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Lecture 06 Electronic Relationship Management
Electronic relationships involve a bond between digital organizations and customers. They can range from discrete transactions to more communal partnerships. Building trust and adding value can help shift relationships toward partnership. Digital organizations benefit from loyal electronic relationships through lower costs, higher prices and greater sales. The stages of an electronic relationship are acquisition, conversion, retention, and dissolution. Interactivity and individualization in digital media can strengthen relationships but also raise costs and privacy issues.
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Lecture 06 Electronic Relationship Management
- 1. Electronic Relationship Management 5G3190 DMCM DavidEdmundson-Bird
- 2. Electronic Relationship Management •So what’s the problem? – You have to produce a digital marketing strategy poster – You have to create a market segmentation exercise – You have to describe a typical digital customer voyage – You have to produce a digital customer experience – You have to consider issues in user experience
- 3. Electronic Relationship Management •So what do you need to learn? – How we define an electronic relationship – Why digital organisations want electronic relationships with digital customers – What the stages of an electronic relationship are – What the effects of digital media with interactivity and individualisation are
- 4. Electronic Relationships • Tobuild a digital customer-centric approach to the digital channel, you have to focus on electronic customer relationships Electronic Customer Relationships Digital Pricing Digital Branding Digital Communication Digital Distribution Social Network Digital Product
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- 6. Defining Electronic Relationships •A “bond” between a digital organisation and its digital customers Exchange-based Communal Discrete Transactions Relationship PartnershipBased on giving one thing in return for another Each entity in the relationship is focussed on meeting the needs of all others in the relationship Parasitic? Symbiotic?
- 7. Making Electronic RelationshipsCommunal • Organisations that want a more communal relationship with digital customers face several opportunities: – Encourage and increase confidence and trust in digital customers – Transmit consistent communications – Create emotional exchange through emotive involvement – Train and motivate customer service personnel – Create a digital presence that adds value Exchange-based Communal Discrete Transactions Relationship Partnership
- 8. Digital Customer Involvement •Electronic relationship link to digital customer values/interests determines digital customer involvement • 3 factors influence involvement: – Product Category • Low cost, irrelevant to life-quality or substitutable product diminish digital customer involvement – Purchase Situation • The context for purchase can stimulate involvement (social perception of product, intended usage) – Digital Consumer Type • Digital consumer life stage and life style impact involvement
- 9. The Electronic RelationshipContinuum Motor Car Rolex Watch Single Malt Posh wine Face soap Spectacles Tissues Disposable razor Liquid bleach Insect repellent Mayonnaise Insecticide Toilet roll Expensive SLR Hi-fi component Credit card Headache tablet Hair dye Deodorant Pop Crisps Washing machine PRODUCT CATEGORY PURCHASE SITUATION DIGITAL CONSUMER TYPE Electronic Relationship Involvement Cost, level of symbolism, risk Visibility, social acceptability Interests, values, attitudes
- 10. WHY DO DIGITALORGANISATIONS WANT ELECTRONIC RELATIONSHIPS WITH DIGITAL CUSTOMERS?
- 11. The Advantages ofElectronic Relationships • High-touch digital customer relationships can have several benefits for organisations – Digital customers anticipate the positive emotional benefits from staying loyal – Digital customers trust the organisation to provide good value – Digital customers feel the digital brand represents who they are because they have similar values – Digital customers actively seek out the organisation’s digital marketing materials, increasing digital marketing effectiveness
- 12. ERM and Profit •ERM can lead to profit (it’s not an ends in itself) – Lower costs • Lower marketing and customer service costs to retain – Higher selling price • Because of time/emotion investment, long-term customers often willing to pay a premium – Greater sales volumes • Long-term customers disclose personal info, leading to increased targeting ability, decreasing cost and increasing customer value
- 13. Electronic Relationship Depth& Profit • ER depth (frequency x magnitude of purchases) is a critical component of customer profitability ££££ £££ ££ £ 1 2 3 4 Long-term profitMagnitude of purchases Frequency of purchases
- 14. Relationship between CustomerLifetime and Profit • Reinartz & Kumar Profitability Customer Lifetime HIGH LOW SHORT LONG
- 15. WHAT ARE THESTAGES OF AN ELECTRONIC RELATIONSHIP?
- 16. 4 Stages ofElectronic Customer Relationship Acquisition Conversion Retention Dissolution Customer has awareness of organisation but no transactions Customer gathers data about the organisation which decides if repeated transactions occur Customer and organisation feel sense of obligation or responsibility to each other Total loss of commitment & relationship
- 17. Moving through theStages • Customers can advance through the stages in several ways Acquisition Conversion Rentention Dissolution
- 18. Commitment Stage • Thereare 2 alternatives at Commitment Stage Retained Stay Retained Dissolution Satisfied profitable customers Unsatisfied or unprofitable customers
- 19. The Acquisition Stage •Easiest stage to cultivate, doesn’t always result in transition Acquisition LEVERS Traditional real-world Media Memorable URL/other entry point Consistency real-world & digital brands Coordinated digital and traditional marketing
- 20. Conversion Stage • KeyStage: determines longevity Conversion LEVERS Attraction Norms Trust Power Relations Satisfaction Customer perceives the organisation to offer advantages that exceed the cost of buying Relationship expectations and behaviour rules are established Customer has faith that an organisation’s word or promise is reliable The ability to mutually influence is established and no party has undue power Interaction provides fulfillment of the consumer’s desires
- 21. Retention Stage • Reflectedthrough interaction Retention INDICATORS Both organisation and customer contribute to the relationship How much each invests will affect the likelihood of future transactions How consistent the exchanges are
- 22. Customer-Initiated Dissolution Dissolution LEVERS A better alternative/ substitute appears Neglector apathy Poor service faulty product or ethical issues Customers outgrow the product category
- 23. Organisation-initiated Dissolution • Profitabilitybelow minimum standard LEVERS Dissolution Customer is “price-motivated” Only buys during “sales” Customer breaks norm Customer too high maintenance Change in strategy makes segment unattractive
- 24. Level of Interactionby Stage • Each stage of the relationship involves a corresponding level of intensity Level of Intensity of interaction with organisation Level of Intensity and Degree of Relationship Acquisition Conversion Retention Dissolution Intensity
- 25. Customer Experience Hierarchy Timeto develop relationship Customer reactions GENERAL PERSONAL OTHER- ORIENTED Acquisiton Conversion Rentention Functional Intimate Internalised Evangelist
- 26. WHAT ARE THEEFFECTS OF DIGITAL MEDIA WITH INTERACTIVITY AND INDIVIDUALISATION ON ERM?
- 27. What do wemean “Interactivity”? • 2-way dialogue between customer and organisation – When “real-world” service personnel handle Digital customer service – When real-world and digital communications are managed together seamlessly – When “chat” is created to discuss product issues – When customers can subscribe to customised content
- 28. What do wemean “Individualisation”? • Customisation of each transaction to individual customer • Requires – Higher customer involvement, expertise and motivation – Unmet customer needs for it to be attractive • Cost and complexity rises whilst speed of service can decline • The issue of privacy loss for customers
- 29. What We’ve CoveredToday • We’ve defined an electronic relationship • We’ve looked at why digital organisations want electronic relationships with digital customers • We’ve explored the stages of an electronic relationship are • We’ve considered the effects of digital media with interactivity and individualisation on ERM