A Strategic Royal Marketing Model on e-Businessas a new generation marketing modelTakeshi Makino

Ryan Chiu

Ryota Adachi

Department of
Web Business Technology
The Kyoto College ofGraduate Studies for Informatics
m04w0024@m1.kcg.edu

Department of
Web Business Technology
The Kyoto College ofGraduate Studies for Informatics
m04w0013@m1.kcg.edu

Department of
Web Business Technology
The Kyoto College ofGraduate Studies for Informatics
m04w0015@m1.kcg.edu

Takao Nakaguchi

Hong Seung Ko

Department of
Web Business Technology
The Kyoto College ofGraduate Studies for Informatics
m04w0026@m1.kcg.edu

Professor,
Department of
Web Business Technology
The Kyoto College ofGraduate Studies for Informatics
h̲ko@kcg.ac.jp

Abstract
Currently, e-Business marketing strategy practices are planned for gaining and maintaining customer loyalty, unfortunately thesestrategies do not achieve the success their e-Businesses desire. So why do these strategies not achieve the profitable results they seek?
In e-Business, customers move easily from one web site to another with just one click. Therefore, it is difficult for companies to gaincustomers and even more difficult to retain them. Moreover, many companies are just carrying out regular marketing strategies trying
to make customers loyal to companies. In this situation, companies should adopt a new marketing strategy encouraging their loyalty toreturning customers so that they will do more business with them. We call this new marketing strategy Royal Marketing . In this paper we discuss existing marketing problems in the e-Business community and the reasons that cause it. From there, we propose ourRoyal Marketing model as the only resolution to these problems. This model process strategically develops Smart Interface andThanks Mail which are used as communication tools, and our Relationship Point System which is used as management tool. As
the result, we verify that our Royal Marketing model performs much better in attaining and retaining customers.
Keywords: e-Business, e-mail, Marketing, Royal Marketing, Smart Interface, Thanks Mail, Relationship Point System

1. Introduction70

e-commerce as a percent of total retail sales has grown from

From the early 90's, a new method of doing business

0.7% to 1.8%. From the e-commerce revenue's view, 2001 sec-

emerged onto the global scene; this method became known as

ond quarter revenue was 7.5 billion US Dollar, which, com-e-Business. In fact, many companies are becoming more andpared to the same quarter in 2004 was 15.7 billion US Dollar.

more aware that e-Business will be a significant tool for profit

In other words, transactions through e-Business have more thanin the future, and they worry that if they do not begin to thinkdoubled within a very short period of time. Many scholars be-

and plan for e-Business transactions now, they will lose to com-lieve e-Business will continue to grow faster and faster in the

petitors. As Bradshaw said if you are not talking online busi-

next few years. Never the less, the increase in the amount of inter-

ness, plenty of your competitors will be, and you will be left

net users is another reason why companies have turned their at-fighting over a shrinking proportion of your market[Brad-

tention to e-Business. In 2004, Internet world stats [2] showed

show 01]. Already, we can see many companies investing andthat the world Internet user population was about 819 million

thinking about e-Business in order to gain an advantage overpeople. This figure represents approximately 12.7% of the en-other companies. Meanwhile we can see that the market for thetire world's population. The percentage of Internet users has

e-Business has grown rapidly also. According to the year 2004

jumped 126.4% since the year 2000. Furthermore, 2001 data

U.S. Census Bureau Data [1], from 1999 until the present day,statistics show that world on-line shopper populations are

NAIS Journal

around 15% of world internet users.

In order for current companies to be more profitable and com-Current e-Business situations can be simply described aspetitive in future e-Business transactions, traditional businesshigh cost for customer acquisition, low customer retention, andmethods need to change. Companies need to understand thatnegative cash flow. Due to ICT infrastructures customers cancustomers are the most important asset to e-Business. As for-gather mass information and move easily from one web site tomer FCC commissioner Nichola Johnson's quoted

another within a very short period of time. That is why e-Busi-be that people needed products to survive. Now products need

ness needs to find a way to gain and maintain customer loyalty

people to survive [Roll 03]. Therefore, companies need to put[Gefen 02, Gillenson 99]. Instead of companies trying this way,

customers in the center and listen to customer concerns. They

we see that most companies retain customers by spending a lot

also must try their best to fulfill each customer's needs.

of money in advertisements or promotions. According to Ma-

Through e-Business, customers can easily move from one com-chlis the average costs of attracting a single customer has beenpany website to another with a single click. Customers canestimated by one source to amount to 34 US Dollar per custom-

leave a company website whenever they want to and no one

er [Machlis 99]. It may look cheap to some people, but it will

will be able to stop them. In order for companies to build solid

become huge amount when the amount of customers is multi-

relationships with their customers, companies need to learn that

plied. Some other companies will try to segment their customer

they must be loyal to their customers. How can a company bebase and provide all necessary products or services to that indi-

so loyal? A company must treat customers as individuals, giv-

vidual customer. Some companies will even try strategic ap-

ing each customer their own customized services and products

proaches like e-mail marketing or CRM (Customer Relation-

for a profitable long-term relationship. Bradshaw also said thatship Management) solutions. While there are many other ways

the web presence must engage customers as individuals, to en-

to obtain and maintain customers in e-Business, most of themsure that they will return again and again. Once a personal re-failed to keep customers and generate profits. Scholars likelationship is formed, better data gathering online customers can

Stahl and Borenstein also point out why the current e-Businessbe accomplished. Moreover, this process can be done in a very

model has failed to attract and keep customers. This is because

un-intrusive way to customers. If those who provide online ser-of the company's lack of experience conducting e-Business andvices can collect more data about customers, they can under-

an organizational fear of doing business over the Internet [Stahlstand those they serve more by customizating each experience.

97, Borenstein 98]. Other than lack of experience and fear of do-

As time progresses, the services provided will meet each cus-

ing e-Business, we believe most companies are trying to tell

tomer's needs specifically. Companies that are completely loyal

their customers to be loyal to them. This is the biggest failure ofto their customers will make them feel special while shopping,

all as it forces customers to be loyal to companies no matter

which breeds customer relationship. Customers will enjoy awhether the company fulfills customer needs. In e-Business,higher satisfaction during each Internet shopping session [De-customers will never be satisfied when they have so many com-varaj 03]. In this paper, we propose the Royal Marketing brief

petitors to choose from. Once other companies can provide fast-

concept and strategic models.

it used toer, easier, and cheaper service than you can, customers will
leave you in one-click.

2. Royal Marketing Brief Concept

We did two surveys (http://web0.kcg.edu/prof/ko/

Keeping a long-term relationship with customers is important

rm/survey2005q1/) on the Internet examining customer behav-

because the marginal return of revenue is low in e-Business.

ior and the new model we proposed. By quantifying reactionary

Don also explained

behaviors, we are finding out how customers feel toward shop-

ing costs, generate increased revenues, refer other customers

ping online versus shopping off-line. Our first survey, con-more frequently, and are always will to pay a premium, which

ducted from December 2004 to January 2005, received 270 res-consequently produces higher volume and margins [Don 97].

ponses, and the age demographic was from mid-teens to 60+.

Current marketing practices can not be called successful Inter-

Our second survey tested whether customers liked our model;

net marketing, as it has not able to attract and maintain custom-

particularly, seeing if our strategic model works for Internet

ers. That is why a new marketing model will be needed. We

shoppers. This survey was held from January 2005 to February

will define this new model as Royal Marketing. This model's

2005. In this survey, we received 112 responses. In the first sur-concept states that companies are loyal to their customers. Roy-vey results, we found that e-Business companies have a low

al Marketing is built from a company's customer base, as theserate of customer faithfulness due to the traditional marketing

they are the foundation for the entire business structure. Compa-

approach.

nies must listen to a customer's order carefully, and fulfill theirlong-term customers entail lower servic-

71

A Strategic Royal Marketing Model on e-Businessneeds at any time. Yet, current marketing practices do not

Internet shopping sites, various user interfaces are developed

achieve this. A company should take great interest in its custom-and provided to urge visitors to access with the site and buy.

ers, treating each of them like a King/Queen. In addition, they

However, many visitors feel inconvenienced to have to use cur-deserve the best in personalized services from the company.

rent interface models. An interface model which solves this in-With this high priority placed on customers, this marketing

convenience has not yet invented. The reason for this is thatmodel has words which show our high esteem in each custom-these current interface models are not designed for visitors to

er. This is the reason why we choose the name Royal Market-

use conveniently and quickly. Through the Royal Marketinging for our proposed model. Moreover, this new model is de-Model, in which a company is loyal to their customers, we pro-signed to work with e-Business. The main function of Royalpose a new interface environment developed to be as visitor-

Marketing is to build long-term trustworthy relationships withfriendly as possible. This interface simplifies the information in-each customer. Also, giving customers a satisfying and pleasantput process reducing the information that visitors will be request-

Internet shopping experience will entice them to come back anded to provide. It also improves convenience for regular custom-

shop again and again. The result: e-Business companies can

ers by greatly speeding up the see and buy process. We call thisgenerate revenue and customers can enjoy shopping on theinterface as Smart Interface.

Internet; a win-win situation.
Our basic concept is completely different from Loyalty

3.2 Problems with current interfaces

Marketing, Which is marketing concept in which companies

Intuitive user interface is very important because the way

force customers to remain loyal to their specific companies andof online communication to consumers is via the user interface.

theirs alone. Most often companies who practice Loyalty Mar-The Smart Interface targets the following three problems. By

keting will issue things like membership cards or point cards,

solving these problems, a company will be able to acquire more

hoping customers will come back again and again to collectcustomers using e-Business.

points in order for exchanging a reward. However in our firstFirst, a company must open their shopping site for non-survey, we discovered that a membership system worked better

registered visitors. During our second survey, 56% of respond-in an off-line store than in e-Business. Moreover, data also

ents wanted to search items, 27.2% wanted to buy items andshowed that customers did not have higher buying or retention

29.6% wanted to use all functions of shopping site. According

rates toward a membership system offered by e-Business. Withto this survey, closing shopping sites for non-registered visitors

our new concept, we have proved that companies will gain bet-

will take searching or buying opportunities away.

ter customer retention and maintain higher customizability
through Royal Marketing.

Second, too much information input not only causes visitors inconvenience, but also loses them. With current online

To develop the Royal Marketing model successfully, one

interfaces, throughout searching and buying products, visitors

will need marketing strategies never been developed before.

are forced to input their information. At the beginning of the

We consider the current existing e-Business marketing strategy

process, when visitors try to create a user account, they areproblems and consider why they fail. From there, we suggest

forced to input information such as usernames, passwords, real

our strategy blue print as follows: Smart Interface , Thanks

names, e-mail addresses, ages, genders, real addresses, and so

Mail , and Relationship Point System . For Smart Interface

on. Requesting visitors to input so much information before

and Thanks Mail, they will work as communication tools withsearching and/or buying is an inconvenience for most visitors.

customers which will foster habits of shopping with a company.

What is worse is that this information is often completely need-

For our Relationship Point System it will work to maintain aless or temporarily needless at the time. Actually, according tolasting customer relationship with Royal. We will be discuss-

our second survey, 51.2% feel inconvenienced to have to input

ing, in further detail, these three strategies that fully develop theinformation at user registration screens. Reducing information

Royal Marketing Model in e-Business.

input quantity is very important in creating an interface environment that visitors feel unobtrusive. In addition, security risks

72

3. Smart Interface

may occur when a company requests that visitors input their in-

3.1 What is the Smart Interface?

formation. Recently, information leaking problems are happen-

As mentioned above, in an e-Business environment it ising often and a concern about security risks while inputting or

hard to get customers because visitors can move so easily. In or-transmitting sensitive information is quite high. According to

der to get customers more effectively, a company must provide

our first survey, 65.2% say that information leaking is theira more convenient interface than others. Currently employed bygreat concern when online using Internet shopping sites. There-

NAIS Journal

fore, gathering user information is itself a matter of visitors. Fur-

Many Internet users receive tens of harmful e-mail each day

thermore, companies are forced to invest in security systems tothat are of no concern, such as porno e-mail, phishing e-mailprevent information leaking. As a result of our studies, the lessand so on. So for Internet users, the fewer places that they haveinformation input required the better visitors and companies

to input their e-mail address the better. Moreover, there arecan improve the convenience and security of their user inter-some inconveniences accompanied with inputting an e-mail ad-

face.

dress. Our Smart Interface generates an e-mail address automatiLastly, the current interface doesn't work well for regularcally to a visitor and provides him/her with a choice to use thisvisitors. All companies which manage shopping sites want visi-

address or not. When a visitor uses this generated e-mail ad-

tors to be regulars. But current interface systems which provide

dress, one can keep his/her own e-mail address secure andup-selling or cross-selling marketing don't always work well forthe input process is voided. Using this interface factor, the in-regular customers, it can't distinguish between various custom-

convenience of inputting visitor's information and security

ers buying reasons. According to our second survey, 64.8% feelrisks on information input can be nullified.

inconvenienced while using such interfaces. For example, a cus-

Finally, this interface factor makes a distinction of custom-

tomer visits a shopping site and buys books for his work, his

er's buying reasons. Our Smart Interface changes the informa-

hobbies, and as a gift for his wife. After a while, book recom-tion displayed on the web browser as the customer buys moremendation pages of his account display various categories of

products. This change can be seen on the recommendation item

books and a few books in each category, but he can't get a plen-list, as well as the shipping address and so on. The selection list

ty information about specific buying reasons from those pagesbox of buying reasons is displayed on the web browser, and as

anymore.

a customer selects his/her buying reasons, information for thatis generated. This information is generated based on the history

3.3 Resolutions for these problemsof each customer's buying data, such as the number of items

At Smart Interface, we propose the following resolutionsbought and how frequently certain items were viewed, andto the aforementioned problems. These resolutions include two

which buying reason was selected as the customer buys items.

suggestions and three new interface factors.

Through this interface factor, the feeling of annoyance in regu-

First, a company should provide as many functions for vis-

lar customer is avoided.

iting shoppers of an internet shopping site as they do for registered shoppers. As mentioned above, a company can increase
the amount of visiting shoppers 31% by providing all functions
to non-registered visitors.

3.4 Validity of Smart Interface

According to our second survey, 9.6% of participants selected very useful and 24% selected somewhat useful in regards

Next, a company should select necessary information in-

to an auto-generated default username and password. So by im-

put factors carefully and request only information that is reallyplementing this feature, Internet shopping sites can greatly im-needed. Then the inconvenience of inputting necessary informa-

prove user interface usability for 33.6% of visitors. 9.6% partici-

tion regarding visitors and the security risks of information in-pants selected very useful and 21.6% selected somewhat usefulput can be reduced.

for a default e-mail address auto generation. 20.8% of partici-

Third, we propose a new interface factor that generates

pants selected very useful and 40.8% selected somewhat usefula default username and default password automatically. Thisin regards to managing shopping history through a customer's

interface factor is based on the fact that the username and pass-buying reasons. From these results, we suggest conclusively

word are only necessary for identifying visitors. In our Smartthat our Smart Interface factor is effective.

Interface, at first, information requested for visitors at the beginning, during user registration, are limited to the username and4. Thanks Mailpassword. Based on that, a default username and a default pass-

4.1 The problems and the ideal image of e-mail marketing in e-word are automatically generated. We can then verify that a visi-

Business

tor can register in one-click; the inconvenience of inputting visi-

Today, the most widespread communication tool on the

tor information and the associated security risk inputs are nulli-Internet is e-mail. All over the world, more than 60 million peo-fied.

ple have sent more than 1 billion e-mails every month [Cliff
Now we will talk about an interface factor that creates an01]. In e-Business, e-mail is the only tool which can make di-e-mail account for visitors that to contact them with. Recently,

rect communication with customers. Under this environment, e-Internet users have been suffering from mass SPAM e-mails.

mail that can be customized for each of the customers and sent73

A Strategic Royal Marketing Model on e-Business

Customer

1.Purchasing

Data analyze

2.Thanks Mail
(Privilege point + Questionnaires)

3.Result of questionnaires

Analyze result
Company

Data analyze

DataSpecialist

Customer

4.Customized e-mail(RP + Customize Information)

Analyze result

Figure.1 The flow structure of Thanks Mailfrom a company directly to an individual's PC at low cost in

think it is SPAM at once. It can be proved from the results thatcomparison to other marketing practices is a very worthy mar-they just get rid of it.

keting tool. However, many companies do not utilize e-mail ef-

In this chapter, the e-mail service as a communication tool

fectively. Many companies recognize e-mail only as a tool thatbased on the concept of Royal Marketing is proposed as Thanks

is not restricted by time and space and can be sent at relatively

Mail.

low cost. As a result, almost all e-mails from companies become less and less attractive to each customer. To make matters

4.2 Structure of Thanks Mailworse, it is recognized as SPAM by customers [Thomas 02]

We suggest : the flow structure of Thanks Mail（see Figure 1）

and customers dump it without even opening it. This can beand explanation of it.

proved from the results of our second survey.

Step 1: When a customer's buying actions are revealed, a com-

In what ways do companies send e-mail to their customers

pany will analyze the details about the buying behavior. The

and how do they expect customers to behave? First, companies

company guesses their customer's thinking from the results ofhave to recognize e-mail as follows [Cliff 01].

the analysis, and prepares some questions which further analyze

1. e-mail is a powerful tool that builds a confidence in athe customer's reasons for buying.

relationship between companies and their customers.

Step 2: The company sends e-mail called Thanks Mail to their

2. Companies have to know what their customers arecustomer, which contains questions and records several percent

thinking through e-mail.
3. The more companies know about their customers indi-of the purchase price offered as Privilege Point which can beused for re-buying different products or services.

vidually, the more companies can offer customers

Step 3&4: If the customer who received Thanks Mail replies toneeds.

questions from the company, the customer can get Relation-

4. If customers are pleased with the e-mail service fromship Point . Relationship Point determines the degree of ser-the company, customers will check e-mail and will ac-

vice a company provides to their customers. This will be ex-cess the company's web site.

plained in more detail in the next chapter. The company can

5. If the average time that a customer accesses the compa-

send customized e-mail which is tailored to their customer's

ny web site increases, they can occupy more of a cus-

thinking by investigating the reply of their customer to the ques-

tomer's time than a competitor occupies.

tions posed.

When these five points have been understood clearly, companies should send e-mail to attract their customers. Moreover,74

4.3 Features and validity of Thanks Mail

companies have to make their customers understand that it is at-

The greatest feature Thanks Mail provides is creating

tractive to have e-mail as the initial contact made by them, be-mass personalization possible through e-mail in an e-Business.

cause customers do not get interested in e-mail which they

The customized e-mail service will support the opportunity for

NAIS Journal

Customize degree of "Thanks Mail"

Customer's reply
to company's questionnaires
answerno answer

Time

1st

2nd

3rd

4th

Figure.2 The Flow of Customization Degree

customers to access the company web site, and will increase thein an e-mail sent from a company, do you reply to the ques-possibility that customer will buy again. To accomplish this,tion?

companies must know their customer's reasons for shopping

naire, 84.8% did not respond. However, to the question,and have to offer the information according to it [Don 97]. Cus-

privileges, such as a coupons and discounts, can be acquired bytomers do not need anything more than valuable information.

replying to a questionnaire, would you reply to the questions?

15.2% of respondents repliedYes

to the questionIf

Value added e-mail is another great feature of Thanks

62.4% of respondents said they would answer, 37.6% would

Mail which shows gratitude to a customer. Offering a service in

not answer. From these results, we find Thanks Mail to be a vi-

which the company becomes useful to a customer's needs

able solution.

builds a better relationship. A relationship with integrity between the company and customers always gives the company

5. Relationship Point System

more profits [Keki 96]. Therefore, companies need to recognize

5.1 About Relationship Point

that their customers do not have to cooperate with them to help

The basic concept of Royal Marketing is that a company

them show profits. The company must show gratitude for cus-

remains loyal to their customers. However there is a limit of re-

tomer cooperation through valuable e-mail.

sources available to e-Business companies who provide such

The more frequent the Thanks Mail responses, the higher

services to their customers. That is why a company must seg-

the degree of customization. Therefore, the bond between com-ment their customer base separating those who are profitable,pany and customer is strengthened more. Figure 2 expresses

giving them high quality service, from those who are not. Yet,this idea graphically.

suppose that a company service is valuable; a customer will vis-

Our second survey shows the following results. To thequestion

Today, how do you feel about e-mail sent from ait the company web site again and again. As a result, an excellent customer will bring tremendous profits to the company.

company? 47.2% of respondents answered that it was trouble-

In this chapter, we propose Relationship Point Systemsome while 8.8% said that it was welcoming. Furthermore, to(RPS) as a way for companies to segment excellent customer

the question

How do you deal with the e-mail sent from afrom regular one. RPS not only assists Thanks Mail, but be-

shopping site? 68% of respondents did not check the contents

comes a much more powerful tool for building a long-term part-of e-mail, 1.6% accessed the company web site from which thenership with its customers. In addition, RPS is also the toole-mail was sent. However, to the question If the e-mail from athrough which a company can visualize how much value a par-company is customized and had valuable information within,ticular customer has brought to the company.

how would you treat the e-mail? 54.4% of respondents would

In RPS, the importance of Relationship Point (RP) is var-check the contents of the e-mail, and 12.8% said they would ac-ied depending on a customer's buying action and behavior. The

cess the web site of that company via the e-mail.

sum of those points will be determined as RP. By observing

Lastly, to the question, If the questionnaire is contained

RP, a company can decide how high a level of service to pro75

A Strategic Royal Marketing Model on e-Businessvide to that customer. Even if two customers buy exactly themuch important than Monetary and Recency factors. This is be-

same products, a customer who has higher RP, will receive

cause the Royal Marketing model has the function of building

much better service from company. It is very important for com-

associations with the customers, and whoever comes to visit thepany segment a customer properly and offer suitable service.

web site often will make those important connections easier. Al-

By doing so, a company can build a strong connection with cus-though the monetary factor is important for today's business,

tomers. Furthermore, the first 20% of customers, who havethe Royal Marketing model believes that it must not be more im-high RP, will be considered to be the most valuable customers,

portant than the Frequency factor. Since customers can move so

according by Pareto's Law. In other words, RPS will support

easily to another web site in a very short time, customers cancompanies by building better associations with customers in e-come and go without being recognized by company. That isBusiness.

why the Recency factor will be considered less important.

In e-Business, customer can move easily between web

Because the Royal Marketing Model is trying to analyze

sites with one-click. Therefore customer buying actions and be-

e-Business customers, VF and MF analyze customer Internet be-haviors are hard to grasp. For e-Business, an understanding of

havior, not their buying reasons. Therefore VF and MF haveits customers is of the utmost importance as, examining only bymuch heavier degree of importance than Recency, Frequency

Recency, Frequency, Monetary (RFM) analysis will not be

and Monetary. In other words, this correlation can be easily ex-enough for segmenting customers. It is very dangerous for an e-plained as VF > MF > F > M > R.

Business if it can not segment excellent customers from others.
Based on the RFM analysis we added another two factors; Visitor Frequency and e-Mail Frequency, making this model moresuitable for an e-Business environment.

5.3 How Relationship Point is Calculated

Relationship Point will be calculated by using MF, VF, F,
M and R as variables. Each factor will be multiplied by alpha

Visitor Frequency (VF) is the factor of point weight that(α). The relative beside each factor will useαi, to denote the lev-shows how often a customer visits the company web site. It isel of importance. As previous shown VF > MF > F > M > R,

important because customers often access a web site manyand then multiplying each factor by their own level of impor-times before buying anything. If the customer visits the web

tance, their result will be RP1. In order for RP to be betweensite very frequently, it indicates that customer has a high inter-the range value 1 to 10, RP1 will multiply by β for mathematic

est and concern about the company. That is why VF is a neces-adjusting. The RPS formula is as following.

sary factor for analyzing e-Business customer traits.
e-Mail Frequency (MF) is the factor point weight thatshows how often a customer responds to company e-Mails.

RP=RP1×βRP1=(VF×α5)+(MF×α4)+(F×α3)+(M×α2)+(R×α1)

From the previous Thanks Mail strategy, we realized that those

β=1/3

customers who will respond to e-mail frequently are very impor-

αi=i/5 (i=1〜5 :i is an integer)tant to the company. As customers regularly reply to the e-mail,the company will be able to understand more about them. There-

We perform three demonstrations that test the RP calcula-fore, adding MF to RFM analysis helps companies segmenttion shown in table. It is mainly trying to find out whether add-

their customers. This not only looks at their buying power, but

ing VF and MF into RFM analysis will yield better results inalso customer behavior.

the segmentation of customers. First, set F, M, and R as constants and VF, MF as variable factors. All factors have to be

5.2 Relation between VF, MF and RFM

any value from 1 to 10. For constants, a factor of 7 is chosen

As previous demonstrated, the RFM analysis will not be

for this demonstration. Comparing DEMO1 and DEMO2, theenough to examine e-Business customers. That is why adding

customer who has the higher VF will have a much higher RP

VF and MF into the RFM analysis, is so essential to e-Business.

value. Furthermore, comparing DEMO1 and DEMO3, the cus-

VF is much more important than MF because e-Business buy-

tomer who has the higher VF does not always mean that he/she

ing processes often begin with customers who visit the web

will get the higher RP value. As a result, if two customers buy-site. MF can only occur after the customer buys the products.

ing the same products from the company web site only use the

Therefore, VF is greater than MF when calculating Relation-

RFM analysis, the company will not able to distinguish who isship Point.

an excellent customer. However when using the Relationship
Point System, the company will be able to do further analysis re-In the RFM analysis, we suggest that Frequency factor is76

garding the customers. Even though customers are buying theNAIS Journal

same products, the RP values will be different because of the
VF and the MF value.

Reference[Borenstein 98] Borenstein, N.,

Whose Net is it Anyway?

Communications of the ACM. Vol. 41, No. 4, pp. 19-21, 1998.

DEMO1;{[9×(5/5)]+[1×(4/5)]+[7×(3/5)]+[7×(2/5)]+[7×(1/5)]}/3=6.07
DEMO2;{[2×(5/5)]+[7×(4/5)]+[7×(3/5)]+[7×(2/5)]+[7×(1/5)]}/3=5.33
DEMO3;{[6×(5/5)]+[5×(4/5)]+[7×(3/5)]+[7×(2/5)]+[7×(1/5)]}/3=6.13[Bradshaw 01] Bradshaw, David, & Brash, Colin,

Managing

Customer Relationships in the e-business Word: How to Personalize Computer Relationships for Increase Profitability.

Interna-tional Journal of Retail & Distribution Management. Vol.29,
VF

MF

F

M

R

RP value

DEMO1

9

1

7

7

7

6.07

DEMO2

2

7

7

7

7

5.33

To-One Web Marketing: Build a Relationship Marketing Strat-

DEMO3

6

5

7

7

7

6.13

egy One Customer at a Time , John Wiley & Sons Inc, NY,

No.12, pp. 520-529, 2001.
[Cliff 01] Cliff Allen, Deborah, Kania, & Beth, Yaeckel,

Table: RP Demonstration Result

2001.
[Devaraj 03] Devaraj, Sarv, Fan, Ming & Kohli, Rajiv,

It is very important for companies to understand the correct way to evaluate a customer's value. Therefore a company

One-

ty: Elusive Ideal Or Competitive Edge?

E-Loyal-Communications of

the ACM. Vol.46, No. 6, pp. 184-191, 2003.

needs to use RPS to find out the real value of each customer,
providing a closer and more personalized service to them.
Thus, in order for the company to survive in e-Business, it[Don 97] Don, Pepper, & Martha, Rogers,

Enterprise One to

One: Tools for Competing in the Interactive Age

Bantam Dell

Pub Group, NY, 1997.

is required that company value the association with each customer and satisfy an excellent repeat customer with personal-[Gefen 02] Gefen, David,

ized service extras.

Journal of the Association for Information Systems. Vol. 3, pp.

6. Conclusion[Gillenson 99] Gillenson, Mark L., Sherrell Daniel L., & Chen,

In e-Business, marketing will become more and more important in the future. The validity of the traditional marketing
method in off-line venues is limited, so a new concept of mar-Customer Loyalty in E-Commerce.

27-51, 2002.

Lei-da,Information Technology As the Enabler of One-to-One

Marketing.

Communication of the Association for Information

Systems. Vol.2, No.18, pp. 02-40, 1999.

keting is necessary. Our main concept is a company must be[Keki 96] Keki, R., Bhote,loyal to their customers . That is acquiring the customer with-

Customer Loyalty: The Key to Greater Profitability , Amacom

out losing within one click. Using this concept, we developed aBooks, NY, 1996.

series of strategic marketing models. The first, Smart Interface,raises interface ease-of-use and aims to satisfy a customer's[Machlis 99] Machlis, S.

Beyond Customer Satisfaction to

Web Retailers try to keep their hits

up , Computerworld. Vol. 33, No. 6, pp. 48, 1999.

needs. The second, Thanks Mail, is aimed at building a reliable
relationship between a company and its customer by providing[Roll 03] Roll, Harvey,

customized e-mail. The third, RPS, is shows how a company

Using a Customer Loyalty Programme.

can evaluate a customer correctly and strengthens a dependable

How to Improve Profits and Cut Costs
An @1 White Paper.

Vol. 27, pp. 02-05, 2003.

relationship with the customer. In order for a company to be[Stahl 97] Stahl, D.,

successful in e-Business, we have proposed that a company

ing. Vol. 57, No. 9, pp. 80-88, 1997.

The Wave of the Future.

Mortgage Bank-

must provide the customer with the most options throughout
these three models.

[Thomas 02] Thomas, A., Foley,

Web Personalization , Nik-kei Business Publications Inc, Tokyo, 2002.

We are sure that this strategic model will bring about anenormous effect on e-Business marketing. Moreover, through[1] http://www.census.gov/mrts/www/current.html

our research, we are sure that it is what leads the way to new
and innovative online marketing techniques.

[2] http://www.internetworldstats.com

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