Internet‐based companies need to remain competitive. One way of improving competitive advantage is to attract more customers and increase customer retention; for example, by developing long‐term, secure relationships between the buyers and sellers. Little empirical research has been conducted on the link between customer relationship management and customer loyalty within an Internet, or e‐commerce, context. This study provides evidence of how to improve planning for customer management by presenting and testing a conceptual model of the process by which the implementation of electronic relationship marketing (e‐CRM), can enhance loyalty. While building the research framework, price sensitivity was found to be a primary confounding element on loyalty and was included in the study for control. An exploratory study of Internet retailers, e‐retailers, and their customers was conducted and the findings revealed that e‐retail companies (with CD, DVD, video and book products) should consider customers’ perceptions of relationship marketing efforts, as they are fundamental to enhancing customer loyalty and that an enhancement of customer loyalty reduces price sensitivity.
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