Crm - Customer Relationship Management

COLOGNE BUSINESS SCHOOL (CBS)

Loyalty Programs. Ebay Plus

Term paper for "Customer Relationship Management"

Winter Semester 2015

Lecturer: Prof. Dr. Schallehn

Anastasiia Kukova

MA 15 in International Business / Financial Management

Student-No. 1155500010

List of contents

1.        Introduction        

2.        Loyalty in CRM        

     2.1             Key objectives        

     2.2             Design characteristics of Loyalty Programs        

     2.2.1      Reward Structure        

     2.2.2      Participation requirements        

     2.2.3      Payment function        

     2.2.4      Sponsorship        

     2.2.5      Cost and revenues of LPs        

3        EBay        

     3.1      EBay Plus        

     3.2      Effectiveness and efficiency        

4        Competitive advantage        

     4.1      EBay competitors        

     4.2      VRIO concept        

5        Conclusion        

6        References        

7        Affidavit        

Figures

Figure 1.                 Basic types of competitive advantage                 p.13.

Figure 2.                 A Model of Competitive Advantage                         p.14.

Figure 3.                 Porter’s Three Generic Strategies                         p.15.

Figure 4.                 VRIO Framework.                                         p.17.

1. Introduction

Customer relationship management is becoming more and more important for managers, due to increasing of the competition on the market. CRM is necessary for companies not only for becoming more profitable and better in common, but just to survive.

 Nowadays many companies underestimate the value of strategic management and multiple dimensions it is consist of. They think only about technological side of CRM, it leads to CRM failures.

To implement CRM, every company should find a sound strategy. CRM can be presented as a business strategy, which concentrates on customers and their preferences. Strategic CRM’s goal is to know customer and implement this knowledge for building stronger relationships between company and its customers. CRM consists of the functional level, the customer-facing level and the company-wide level. When company takes CRM at the company-wide level, it represents strategic CRM. That means that this knowledge about customers is used in a whole company, including different departments, such as HRM or supply chain management (Kumar and Reinartz, 2012, pp.35-36).

Strategic CRM shows that organizations should take into account interests of the customers. Strategic CRM’s goal is building such relationships between company and its customers that maximize the lifetime value of customers. If strategic CRM is implemented in appropriate way, company achieves sustainable competitive advantage. There are 4 key components of a successful CRM strategy (Kumar and Reinartz, 2012, p.36):

1. A customer management orientation;
2. The integration and alignment of organizational processes;
3. Information capture and the alignment of technology;
4. CRM strategy implementation.

1. Loyalty in CRM

For strategic CRM is quite important to correlate with the term “loyalty”. You can say that customer loyalty exists if people choose to use a particular shop or buy one particular product, rather than use other shops or buy products made by other companies (Lovelock and Wirtz, 2011).  Loyalty of customers means that customers come back to the company for some reasons and they are loyal to a certain product or service. However, sometimes that is just a result of marketing program, for example, 2-year contract; company can predict for sure how much money they will have for the certain period of time. For company it is easier and cheaper to deduct existing customers than to attract the new ones. Therefore, companies are trying to increase customers’ loyalty. The easiest way to do it is using a successful strategic CRM.

It is more profitable for the organization to find wealthy customers and build strong and long-term relationships with them. From this point, they use loyalty programs (LP). The loyalty program is “an integrated system of marketing actions that aims to make member customers more loyal” (e.g. Sharp & Sharp, 1997, p.474; Yi and Jeon, 2003, p.230). The main question is whether LP members are becoming more loyal due to their memberships (Leenheer et al., 2007, p.32). Of course, you should take into account that these programs could be successful as well as unsuccessful. Firstly, the organization should realize what would lead to a profit. When companies design such programs, they are looking forward to increasing purchase levels and strengthening relationships with the customers. Moreover, if LP is optimal and effective, company gets a competitive advantage over other companies of this industry.