INMA_A01.QXD

Building long-term relationships with customers is essential for any sustainable business,

and this applies equally to online elements of a business. Failure to build relationships

largely caused the failures of many dot-coms following huge expenditure on customer

acquisition. Research summarised by Reichheld and Schefter (2000) showed that acquir-

ing online customers is so expensive (20–30% higher than for traditional businesses)

that start-up companies may remain unprofitable for at least 2 to 3 years. The research

also shows that by retaining just 5% more customers, online companies can boost their

profits by 25% to 95%.

Over the last decade or more, relationship marketing, direct marketing and database

marketing have combined to create a powerful new marketing paradigm. This paradigm

is often referred to as customer relationship management (CRM). A related approach is

known as one-to-one marketing, where in theory, relationships are managed on an indi-

vidual basis. But, owing to the costs of managing relationships on an individual level,

many companies will apply CRM by approaches which tailor services to develop rela-

tionships with particular customer segments or groups, rather than individuals. This

involves a company in developing a long-term relationship with each customer in order

to better understand that customer’s needs and then deliver services that meet these

individual needs.

The interactive nature of the web combined with e-mail communications provides an

ideal environment in which to develop customer relationships, and databases provide a

foundation for storing information about the relationship and providing information to

strengthen it by improved, personalised services. This online approach to CRM is often

known as e-CRM or electronic customer relationship management, and it is on this we

focus in this chapter.

Figure 6.1 summarises the linkages between CRM and existing marketing approaches.

Direct marketing provides the tactics that deliver the marketing communications and

sometimes the product itself to the individual customer. Relationship marketing theory

provides the conceptual underpinning of CRM since it emphasises enhanced customer

service through knowledge of the customer, and deals with markets segmented to the

level of the individual. Database marketing provides the technological enabler, allowing

vast quantities of customer-related data to be stored and accessed in ways that create

strategic and tactical marketing opportunities.

Introduction

Introduction

Customer
relationship
management (CRM)
A marketing-led
approach to building
and sustaining long-
term business with
customers.

One-to-one
marketing
A unique dialogue
occurs between a
company and individual
customers (or groups
of customers with
similar needs).

Electronic customer
relationship
management
Using digital
communications
technologies to
maximise sales to
existing customers and
encourage continued
usage of online
services.

Figure 6.1 Linkages between customer relationship management and related

marketing approaches

Direct

marketing

Customer

relationship

management

Relationship

marketing

Database

marketing

One-to-one

marketing