From Business Strategy to IT Action - Research Paper Example

CRITICAL REVIEW: e-CRM AND CUSTOMER LOYALTY PROJECT RATIONALE An increasing percentage of dominant industrial economies of the world are directly or indirectly dependent upon their sales in the form of exports or imports. Revenue generation is governed by the ability of an economy to operate globally. The same generalization applies for firms and organizations. With the advent of modern technology, it has become possible for organizations to conduct trade and manage business on a global scale. To setup a venture on a global scale, some sort of an inter-connect is essential. In today’s world, the world-wide-web does the trick for most of the organizations. This very concept of globalization has led basis for a new type of business conducting strategy termed as e-business. Explained as any kind of sale, service, purchase or commerce operation over an electronic medium as the internet, the e-business concept has drastically morphed the means by which companies can reach out to their customers and conduct trade. Setting up an e-business is not simple. Some of the challenges include communicating with distant distributors and suppliers, operating 24/7 un-interrupted throughout the year and guaranteeing quality to local and international customers. A business process forms the core of an organization and depicts the manner in which the organization coordinates and arranges work procedures, information and knowledge to produce a product or render a service. A venture in which all important business processes and relationships with customers, vendors and employees utilize the internet falls under the category of a digital firm. Pure digital firms operate in a total virtual world; they are all clicks. Internet technology is creating a global platform for carrying out trade and for fueling business processes. Where transition to e-business results in increased customer service, increased sale and reduction in costs; a whole new set of challenges that must be met have been introduced. The challenges are not all technical. Many involve a change in the business strategy and the overall mindset. Digital firms require new management styles and organizational designs. Successful implementation of the electronics commerce or the electronics business requires the companies to examine and redesign the entire or part of the existing business process. Simply providing an interconnect technology to the existing business practice does not always generate the results. Companies have to sort a different organizational structure, changes in organizational culture, a different support mechanism for end systems, different methods of managing employees and networked processing functions. Starting a new venture needs the entrepreneur to take all these challenges into considerations. The conventional business strategy might not work well. Companies have raced to put up websites in the hope of increasing the earnings through electronics commerce. Many electronics commerce sites are to produce profitable figures. Merely starting a website does not guarantee the cost saving or access to new markets. It needs to be carefully thought that whether genuinely workable business model has been created and if the internet technology relates to the overall business strategy effectively. Electronic business requires different strategies for ordering, advertising and customer support; way different than a traditional business1. As with any business, the flourishing is dependent on the organization’s efforts for maximization of sales to the existing customers and encouragement of usage continuation of the current service. The practice is termed as customer relation management (CRM)2. An internet based venture utilizes digital communication for this particular purpose resulting in a modified form of the practice – the electronic CRM. The problem Kelly et al. investigate is to develop a relationship between CRM and customer retention within an internet based organization. Analysis of linkage between effective customer relations marketing and consequent effect on price sensitivity is also presented. The overall goal of this study is to establish whether e-CRM affected the loyalty of customers who purchase items over the Internet from ``pure-clicks’’ e-retailers. LITERATURE REVIEW A notion of what and how the enterprise delivers a product or service, governing how the enterprise wealth is created, is termed as a business model3. A number of internet business models exist. The important ones have been categorized and briefly explained below. The models have one thing in common, all of them in way or the another add value. With such models, the customer is provided with a new product or service, additional information or service with a traditional product or service or a product or service with a lower cost than a traditional equivalent. Most of these models have been possible due to the internet’s excellent communication capacity. A Virtual Storefront sells physical goods or services online instead of through a physical storefront or retail outlet Delivery of non-digital goods and services takes place through traditional means. Examples include Amazon.com, Wine.com, WingspanBank.com Marketplace concentrator concentrate information about products and services from multiple providers at one central point. Purchasers can search, comparison-shop, and sometimes complete the sales transaction. Examples include ShopNow.com, InsureMarket, DealerNet On-line exchange comprises of bid-ask systems where multiple buyers can purchase from multiple sellers. Covisint, Fibermarket are important examples. Information broker provides product, pricing and availability information, some facilitate transactions, but the prime function is the information provided. Include PartNet, Travelocity. In a transaction broker buyers can view rates and terms, but the chief business activity is to complete the transaction. Examples include E*TRADE, Ameritrade. Auction provides electronic clearance sale facility where produts where the piece and availability are constantly changing, controlled in response to customer actions. eBay, Ubid, BIgEquip.com are important examples. In Reverse Auction Consumers submit a bid to multiple sellers to buy goods or services at a buyer specified price. Examples include Priceline.com, ImportQoute.com. In An Aggregator model groups of people who want to purchase a particular product signup and then seek a volume discount from vendors. Examples include MobShop.com. Digital Product Delivery model aims to sell and deliver software, multimedia and other digital products over the internet. Regards.com and Photodisc are important examples. A content Provider creates revenue by providing content. The customer may pay to access the content, or revenue may be generated by selling advertisement space or by advertisers pay for placement in a organized listing in a searchable database. Examples include Wall Street Journal Interactive, Salon.com and TheStreet.com. Online service providers provide services and support for hardware and software users. PCSupport.com, @Backup, Xdrive.com are important examples. A Virtual Community provides online meeting places where people with similar interests can communicate and find useful information. Examples include GeoCities, FortuneCity, and Tripod. A Portal provides initial point of entry to the web along with specialized content and other services. Examples are Yahoo, Barrabas. The Syndicator model aggregates content or applications from multiple sources and resells them to other companies. Examples include Thinq and Screaming Media. With the development of these models for e-business came in the effort to maximize revenue generation. For revenue generation, customer attraction is necessary4. Organizations started doing whatever it might take to attract customers to their sites. It soon became clear that the challenge was not simply to bring the customers in the door but also to retain these customers for future purchases. Dholakia and Bagozzi5 summarized how consumers make their purchasing in the new digital environment. Haubl and Triftis6 discussed consumer decision making and the impact of decision aids in the decision making process. Ariely and Carmon7 deduced that an important part of the purchase experience occurs at the end of the purchase process, when critical factors influence one’s likelihood to return to the same site. Reibstein8 in his study revealed survey and behavioral data drawn from Internet customers that reflected what was most important to the Internet shoppers and compare the factors for attraction versus retention. The factors, in descending order of their significance in customer retention, included customer support, on time delivery, product representation, shipping, handling, posted privacy policy, ease of ordering, product information, website navigation and products selection. DESIGN AND METHODOLOGY Conduction of initial researches to establish which product categories had the highest purchase online is important in the preparation of the questionnaire which are set to serve as the basis for the survey data collection. The author chose Nielsen Netratings to acquire a list of the top 15 e-retailers in the USA. Each e-retailer’s Website was visited and a list of the products sold was prepared. The result depicted that the most common set of products sold online were books, CDs, DVDs and console games. Another survey was conducted During July 2001 aimed at providing confirmation that, at the time of research, there were 1,314 Web sites listed selling books, CDs, DVDs and games. From this result, the authors inferred that these products were the most popular products sold over the Internet in the UK at that time. For this study, two questionnaires were developed. The first questionnaire was formed to measure the e-CRM effort employed by each of the selected e-retailers. The second questionnaire was developed to capture the perception of e-CRM received, their expressed loyalty and sensitivity to the price changes. IBM UK was chosen as the sample frame as it provided a rich mixture of age, ethnic cultural roots, job position and disposable income levels, ideal for such a study. From a total of 21,082 employees, the minimum sample size was calculated at 2,103. 4,216 employees were randomly selected from the e-mail addresses of IBM UK to participate in the survey. Once a target respondent received the e-mail, the questionnaire was presented to him/her via the Web browser. If a respondent indicated he/she had never purchased from the Internet, the survey was considered ``complete’’ and, on return, it was included in the analysis. If the respondent had purchased from the Internet, data was collected about what product type, or types, were bought. To qualify for the final stage of the questionnaire, the respondent was asked whether he/she had purchased a CD, DVD, book or console game from the Internet. A negative response at this point meant that the survey was over and the returned questionnaire included in the analysis. The remaining respondents were then asked to indicate which e-retailer they had purchased a CD, DVD, books or console game from and to complete the main section of the questionnaire which gathered data on the project’s main constructs. RESULTS To check the internal reliability of the questionnaire scales, Cronbach’s alpha was used. Cronbach's alpha measures how well a set of items (or variables) measures a single unidimensional latent construct. When data have a multi-dimensional structure, cronbach's alpha will usually be low. Altenatively, cronbach's alpha can be viewed as a measure of consistency. Factor Analysis is a method for investigating whether a number of variables of interest are linearly related to a smaller number of un-observable factors. It was used to measure the same construct and then compared to assess internal construct validity. In case of the first hypothesis, the results obtained depicted a positive relationship between the extent of implementation of the e-CRM in a business venture and the customer’s perception of the reception of the e-CRM. The second hypothesis proposes a positive relationship between the amount of e-CRM a customer believes he/she has received from an e-retailer and the customer’s loyalty towards that e-retailer. The third hypothesis proposes an inverse relationship between the amount of e-CRM a customer believes he/she has received from an e-retailer and the customer’s price sensitivity towards any changes in the prices of CDs, DVDs, books and console games sold by thee-retailers. The final hypothesis proposes a relationship between the customer’s loyalty towards an e-retailer and that customer’s price sensitivity towards the products sold by the e-retailer. E -‘Customer Relationship Management is a comprehensive approach for creating, maintaining and expanding customer relationships’. CRM does not belong to just sales or marketing9. It is not the sole responsibility of customer service group or an IT team; i.e. CRM must be a way of doing business that touches all the area An approach is broadly a way of treating or dealing with something. CRM is a way of thinking about and dealing with the customer relationship. CRM strategy can usually serve as a benchmark for other strategies in an organization. Each strategy must support managing customer relationships. Thus CRM is strategic. In today’s world where we do business with individuals or groups with whom we may never meet and hence much less know in person to person sense. CRM is about creating the feel of comfort in this high tech environment10. REFERENCES Ariley D., and Carmon Z. (2000). Gestalt Characteristics of Experiences: The defining features of summarized events. Journal of Behavioral decision making. Benson J.R. & Buqnitz . (2004). From Business Strategy to IT Action: Right Decisions for a Better Bottom Line. Publisher: John Wiley & Sons Dholakia V., and R.P., Bagozzi.(2001). Consumer Beahavior in Digital Environments. In Digital Marketing. John Wiley and Sons. Haubl G., and V. Trifts.(2000). Consumer decision making in online shopping environments. Working Paper, Wharton School, University of Pennsylvania. Laudon K.C. & Laudon J.P. (2002). Information Systems: Managing the digital firm. 7 edition. Publisher: Prentice Hall Peel J, Gancarz M. (2002). CRM: Redefining Customer Relationship. Digital press.. Reibstein. J.R (2001). What Attracts Customers to Online Stores, and What Keeps Them Coming Back? Working Paper.University of Pennsylvania Ray P K. (2003). Integrated Management from E-business Perspective. Publisher: Springer Shin N. Strategies for Generating E-business Returns on Investment by Ideal Group Inc 2002. WyattHaines R. (2007).Align IT: Business Impact Through IT publisher: John Wiley & Sons Read More