Customer Relationship Management

CRM Practices in Online Retail Industry
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online retailing or e-tailing. While India’s $28-billion organized retail industry is growing at a CAGR of 22-25%. EASE OF NAVIGATION The website should make it easy for the user to find what they’re looking for without a lot of distractions. which at present occupies less than 1% of the organized retail trade. 2. While these figures seem to be promising. MINIMAL DESIGN .300000 and above. it is very important to define our target audience to achieve optimum results.A2 and B1 Psychographic profile: Young Indians who have high aspirational standards. TOP CHARACTERISTICS OF SUCCESSFUL ONLINE STORES 1. A good website should not have a lot of clutter and things should be easily navigable. is witnessing a growth of 40-50% year-on-year and is poised to touch $4-5 billion by 2015. We can classify the target audience as follows: Demographic profile:   Individuals who are 25 to 40 years old with a yearly household income of Rs.TARGET AUDIENCE The Online retail sector has just opened up and recently seen a lot of growth in terms of the number of people opting to buy online. Upper Middle Class –SEC A1. who love to drive and have value for money.

5. customers look forward to shopping. Zappos. Customers want to get quickly to what they want to purchase. Therefore. it is hard to copy. but that also make the users want to visit again and again. pleasant. Accurate descriptions also limit the number of returns and dissatisfied customers. it’s important to be as descriptive and accurate as possible so they feel comfortable making their purchase. without a lot of hype and production. it is critical that retail sites make the buying experience a breeze. They should create sites that are not only user-friendly. and non-stressful website visit. Because the culture involves values. EASY CHECKOUT One of the most important features is to enable an easy. Product showcases can also entice customers to buy a product that they weren’t intending to buy.simple checkout for customers by keeping the steps simple and by capturing the essential information in a succinct fashion. but were impressed by when they saw it. 4. being a bit weird and acting humble. humor and taking the stress out of dealing with computers and entertainment systems. programs and leadership. Providing accurate product descriptions and high definition images will ensure consumer retention. has been guided by ten values which include delivering "Wow" service. ACCURATE PRODUCT DESCRIPTIONS Customers can’t touch or hear the products on the retail website.The retail websites that greet the user with loud music and eclectic colors are sure to get a clickaway before the user even peruses the products. With so many online stores competing for the consumer’s attention. A vision-driven organizational culture has enormous power to make the strategy succeed. . knowing that they will have a satisfactory. PRODUCT SHOWCASE AND PROMOTION By keeping sales products or featured products in a prominent place on the site. EMPHASIS ON STRONG CULTURES & VALUES The successful new retail concepts are almost always accompanied by extraordinarily strong culture and values that provide energy and direction in the early years and support the vision and its execution as the business matures. Best Buy’s Geek squad is about fun.

calmness and self-restraint. one of Japan’s top four retailing brands. moderation. Muji is anti-glitz and delivers self-expressive benefit to those that are beyond buying badge brands and have the right values about sustainability.Muji. That is also why we use CRM. For example. CUSTOMER JOURNEY . These touchpoints are the modes of interaction between the customer and our organization/brand/ product. natural. Once our customer journey is mapped we should start looking at the touch points.EMOTIONAL & SELF-EXPRESSIVE BENEFITS Most of these successful new retail concepts have gone beyond functional benefits to deliver emotional or self-expressive benefits. humility. is the no-brand brand and is all about simplicity. We have to make sure that at every point in a customer’s journey we are there to support their decision making (basically influence them) and that is where we create various touchpoints. These touch points can fall in any of the four categories: . our major challenge is that how can we assist in making a customer’s journey smooth and enjoyable such that they would stick to do business with us even in the future. CONSUMER TOUCHPOINTS In whatever business we do.

websites and Facebook pages. That will result in optimum utilization of resources. then we should exploit a particular touchpoint. SO the diagram above also shows that there should be proper coordination at every stage of customer journey and the various categories of touchpoints. Only when the answers to these questions are in positive. ads on websites and also on television (flipkart) and newspapers these days. But it is not feasible to exploit each and every one of them. Facebook Stamp Ads. we must ask questions like: ‘What do we need to do at each touch point?’ ‘Do the touch points help us retain our customers?’ ‘Do the touch points differentiate us from the competitors?’ ‘Do they address our needs?’ and many more. Now there are a large number of touchpoints available to marketers. Settings: These are any locations (physical or virtual) where our product/ service is used or displayed. . Messages: Here we include the one way communications like the ads featured on YouTube. So at every stage in the above chart.i) ii) iii) iv) Products: In online retail industry these products could be the real products that you are selling online or just about any software or service you might be selling to the customer. Interactions: Here we talk about the two way interactions which we can have in real time using our company blogs. People find it easy and it also has an emotional connect and personal bonds which will make our customers come back to us. This is because not all of them will help us in our business.

Then whenever they have new products in that range or style you will receive Emails and messages prompting you to about various new t-shirt collections they have. Also my sister is a lover of books. banner says buy books for travel. So at many times I have seen that I keep getting ads from Inkfruit. For Social media: Social media like Facebook. Convenience: This is one thing which left me surprised and stunned.Let us see the various touchpoints which are being used these days. YouTube advertising: Advertising on YouTube is also one of the smart ways to create touchpoints and get the traffic on your page. they will record your choices. .com. But she always orders from flipkart. Contextual banners: These are banners that give situational messages to the people browsing. You create a touch point via these social networking sites. She can order books online. Today the value of these spots is rising exponentially. Pop Ups: Similar to messages and mailers above your choice is recorded and you will keep getting updates on various sites you visit. banner says ‘Super hit sale on books’ and so on. Advertising on other websites: When you are booking tickets on IRCTC you will often see the ads of Redbus. Same is the case with RedBus. One of my friends told me that she ordered a garment from an online retail website. SMS/ Mailers: Whenever you make a purchase or also browse for a particular product on a online store. They sent a medium and a small size so that she can try and buy whichever fits her best. Facebook Stamps: The Facebook stamp ads(on sides of Facebook pages) are also effective touch points which are used by marketers to connect to their consumers. She ordered for cash-on-delivery and a medium size. inexpensive but a very effective way of keeping your consumers loyal to you. This is a small. This is because they give very pretty bookmarks with every book ordered. if user is on travel site. twitter. They are very proactive in their online promotional touchpoints. I buy a lot of t-shirts online. If user is on entertainment site. I found this as a major reason why I would want to place my order from this site and nowhere else from next Almost all online stores and normal stores sell those books. pinterest are used to provide sops to the consumers which would in turn bring them towards your website.

There is some data that they need to have in order to complete a transaction such as the postal address and bank details. call center agents and customers. A customer database is essentially a storehouse of all the information about the current and prospective customers of an organization. user is recommended certain relevant products may or may not be of same brand or company. CUSTOMER DATABASE A sound and accurate customer database can be the most important marketing tool for an online retailer. as more and more online retail sites are coming up. It is defined as the software that is used to integrate the information stored in the database. This is also an important touch point. From home furniture to groceries to appareal. Online retail is fast becoming a crowded space. Some of the parameters on which they collect data are  Personal information o Email o Name o Gender o Postal address o Contact information o Birthday o Facebook page link up o IP addresses o Mac or PC Financial information o Bank details o Card number o Income level  . to provide easy accessibility to the sales agents. marketing team. Also the cost of gather customer data is not there. The more you know about your customers the better chance you have of pitching to them products / services / offers that they would actually want to buy.Recommendations: On buying or searching a product. because customers provide that data themselves. Customer database helps in this segmentation of customers based on various parameters and helps companies know and understand their consumers better. It also helps them analyze and predict the needs of their customers too. The biggest advantage that online retailers have theat they can easily gather customer information. It is important to have updated and accurate information about the customers for an organization to direct its communication and promotion messages to the right segment of its audience. and everything in between are available through online stores.

Points of data collection   Directly from consumers (sweepstakes.   SEC data Preferences o Most searched items o Shopping patterns. related to time of year or season etc. Using IP addresses and email account information. ‘Mac Users See Pricier Rooms At Orbitz’. Online retailers need to study data and figure out patterns (demographic. Adjacencies (2 products bought together) Products the consumer already has . contests. As a friend observed that after searching for a specific kind of shoes on Jabong. on-line registrations. Such kind of specific data mining is possible only in an online retail format. As a result of which they showed their Mac book owning customers more expensive options. Online retailers also need to differentiate the communication messages targeted at current customers and prospective customers as their needs and loyalty levels are different. behaviors and consumption patterns.) in order to understand their consumers’ needs. Another advantage is that the data can be collected and used immediately as there is real time collection of data. he saw their ads on almost all other sites including Facebook. they highlighted how Orbitz understood through analysis of existing customer data that Apple users generally paid more for hotel rooms and preferred more expensive rooms than windows users. frequency and monetary gain from transaction o Customer feedback All of the above data points help online retailers classify their customers based on different parameters. and other lead generation activities) Third party sources / data aggregators In addition to the above information they can also collect the following information. online retailers can direct communication messages at their prospective and current clients. This data can also be used to measure Customer loyalty and customer lifetime. and subsequently send them well directed and correctly positioned messages. where collection of data is easy and searched items Transactional information o Transaction history o History of past communications to and from customer o Recency. In an article published by the informationweek.      Referrals of friends/relatives What they buy from / search for on other online retailer sites Job profile details: personalized products based on the work they do.

Thus. Retailers need to use innovative methods to collect such useful data. 300 2 3 years Rs. The Customer acquisition cost comes out to be about Rs. there is a general reluctance among the customers to divulge some other information. 1200 Rs.     Update data base Make sure data is accurate Privacy policies Protect your data CUSTOMER LIFETIME VALUE: Let’s us now do a back of the envelope calculation of the average Online Retail Customer. 1200. However it is not impossible to get this information. The Average Life time is approximately 3 years and the contribution per transaction is approximately Rs 300. Customers would be willing to give referrals only if they see a benefit in it for themselves. On the other hand data related to bank details may be hard to get as it goes against the privacy laws. Demographics While is easy to collect information about some parameters. we see the following: Average profit per purchase/order Average number of purchases/orders per year Average customer lifetime (number of years) Average cost to acquire a new customer Customer lifetime value Rs. They may be hesitant in giving information about their job profiles or the products they already own.  Services the customer has signed up for is interested in. Online retailers also need to ensure some other key points in order to make their customer database a useful tool. 600 This can also be summed up in the following way: Lifetime Value of Customer Revenue Year 1 3000 Year 2 3000 Year 3 3000 . Also information about what they search for on other retailer websites is difficult to procure as competitors may not divulge such data.

viral and various other forms of publicity. the cost of acquisition is set to increase. the profit margin is reducing even has been able to maintain a low churn rate and is doing well on loyalty. 1500 after SEO. he needs to sell at least 5 products to the same customer: which is next to impossible considering the churn is higher in Online Retailing. ad-words. social. the margin on the sale is approximately Rs. in such a situation. Diversification will lead to repeat purchase from the customer albeit under a different category. which started in 1995. 3) With offers like Cash on Delivery. Cons: 1) With increasing competition. 2) The cost of retention is also on the up. which help bring down costs. Thus. Getting Lifetime Value strategy right is critical to Online Retail. 3) Stable systems if established.Contribution Margin Cost of Acquisition Customer Value 600 1200 -600 600 0 600 600 0 600 600 Here if we also decide to consider the customer retention cost. will prove to be a competitive advantage. 300. profitability will come with time. Alternate categories and alternate verticals need to be looked into to gain a good customer lifetime value. . 100. to break even on customer acquisition costs. Thus. Currently companies try to acquire customers with low-ticket-low-margin products. It touches the figure of Rs. This enables acquisition and retention with good returns. In fact. and various discounts. diversification is the solution. Thus. now the Lifetime value of the customer comes down to about Rs. healthcare and lifestyle products. Thus. became profitable only in 2001. but try and subsequently sell them high-ticket-high-margin products. now it also sells stationery. The above exercise has been done with some research on current market scenario and it is likely to change in the coming future. Suppose an online retailer sells a product to a customer. Pros: 1) The industry is growing by leaps and bounds and is expected to grow further within the next few years 2) Amazon. Let us assume that the retention cost is approximately Rs. 500. Thus. only flipkart. the Lifetime Value decreases even further. The cost of acquisition of customers is quite high in the online retail business. Flipkart started with books and diversified into CD’s and DVD’s and then into consumer electronics. has shown very high levels of loyalty. it captures the browsing information based on cookies. sales andretention performance. It was created in the view that internet could revolutionize the way things could be sold to the consumers. The regular shoppers are favored but at the same time not neglecting the low value in the e-retail business. Whenever a customer registers on Amazon. Amazon. In a research by Millward works on an interactive technology which is very smart.comhas proved to be a category-leader in acquisition.4) Due to Cash on Delivery.On the For the regular customer. and has displayed excellent bonding levels hence remaining no. Amazon. This again helps in sending customer specific information in the form of works on the principle of direct marketing. 54% of category buyers in US are loyal towards Amazon. the interests which he mentions are used in have category information about them and whenever a customer buys any such product. This again helps Amazon. There were a lot of companies which had jumped into the mad race of capitalizing on the internet retail. All the books and products of Amazon. This was an example of a bad marketing thinking.COM Amazon. the online retailers have to face a delay n receiving the payment (via the courier) 5) Stable systems need to be established CRM PRACTICES FOLLOWED BY AMAZON. the customer can view display prompts and advice about birthday has shown high levels of customer satisfaction and work? Amazon. but these customers vanished whenever the companies tried to improve on their margins. On the website. Also the recommendations made to the customer are tailored. The industry average says 10%.The websites tried attracting customers by deep discounts and free giveaways.comas we all know is the leader in the online retail segment. but this had led to a lot of bad practices in the chase for customers but ultimately not creating to recommend books or any product that could be relevant to that particular customer. All this can be received if the customer has registered to allow for Hence the customer gets a personalized view on his system. It naturally focusses on servicing the high value customers. there is a buying history maintained.A customer can also put up . Amazon. How does Amazon.

Amazon. (Angus Jenkinson. There is high consumer brand awareness and a wide range of products.’ It firmly believes that the acquisition cost of the customer equity will be repaid effortlessly if the current customers are kept satisfied and a fruitful relationship with them is maintained. This brings about more customer targets these users as their prime audience. Amazon.information about himself for others to read. There is a feature called the ‘My Favorites’ folder where the customer can bookmark his favorite then rewards those who provide many valued reviews. its values and its positioning’. 2005) The CRM strategy in practice: 1. the service and the selling the most effective way at each touch point. Reputation: Amazon. These reviews can be recorded and scored or graded by others. This practice is known as permission follows a step by step process of selling books to customers in the minimum time possible and with the easiest of navigation. It provides interesting information about other customers like the most preferred books for people in say. It also provides information on what else the customers who purchased that particular book or product truly follows: ‘Be true to the leverages its CRM on lean Amazon. . This kind of direct marketing also enables consumer word of mouth. They aim at being trustworthy in ethics and providing guaranteed satisfaction in the delivery as well as the product. 2. This is quite beneficial as they get to review books and products for and through each provides for customers to interact with one another on their website. Detroit or how many people are currently online from New followed this rule: ‘Invest according to customer value’.com believes in the principle of: ‘Optimizing the whole customer relationship and not just acquiring them. Amazon. Investment: works on ways how to increase the sense of customer community andbelonging. Relationship: Amazon. Amazon. Also not to forget the beautifully managed website. It focussed heavily on the regular buyers and the high value customers. They believe in investing 70% of resources in building great customer experiences and then utilizing 30% on spreading the word about it.comin achieving targeted frequent communication along with widespread distribution presence and accessibility. All these attributes help Amazon. There is huge spending on the internet banners which favour the already existing online shoppers. Amazon. 3.

Technology: The most remarkable feature that has helped Amazon. They classify products and act as the perfect guide. Value: They constantly believe: ‘Creating enduring values first. In the recommendations. Learning: Another policy that Amazon. This gives each customer a feeling of being serviced in a special and trustworthy followed ardently was: ‘Bringing imagination to the customer experience’. This acts as a very good social bonding and customer engagement tool. Relevance: As discussed previously. 8. Touch points: Amazon. Amazon has kept an accurate track and information of the value and cost of each of its customers. They have audited all the available touch points in order to optimize the customer acquisition and retention. tracked the interests of each customer and serviced each user community suitably. This develops the sense of belonging and spreads the has its own set of experts and editors on all topics.They look for different ways to achieve stickiness to the website. knowledge of which is further used to design and improve its systems. and then the tactical worth’ . the order processing system which contained an effective linked back-end delivery system. the easily navigable and user-friendly website and the automatic communication system like the emails and order information systems all have been efficiently managed. Amazon. 10. 9. of product follows is: ‘Measure and learn’. 6. Stakeholders: . 5. And hence the highly interactive and smart website design and flow keeps the customers return to the website for further buying. marketing and estimate sales and the share of wallet. Amazon. It also helps Amazon. The relational database of customers. it not knows provides users’ recommendations but also its is committed towards: ‘Managing the customer relationship at all appropriate touch points’. This is coupled with the remarkable feedback achieve the undisputed position is the smart use of technology: ‘Use technology like an artist’. It invites the customers to subscribe to newsletters and welcomes the customer to each return. Imagination: One essential that Amazon.

They also provide a 30-day return policy along with COD. They believe in the policy of ‘under promise’ and ‘over deliver’.in. Flikpkart. ebay. This feature however has been used by almost every Indian retailer. Fashion and You. Amazon. mobile accessories. is an online store that offers books. The Indian online retails are recent and have closely followed the practices of Amazon. They have fine-tuned their operations suiting the Indian household and hence they came up with the policy of ‘COD’ or cash on delivery. This had led them to deliver an efficient CRM etc. all the online retails provide more or less same benefits. Flikpkart. 2000 credit on signing up. Flipkart. internet banking) and have a special EMI scheme as there is a burgeoning growth of online retail is a web retailer which operates in the multimedia environment. They also introduced the concept of 30 day return has a very interactive website. To name a few: Flipkart. Jabong. They have integrated their website with social media such as Facebook. So there is not much differentiation when it comes to the Indian players in this segment. MP3 They have their telephone ordering system as well wherein the customer can place order over the telephone as well. game consoles. Which means the customer can return the ordered item within 30 days. They also encourage users to sign up with their email addresses so that they can receive promotional offers as and when there are offers. has a very dynamic site with easy navigation and user friendly buttons. They include television to sell their products as well. In the Indian scenario. It contains easy navigation and is more guided by visual buttons than text. Their delivery times range in the order of 3-4 working days. COMPETITOR ANALYSIS BASED ON CRM PRACTICES In the Indian scenario. provides an introductory offer of Rs. They provide for payment through all means ( has the CRM policy of maintaining ‘customer delight’.com. To prove their authenticity. Pinterest. They provide shopping guides on their also provides for EMI is a market place which allows users to buy as well as sell. On their website itself they have a section which displays customer feedback. Another popular Indian eretail is myntra. This allows customers to order online but pay online when the delivery is made.Lastly Amazon. myntra. cameras and home and kitchen appliances and lots of other makes sure that: ‘It makes it good for everyone’. has successfully built up its strategy by thinking in an integrated way and focusing on details that build up brand and customer equity. and Google+.Jabong. they have a seal of 100% original and . YouTube. Jabong. Homeshop18. Be it customers or stakeholders it has managed to stay attractive for everybody.

Most of them have been adapted by Amazon. Of CUSTOMER ACQUISITION A core principle of CRM is to target acquisition efforts accurately. these traditional forms of online retail customer acquisition cannot be overruled while advertising on social media is on the rise. Other forms of prospecting are:      TV Advertising Print Media Public Relations Word of Mouth Referrals . seamless service and an effective supply chain.guarantee on the website itself. Thus. Freely accessible buttons which would directly lead them to their contact page is placed right on their middle of the webpage. Hence we see that the CRM practices followed by most online retail stores are more or less similar. There is not much differentiation in terms of the Customer relationship services provided by the same. quality products. Internet advertising also makes for a high customer acquisition rate. e-mail marketing has emerged as an effective way of marketing if utilized in the right manner. These customers are acquired either through outbound marketing techniques or inbound marketing or a combination of both. Online retail is downloading at a rapid pace in the psyche of consumers. Even though online retail has been gaining a lot of popularity but still it aims to acquire ‘New-to-Category’ customers. It is triggered by lack of time and variety of products offered by the online retailers. Price discounts in online retail are no substitute for a robust back-end. They also maintain a style blog to sustain the interest of the users on their website. Poor Acquisition efforts result in waste marketing budget and may alienate more prospects than they gain through irrelevant and unnecessary messaging and marketing. They also have a separate category which caters to express sales and shipping within 24-hrs. they have explicitly mentioned the no of brands and product categories they provide for. To keep the customer attracted to the website.

CRM helps organization realize that complaint is a gift because majority of the customers who cancel the contracts or are dissatisfied with the organization walk away without complaining. CUSTOMER RETENTION It is the number of customers doing business with a firm at the end of a period. Customer Retention is important to increase the share of wallet of an organization and helps disappointed customers return if seamless services are offered. Other forms of customer Retention are:           Sampling Patronage awards Self-Liquidating Premium Discounts Coupons Rebates Banded Packs Cross Promotions Competitions Buzz or Word of Mouth (online and offline) . Positive customer retention strategies should be applied by the organization in order to reduce attrition after segmenting the target group effectively. Some positive customer retention strategies could be loyalty programs. membership clubs etc. expressed as a percentage of those who were active customers at the beginning of the period. Organization should take into account that only those customers should be retained by the organization.       YouTube Social Media Search Engine Optimization Search Engine Marketing Events Shows Publicity Customer Relationship management plays an important role in increasing the share of wallet as well as acquiring new customers using traditional as well as new marketing methods. who are beneficial to the organization and add value to it.

following is the breakup of the costs incurred by a hypothetical online retail store: Costs Capital Costs 30 15 40 15 Sales & Marketing Team Online Marketing spend . Merchandising Budget Allocation: Based on the above arguments.

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