Is Electronic Customer Relationship Management for Luxury Brands?
Case study of the fashion luxury industry
Written by P. Kejmar, J. Stefansson
Business Administration>Marketing & Sales
Thesis: Fashion luxury brands Kapferer and Laurent (2016) believe that luxury is both a concept and a macroeconomic field. In the published literature, there are many definitions of luxury goods. In addition, these definitions have changed over time (Kapferer & Valette-Florence, 2016; Kapferer & Bastien, 2009; Choo, Moon, Kim & Yoon , 2012; Albretch, Backhaus, Gurziki and Woisetschläger, 2012). In many languages, the concept of "luxury" originated from Latin and is related to "surplus". The perception of luxury goods may vary from time to time and person to person, and can be further described as a process rather than a thing (Berthon et al., 2009). In addition, research has shown that customers have different personal definitions of luxury goods, which has diffused this concept (Kapferer and Laurent, 2016). Luxury goods have also been described as an identity, culture and philosophy. (Okonkwo, 2009) Luxury goods are neither the result of a survey showing where niches or business opportunities may exist. The most important factor is uniqueness, not comparison with competitors (Kapferer & Bastien, 2009). 2.1.1 Online shopping of luxury goods. Today's society is different. More and more consumers choose online shopping, including the purchase of luxury goods. Technological developments have almost forced luxury brands to go online because these companies must operate where their customers are. Research shows that the Internet has changed the attitude, behavior and value system of luxury consumers (Okonkwo, 2009). Online and in-store consumers are driven by different incentives. The main attributes of online luxury purchases are convenience, price, product availability, online shopping attitude and trust (Liu, Burns & Hou, 2013). The Internet may be the best environment to spread brand awareness and increase attractiveness at the same time. One of the main challenges faced by online luxury brands is to retain brand value when using mass marketing strategies and maintain the “desire” and “exclusive” characteristics of luxury brands (Okonkwo, 2009; Hennigs, Wiedmann, and Klarmann, 2012). The important task is to understand how to provide a multi-sensory luxury experience online (Hennigs, Wiedmann and Klarmann, 2012). 2.2 The value of luxury brands Wiedmann, Hennigs & Siebels (2009) conceptualized the customer's perception of luxury value into four dimensions: financial, functional, personal and social, and combined them into a model. The financial dimension of luxury value perception focuses on financial aspects, such as pricing, discounts, investment, and resale. The functional dimension of luxury value perception refers to the basic benefits and utility that drive consumers to pursue luxury value, such as uniqueness, quality, trust, and usability. The personal dimension of luxury value perception solves consumers' personal problems and values of the brand, such as hedonism, self-identity value and materialism. 2.4 Electronic customer relationship management Electronic customer relationship management (e-CRM) was in the early stages of expansion in 2009 and is a relatively new concept. This concept evolved through traditional customer relationship management (CRM) (Sophonthummapharn, 2009). There is no universally recognized definition of E-CRM. Previous documents describe different definitions and contexts, which are further shown in Table 2.1. 2.4.1 E-CRM as a strategy for online purchase of information and network traffic. The development of e-CRM makes e-CRM more than just a software, it has been recognized as a strategy. E-CRM should be incorporated into all aspects of business processes in order to maintain synchronized interactions with customers in each channel. In other words, e-CRM used as software is not enough to achieve successful results. E-CRM is a strategy that must be implemented and managed well (Chen and Chen, 2004). E-CRM applications mainly include two parts: Operational e-CRM and Analytical e-CRM (Sophonthummapharn, 2009; Dohery & Lockett, 2007. Operating e-CRM, known as the "front office", usually involves customer contact using telecommunication technology ( Dohery & Lockett, 2007). These technologies include loyalty programs, automated email response systems, cross-selling/up-selling functions, site customization, and automated service systems (Sophonthummapharn, 2009). On the other hand, they are called "back-office" systems. Analytical systems use data management techniques and software to process large amounts of customer data (Sophonthummapharn, 2009; Dohery & Lockett, 2007). Some of the systems included in the analytical e-CRM are sales record systems, sales trend and forecast reporting systems , Analysis and Reporting System and Customer File System (Sophonthummapharn, 2009). Therefore, the operation and analysis system is not the whole of e-CRM. According to its application mode, different benefits can be expected (Sophonthummapharn, 2009). 2.4.2 Successful application e-CRME-CRM may be a good strategy for organizations to take better care of customers. Sophonthummapharn (2009) further identified three different types of potential benefits of e-CRM implementation: strategy, customer service, and productivity benefits. Potential strategic benefits include Gain and maintain competitive advantages, and effectively analyze and understand customer needs. Customer service benefits include improved customer satisfaction, customer retention, and customer loyalty. In addition, productivity advantages include increased revenue and profitability, and overall cost reduction is success Further possible advantages of applying e-CRM applications (Sophonthummapharn, 2009). The benefits of a successfully implemented e-CRM system can also be designated as intangible and tangible benefits. Read Less