Customer Relationship Management: a Framework, Research Directions, and the Future
Customer Relationship Management: A Framework, Research Directions, and the Future
Russell S. Winer Haas School of Business University of California at Berkeley
April 2001
Introduction The essence of the information technology revolution and, in particular, the World Wide Web is the opportunity to build better relationships with customers than has been previously possible in the offline world. By combining the abilities to respond directly to customer requests and to provide the customer with a highly interactive, customized experience, companies have a greater ability today to establish, nurture, and sustain long-term customer relationships than ever before. The ultimate goal is to transform these relationships into greater profitability by increasing repeat purchase rates and reducing customer acquisition costs. Indeed, this revolution in customer relationship management or CRM1 as it is called, has been referred to as the new “mantra” of marketing.2 Companies like Siebel, E.piphany, Oracle, Broadvision, Net Perceptions, Kana and others have filled this CRM space with products that do everything from track customer behavior on the Web to predicting their future moves to sending direct e-mail communications. This has created a worldwide market for CRM products and services of $34 billion in 1999 and which is forecasted by IDC to grow to $125 billion by 2004.3 The need to better understand customer behavior and focus on those customers who can deliver long-term profits has changed how marketers view the world. Traditionally, marketers have been trained to acquire customers, either new ones who have not bought the product category before or those who are currently competitors’ customers. This has required heavy doses of mass advertising and price-oriented promotions to customers and channel members. Today, the tone of the conversation has changed from customer acquisition to retention. This requires a different mindset and a
2
different and new set
Russell S. Winer Haas School of Business University of California at Berkeley
April 2001
Introduction The essence of the information technology revolution and, in particular, the World Wide Web is the opportunity to build better relationships with customers than has been previously possible in the offline world. By combining the abilities to respond directly to customer requests and to provide the customer with a highly interactive, customized experience, companies have a greater ability today to establish, nurture, and sustain long-term customer relationships than ever before. The ultimate goal is to transform these relationships into greater profitability by increasing repeat purchase rates and reducing customer acquisition costs. Indeed, this revolution in customer relationship management or CRM1 as it is called, has been referred to as the new “mantra” of marketing.2 Companies like Siebel, E.piphany, Oracle, Broadvision, Net Perceptions, Kana and others have filled this CRM space with products that do everything from track customer behavior on the Web to predicting their future moves to sending direct e-mail communications. This has created a worldwide market for CRM products and services of $34 billion in 1999 and which is forecasted by IDC to grow to $125 billion by 2004.3 The need to better understand customer behavior and focus on those customers who can deliver long-term profits has changed how marketers view the world. Traditionally, marketers have been trained to acquire customers, either new ones who have not bought the product category before or those who are currently competitors’ customers. This has required heavy doses of mass advertising and price-oriented promotions to customers and channel members. Today, the tone of the conversation has changed from customer acquisition to retention. This requires a different mindset and a
2
different and new set