customer relationship management with reference to amazon

8/13/2019 Customer Relationship Management With Reference to Amazon

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Critically evaluate the extent to which customer relationship managementstrategy and processes can achieve effective customer intimacy for the

mutual benefit of both organisation and customer, with reference to Amazon.

Customer Relationship Management (CRM) is used to build personalised relationships

with customers which drive value for the firm. By using CRM strategies companies canreduce overall marketing costs, increase customer response rates, and mostimportantly, increase overall customer and firm profitability (umar, !"#").$ma%on.com are the biggest online retailer in the &' with online sales topping*,""",""",""" which is nearly five times higher than its nearest competitor(+nternet retailer, !"#!, online). $ma%on.co.uk is also the biggest online retailer in the&, ahead of both $rgos and $pple (igital 'trategy Consulting, !"#!, online).$ma%on.com as well as $ma%on.co.uk use very similar if not identical CRM strategies,therefore, e-amples from both will be given to look at the e-tent to which CRMstrategy and processes can achieve effective customer intimacy for the mutual benefitof both $ma%on as the organisation and customer.

$ma%on itself implements a wide range of different CRM strategies, a number of theseshall evaluated, and an overall conclusion of the effectiveness of $ma%ons CRMstrategies shall be given. /his paper will look through the entire $ma%on processbeginning with the processes of setting up your own $ma%on account, and thenlooking at how $ma%on is able to retain such high percentages of its customers,0enkinson (!""1) states that around 12 of its &' category buyers are committedand loyal to $ma%on, compared with an industry average of under #"2.

3owever, before this paper looks into the CRM strategies implemented by $ma%on,the CRM value chain, 4igure # below, shall be e-amined to see what issues areneeded to be firstly addressed before a CRM strategy can be implemented. Byanalysing this, the CRM strategies implemented by $ma%on can then be criticallyevaluated more fully.

/he ultimate purpose of the CRM value chain process is to ensure that the companybuilds long5term mutually5beneficial relationships with its strategically5significant

customers (Buttle, !"""). /he CRM value chain was developed over 1 years and hasbecome a proven model for businesses to follow when developing their CRMstrategies. By identifying 1 primary stages and 1 supporting conditions to increase

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Figure 1: CRM Value Chain (Buttle, 2000)


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customer profitability it clearly gives a visual representation of what companies needto do in order to implement a CRM strategy successfully. /hese five primary stages ofthe CRM value chain represent three main se6uential phases of CRM strategy7analysis, resource development and implementation ($ntariksa, unknown, online). +tshould also be noted that the value chain is not a one5time process that leads to astrategy that is serviceable forever, it is important to periodically review which

customers to serve, what to serve them and how to deliver the value.

/he first CRM strategy $ma%on employs is at the very start of 8oining them, whensetting your $ma%on account up, you not only have to enter all you details, but arealso asked to register your interests and uncheck and newsletters you do not wish toreceive (0enkinson, !""1), it should be noted that all types of newsletters are initiallyselected, and they need to be deselected. +ndeed throughout the lifespan of theaccount itself you are able to update it with a wide variety of information, as your lifestyle changes so $ma%on can change with you. /his in itself is a very good way ofkeeping customers involved with the company. /his allows $ma%on to identify itscustomers and become more intimate with them, when looking at the CRM valuechain outlined above in figure #, it is clear that identifying your customers andbecoming more intimate with them is important, this is something $ma%on does well,sometimes without even the customers being aware its happening. By also changingand growing with the individual the company allows itself not to be left behind by thecustomer, but always suggesting relevant items to the customer. +t was also noted byButtle (!""*) that there are other services the site provides, this includes adviceabout birthday presents and the like, this is general information based on what datayou input about location and age, which is available before you have made a singlepurchase. Buttle also identified that $ma%on allows customers to ad8ust their owncontact preferences with regards to mail, e5mail, or telephone, and they do not stopat that, there are 9 different types of e5mail content customers can opt to receive, socustomers are fully informed and feel involved with their company right from the verybeginning.

:nce you have an account set up there are a number of different CRM strategies$ma%on has employed over the years, some work well, other may have be great intheory but failed in practice. /here are three CRM strategies to $ma%on have used totry to retain customer and encourage them to buy more at a greater profit for thecompany which this paper shall e-plore; Collaborative 4iltering, ynamic discussed (!""#, pp. ##) ?$ma%on factors in the buyers past purchasesand geographic location to suggest what other customer who live in theirneighbourhood and share similar interests might be buying?. /he more similar itemspeople buy, the smarter $ma%on becomes, and the more accurate suggestions it canmake. $lso by showing the customer items others have bought which are related tothe item you have bought or are looking at, or offering package deals on items allows

the company to up5sell and overall increase the si%e of the sale and in turnprofitability for the company. Many different e5commerce sites are implementingrecommender systems, such as $ma%on, to help their customers find the most

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valuable products and services, but what $ma%on does so well is combine this withthe inclusion of other customers opinions and reviews, this lets customers makebetter buying decisions (im @ im, !""#). +ncluding other customers opinions andmaking reviews so easily available also allows customers to make a more involvedpurchasing decision, and feel more confident on the items they are looking topurchase.

/here are, however, some e-amples of CRM strategies $ma%on have tried, whichhavent necessarily worked out as initially planned, ynamic pricing is one suchmethod. /his is where the company leverages CRM technology and detailed customerdata to allow it to alter the price of a product to best suite the customer, for instance,comparing a shoppers desire for a product with their perceived ability to pay for theproduct (ych>, !""#). /his strategy is very highly contested as to not only theeffectiveness but also the moral implications of pricing products differently fordifferent customers. Aewis (!""1) states that the practice of offering discounts toprospective customers is something that is done by many different companies inmany different markets. 4urthermore, he states the increase in powerful CRM systemsprovides the data and the communication channels necessary to e-tend this type ofpricing strategy into true dynamic marketing policy, this allows pricing to be ad8ustedas the customer relationships evolve. +t is now easier for companies to see the loyaltyand e-penditure of its customers, so they can ad8ust prices for customers as they seemost beneficial. /his strategy initially looks like a very good idea, by increasing thecost of items people are almost certain to buy the company can ma-imise profitability,and by decreasing prices on other items it encourages customers to buy somethingthey otherwise might not. /his method allows the customer to get the occasionalgreat deal, and still increases company profits, therefore when looking at the CRMvalue chain Buttle put forward in !""" this matches well with a number of areas./here are however, some who would deem this kind of marketing as immoral andunfair to customers, this view is not only carried by a number of different researcherssuch as Aewis (!""1), but most importantly by the public. /he customer is the biggestconcern for companies implementing any type of CRM, it is after all customerrelationship management, and $ma%on in fact came under fire when their consumerslearned they were paying different prices for the same s (3amilton !""#). +t wasin fact because of such adverse publicity $ma%on had to issue refunds and apologiesto customers who were charged higher prices in their dynamic pricing e-periment. 'oalthough this type of CRM may sound great on paper, the implementation of it wassomething which caused great issues for $ma%on and rather than improve customerrelations and company profits, damaged both.

/he third type of CRM this paper will focus on which is implemented by $ma%on is

irect Marketing, also known as one to one marketing, this works be recognising thecustomers interests by using cookiesD placed on their computer, these are placed bymost websites to store data for the website to use when you return. /his allows$ma%on to once again personalise what the customer sees, giving them tailoredrecommendations (0enkinson, !""1). /here has been a wide range of research carriedout into :ne to :ne marketing as ewan, 0ing and 'eidmann (#EEE) identified it usesthe cookies stored on a computer to do a number of things, all of which are bennificialfor the customer and company alike; automatically log in upon visiting the site,recalling past shopping carts so you never lose what you added, and customeridentification to allow for true customi%ation, to name but a few. /his type of CRM isdesigned to interact with customer more, allowing them to see more items they may

be interested in, in fact giving them more choice to buy more items that theythemselves may want. /his is a great way to interact with customers, to get them to

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purchase more items from the company and in general increase profitability for thecompany, all whilst building the relationship with, and knowledge of the customer.

+t is clear to see that $ma%on employs many different types of CRM strategies, andthere are more still than 8ust the few outlined above. Fhat this paper has aimed to dois to identify a number of key and specialised strategies to demonstrate how CRM

strategy and processes can achieve effective customer intimacy for the mutual benefitof both organisation and customer. /he CRM alue Chain as put forward by Buttle(!"""), which has become so widely accepted, has been used as a guide to analysethe effectives of the strategies $ma%on uses, as well as looking into the effect ofimplementing the specific CRM strategy. By analysing the information about itscustomers, which $ma%on is able to do by using the data customers freely providewhen they set up their accounts, $ma%on is able to reliably keep in touch with theircustomer. +mportantly it should also be noted that $ma%on is able to keep in touchwith the customer about issues they are interested in, rather than market potentialcustomers items they will have no need for, it is more precise and specialisedmarketing. /here has also been three main CRM strategies implemented by $ma%onthis paper has e-amined, and although ynamic


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References

$ntariksa, G (&nknown), CRM alue Chain, online, available fromhttp7HHwww.studymarketing.orgHcategoryHManagingICRMHCustomerIRelationshipIManagement.html Jaccessed "9H"#H!"#KL

Buttle, 4., (!""*). Customer Relationship Management, 'econd =dition. /aylor @4rancis

Buttle, 4., (!""") /he CRM alue Chain, online, available fromhttp7HHsuanpalmK.kmutnb.ac.thHteacherH4ileAHsakchai#"9!11K#!*1.pdf J$ccessed"9H"#H#KL

ewan, R., 0ing, B. and 'eidmann, $. (#EEE) +C+C EE

customer relationship management with reference to amazon

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