Application Of Information Technology For Customer Retention

Published Date: 02 Nov 2017

E-commerce is growing rapidly since its first day. The credit card company reported the internet purchase of their customers has researched 13 billion dollar mark in the year of 2000. They still expected to have a tremendous grows in the future. The online transaction will be one if the major activity of credit card companies. In some areas the E-commerce has already become the most popular format of business, such as books, CDs and magazines. According to David (2000) Amazon now selling millions books, CDs, and DVDs to more than 6.2 million customers in more than 160 different countries and areas. (David, 2000) With the exceptional rapid growth of the E-commerce business also come the great challenges. Customer relationship management in the E-commerce area is one of the areas require deeper research. In the 80.s the marketing approach started to focus on customers than products. The concept of relationship marketing became the major marketing approach. Relationship marketing put more attention on attracting, maintaining and enhancing customer relationship. With the technology involving business combine the information technology and relationship marketing together to improve the efficiency of relationship marketing strategies, it forms the CRM concept. The ECRM concept is an involvement from CRM. Because the web technology and internet technology are becoming more and more wildly used and these technologies could give the businesses more durability to stay with their customer information, CRM concept adopt these technology to provide the better supporting for businesses- ECRM. Since the adoption of relationship marketing lots of the research and data from the real businesses show that to retain an existing customer is far more economic than to require a new one. Business starts to invest more and more resource and efforts into this area. At the same time academic researchers also start to investigate different merits that enhance the customer retention. Also the E-commerce environment also is trying to catch the same trends because of the unique characters of this industry. Because of the unique characters of this industry, E-commerce business cannot just adopt the classic theories from relationship marketing. These businesses need some theories in the E-commerce context to support their operation.

2. Literature Review

Previous studies have identified the benefits that customer retention delivers to an organization (see Colgate et al., 1996; Reichheld and Sasser, 1990; Storbacka et al., 1994).

For example, the longer a customer stays with an organisation the more utility the customer generates (Reichheld and Sasser, 1990). This is an outcome of a number of factors relating to the time the customer spends with the organisation. These include the higher initial costs of introducing and attracting a new customer, increases in both the value and number of purchases, the customer's better understanding of the organization, and positive word-of mouth promotion.

The significant role of information technology in today's business world and in retail management. It indicates that a sound Information Technology system is imperative to success in large format retail. IT system can be leveraged to increase efficiencies in supply chain and vendor management as well as centralize their control. (Vikas Saraf)

"To survive in the global market, focusing on the customer is becoming a key factor for companies big and small. It is known that it takes up to five times more money to acquire a new customer than to get an existing customer to make a new purchase. A Second aspect of CRM is that knowing the customer and his /her problem allows to acquire new customers more easily and facilitates targeted cross-selling." (Tariq Mohiuddin Ahrned - p. 9)

Retail complexities may reduce with the help of Information Technology solutions. The right solution can result in improved productivity and major cost saving through key advantages such as more accurate supply chain, forecasting and better inventory management. Information Technology also help retailers to solve major problems related to customer services like customer loyalty and customer satisfaction. (Dr. Pankaj Tiwari)

Dawkins and Reichheld’ s (1990) seminal paper on customer retention implied that a relatively small percentage increase in the retention rate can lead to a large increase in the net present value of customers. This suggests that customer retention may be measured in terms of absolute number of those staying as a percentage of the original number over a specific period, for example 1 year.

The findings from this study shows that with an efficient IT system a retailer can observe sales and consumer behavior more efficiently and accurately and thus plan its sourcing and customer promotions more effectively. This result also lead to the conclusion that use of new technologies in retailing helps to increase customer loyalty and customer satisfaction. An IT system is also beneficial for various retailing related operations.

Retailers need to understand that technology is not a sunk cost but rather an investment to reduce heavy long-term costs. It is an investment to maintain competitive advantage for long-term growth. (Vijeta Malviya)

Information technology on the other hand is the processing and distribution of data using computer hardware and software, telecommunications and digital electronics. CRM is not only a technology application for marketing purposes, it is a cross functional, customer driven, technology integrated into business process and a management strategy that maximizes relationships which encompasses the entire organization (Goldenberg, 2000).

3. Need of the Study

The business of E-commerce is a new growing area with a huge market in the internet community. But great benefit comes with great challenge. The better information transparent of online business improves the possibility that the customer could find the right product with good price. But the information transparent also gives the customer more power to select their vendors. Now the competitor is just a click away, the competition become more flat more directly. In the modern time the difference of products is less and less. When the products provide almost the same value for customer, you need to add some extra value to customer to stand out from the crowd.

Then new trends of E-commerce industry are to import the customer relationship management concept to understand better of their customers. By understand the customer the businesses could provide more tailored products or service for customer and also the businesses gets to know who is their customer and what kind of the customer is the most valuable customer.

According to many research, business found that the most valuable customer is the repeat customers. The high cost of require new customer makes the many customer relationship goes unprofitable because the new customer only stay in the initial stage of the transactions. Only in the later transaction the cost of service starts to fall and the customer trends to buy more and not so price sensitive. (Srini, Rolph and Kishore.2002)

So for the E-commerce business customer retention is one of the key paths to profit. The businesses should have a clear strategy of customer retention.

As such, this study intends to explore customer retention practices among the major retailers in Aurangabad City. It should be noted that retailing has been one of the most dynamic sub-sectors in the Indian economy, which endured constant transformation over the years (Mui et al., 2003).

This study explores literatures pertaining to the factors that influence customer retention and its measures at great length. Accordingly, a theoretical framework will propose and some possible recommendations will put forward for future researches.

4. Scope of the Study

The study will be a policy-oriented study. It will be an applied study for formulating correct policies and strategy for retailers to improve the system for customer retention. Retailers have developed lot of programmes, projects and policies for customer retention through information technology. However this study will be limited to selected areas from the city. Likewise Information and Communication Technology is a tremendously growing technology; it is very difficult to include all minute developments taking place in this field.

5. Objectives of the Study

The study will be undertaken with the following objectives:

To identify the existing Information Technology applications in the retail sector.

To come across the information needs of customer, and significance of information sources in retail sector.

To find out, what extent the application of Information Technology will help for customer retention programmes implemented in retail sector.

To ascertain the impact of Information Technology for customer retention in retail sector.

To determine the potentialities of E-literacy in retail sector.

To assess the role of internet for the application of Information Technology for customer retention in retail sector.

To identify the limitations/constraints of Information Technology application for customer retention in retail sector.

6. Research Methodology

TOOLS USED FOR DATA COLLECTION

The researcher will use both primary and secondary data for the research work. A questionnaire will administer for collecting the required primary data. Secondary data will be collect mainly from the brochures, newsletters, records and different publications of retailers

Personal Interview

In order to identify the potentialities of Information technology application for Customer Retention, the researcher will conduct detailed interview with the resource persons in the Retail stores of Customer Retention and Information Technology.

Observation Method

Observation is the most natural way of gathering data. The researcher will visit all retail stores selected for the study and will observe the organizational and administrative practices, functioning, facilities and recourses of the store. It will help the researcher to have a clear picture of the computerized activities taking place in the retail stores.

Sample Size

For the study the researcher will collect a total of 1200 sample from the areas of Aurangabad City and will give equal weight to the retail store managers as well as to the customers from the selected areas of Aurangabad city.

7. Tentative Chapter Scheme

I Introduction

II Information Technology Convergence & Customer Retention:

An Assessment

III Review of Related Literature

IV Methodology

V Analysis and Interpretations of the Data

VI Summary of Major Findings and Suggestions

Submitted by Supervised by