Organization of the Book

The book is organized into four sections with 11 chapters. Section I addresses the role of Customer Relationship Management (CRM) in the context of Internet and mobile commerce channels. CRM has become increasingly important for companies as electronic and wireless technologies have provided new opportunities to interact with customers. The evolution of CRM from traditional systems to e-CRM to wireless CRM has provided companies with both new challenges and new opportunities for developing innovative customer strategies. Companies in the digital era have been forced to reinvent their companies from the customer perspective. Chapter 1 addresses a broad array of issues related to evolving CRM systems and potential research directions. Section II addresses specific issues related to wireless technologies and mobile commerce. Specifically, Chapter 2 addresses the issues of information presentation on handheld devices. This issue has been significant from the consumer perspective. Information must be packaged in ways that limit the amount of information that must be read by the end user but at the same time provide value in timely information. The authors address the issues of human interface and interaction in this context. Chapter 3 addresses the critical issue of making payments on mobile devices. Many believe solutions to mobile payments may be a driving force behind mobile commerce. In this chapter the authors examine the various options for mobile payments and resulting challenges. Standards, security and consumer acceptance are discussed in this context. Chapter 4 examines the issues associated with 3G multimedia services specifically from the perspective of the Italian market. Conclusions from the study can be compared and applied to other markets. Lessons learned may be relevant for other markets. Finally, Chapter 5 addresses a broad perspective on wireless technology and mobile commerce for developing countries. Developing countries have found it advantageous to leapfrog traditional

technologies through the use of wireless applications. The authors provide specific examples of how these technologies are being implemented and the development of new business opportunities afforded by these technological advancements. Section III takes a more focused look at specific technologies and issues relevant to the digital age in general. Chapter 6 examines digital watermarking technology in the context of specific applications and potential problems. The authors explain the specifics of the technology and its potential benefits. Chapter 7 addresses digital rights management and the issues related to the protection of intellectual property in digital format. The authors develop a domain model to provide insights on issues and future trends. Chapter 8 looks at the dynamic nature and role of ad hoc networks. Change rates are examined in the context of these networks that form, change and dissolve in an ad hoc way routinely. The authors examine the impact of these networks on network functionality. In Section IV, the focus shifts to specific issues relevant to electronic business. In Chapter 9 the authors report results of an empirical study that measures the loyalty of Internet shoppers to online companies. Based on the findings, the authors provide recommendations for online companies. In Chapter 10, findings of a study on managers’ perceptions of the benefits and difficulties of Internet use in hotels is discussed. Finally, a case study is presented in Chapter 11 that addresses the pros and cons and other issues relevant to reverse auctions. A strength of the book is its international flavor. Authors of the chapters are from a variety of countries all over the world. This gives the reader perspectives on the issues from different world viewpoints. Culture, the role of government, legal environments and other differences among countries may play a key role in the direction countries take on various technologies and the significance of security, privacy, ethics and other related issues. It has become increasingly important to look at the direction of technological advancement, trends, and specific applications from a global perspective.

I would like to thank all the authors who made contributions to this book. Without their dedication and interest the book would not have been possible. I would also like to acknowledge all those involved in the review process. Their constructive and comprehensive reviews were valuable to the overall process and quality of the final product. Special thanks go to the publishing team at Idea Group Inc. Mehdi KhosrowPour and Jan Travers always provide encouragement and professional support. It has been a pleasure to work with the editorial team led by Jennifer Wetzel. This project went smoothly because of the support and organization from all those involved at Idea Group.

Candace Deans January 2004

Section I

Customer Relationship Management: Internet and Wireless Channels

Customer Relationship Management on Internet and Mobile Channels 1

Chapter I

Customer Relationship Management on Internet and Mobile Channels: An Analytical Framework and Research Directions

Susy S. Chan, DePaul University, USA

Jean Lam, IBM, USA

Abstract

The Internet has served as an effective channel for companies to build and manage relationships with customers. The mobile channel, emerging from the convergence of wireless communications and the mobile Web, promises to deliver additional support to meet consumer needs. This chapter examines features of customer relationship management (CRM) as implemented on the Internet (eCRM) and the mobile channel (mCRM) from the customer’s perspective. It further explores how companies can

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better coordinate their CRM strategies between these two channels to support e-commerce customers. We propose an analytical framework to examine the current eCRM and mCRM practice in terms of customer loyalty, branding, customer satisfaction, customization, and trust. These five factors affect customer acquisition, sales and services, and customer retention. A checklist was developed to guide the evaluation of CRM practice for e-commerce sites. Several examples and research directions are discussed in the chapter.

Introduction

Customer relationship management (CRM) involves the deployment of strategies, processes, and technologies to strengthen a firm’s relationship with customers throughout their lifecycle – from marketing and sales, to post-sales service. The motivation for CRM stems from companies’ desire to increase their revenues and profitability through improved customer satisfaction and retention (Reichheld, 1996; Reichheld & Sassar, 1990; Winer, 2001). Internet technology has transformed CRM into electronic CRM (eCRM), because companies can use Internet technologies to capture new customers, track their preferences and online behaviors, and customize support and services. Furthermore, the convergence of wireless communication and mobile Internet provides companies with opportunities to interact with their customers through a new mobile channel. Despite the potential growth of mobile commerce for location-aware and customer-aware services (Varshney, 2003), recent research points out that most mobile sites were designed primarily for supporting existing e-commerce customers (Chan et al., 2002). Customers who are already familiar with the interface and services provided on a company’s Web site are likely to benefit more from its mobile site. Therefore, out of a wide range of mobile services (Varshney, 2003; Varshney & Vetter, 2001), it is logical to consider the mobile channel as appropriate for building and retaining relationships with existing customers. Because of current technology and usability barriers (Chan & Fang, 2003; Ernst & Young, 2001; Shim et al., 2002), businesses and consumers are hesitant to adopt the mobile channel. Research is needed to examine how the mobile channel can be effectively leveraged to attract and retain e-commerce customers.

Customer Relationship Management on Internet and Mobile Channels 3

The main purpose of this chapter is to provide an analytical framework for examining how companies can build and manage relationships with their ecommerce customers by leveraging the Internet and the mobile channels. We take a customer’s perspective in examining the firm-customer interactions through these two channels. The chapter focuses on the features of content and services presented on companies’ Web and mobile sites. Our intent is to identify (a) how CRM can be effectively coordinated between these two channels, and (b) key research questions pertinent to the eCRM and mCRM coordination. Our proposed framework examines CRM implementation across three phases of an e-commerce site’s interactions with its customers – acquisition, sales/service, and retention. Interactions in each phase are also examined along five factors that are essential to Internet-based CRM solutions: (1) customer loyalty, (2) branding, (3) customer satisfaction, (4) customization, and (5) trust. We apply this framework to several e-commerce sites and their corresponding mobile sites to explore how CRM features are currently incorporated into these sites. A checklist, derived from the framework, was used for the site analysis. From this exploratory work, we identify commonalities between eCRM and mCRM, and the respective roles played by each channel. Furthermore, we propose a set of research questions for future investigation. This chapter contributes to a better understanding of mobile commerce technology and strategies. In particular, it addresses how organizations can optimize CRM by leveraging the unique characteristics of Internet and wireless technologies.

CRM and E-Commerce

CRM Research

CRM is a strategy for companies to build and manage long-term relationships with their customers. Researchers have shown that CRM implementation can provide better customer service, as well as improvement and management of customer expectations and loyalty (Cho et al., 2001; Reichheld, 1996; Reichheld & Sassar, 1990; Romano, 2001; Winer, 2001). CRM also complements a firm’s capability to present products, quality, and services to its customers (Chen & Sukpani, 1998). By implementing CRM solutions, many

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firms expect to improve profitability by gaining customer loyalty, customizing offerings, and lowering costs. The increasing pressure on profitability has motivated companies across different industry sectors to invest in CRM solutions. An Internet impact study shows that CRM applications are the most widely adopted e-business solutions (Varian et al., 2002). On the average, 71% of companies in this study have adopted Internet-based solutions for customer service and support, 68% adopted e-marketing for customer development, and 52% adopted e-commerce for sales and transactions. Generally, an investment in retaining repeat customers contributes more to a company’s profitability than do marketing expenditures for attracting new customers. Reichheld and Sassar (1990) have demonstrated that the overall profit generated by existing customers over seven years exceeded those generated by new customers. For e-commerce companies, the need to expand customer base and attract repeat customers may be equally important for their sustainability. Forrester Research (2003) has projected online retail sales to grow to $96 billion in 2003, a 26% increase from 2002. However, this growth only represents 4.5% of total retail sales in 2003. E-commerce still has potential for further growth. Therefore, a dual emphasis on customer acquisition and retention is important to achieve profitability for ecommerce companies. CRM approaches are built on the concept of relationship marketing, which emphasizes building a long-term relationship with individual customers. In contrast, traditional transaction marketing maintains a short-term focus on the transaction of products. Relationship marketing embraces strategies of personal and ongoing exchanges with customers for brand management, feedback, knowledge acquisition, and customer differentiation (Moon, 2002). Knowledge acquisition enables companies to gather better information about their customers through some type of self-disclosure. Customer differentiation allows companies to offer services that match different customer needs and customer values. Essential to relationship marketing is the strategy of customizing the marketing mix – products, services, communications, channels, and price. Thus, “the relationship marketing process involves an iterative cycle of knowledge acquisition, customer differentiation, and customization of the entire marketing mix” (Moon, 2002). Researchers and industry practice tend to adopt a suppliers’ (or firms’) perspective of relationship marketing by emphasizing the goal of customer retention and profitability (Hennig-Thurau & Hansen, 2000; Hennig-Thurau & Klee, 1997). Most of the relationship and loyalty programs tend to focus on the

Customer Relationship Management on Internet and Mobile Channels 5

company’s drive for transforming relationships into profit (Winer, 2001). In contrast, less attention has been devoted to understanding customers’ motives and wishes regarding their relationships with the companies. The IT approach to CRM stems from early research on customer resource life cycle (CRLC). Different life cycle modes have been used for analyzing how a company can strengthen its relationship with customers through the application of information technology (Burnstine, 1980; Ives, 1984). Ives (1984) expands IBM’s four-stage model into 13 steps to: (1) establish customer requirements, (2) specify requirements, (3) select sources, (4) order products or services, (5) authorize and pay for product/services, (6) acquire products/services, (7) test and accept products/services, (8) integrate products/services into existing processes, (9) monitor product/service performance, (10) upgrade products/ services, (11) maintain the condition of products/services, (12) transfer or dispose of products/services, and (13) account for the products/services. In practice, this CRLC model may be simplified into three broad phases of interactions between a firm and its customers – acquisition, sales/service, and retention. For e-commerce, the acquisition phase emphasizes marketing activities that are based on personalization technology to facilitate the customer decision process in the pre-sales phase. During the sales phase, creating customized transactions makes a customer’s shopping and purchasing experience more efficient and satisfactory (Lee & Shu, 2001). An e-commerce site can enhance customer retention by building customer trust and loyalty through a variety of online features (Hoffman et al., 1999; Lee & Shu, 2001; Papadopoulou et al., 2001). These features enable customers to check the status of transactions, shipments and orders, and to work collaboratively with the sales force. Incentives for repeat visits through push e-mails and other loyalty programs can also enhance customer trust and loyalty.

Electronic CRM

Internet technology enables companies to capture new customers, track their preferences and online behaviors, and customize communications, products, services, and price. The mass customization concept, or the one-to-one approach, promoted by writers such as Peppers and Rogers (1993), has become the “mantra” of eCRM (Winer, 2001). A company’s e-commerce Web site integrates marketing, sales/service, and post-sales support as a

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seamless front-end to meet customer needs. Therefore, e-commerce Web sites have become viable channels for customer acquisition, sales/service, and retention. The Internet plays an active role in customer acquisition via e-marketing, which emphasizes proactive and interactive communications between companies and their customers. Companies can provide information on products and services on their Web sites for prospective customers. Advanced searching capability and functions for product and service inquiry can attract new and repeat customers to visit, compare products and prices, and reach decisions for purchase. Companies also create online communities to facilitate social groups among existing and prospective customers. Online product discussions and reviews encourage customer-initiated communications between firms and customers and among fellow customers (Strauss, 2000). These online communities improve customer loyalty, branding, and trust, which can lead to increased sales and improved customer relationships (Lee & Shu, 2001).

The Mobile Channel

The convergence of mobile Internet and wireless communication technology has promised users “anytime anywhere” access to information for their work and personal communication. Mobile services support m-commerce transactions and improved management of personal activities, mobile office, and mobile operations (Alanen & Autio, 2003). Among many mobile applications proposed by wireless researchers (e.g., Kannan et al., 2001; Mannecke & Strader, 2001; Varshney & Vetter, 2002), mobile financial applications, location-aware and context-aware advertising, and location-based services seem to hold special promise (Varshney, 2003). These mobile services may provide customized support for individual users. Many researchers point to four reasons that the mobile channel could be used to build relationships with customers. The mobile channel and wireless technology enable companies to: (1) personalize content and services; (2) track consumers or users across media and over time; (3) provide content and service at the point of need; and (4) provide content with highly engaging characteristics (Kannan et al., 2001). Anckar and D’Incau (2002) point out that consumers are most interested in services with high mobile values that meet spontaneous and time critical needs, such as checking stock quotes, driving directions, and short messages.

Customer Relationship Management on Internet and Mobile Channels 7

A recent study indicates that, at present, most of the available mobile sites tend to share similar interfaces with their corresponding Web sites and primarily support existing customers (Chan et al., 2002). For example, Amazon only offers the 1-click order option for purchasing from its wireless site. This feature does not allow customers to review order details before submitting the order. Once an order is submitted, it is difficult for customers to navigate to the right screen on the handheld device to cancel the order. Therefore, only experienced mobile customers who have already built trust in Amazon and the interface of the 1-click order option would find it efficient to order products from the mobile Amazon site. In comparison, new customers would be hesitant to use the mobile channel. In the case of accessing eBay by a wireless PDA device, users often encounter a large number of results from a product search. The high volume of transferred data can result in connection errors and frustrate new customers. Only seasoned eBay customers are more likely to benefit from using a handheld device to monitor a bid in progress. These findings imply that current mobile sites have been designed primarily to support existing e-commerce users. The inherent difficulties using the wireless technology may discourage prospective customers from exploring a new mobile site. These barriers include limited bandwidth and poor connectivity, small screen display, and difficulty in input formats of wireless handheld devices (Chan & Fang, 2003). The study by Anckar and D’Incaur (2002) indicates that e-commerce users are more likely to adopt m-commerce services. Their finding further confirms the proposition that the mobile channel is more relevant to customer support and retention than acquisition.

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