E-crn

How e-CRM can enhance customer loyalty

Liz Lee-Kelley Surrey European Management School, University of Surrey, Guildford, Surrey, UK David Gilbert Surrey European Management School, University of Surrey, Guildford, Surrey, UK Robin Mannicom Surrey European Management School, University of Surrey, Guildford, Surrey, UK

Keywords

Internet, Pricing, Customer loyalty, Retention, Relationshipmarketing

Introduction
The Internet has witnessed dramatic evolvement over the past 30 years. Today, the Internet provides the foundation for electronic mail (e-mail), the World Wide Web (WWW) and electronic commerce (e-commerce). Hence, it is not surprising that much entrepreneurial activity has surrounded its transfer over to the public domain. Until recently, venturing into the electronicmarketplaces of the Internet seemed to promise vast opportunities, fasttrack business success, continuous growth and large financial gains. However, the failure of nearly 200 United Kingdom (UK)based Internet companies in 2000 (Neal, 2001), highlights an urgent need to discover the key to Internet success. Nonetheless, a feeling of ``make or break'' has taken grip and now many UK businesses have apresence on-line, advertising their company image, values and products and services. The UK online retailing marketplace is estimated to be worth £1.8 billion a year (The Times, 2001). Despite the revenue-generation potential of the Internet, there is surprisingly little empirical research in locating successful online models. Research findings in the traditional marketing literature conclude thatgreater customer loyalty leads to higher customer profitability (Clark, 1997; Hallowell, 1996; Reichheld and Sasser, 1990; Storbacka et al., 1994). Given this belief in the economic advantage of customer loyalty, there is agreement in the need to investigate the online factors underlying customer relationship building (Gronroos, 1994; È Gilbert, 1996; Clark, 1997):
As organisations becomeincreasingly customer focussed and driven by customer demands, the need to meet customers' expectations and retain their loyalty becomes more critical (Disney, 1999, p. 491).

Abstract

Internet-based companies need to remain competitive. One way of improving competitive advantage is to attract more customers and increase customer retention; for example, by developing long-term, secure relationshipsbetween the buyers and sellers. Little empirical research has been conducted on the link between customer relationship management and customer loyalty within an Internet, or e-commerce, context. This study provides evidence of how to improve planning for customer management by presenting and testing a conceptual model of the process by which the implementation of electronic relationship marketing(e-CRM), can enhance loyalty. While building the research framework, price sensitivity was found to be a primary confounding element on loyalty and was included in the study for control. An exploratory study of Internet retailers, e-retailers, and their customers was conducted and the findings revealed that e-retail companies (with CD, DVD, video and book products) should consider customers'perceptions of relationship marketing efforts, as they are fundamental to enhancing customer loyalty and that an enhancement of customer loyalty reduces price sensitivity.

Indeed, an article in The Times (2001) highlights that ``almost two-thirds of British companies [e-businesses] have learnt nothing about their customers' preferences and behaviour online'' and that ``the future of e-customerrelationship management (e-CRM) is being seriously undermined because of this ignorance''. Thus, leading to the question:
Would the careful staging of relational interactions be a driver for customer retention and willingness to increase online spending with a particular company?

The objective of this research is to examine if the utilisation of information gleaned from customers' online...