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Discuss techniques for retaining new customers and cross and up selling using media.

Mumbai University > Information Technology > Sem 7 > E–Commerce & E-Business

Marks: 10 M

Year: May 2013

1 Answer
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Techniques for retaining new customers (Customer retention):

  1. Definition: Customer retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship.
  2. Techniques:

    a. Personalization and mass customization: Personalization and mass customization can be used to tailor information and opt-in email can be used to deliver it to add value and at the same time remind the customer about the product. Personalization refers to customization of information requested by a site customer at an individual level. Mass customization involves providing tailored content to a group with similar interests. An example of mass customization is when Amazon recommends similar books according to what others in a segment have offered. This approach is sometimes referred to as ‘collaborative filtering’. All the personalization techniques take advantage of the dynamic possibilities of the web content. Personalization can be achieved through several dynamic variables including:

    • The customer’s preferences
    • The date or time
    • Particular events
    • The location

    b. Online communities: Community is a key feature of the new interactive media that distinguishes them from traditional push media. Thus, it is a customer-to-customer interaction delivered via e-mail groups, web based discussion forums or chat. The key to successful community is customer centred communication. It is a C2C interaction. Consumers, not the businesses generate the content of the site, email list or bulletin board. Depending on the market sector, an organization has a choice of developing different types of community for B2C based on:

    • Purpose
    • Position
    • Interest
    • Profession

    c. Techniques for managing customer activity and value: Within the online customer base of an organization, there will be customers who have different levels of activity in usage of online services or sales. The various objectives and tactics required for managing include:

    • Increasing number of new-users per month and annually through promoting online services to drive visitors to website.
    • Increasing % of active users: Using direct communications such as email, personalized website messages, direct mail and phone communications to new, dormant and inactive users increases the percentage of active users.
    • Decreasing % of dormant users, but have not used within a time period to be classified as active.
    • Decreasing % of inactive users: Those who have signed up for a service bur have not used up that service. Another key metric, in fact the key retention metric for e-commerce sites refers to repeat business. The main retention metrics are as follows:
    • Repeat customer conversion rate: How many first time customers purchased a second product.
    • Repeat customer base: The proportion of customer base that have made repeat purchases.
    • Number of transactions per repeat customer: This indicates the stage of development of customer in the relationship.
    • Revenue per transaction of repeat customer: This is a proxy for lifetime value since it gives average order value.

    d. Improving online service quality: Delivering service quality in e-commerce can be assessed through reviewing existing frameworks for determining levels of service quality. Those most frequently used are based on the concept of a ‘service-quality gap’ that exists between customers expected level of service and their perception of actual level of service delivery. The dimensions of service quality on which consumers judge expected and delivered service quality levels are:

    • Tangibles: The physical appearance and visual appeal of facilities
    • Repeatability: The ability to perform service consistently and accurately.
    • Responsiveness: A willingness to help customers and provide prompt service.
    • Assurance: The knowledge and courtesy of employees and their ability to convey trust and confidence.
    • Empathy: Providing caring, individualized attention.

Cross and up selling using media:

  1. Cross-selling is the action or practice of selling among or between clients, markets, traders, etc. or the action or practice of selling an additional product or service to an existing customer. This article deals exclusively with the latter meaning. In practice, businesses define cross-selling in many different ways. Elements that might influence the definition might include the size of the business, the industry sector it operates within and the financial motivations of those required to define the term. The objectives of cross-selling can be either to increase the income derived from the client or clients or to protect the relationship with the client or clients. The approach to the process of cross-selling can be varied.
  2. Up selling is a sales technique whereby a seller induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale. Up selling usually involves marketing more profitable services or products but can be simply exposing the customer to other options that were perhaps not considered. Up selling implies selling something that is more profitable or otherwise preferable for the seller instead of, or in addition to, the original sale. A different technique is cross-selling in which a seller tries to sell something else. In practice, large businesses usually combine up selling and cross-selling techniques to enhance the value that the client or clients get from the organization in addition to maximizing the business's profit. In doing so, the organization must ensure that the relationship with the client is not disrupted. In restaurants and other similar settings, up selling are commonplace and an accepted form of business. In other businesses (e.g. car sales), the customer’s perception of the attempted up sell can be viewed negatively and impact the desired result.
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