Customer relationship management and e-business: more than a software solution.

Internet business-to-business sales will reach $1.3 trillion by 2003 and, by 2004, business-to-consumer sales will reach $100 billion. E-businesses today have reached a point where they are trying to move beyond a cursory view of their customers to engaging in rich customer relationships. Strategic customer relationship management and its relationship to e-business is the focus of this paper.

Introduction

Internet business-to-business sales will reach $1.3 trillion by 2003 and, by 2004, business-to-consumer sales will reach $100 billion (14). By 2005, U.S. companies will spend $63 billion annually on online advertising, promotions and Email Marketing (9). The Gartner Group estimates that 75 percent of all e-business ventures will fail due to lack of technological understanding and poor business planning (14). Despite the risks, the Internet challenge is intriguing. Successful e-businesses today have moved beyond an arm's length transactional view of their customers to forging rich customer relationships (15).

Effective e-business strategy requires that an organization provide customer value that is superior to that of the competition. To offer superior delivered value, marketing should directly influence three core business processes: product development management (PDM), supply chain management (SCM) and customer relationship management (CRM) (19). The goal of the PDM process is to create solutions that customers need and want. SCM processes comprise the acquisition of physical and informational inputs and the efficiency and effectiveness of transforming these inputs into customer solutions. The objectives of the CRM process are to shape customers' perceptions of the organization and its products through identifying customers, creating customer knowledge and building committed customer relationships. In essence, CRM "is a business strategy that attempts to ensure every customer interaction (whether for sales or service) is appropriate, relevant, and consistent -- regardless of the communication channel" [11:1]. C RM is a core business strategy for managing and optimizing all customer interactions across an organization's traditional and electronic interfaces (18). An effective web site, for example, can help build relationships between an organization and its stakeholders (20). Without a doubt, customers are the primary stakeholders of any organization. CRM can be used to gain clearer insight and more intimate understanding of customers' buying behaviors, thus helping to build an effective competitive advantage. Strategic CRM and its relationship to e-business is the focus of this paper.

The CRM/E-Business Connection

The Web promised customers personalization and customization; it promised marketers deeper insights into the habits, feelings, likes and dislikes of customers. But has it lived up to these promises? According to Don Peppers and Martha Rogers, authors of The One to One Future, among the "new rules of engagement governing business competition" were "initiating, maintaining, and improving dialogs with individual consumers, abandoning the old-fashioned advertising monologs of mass media" [1:1]. Weiss (20) argues that CRM drives relationships and purchases (both online and off) and drives brand loyalty by fostering trust. Sowaiskie (18) suggests that CRM is driven by three factors: 1) consumers empowered by information, technologies, choice, globalization and deregulation; 2) increased competition; and 3) the Internet and e-business, which facilitate the emergence of new distribution channels and enhance sales and marketing as well as service effectiveness and efficiency. Blue-chip companies are investing millions in software products from CRM leaders like Epiphany Kana Communications and Siebel (9).

Strategically effective CRM requires the intelligent application of technology. It must be remembered that effective CRM is more than a software solution; it is about how customer information is used to create an ongoing relationship with the customer. To help achieve that outcome, different relationship approaches, and perhaps even different CRM software, might be needed for the different types of customer relationships found in the business-to-business (B2B), business-to-consumer (B2C) or business-to-business-to-consumer (B2B2C) markets (13).

As noted earlier, the B2B market accounts for the great majority of Internet commerce. Relationships in this market are usually long-term--offering multiple marketing opportunities coupled with longer multi-stage sales cycles. Obviously, business customers want products and services that help them to perform their value added functions. Close supplier-vendor relationships built on performance, history and trust are of the utmost importance. Information needed about the business customer includes profiles of key decision makers and influencers in the buying center and their evaluative criteria. Business customers can be contacted directly by sales representatives, with the Web or call centers used for straight rebuys or information gathering. Service after the sale is often critically important.

Compared to the B2B market, the small but growing interactive B2C market may require different types of relationships, information and contact approaches. The B2C relationship is typically shorter term with shorter sales cycles. Interactions may be transaction-driven. The B2C consumer may be seeking a mix of convenience, price and product capabilities. Information gathered about the consumer typically includes demographics, past and current purchase behavior, preferences and psychographics. The contact strategy for the B2C market includes using past purchase patterns to anticipate new needs and wants that can be targeted with new offers. Two-way communication on the Internet offers more immediate and direct consumer feedback.

The B2B2C market includes businesses that sell and service the business consumer--who, in turn, serves the end consumer. The middleman wants products that are easy to sell and service, and that will meet the requirements of the end customer. The producer needs information on its customers' territory, business model, product preferences and end customer characteristics. The contact strategy centers on facilitating end sales including product and competitive information, training and tools to quickly monitor product and order status.

As described above, different markets and customer types often require different kinds of relationships. Different customer wants and expectations may require different customer information and customer contact strategies. CRM software and analytics--the ability to use multiple data sources to anticipate customer preferences, needs and buyer behavior--can be useful in any market environment. However, it can be especially helpful in the B2C market as a means of relationship building and for improving Internet B2C profitability. Here, the organization has the closest contact with customers via Web site transactions, call centers and suggestion lines (16). Information from these personalized contact points can be linked to statistical and reporting software tools when these data are captured, ideally in real time.

Exhibit 1, the CRM Industry-Benefit Grid, presents a range of industries and companies that have successfully used a variety of CRM software from different vendors and analytics to help them establish and sustain mutually beneficially relationships with their customers. As indicated by the Pillsbury and Fingerhut companies, it should be noted that it's sometimes necessary to use more than one type of CRM software for different purposes within the same company.

In computer manufacturing, eMachines, Inc. has built a database of customer problems and comments to supplement its call center actions in the B2B market. Helix by Alorica, Inc. CRM application software aggregates the information and can produce reports that might, for example, reveal a defective part on a certain model. eMachines is using the software to learn more about its call center operation and to quickly identify potential trouble-areas so that they can be promptly solved for the customer. Helix by Alorica, Inc. offers a Web based, fully integrated outsourced CRM support service that transforms data into analytic business intelligence.

In the accommodations market, Hilton Hotels has used E.piphany CRM software at its headquarters to quickly analyze data generated by its reservation and property management systems. The company can also analyze demographic information from its Hilton Honors program database of customers most likely to use Hilton Hotels. These data and behavioral patterns are used to help create targeted direct mail campaigns and to help local hotel managers plan for seasonal activity by wholesale customers (B2B) and business travelers (B2C). The E.piphany software comprises a suite of CRM products that merge analytical and operational CRM capabilities. Benefits include a single view of the customer by integrating data from existing systems, real-time analytics and multi-channel capability.

Pillsbury Co., a consumer products food processor, uses two different CRM software packages to help manage its relationships with the consumer market and the B2B2C market. To react quickly to what consumers want, Pillsbury built a system around Insightful Corporation's S-Plus analytics tool and its StatServer, enabling Web users to perform analyses of S-Plus data. These analytics use data gleaned from the company's toll-free customer comment line to provide intelligent information for decision makers.