THE UNIVERSITY OF NORTHAMPTON

DIVISION OF MARKETING AND ENTREPRENEURSHIP

MODULE: MKT3016 CUSTOMER RELATIONSHIP MANAGEMENT 2012-2013

TUTOR: GIL OGILVIE-JOHNS

Assignment Front Sheet

Hand-in date
e-submission: 9th January 2013 by 11.59pm

Title
Customer Relationship Management:- (Assignment 1, Individual)

Name James Moring

Student No. 09331141
Award Joint Honours Retailing and Education Studies
Student declaration

I declare that this assignment is my own work, that all sources of reference are acknowledged
in full according to University policy and that it has not been submitted for any other course.

Self-evaluation

Please comment on relevant aspects of your work

I have enjoyed this assignment and am mostly very happy with it, I have tried to make sure I have
answered the question asked as well as bring in relevant material from the lectures as well as a
relatively wide amount of further, generally very modern reading. I would have liked to include a
few more references, however I tried to analyse what references I did find to one and other rather
than just fill the page up with references, I did also find that it was tricky to find some
disagreements with a lot of the information presented, but am generally happy with how the entire
assignment has gone.

For once I havent left it to the last minuite and I do hope it shows in the grade!

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MKT 3016 Customer Relationship Marketing

Assignment 1 Essay weighting 60%

Name: Grade:

Student Number

Structure and Clarity of Expression

Suitable conceptual framework in order to evaluate and analyse the question. Work should remain clearly focused,
follow a logical sequence and demonstrate a clear sense of direction even although complex issues are being
addresses.

A+ A A- B+ B B- C+ C C- D+ D D- F+ F F- G

Content and Understanding

Knowledge & Understanding is expected. Analysis is important. Demonstration of awareness of contemporary issues
in CRM and their usefulness for contributing to a greater understanding of the role and effectiveness of CRM strategy

A+ A A- B+ B B- C+ C C- D+ D D- F+ F F- G

Analysis/ Evaluation
Ability to identify the most relevant key issues. Ability to appraise and evaluate CRM concepts, theories &
frameworks. Critical evaluation of theory

A+ A A- B+ B B- C+ C C- D+ D D- F+ F F- G

Reading/ Research and Referencing

A+ A A- B+ B B- C+ C C- D+ D D- F+ F F- G

Application to Industry Ability to integrate theory into practise

A+ A A- B+ B B- C+ C C- D+ D D- F+ F F- G

Synthesis and Originality Ability to draw conclusions.

A+ A A- B+ B B- C+ C C- D+ D D- F+ F F- G

Tutors comments:

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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 (Kumar, 2010).
Amazon.com are the biggest online retailer in the US with online sales topping
$48,000,000,000 which is nearly five times higher than its nearest competitor
(Internet retailer, 2012, online). Amazon.co.uk is also the biggest online retailer in the
UK, ahead of both Argos and Apple (Digital Strategy Consulting, 2012, online).
Amazon.com as well as Amazon.co.uk use very similar if not identical CRM strategies,
therefore, examples from both will be given to look at the extent to which CRM
strategy and processes can achieve effective customer intimacy for the mutual benefit
of both Amazon as the organisation and customer.

Amazon itself implements a wide range of different CRM strategies, a number of these
shall evaluated, and an overall conclusion of the effectiveness of Amazons' CRM
strategies shall be given. This paper will look through the entire Amazon process
beginning with the processes of setting up your own Amazon account, and then
looking at how Amazon is able to retain such high percentages of its customers,
Jenkinson (2005) states that around 54% of its US category buyers are committed
and loyal to Amazon, compared with an industry average of under 10%.

However, before this paper looks into the CRM strategies implemented by Amazon, the
CRM value chain, Figure 1 below, shall be examined 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 Amazon can then be critically evaluated more fully.

Figure 1: CRM Value Chain (Buttle, 2000)

The ultimate purpose of the CRM value chain process is to ensure that the company
builds long-term mutually-beneficial relationships with its strategically-significant
customers (Buttle, 2000). The CRM value chain was developed over 5 years and has
become a proven model for businesses to follow when developing their CRM
strategies. By identifying 5 primary stages and 5 supporting conditions to increase
customer profitability it clearly gives a visual representation of what companies need

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to do in order to implement a CRM strategy successfully. These five primary stages of
the CRM value chain represent three main sequential phases of CRM strategy:
analysis, resource development and implementation (Antariksa, unknown, online). It
should also be noted that the value chain is not a one-time 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.

The first CRM strategy Amazon employs is at the very start of joining them, when
setting your Amazon 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 (Jenkinson, 2005), it should be noted that all types of newsletters are initially
selected, and they need to be deselected. Indeed 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 Amazon can change with you. This in itself is a very good way of
keeping customers involved with the company. This allows Amazon to identify its
customers and become more intimate with them, when looking at the CRM value
chain outlined above in figure 1, it is clear that identifying your customers and
becoming more intimate with them is important, this is something Amazon 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. It was also noted by
Buttle (2008) 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 Amazon allows customers to adjust their own
contact preferences with regards to mail, e-mail, or telephone, and they do not stop
at that, there are 6 different types of e-mail content customers can opt to receive, so
customers are fully informed and feel involved with their company right from the very
beginning.

Once you have an account set up there are a number of different CRM strategies
Amazon has employed over the years, some work well, other may have be great in
theory but failed in practice. There are three CRM strategies to Amazon have used to
try to retain customer and encourage them to buy more at a greater profit for the
company which this paper shall explore; Collaborative Filtering, Dynamic Pricing and
Direct Marketing. Each of these allow Amazon to develop their customer networks and
increase the value they offer to their customers, when looking at the CRM value chain
outlined in figure 1 this is the way Amazon is looking to develop its resources to fulfil
not only customer needs, but in turn company profitability. Also certain strategies are
aimed to manage the relationship between company and customer, to also increase
customer profitability.

The first example of a CRM strategy Amazon employs is Collaborative filtering,

Amazon is in fact the most recognised example of this type of CRM across the web. As
Jill Dych discussed (2001, pp. 141) "Amazon 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". The more similar items
people buy, the smarter Amazon becomes, and the more accurate suggestions it can
make. Also 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 up-sell and overall increase the size of the sale and in turn
profitability for the company. Many different e-commerce sites are implementing
recommender systems, such as Amazon, to help their customers find the most
valuable products and services, but what Amazon does so well is combine this with

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the inclusion of other customers opinions and reviews, this lets customers make
better buying decisions (Kim & Kim, 2001). Including 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.

There are, however, some examples of CRM strategies Amazon have tried, which
haven't necessarily worked out as initially planned, Dynamic pricing is one such
method. This 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 (Dych, 2001). This strategy is very highly contested as to not only the
effectiveness but also the moral implications of pricing products differently for
different customers. Lewis (2005) states that the practice of offering discounts to
prospective customers is something that is done by many different companies in many
different markets. Furthermore, he states the increase in powerful CRM systems
provides the data and the communication channels necessary to extend this type of
pricing strategy into true dynamic marketing policy, this allows pricing to be adjusted
as the customer relationships evolve. It is now easier for companies to see the loyalty
and expenditure of its customers, so they can adjust prices for customers as they see
most beneficial. This strategy initially looks like a very good idea, by increasing the
cost of items people are almost certain to buy the company can maximise profitability,
and by decreasing prices on other items it encourages customers to buy something
they otherwise might not. This 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 2000 this matches well with a number of areas.
There 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 Lewis (2005), but most importantly by the public. The customer is the biggest
concern for companies implementing any type of CRM, it is after all customer
relationship management, and Amazon in fact came under fire when their consumers
learned they were paying different prices for the same DVDs (Hamilton 2001). It was
in fact because of such adverse publicity Amazon had to issue refunds and apologies
to customers who were charged higher prices in their dynamic pricing experiment. So
although this type of CRM may sound great on paper, the implementation of it was
something which caused great issues for Amazon and rather than improve customer
relations and company profits, damaged both.

The third type of CRM this paper will focus on which is implemented by Amazon is
Direct Marketing, also known as one to one marketing, this works be recognising the
customers' interests by using cookies placed on their computer, these are placed by
most websites to store data for the website to use when you return. This allows
Amazon to once again personalise what the customer sees, giving them tailored
recommendations (Jenkinson, 2005). There has been a wide range of research carried
out into One to One marketing as Dewan, Jing and Seidmann (1999) 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 customization, to name but a few. This 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. This 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.

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It is clear to see that Amazon employs many different types of CRM strategies, and
there are more still than just the few outlined above. What 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. The CRM Value Chain as put forward by Buttle
(2000), which has become so widely accepted, has been used as a guide to analyse
the effectives of the strategies Amazon uses, as well as looking into the effect of
implementing the specific CRM strategy. By analysing the information about its
customers, which Amazon is able to do by using the data customers freely provide
when they set up their accounts, Amazon is able to reliably keep in touch with their
customer. Importantly it should also be noted that Amazon 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. There has also been three main CRM strategies implemented by Amazon
this paper has examined, and although Dynamic Pricing was, what can only be
classified as a failure, both Collaborative filtering and Direct marketing have been very
successful ways of building and managing the relationships with customers. By using
the strategies Amazon 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 Amazon 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.

References

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Antariksa, Y (Unknown), CRM Value Chain, online, available from
http://www.studymarketing.org/category/Managing_CRM/Customer_Relationship_Man
agement.html [accessed 06/01/2013]

Buttle, F., (2008). Customer Relationship Management, Second Edition. Taylor &
Francis

Buttle, F., (2000) The CRM Value Chain, online, available from
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06/01/13]

Dewan, R., Jing, B. and Seidmann, A. (1999) ICIC '99 Proceedings of the 20th
international conference on Information Systems Pages 93-102

Digital Strategy Consulting (2012). Top 50 Online Retailers in the UK, online, available
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Dych. J., 2001. The CRM Handbook: A Business Guide to Customer Relationship
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Hamilton, David (2001), E-Commerce Special Report: The Price Isnt Right, The Wall
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Internet retailer (2012). Top 500 Guide. Online available from

http://www.internetretailer.com/top500/list/ [accessed 02/01/2013]

Jenkinson, A, 2005. Amazon bonding customers with integrated service. Centre for
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Kim B-D and Kim S-O (2001) A new recommender system to combine content-based
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Kumar, V. (2010) Customer Relationship Management. Wiley International

Encyclopedia of Marketing.

Lewis, M, 2005. Incorporating Strategic Consumer Behavior into Customer

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Michael Lewis (2005) Research Note: A Dynamic Programming Approach to Customer

Relationship Pricing, Management Science 51:986-994