“I know who you are, I remember you. I get you to talk to me. And then, because I know something about you, my competitors don't know, I can do something for you my competitors can't do - not for any price.” (Newell, 2000)
In today’s business there is a shift of many companies away from a transactional mindset toward a relational mindset when it comes to dealing with customers. That is because researches proofed that nowadays for many companies profitability depends on the companies ability to develop and maintain long-term relationships with their clients (e.g. Lemon et al., 2002, pp.1-14). In order to gain a competitive edge, companies need to be customer-driven and able to serve their customers needs. Moreover, companies have to deliver a certain added value to exceed customer expectations and build strong relationships.
In the traditional market, where face-to-face contact is possible, marketers get to know their clients personally. By personal contact, marketers have the possibility to build a personal relationship with their clients, figure out their needs and finally satisfy their needs by personalized services. As a result, customers are likely to stay with a company and the potential that they become loyal increases.
However, the emergence of the internet and e-commerce makes it is very difficult for companies to build long-term relationships with customers. By means of the internet the personal contact to customers is abolished and a reduction of transaction costs is enabled, which in turn creates a new set of customer expectations. Therefore, the potential that customers will switch to the competition rises dramatically compared to traditional markets. This is because customers now have access to millions of different companies and they can easily compare different products 24 hours and seven days a week.
In order to maintain strong customer relationships in the internet era the modified customer expectations need to be identified. Companies need to figure out what is influencing the satisfaction of customers and how to create loyalty. Competitive forces have to be considered to safeguard the business success. Furthermore, relationship bonds need to be created to encourage customers to remain in a relationship. All of the above will be examined within this report.
Table of Contents
1. Introduction
2. Project description
2.1 Problem definition
2.2 Project assignment
2.3 Objectives
3. Customer Relationship Management
3.1 Customer Relationship Marketing
3.2 Understanding customer satisfaction
3.3 The relationship between satisfaction and loyalty
3.4 Benefits of customer retention
3.4.1 Benefits for buyers
3.4.2 Benefits for marketers
4. The digital age
4.1 E-business
4.2 E-CRM
4.3 Buyer and marketer values
4.3.1 Values to buyers
4.3.2 Values to marketers
4.4 Online customer expectations
4.5 How to retain customers in E-business
4.5.1 Service quality
4.5.2 Database marketing
4.5.3 Personalization by collaborative filtering
4.5.4 Customer integration
4.5.5 Partner programs
4.5.6 Virtual communities
4.5.7 Recovering from service failures
4.5.8 Handling competitive forces
5. Practical application
5.1 Initiation
5.2 Amazon best practice
5.3 Customer retention at Amazon.com
5.4 Conclusion
Objectives & Key Themes
The primary objective of this report is to investigate how online companies can effectively retain a loyal customer base in the challenging environment of the internet marketplace. The work addresses the transition from transactional to relational mindsets and explores tools to manage customer satisfaction and loyalty.
- Analysis of the interconnection between customer satisfaction and loyalty
- Evaluation of relational benefits for both buyers and marketers
- Identification of specific tools and strategies for customer retention in e-business
- Examination of online customer expectations and competitive forces
- Practical case study of Amazon.com's retention strategies
Excerpt from the Book
3.3 The relationship between satisfaction and loyalty
"Although the terms satisfaction and loyalty are sometimes used interchangeably they do not necessarily correspond." (Chaffey et al., 2006, p.261). Satisfaction and loyalty need to be distinguished, because satisfied customers in comparison to loyal customers still have a high potential to switch to competitors. That is why just focusing to satisfy customers is not enough. Satisfied customers will only stay with a company until a better alternative is offered by the competition. This is because satisfaction does not necessarily bring along commitment. Satisfying customers without creating an emotional connection with them has no real value to a company (Mc Ewen, 2003, p.2).
However, "as a customers satisfaction with products and/or services increases, so should their behavioural and emotional loyalty" (Chaffey et al., 2006, p.261). If a customer is loyal the potential that the customer switches to the competition is reduced by far. This is because loyalty brings a long several benefits for customers. Those benefits are identified and explained in the Chapter 3.4: Benefits of customer retention.
Summary of Chapters
1. Introduction: This chapter introduces the shift from a transactional to a relational business mindset and highlights the challenges the internet poses for long-term customer relationships.
2. Project description: This section defines the core problem of unpredictable internet revenues and sets the objective of identifying strategies to retain loyal customers.
3. Customer Relationship Management: This chapter analyzes the definition and goals of CRM, focusing on the link between satisfaction, loyalty, and the resulting relational benefits.
4. The digital age: This chapter examines the specific environment of E-business, defining E-CRM, buyer-marketer values, and specific tools to handle service quality and competitive forces.
5. Practical application: This section evaluates Amazon.com as a best-practice example, analyzing its methods for convenience, personalization, and community interaction.
Keywords
Customer Relationship Management, CRM, E-business, Customer Loyalty, Customer Retention, Online Marketing, Satisfaction, Collaborative Filtering, Service Quality, Database Marketing, Virtual Communities, Competitive Forces, Amazon.com, Personalization, Customer Expectations
Frequently Asked Questions
What is the core focus of this report?
The report focuses on the challenges of retaining loyal customers in the online marketplace, where competition is often just one click away.
What are the central themes of the work?
The central themes include the relationship between customer satisfaction and loyalty, the benefits of retention for both parties, and the digital tools used to maintain customer commitment.
What is the primary goal or research question?
The primary goal is to determine to what extent online companies can establish a loyal customer base and identify the tools required to achieve this.
Which scientific methodology is applied?
The report uses an analytical review of existing literature on marketing and relationship management, followed by a practical case study analysis of Amazon.com.
What is covered in the main body of the work?
The main body covers the theoretical foundations of CRM, the specific characteristics of the digital age, customer expectations, and various retention tools like service quality and collaborative filtering.
Which keywords best characterize the work?
Key terms include Customer Retention, Customer Loyalty, CRM, E-business, and Online Customer Expectations.
Why is Amazon.com used as a case study?
Amazon.com is frequently cited as a best-practice company in the digital era, making it an ideal subject to observe real-world application of the retention strategies discussed.
How does the report link satisfaction to loyalty?
The report highlights that while satisfaction is necessary, it does not guarantee loyalty, as satisfied customers may still switch to competitors if they lack emotional commitment to the company.
What is the role of 'collaborative filtering' in customer retention?
It is used as a personalization tool that evaluates past purchases to provide recommendations, thereby enhancing the customer's feeling of being recognized and valued.
- Quote paper
- Tim Stricker (Author), 2007, Retaining loyal customers in e-commerce - Winning customers is good, but keeping them is better, Munich, GRIN Verlag, https://www.grin.com/document/85346
