No. 10,163,101. Washington, DC: U.S.
Patent and Trademark Office.
Meek, C. A., Horvitz, E. J., Goodman, J. T., Flake, G. W., Hurst-Hiller, O., Gupta, A., ...
& Griffin, T. J. (2016). U.S. Patent No. 9,396,269. Washington, DC: U.S. Patent
and Trademark Office.
Timmers, P. (1999). Electronic commerce. John Wiley & Sons, Inc..
Turban, E., Outland, J., King, D., Lee, J. K., Liang, T. P., & Turban, D. C.
(2017). Electronic commerce 2018: a managerial and social networks
perspective. Springer.
Turban, E., Whiteside, J., King, D., & Outland, J. (2017). Introduction to electronic
commerce and social commerce. Springer.
Page 8 of 8

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CUSTOMER RELATIONSHIP MANAGEMENT

This lesson discusses how a firm can excel in ecommerce activities.

Expected Learning Outcomes

By the end of this lesson, the learner should be able to:

 Discuss different methods of acquiring customers via electronic media

 Explain different buyer behavior amongst online customers

 Describe techniques of retaining customers.

Customer relationship management (CRM) entails all aspects of

How CRM is Used Today

The CRM Strategy

Customer relationship management is often thought of as a

 Understand the customer

 Retain customers through better customer experience

 Attract new customers

 Win new clients and contracts

 Decrease customer management costs

An effective website should have three characteristics.

Magnetic. Acquisition of visitors by promotion and making it

Sticky. Retention that is keeping customers on the site once they

CRM is usually undertaken in three phases as indicated in the below

Acquisition Retention Extension

CUSTOMER ACQUISITION MANAGEMENT

In the online context, customer acquisition can have two meanings:

Marketing Communication for Customer Acquisition

A firm’s management needs to consider the most effective mix of

There are four main methods of online marketing communications.

1. Search engine registration. Search engine and directories are the

3. Viral marketing which is a marketing strategy that focuses on spreading

4. Banner advertisement is an image-based rather than text-based and is a

Offline Marketing Communication

These methods include print, TV, Radio, and word of mouth

CUSTOMER RETENTION MANAGEMENT

Customer retention is the activity that a selling organization

Customer retention is an outcome that is the result of several

1) Customer satisfaction: Research shows that customer satisfaction

2) Customer delight: Some scholars argue that in today's

3) Customer switching costs: Switching costs are onetime costs that

4) Customer relationship management: Acknowledging the social

Customer extension has the aim of increasing the lifetime value of

Choi, S. Y., Stahl, D. O., & Whinston, A. B. (1997). The economics of electronic

Timmers, P. (1999). Electronic commerce. John Wiley & Sons, Inc..

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