Hi! Thanks for an interesting question.
I will try to answer your questions in a point-by-point manner.
Whenever appropriate, I will also provide small snippets from the
articles I will cite but I highly recommend that you read them in
their entirety to get a better understanding of the topic.
Before we start on how e-commerce helps us in understanding customers,
let us first discuss how it goes about collecting information.
One way to do it is by using online profiling. Only profiling works in
the following manner:
?It all begins with your customers' web browser. When your customers
visit a web page that contains banner ads, there's special code
written into the web page. This code tells your customers' web browser
to get the banner ads from an advertising network site on the
Internet, or "ad network." The browser then asks the add network for
an ad and it then pops up inside the web page. Your customer usually
doesn't realize that the ads are coming from the ad network, and the
web page contents from you.?
?When your customer clicks on one of the ads, the ad network receives
a message, which then sends your customer to wherever the ad goes.
However, the fun doesn't end there.?
?The ad network keeps a record of your customer's Internet Protocol
(or "IP") address, the number of times that your customer's particular
IP address responded to a particular ad and, more importantly, the ad
network may begin to track your customer's IP address as she moves
from site to site on the Net.?
?Online Profiling?
http://www.ecomputerlaw.com/articles/2000/online_profiling.htm
?Cookies collect information as a user surfs the web and feed the
information back to a web server. An online vendor's site will send
cookies (which is most simply an identification number) to a user's
computer, where it is stored in a file on the user's hard drive and
serves as a digital identifier tag that notifies the vendor whenever
that user re-enters the vendor's website. Although users can configure
their browser to disable cookies, some sites require users to accept
them before allowing entry.?
?Cookies have two main uses. First, by allowing the site to "remember"
the user, they can customize a website by producing special content
targeted to a specific user.?
?Web bugs are images--usually invisible because they are only one
pixel wide by one pixel high--that are embedded in web pages and
HTML-formatted emails. Advertising networks often use web bugs on web
pages to add information to personal profiles stored in cookies and to
collect statistics about how many hits the site gets.?
?Consumer Privacy?
http://cyber.law.harvard.edu/ecommerce/privacy.html#devtech
These days a more sophisticated method called Customer Relationship
Management (CRM) software has been used to help businesses understand
their customers. Unlike the technologies mentioned above, CRM teaches
every facet of the business to help understand and serve the customer.
?Customers frequently encounter your employees at multiple touch
points: retail outlets, telephone, Web, eMail, field staff, etc. CRM
technology can help make all the relevant information about a customer
accessible to everyone who needs it by holding one database record for
each customer and enabling all departments and systems to have
appropriate access. This avoids the irritating request for the
customer to repeat their story again and again, when passed from one
employee to another in a different department. It also provides a
complete audit trail of customer encounters and transactions from all
touch points.?
?Principles of Customer Relationship Management (CRM)?
http://www.opportunitywales.co.uk/0-0-0/2-0-0/2-1-0/2-4-0/2-4-7c.htm
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How can E-commerce help me understand my customers?
- ?Improved customer satisfaction and retention?
- ?Enhance company marketing and sales practices?
?Spinning Customer Data into Gold?
http://sbinformation.about.com/cs/marketresearch/a/custdata.htm
- ?The data and information collected by a CRM system from all
customer interactions, including off-line and on-line, can also be
used to profile each customer and identify their preferences so that
promotional, cross-selling and up-selling offers can be made by eMail,
direct mail or another communications channel.?
- ?A CRM system database can also be used to identify the
profitability of your customer segment, so that you can provide an
appropriate level of service.?
?Principles of Customer Relationship Management (CRM)?
http://www.opportunitywales.co.uk/0-0-0/2-0-0/2-1-0/2-4-0/2-4-7c.htm
- ?Evaluate Web content, track the success of marketing campaigns and
refine spending levels?
- ?Enhance site design and navigation to improve browse-to-buy ratios
and retention rates?
- ?Reduce the costs of serving customers?
?Understanding Online Behavior?
http://ecommerce.internet.com/how/customers/article/0,3371,10363_803701,00.html
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Advantages:
- ?This data can be used to anticipate a customer's actions. For
instance, if it looks like a customer may abandon a shopping cart
because of the particularly high shipping cost of a product, and if
other customers have shown a pattern of doing the same thing with the
same product, the Web site may provide an incentive, such as a
discount, to buy the item.?
- ?If the advertiser has information about a group of Web site
visitors, such as their sexes and ages, they can apply statistical
sampling techniques to browsing data.?
?Online Profiling?
http://www.computerworld.com/databasetopics/data/story/0,10801,50332,00.html
?Knowing where customers go after they leave your website can be
valuable information for you. It can help direct how you spend your
precious advertising dollars. Now you'll know those websites that tend
to attract traffic from the people who will likely visit and purchase
things from your e-business.?
?Online Profiling?
http://www.ecomputerlaw.com/articles/2000/online_profiling.htm
Finally you will be able to understand a very important concept? the
customer life cycle.
?What is a customer LifeCycle? It is simply the behavior of a
customer with your company over time. Customers begin a relationship
with you, and over time, either decide to continue this relationship,
or end it. At any point in this LifeCycle, the customer is either
becoming more or less likely to continue doing business with you, and
demonstrates this likelihood through their interactions with you.?
?If you collect data from these interactions (purchases for commerce,
page views or log-ins for publishing, contacts for service) you can
use this data to predict where the customer is in their LifeCycle - is
the customer becoming more or less likely to do business with you? If
you can predict where customers are in the LifeCycle, you can maximize
your marketing ROI by targeting customers most likely to buy, trying
to ?save? customers who have declining interest, and not wasting money
on customers unlikely to continue doing business with you.?
?CRM and the Customer LifeCycle?
http://www.jimnovo.com/CRM-Lifecycles.htm
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Risks involved:
The main risks involved in gathering data about your customers is that
you might have trouble with security and privacy concerns in handling
such information. Such problems will then lead to legal troubles.
a. Security Threats:
- ?Unauthorized access?
- ?Data alteration?
- ?Monitoring?
- ?Spoofing?
- ?Service Denial?
- ?Repudiation?
A description of each type of threat can be seen from the next link.
?Security and Encryption?
http://digitalenterprise.org/security/security.html
b. Privacy Risks
?A recent study sponsored by IBM found that 54 percent of US consumers
have decided not to purchase something from a company because they
weren't sure how their personal information would be used.?
?The issue of privacy is further complicated by the global nature of
the Web. Different countries have taken historically different
approaches to protecting consumer privacy.?
?Internet Privacy?
http://digitalenterprise.org/privacy/privacy.html
c. Legal Risks: The following document provides steps on how to avoid
having legal problems in collecting customer data.
?Online Profiling?
http://profs.lp.findlaw.com/privacy/1e.html
Search terms used:
Ecommerce online profiling collecting ?customer data? legal risks CRM
I hope these links would help you in your research. Before rating this
answer, please ask for a clarification if you have a question or if
you would need further information.
Thanks for visiting us.
Regards,
Easterangel-ga
Google Answers Researcher |
