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17.2 Why Electronic Customer Relationship Management?

Learning Objectives

  1. Learn why e-CRM (electronic customer relationship management) is an important part of business.
  2. Become familiar with the different types of e-CRM.

CustomersA person who buys or uses goods or services; a person with whom a business must deal. can be seen as the most important stakeholdersA person or organization with an interest (a “stake”) in how a resource is managed. in a business’s success. Without customers purchasing goods or services, most businesses would not have a revenue stream. But it can be difficult to shift from realizing this important fact to implementing it into day-to-day business decisions and strategy.

A successful relationship with a customer is based on meeting (and perhaps even exceeding) his or her needs. It is in determining what problems the customer has and in providing solutions to those problems.

Maintaining good customer relationships is critical to the success of a business. The costs associated with acquiring a new customer are generally far higher than the cost of maintaining an existing customer relationship. This is why investing in customer relationship management (CRM) should result in increasing revenue for the business.

The cycle of CRM starts with determining what problems potential customers might have and then presenting solutions to those problems. Solutions are implemented, and then ongoing service maintains the relationship with the customer.

Take, for example, two people booking an overseas holiday. One is a twenty-three-year-old recent graduate who is visiting Argentina for three months with a friend; one is a thirty-eight-year-old mother of two young children planning a family holiday to Thailand. If they both walked into a travel agency, the travel agents would make judgments on their dress and appearance to determine how they will aid each of them in booking their holiday (and how much commission the agent will be able to earn). The travel agent will also ask further face-to-face questions to try to sell additional services to these two customers. For the twenty-three-year-old, additional services might include travel insurance that covers extreme-sports activities and a calling card that allows her to call home from anywhere in the world. For the thirty-eight-year-old, additional services could include babysitting services included in a hotel reservation.

Seat the two potential travelers in front of their computers, and you no longer have human travel agents to make snap judgments based on appearance or to try to sell additional services based on the type of traveler they see. Of course, you also no longer have the overhead costs of a travel agency and agents. However, Web technology does allow for similar, and often superior, judgments and sales opportunities.

For example, both travelers are likely to have started researching their trips using a search engine. Creating landing pages tailored to the types of searches being made can allow the opportunity to tailor the products being presented to each traveler.

Technology can also be used to allow the online business to interact personally with a Web visitor and also to provide the visitor with information she might not get in a travel agency—unbiased reviews from other customers. Technology can and should be used to treat different customers differently.

Web technology allows for customer-related marketing decisions to be made and tested relatively quickly and adjusted as required.

For example, in 2002, Jeff Bezos of launched free shipping for orders over $99 in value. While the offer was advertised as being for a limited time only, this time limit enabled Amazon to test the effect of the offer on its bottom line and still retract it if necessary. Over the months, the order threshold for free shipping dropped, and today U.S. orders over $25 ship for free. However, free shipping does not mean priority shipping, so orders can still be delivered in a shorter period of time—for a delivery fee.

Electronic customer relationship management (e-CRM) uses technology in a number of ways to cement CRM into the way that organizations conduct themselves. Once a business shifts its focus to consumer needs, it will find that all these technologies feed each other. However, the fundamental principle of e-CRM is to remember that technology should be used to enable customer relationships, not replace meaningful relationships.


Why is knowing what keywords purchasing customers use helpful for CRM?

First, the data that are collected online should be used to build meaningful profiles of potential customers, and that information should be used in fostering relationships. Web analytics tools gather a wealth of data that can inform customer relationships, from search keywords used to reach a Web site, to navigation paths on a Web site. It is even possible to capture this kind of information about specific customers when they perform an action such as purchasing or subscribing on a Web site. Without the customer knowing, the referral source of their visit and even an indication of their navigation path can be captured, along with their order or registration details, and stored for future use.

CRM software enables businesses to manage all customer and leadA potential customer. information across all departments in a centralized place. No matter whom a customer speaks to within a business, all employees can access the same information recorded over time—a 360-degree view of the customer. This means that any time someone inside the organization looks up the customer, he can see every interaction the organization has had with the customer, what previous queries have been raised, and how these have been solved in the past.

CRM software also enables businesses to automate much of the sales cycle, freeing salespeople to spend time on creating personal relationships where it matters—with potential and existing customers.

Technology, of course, has also changed the ways that customers can contact companies. In Chapter 8 "Social Media" and Chapter 11 "Online Reputation Management", the importance of letting the customer select communication channels was highlighted. Customer relationships are no longer driven by telephone call centers, but instead blogs, Twitter, e-mail, and instant messenger (IM) are all used as customer-service channels both pre- and postsale.

Customer-centric and Customer Driven

It is one thing to place the customer at the center of an organization’s planning and execution of business plans and another to have customers driving the direction of a business. Many new, Web-based businesses rely on the latter for their business to succeed and actively encourage customers to take the lead and add value to the business. Services such as Flickr (, Delicious (, and Twitter ( are examples of services that are user driven rather than user-centric. They provide tools that enable users to make the service their own, often by allowing outside developers access in order to create supplementary services.

Savvy organizations can also provide tools to customers to drive their business, passing on tasks to customers that might ordinarily have been performed by the organization. For example, many airlines now allow travelers to check in online prior to arriving at the airport. Although they are giving travelers convenient tools and increased options when it comes to checking in, the airlines are also outsourcing the check-in process to their travelers. As more travelers select to check themselves in, staff costs for airlines can be reduced. The travelers are doing the job for free.

Types of CRM in Organizations

CRM should infuse every aspect of a business (in the same way that marketing should infuse every aspect of a business), but it is useful to look at the different ways that CRM is implemented.

Operational CRMEntails supporting the “front office” business processes, which include customer contact (sales, marketing, and service). refers to the most obvious channels that relate to customers: the front end of a business and its customer service. From a Web technology point of view, operational CRM informs the Web site a customer sees as well as his entire online user experience. Technology also enables effective customer service, from providing numerous contact channels to presenting technology that records all customer contacts.


Data mining is the analysis of large volumes of data in order to determine patterns, correlations, relationships, and trends in the data.

Analytical CRMSoftware that assists a business in building customer relationships and analyzes ways to improve them. analyzes data collected by a business to determine information about customers that can inform sales and marketing decisions. Data mining is a crucial step to effective CRM. Web analytics and conversion optimization can be seen as part of the CRM process. Data collected about the nature of visits to your Web site can be used to make informed decisions about where to focus attention based on customer behavior. Past purchasing behavior of customers can be analyzed to predict future purchasing behavior. Data can be used to segment customers, and so communications can be tailored.

For example, uses the purchase history of a customer to make recommendations to that customer for future purchases. Thus, a customer who has purchased a number of cookbooks in the past will be sent offers related to cookbooks. also looks at the purchase behavior of customers who buy the same book and uses those data to recommend books based on similar customers’ preferences. This process is referred to as collaborative filtering.

Sales-force automation uses CRM software to manage sales cycles and to collect customer sales data. The software enables businesses to track leads, to schedule transactions and communications with potential and existing customers, and to generate detailed reporting on the sales process. There are numerous software providers, such as

Collaborative CRMUmbrella term for all the interactive options for serving customers. It is people-based customer support that includes collaborative browsing, Web-based text and voice chat, desktop sharing, application sharing, file transfer, and phone support. refers to a process that combines customer data across all facets of a company. For example, queries regularly submitted to the technical support or customer service arm of a business can be used to inform Web site updates (updating content on the Web site to address a query that is regularly submitted) and to inform product development. Instead of various departments collecting their own customer data and using these in isolation, data are collaborated so that all channels are making informed decisions based on an entire customer experience.

Key Takeaways

  • A successful relationship with a customer is based on meeting or exceeding his or her needs.
  • Maintaining good customer relationships is critical to the success of a business, as costs for most new relationships are more expensive than maintaining existing relationships.
  • The cycle of CRM starts with determining what problems potential customers may have and then presenting solutions to them.
  • Technology can be used to allow an online business to interact personally with a Web visitor. Customers can get unbiased reviews from others online.
  • Customer relationships are no longer driven by telephone contact centers, but instead by blogs, Twitter, e-mail, and IM, as well as CRM channels both pre- and postsale.
  • There are several types of CRM in organizations: operational, analytical, sales-force automation, and collaborative CRM.


  1. Visit Comcast’s page on Twitter ( Study the posts on the page to see how people are talking to Comcast, and how Comcast responds. Describe what you see.
  2. As discussed above, sales-force automation uses CRM software to manage sales cycles. Consider how this may impact business. How do you think businesses managed this type of data before CRM software existed?