A Model of CRM and BI for Catalogue and Online Retailers

Dien D. PhanDouglas R. Vogel

Information & Management, Vol. 47, Issue 2, 2010.

Ranked 2nd of the top hottest articles on Information&Management

Concepts and StrategiesFour key value propositions (Amit and Zott,

2001)1. Search and transaction cost efficiency2. Lock-in3. Novelty4. Complementaries

CRM SystemsUse CRM and BI to achieve and maintain the

four key value positions:Common novelties:

1. Price Discrimination2. Switching Cost3. CRM and BI

Long-Tail Phenomenon

CRM-BI Model

HypothesesH1: Price discrimination improve customer

relationshipsH2: Higher switching cost lower levels of

customer satisfactionH3: CRM and BI increase satisfaction and

customer relations

Case study: FingerhutCRM and BI success at first Fingerhut: Lock in

and CRM/BI/DM novelties:1. Closed-end credit coupon system: switching

cost2. CRM tailored sales to customer’s ability to

pay3. BI to predict customer buying patterns4. Mail Stream Optimization algorithm to

reduce impacts of cutting number of overlapped catalogs

5. Viral marketing

Fingerhut Failure in E-commerceEntered e-commerce: 1998Acquired by Federated Department Store:

1999 Fingerhut.netAbandoned BI/CRM: replaced closed-end

credit system with credit cardsSuffered $400 mil. losses in unpaid creditLiquidated Fingerhut: 2002

The new Fingerhut after 2002Fingerhut Direct MarketingBack to closed-end credit system with

CRM/BIStrong growth: 2002-2008.

CRM-BI Impacts on Success

Lessons LearnedBI and CRM reduce the threat of low price

marketHigh switching cost does not reduce

customer satisfactionPrice discrimination reduces customer

satisfactionCRM and BI are critical for FingerhutSupply chain integration are important for

online and catalog firms

Conclusions