Critically evaluate the extent to which customer relationship management strategy and processes can achieve effective customer

intimacy for the mutual benefit of both organisation and customer, with reference to Amazon. Customer Relationship Management (CRM) is used to build personalised relationships with customers which drive value for the firm. By using CRM strategies companies can reduce overall marketing costs, increase customer response rates, and most importantly, increase overall customer and firm profitability ( umar, !"#"). $ma%on.com are the biggest online retailer in the &' with online sales topping ()*,""",""",""" which is nearly five times higher than its nearest competitor (+nternet retailer, !"#!, online). $ma%on.co.uk is also the biggest online retailer in the & , ahead of both $rgos and $pple (,igital 'trategy Consulting, !"#!, online). $ma%on.com as well as $ma%on.co.uk use very similar if not identical CRM strategies, therefore, e-amples from both will be given to look at the e-tent to which CRM strategy and processes can achieve effective customer intimacy for the mutual benefit of both $ma%on as the organisation and customer. $ma%on itself implements a wide range of different CRM strategies, a number of these shall evaluated, and an overall conclusion of the effectiveness of $ma%ons. CRM strategies shall be given. /his paper will look through the entire $ma%on process beginning with the processes of setting up your own $ma%on account, and then looking at how $ma%on is able to retain such high percentages of its customers, 0enkinson (!""1) states that around 1)2 of its &' category buyers are committed and loyal to $ma%on, compared with an industry average of under #"2. 3owever, before this paper looks into the CRM strategies implemented by $ma%on, the CRM value chain, 4igure # below, shall be e-amined to see what issues are needed to be firstly addressed before a CRM strategy can be implemented. By analysing this, the CRM strategies implemented by $ma%on can then be critically evaluated more fully.
Figure 1: CRM Value Chain (Buttle, 2000)

/he ultimate purpose of the CRM value chain process is to ensure that the company builds long5term mutually5beneficial relationships with its strategically5significant customers (Buttle, !"""). /he CRM value chain was developed over 1 years and has become a proven model for businesses to follow when developing their CRM strategies. By identifying 1 primary stages and 1 supporting conditions to increase
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customer profitability it clearly gives a visual representation of what companies need to do in order to implement a CRM strategy successfully. /hese five primary stages of the CRM value chain represent three main se6uential phases of CRM strategy7 analysis, resource development and implementation ($ntariksa, unknown, online). +t should also be noted that the value chain is not a one5time process that leads to a strategy that is serviceable forever, it is important to periodically review which customers to serve, what to serve them and how to deliver the value. /he first CRM strategy $ma%on employs is at the very start of 8oining them, when setting your $ma%on account up, you not only have to enter all you details, but are also asked to register your interests and uncheck and newsletters you do not wish to receive (0enkinson, !""1), it should be noted that all types of newsletters are initially selected, and they need to be deselected. +ndeed throughout the lifespan of the account itself you are able to update it with a wide variety of information, as your life style changes so $ma%on can change with you. /his in itself is a very good way of keeping customers involved with the company. /his allows $ma%on to identify its customers and become more intimate with them, when looking at the CRM value chain outlined above in figure #, it is clear that identifying your customers and becoming more intimate with them is important, this is something $ma%on does well, sometimes without even the customers being aware its happening. By also changing and growing with the individual the company allows itself not to be left behind by the customer, but always suggesting relevant items to the customer. +t was also noted by Buttle (!""*) that there are other services the site provides, this includes advice about birthday presents and the like, this is general information based on what data you input about location and age, which is available before you have made a single purchase. Buttle also identified that $ma%on allows customers to ad8ust their own contact preferences with regards to mail, e5mail, or telephone, and they do not stop at that, there are 9 different types of e5mail content customers can opt to receive, so customers are fully informed and feel involved with their company right from the very beginning. :nce you have an account set up there are a number of different CRM strategies $ma%on has employed over the years, some work well, other may have be great in theory but failed in practice. /here are three CRM strategies to $ma%on have used to try to retain customer and encourage them to buy more at a greater profit for the company which this paper shall e-plore; Collaborative 4iltering, ,ynamic <ricing and ,irect Marketing. =ach of these allow $ma%on to develop their customer networks and increase the value they offer to their customers, when looking at the CRM value chain outlined in figure # this is the way $ma%on is looking to develop its resources to fulfil not only customer needs, but in turn company profitability. $lso certain strategies are aimed to manage the relationship between company and customer, to also increase customer profitability. /he first e-ample of a CRM strategy $ma%on employs is Collaborative filtering, $ma%on is in fact the most recognised e-ample of this type of CRM across the web. $s 0ill ,ych> discussed (!""#, pp. #)#) ?$ma%on factors in the buyer.s past purchases and geographic location to suggest what other customer who live in their neighbourhood and share similar interests might be buying?. /he more similar items people buy, the smarter $ma%on becomes, and the more accurate suggestions it can make. $lso by showing the customer items others have bought which are related to the item you have bought or are looking at, or offering package deals on items allows the company to up5sell and overall increase the si%e of the sale and in turn profitability for the company. Many different e5commerce sites are implementing recommender systems, such as $ma%on, to help their customers find the most
2

valuable products and services, but what $ma%on does so well is combine this with the inclusion of other customers opinions and reviews, this lets customers make better buying decisions ( im @ im, !""#). +ncluding other customers opinions and making reviews so easily available also allows customers to make a more involved purchasing decision, and feel more confident on the items they are looking to purchase. /here are, however, some e-amples of CRM strategies $ma%on have tried, which haven.t necessarily worked out as initially planned, ,ynamic pricing is one such method. /his is where the company leverages CRM technology and detailed customer data to allow it to alter the price of a product to best suite the customer, for instance, comparing a shoppers desire for a product with their perceived ability to pay for the product (,ych>, !""#). /his strategy is very highly contested as to not only the effectiveness but also the moral implications of pricing products differently for different customers. Aewis (!""1) states that the practice of offering discounts to prospective customers is something that is done by many different companies in many different markets. 4urthermore, he states the increase in powerful CRM systems provides the data and the communication channels necessary to e-tend this type of pricing strategy into true dynamic marketing policy, this allows pricing to be ad8usted as the customer relationships evolve. +t is now easier for companies to see the loyalty and e-penditure of its customers, so they can ad8ust prices for customers as they see most beneficial. /his strategy initially looks like a very good idea, by increasing the cost of items people are almost certain to buy the company can ma-imise profitability, and by decreasing prices on other items it encourages customers to buy something they otherwise might not. /his method allows the customer to get the occasional great deal, and still increases company profits, therefore when looking at the CRM value chain Buttle put forward in !""" this matches well with a number of areas. /here are however, some who would deem this kind of marketing as immoral and unfair to customers, this view is not only carried by a number of different researchers such as Aewis (!""1), but most importantly by the public. /he customer is the biggest concern for companies implementing any type of CRM, it is after all customer relationship management, and $ma%on in fact came under fire when their consumers learned they were paying different prices for the same ,B,s (3amilton !""#). +t was in fact because of such adverse publicity $ma%on had to issue refunds and apologies to customers who were charged higher prices in their dynamic pricing e-periment. 'o although this type of CRM may sound great on paper, the implementation of it was something which caused great issues for $ma%on and rather than improve customer relations and company profits, damaged both. /he third type of CRM this paper will focus on which is implemented by $ma%on is ,irect Marketing, also known as one to one marketing, this works be recognising the customers. interests by using CcookiesD placed on their computer, these are placed by most websites to store data for the website to use when you return. /his allows $ma%on to once again personalise what the customer sees, giving them tailored recommendations (0enkinson, !""1). /here has been a wide range of research carried out into :ne to :ne marketing as ,ewan, 0ing and 'eidmann (#EEE) identified it uses the cookies stored on a computer to do a number of things, all of which are bennificial for the customer and company alike; automatically log in upon visiting the site, recalling past shopping carts so you never lose what you added, and customer identification to allow for true customi%ation, to name but a few. /his type of CRM is designed to interact with customer more, allowing them to see more items they may be interested in, in fact giving them more choice to buy more items that they themselves may want. /his is a great way to interact with customers, to get them to

purchase more items from the company and in general increase profitability for the company, all whilst building the relationship with, and knowledge of the customer. +t is clear to see that $ma%on employs many different types of CRM strategies, and there are more still than 8ust the few outlined above. Fhat this paper has aimed to do is to identify a number of key and specialised strategies to demonstrate how CRM strategy and processes can achieve effective customer intimacy for the mutual benefit of both organisation and customer. /he CRM Balue Chain as put forward by Buttle (!"""), which has become so widely accepted, has been used as a guide to analyse the effectives of the strategies $ma%on uses, as well as looking into the effect of implementing the specific CRM strategy. By analysing the information about its customers, which $ma%on is able to do by using the data customers freely provide when they set up their accounts, $ma%on is able to reliably keep in touch with their customer. +mportantly it should also be noted that $ma%on is able to keep in touch with the customer about issues they are interested in, rather than market potential customers items they will have no need for, it is more precise and specialised marketing. /here has also been three main CRM strategies implemented by $ma%on this paper has e-amined, and although ,ynamic <ricing was, what can only be classified as a failure, both Collaborative filtering and ,irect marketing have been very successful ways of building and managing the relationships with customers. By using the strategies $ma%on has in place they are creating very strong levels of customer loyalty and customer retention as shown by their levels of customer retention, it is clear that $ma%on has not become the largest online retailer by sheer luck, it has at least in part been down to a number of inspired CRM solutions which have allowed each individual customer to feel a personal service from one of the biggest companies in the world, this without ever meeting the customer face to face.

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