Moving Beyond 'One-to-One' - Customer Relationship Management in a Networked World

Customer relationship management used to be synonymous with “one-to-one” marketing, a model for how to target and manage individual customers. The concept worked when it involved one firm selling to individual customers. But an increasingly networked world requires us to consider new CRM models. This is the argument put forth by Soumitra Dutta, Theodoros Evgeniou, and Vasiliki Anyfioti. They propose three new models to complement one-to-one: one-to-many, many-to-many, and many-to-one, and illustrate how AOL, eBay, and Amazon have put them to use.

by Soumitra Dutta,Theodoros Evgeniou, Vasiliki Anyfioti
Last Updated: 23 Jul 2013

Take a few moments to ponder a simple question: what do the leaders of the Internet revolution – AOL, eBay, and Amazon – have in common? Each comes from a different background and operates in a different industry sector. Though the differences are many, core to their enduring success is one fact: each has mastered customer relationship management in a networked world.

This is the starting point for Soumitra Dutta, The Roland Berger Chaired Professor of e-Business and Information Technology, Theodoros Evgeniou, Assistant Professor of Information Systems, and Vasiliki Anyfioti, Research Fellow at eLab@Insead (and Senior Consultant, Roland Berger and Partners), all from INSEAD, who examine how these firms have responded to an increasingly networked world, where the notion of buyer and seller is being redefined.

Consider, for example, the CRM implications for a company like AOL, which pioneered the development of online communities. AOL’s loyal customers, some 140m strong, spend more than an hour each day online on AOL’s properties, with the bulk of the time spent communicating with each other. The firm capitalised on this by developing a network of business partners (300 and growing) to meet the needs of these customers, a process that happens instantly thanks to the global real-time connectivity of the Internet.

This, say the authors, is a classic example of a “many-to-many” relationship, where a collection of business partners delivers a range of products and services to networks of customers.

A slightly different approach is the “one-to-many” relationship perfected by Amazon, a company that has gone from online book seller to online seller of practically anything, from books and videos to computers and electronics to garden equipment. Amazon carries a negligible fraction of the millions of products it offers in its own warehouse, relying instead on a range of partnerships with other providers who sell their wares through the firm’s online infrastructure. The company continues to harness the value of its 30m global customers by using leading-edge technology to customise marketing messages based on a customer’s individual buying habits.

A third relationship, best illustrated by Internet auction house eBay, is “many-to-one.” With a philosophy of helping customers help each other, eBay has created the world’s largest person-to-person trading network with 30m customers around the world. In addition to providing a venue in which to buy and sell, eBay gives its customers a place to socialise, discuss topics of interest, and give feedback to one another. With a business model based upon the strength of its customer communities, eBay has worked hard to cultivate the inter-personal relationships among its customers that help make them loyal to each other and therefore to eBay.

These new relationships join the traditional “one-to-one” concept to create what the authors call the “Network Relationship Management Matrix,” a four-section matrix that charts relationships on two dimensions: degree of business connectivity (high or low) and degree of customer connectivity (high or low). A company’s ranking within the matrix offers insights into where to invest marketing efforts.

To help put into context the implications of these new relationships, the authors conclude by offering four action items that allow firms to benchmark themselves in terms of CRM and understand what opportunities an increasingly networked world might offer. This analysis is worthwhile, say the authors, because the rate of networking between customers and businesses will only increase, and a one-size-fits-all approach to CRM will no longer suffice.

INSEAD 2002

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