Electronic Relationship Management

5G3190 DMCMDavid Edmundson-Bird

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

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

Electronic Relationships

• To build a digital customer-centric approach to the digital channel, you have to focus on electronic customer relationships

ElectronicCustomer

Relationships

DigitalPricing

DigitalBranding

DigitalCommunication

DigitalDistribution

SocialNetwork

DigitalProduct

DEFINING ELECTRONIC RELATIONSHIPS

Defining Electronic Relationships

• A “bond” between a digital organisation and its digital customers

Exchange-based Communal

Discrete Transactions RelationshipPartnershipBased on giving

one thing in returnfor another

Each entity in therelationship isfocussed on meetingthe needs of all othersin the relationship

Parasitic?

Symbiotic?

Making Electronic Relationships Communal

• 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 RelationshipPartnership

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

The Electronic Relationship Continuum

Motor Car

Rolex Watch

Single Malt

Posh wine

Face soap

Spectacles

Tissues

Disposable razor

Liquid bleachInsect repellent

Mayonnaise

Insecticide

Toilet roll

Expensive SLR

Hi-fi component

Credit card

Headache tablet

Hair dye

Deodorant

PopCrisps

Washing machine

PRODUCT CATEGORY

PURCHASE SITUATION

DIGITAL CONSUMER TYPE

ElectronicRelationshipInvolvement

Cost, level of symbolism, risk

Visibility, social acceptability

Interests, values, attitudes

WHY DO DIGITAL ORGANISATIONS WANT ELECTRONIC RELATIONSHIPS WITH DIGITAL CUSTOMERS?

The Advantages of Electronic 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

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

Electronic Relationship Depth & Profit

• ER depth (frequency x magnitude of purchases) is a critical component of customer profitability

££££

£££

££

£

1 2 3 4

Long-termprofitMagnitude

of purchases

Frequencyof purchases

Relationship between Customer Lifetime and Profit

• Reinartz & Kumar

Profitability

Customer Lifetime

HIGH

LOW

SHORT LONG

WHAT ARE THE STAGES OF AN ELECTRONIC RELATIONSHIP?

4 Stages of Electronic Customer Relationship

Acquisition Conversion Retention Dissolution

Customer hasawareness oforganisation butno transactions

Customer gathersdata about theorganisation whichdecides if repeatedtransactions occur

Customer andorganisation feelsense of obligationor responsibility toeach other

Total loss ofcommitment &relationship

Moving through the Stages

• Customers can advance through the stages in several ways

Acquisition Conversion Rentention Dissolution

Commitment Stage

• There are 2 alternatives at Commitment Stage

Retained

StayRetained

Dissolution

Satisfied profitablecustomers

Unsatisfied orunprofitable customers

The Acquisition Stage

• Easiest stage to cultivate, doesn’t always result in transition

Acquisition

LEVERS

Traditionalreal-worldMedia

MemorableURL/otherentry point

Consistencyreal-world &digital brands

Coordinateddigital andtraditionalmarketing

Conversion Stage

• Key Stage: determines longevityConversion

LEVERS

Attraction

Norms

Trust

PowerRelations

SatisfactionCustomer perceivesthe organisation tooffer advantagesthat exceed thecost of buying Relationship

expectations andbehaviour rulesare established

Customer hasfaith that anorganisation’sword or promiseis reliable The ability to

mutually influenceis established andno party hasundue power

Interactionprovidesfulfillment ofthe consumer’sdesires

Retention Stage

• Reflected through interactionRetention

INDICATORS

Both organisationand customercontribute to therelationship

How much eachinvests willaffect the likelihoodof futuretransactions

How consistentthe exchangesare

Customer-Initiated Dissolution

Dissolution

LEVERS

A betteralternative/substituteappears

Neglect orapathy

Poor servicefaulty productor ethicalissues

Customersoutgrow theproductcategory

Organisation-initiated Dissolution

• Profitability below minimum standard

LEVERS

Dissolution

Customer is“price-motivated”Only buys during“sales”

Customerbreaks norm

Customer toohighmaintenance

Change instrategy makessegmentunattractive

Level of Interaction by Stage

• Each stage of the relationship involves a corresponding level of intensity

Level of Intensity ofinteraction

withorganisation

Level of Intensity and Degree of Relationship

Acquisition Conversion Retention Dissolution

Intensity

Customer Experience Hierarchy

Time to develop relationship

Customerreactions

GENERAL

PERSONAL

OTHER-ORIENTED

Acquisiton

Conversion

Rentention

Functional

Intimate

Internalised

Evangelist

WHAT ARE THE EFFECTS OF DIGITAL MEDIA WITH INTERACTIVITY AND INDIVIDUALISATION ON ERM?

What do we mean “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

What do we mean “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

What We’ve Covered Today

• 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