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Building Customer Relationship

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184 views

Building Customer Relationship

Uploaded by

MD FarHan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 17

Chapter7-1

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
7-2

Objectives for Chapter 7:


Building Customer Relationships
 Explain relationship marketing, its goals, and the benefits of
long-term relationships for firms and customers.

 Explain why and how to estimate customer relationship value.

 Introduce the concept of customer profitability segments as a


strategy for focusing relationship marketing efforts.

 Present relationship development strategies—including quality


core service, switching barriers, and relationship bonds.

 Identify challenges in relationship development, including the


somewhat controversial idea that “the customer is not always
right.”
7-3

Relationship Marketing
 is a philosophy of doing business, a strategic orientation,
that focuses on keeping current customers and improving
relationships with them

 does not necessarily emphasize acquiring new customers

 is usually cheaper (for the firm)


 keeping a current customer costs less than attracting a new one

 thus, the focus is less on attraction, and more on retention


and enhancement of customer relationships
7-4

The “Bucket Theory of Marketing”


7-5

Customer Goals of Relationship Marketing


7-6

A Typology of Exchange Relationships


7-7

Benefits of Relationship Marketing


 Benefits for Customers:  Benefits for Firms:
 Receipt of greater value  Economic benefits:
 increased revenues
 Confidence benefits:
 reduced marketing and administrative
 trust costs
 confidence in provider  regular revenue stream
 reduced anxiety  Customer behavior benefits:
 Social benefits:  strong word-of-mouth endorsements
 customer voluntary performance
 familiarity
 social benefits to other customers
 social support
 mentors to other customers
 personal relationships
 Human resource management
 Special treatment benefits: benefits:
 special deals  easier jobs for employees
 price breaks  social benefits for employees
 employee retention
7-8

Profit Generated by a Customer Over Time


7-9

Profit Impact of 5 Percent Increase in


Retention Rate

Source: F. F. Reichheld, “Loyalty and the Renaissance of Marketing,” Marketing Management, vol. 2, no. 4 (1994), p. 15.
7-10

 Think of a service provider to whom you are


loyal.

 What do you do (your behaviors, actions,


feelings) that indicates you are loyal?

 Why are you loyal to this provider?

 What factors have influenced the formation of


your loyalty?
7-11

The Customer Pyramid


7-12

The Customer Pyramid


7-13

Segmenting Customers Based on


Commitment and Profitability
BUTTERFLIES TRUE FRIENDS
• Good fit of company offering and • Good fit of company offering and
customer needs customer needs
High • High profit potential • Highest profit potential
• Action: • Actions:
–Aim to achieve transactional satisfaction, not –Consistent intermittently spaced
(Behavioral Loyalty)

attitudinal loyalty communication


–Milk the accounts as long as they are active –Achieve attitudinal and behavioural loyalty
–Key challenge: cease investment once –Invest to nurture/defend/retain
CLV

inflection point is reached

STRANGERS BARNACLES
• Little fit of company offering and • Limited fit of company offering and
customer needs customer needs
• Lowest profit potential • Low profit potential
Low • Action: • Action:
–No relationship investment –Measure size and share-of-wallet
–Profitize every transaction –If share-of-wallet is low, specific up and
cross-selling
–If size of wallet is small, strict cost control

Relationship Commitment High


Low (Attitudinal Loyalty)

W. Reinhartz & V. Kumar, "The Mismanagement of Customer Loyalty," Harvard Business Review 80 (July 2002), pp. 86-94.
7-14

Relationship Development Model


7-15

Strategies for Building Relationships


 Core Service Provision:
 service foundations built upon delivery of excellent
service:
 satisfaction, perceived service quality, perceived value
 Switching Barriers:
 customer inertia
 switching costs:
 set up costs, search costs, learning costs, contractual costs
 Relationship Bonds:
 financial bonds
 social bonds
 customization bonds
 structural bonds
7-16

Levels of Relationship
Strategies
7-17

“The Customer Is NOT Always Right”

 Not all customers are good relationship


customers:

 wrong segment

 not profitable in the long term

 difficult customers

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