Building Customer Relationship
description
Transcript of Building Customer Relationship
McGraw-Hill © 2000 The McGraw-Hill Companies
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SMSM
McGraw-Hill © 2000 The McGraw-Hill Companies
Chapter 6
BUILDING
CUSTOMER
RELATIONSHIPS
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SMObjectives for Chapter 6:Objectives for Chapter 6:
Building Customer Building Customer RelationshipsRelationships
• Explain relationship marketing, its goals, and the benefits of long-term relationships for firms and customers
• Explain why and how to estimate customer lifetime value
• Specify the foundations for successful relationship marketing--quality core services and careful market segmentation
• Provide you with examples of successful customer retention strategies
• Introduce the idea that “the customer isn’t always right”
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SM Relationship MarketingRelationship Marketing
• is a philosophy of doing business that focuses on keeping and improving current customers
• does not necessarily emphasize acquiring new customers
• is usually cheaper (for the firm)--to keep a current customer costs less than to attract a new one
• goal = to build and maintain a base of committed customers who are profitable for the organization
• thus, the focus is on the attraction, retention, and enhancement of customer relationships
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SM Lifetime Value of a CustomerLifetime Value of a Customer
• Assumptions
• Income
– Expected Customer Lifetime
– Average Revenue (month/year)
– Other Customers convinced via WOM
– Employee Loyalty??
• Expenses
– Costs of Serving Customer Increase??
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SM A Loyal Customer is One Who...A Loyal Customer is One Who...
• Shows Behavioral Commitment– buys from only one supplier, even though other options
exist
– increasingly buys more and more from a particular supplier
– provides constructive feedback/suggestions
• Exhibits Psychological Commitment– wouldn’t consider terminating the relationship--
psychological commitment
– has a positive attitude about the supplier
– says good things about the supplier
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SM Customer Loyalty ExerciseCustomer Loyalty Exercise
• Think of a service provider you are loyal to.• What do you do (your behaviors, actions, feelings)
that indicates you are loyal?• Why are you loyal to this provider?
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SMBenefits to the Organization Benefits to the Organization
of Customer Loyaltyof Customer Loyalty
• loyal customers tend to spend more with the organization over time
• on average costs of relationship maintenance are lower than new customer costs
• employee retention is more likely with a stable customer base
• lifetime value of a customer can be very high
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SM Benefits to the CustomerBenefits to the Customer
• inherent benefits in getting good value• economic, social, and continuity benefits
– contribution to sense of well-being and quality of life and other psychological benefits
– avoidance of change– simplified decision making – social support and friendships– special deals
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SM““The Customer Isn’t Always The Customer Isn’t Always
Right”Right”
• Not all customers are good relationship customers:
– wrong segment
– not profitable in the long term
– difficult customers
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SMStrategies for Building Strategies for Building
RelationshipsRelationships
• Foundations: – Excellent Quality/Value– Careful Segmentation
• Bonding Strategies:– Financial Bonds– Social & Psychological Bonds– Structural Bonds– Customization Bonds
• Relationship Strategies Wheel
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SM
Getting
Satisfying
Retaining
Enhancing
Figure 6-1Figure 6-1
Customer Goals of Customer Goals of Relationship MarketingRelationship Marketing
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SM
Figure 6-3Figure 6-3
Underlying Logic of Customer Underlying Logic of Customer Retention Benefits to the Retention Benefits to the
OrganizationOrganization
Customer Retention &Increased Profits
Employee Loyalty
QualityService
Customer Satisfaction
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SMFigure 6-5Figure 6-5
Steps in Market Segmentation Steps in Market Segmentation and and
Targeting for ServicesTargeting for Services
IdentifyBases forSegmentingthe Market
STEP 1:
DevelopProfiles ofResultingSegments
STEP 2: DevelopMeasuresof SegmentAttractive-ness
STEP 3: Select the
TargetSegments
STEP4:Ensure thatSegmentsAre Compatible
STEP 5:
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SM
ExcellentQuality
andValue
Figure 6-6Figure 6-6 Levels of Retention StrategiesLevels of Retention Strategies
I. Financial Bonds
II. Social Bonds
IV. Structural
Bonds
III. CustomizationBonds
Volume and Frequency Rewards
Bundling and Cross Selling
Stable Pricing
Social Bonds Among Customers
Personal Relationships
Continuous Relationships
Customer Intimacy
Mass Customization
Anticipation/ Innovation
SharedProcesses and Equipment
Joint Investments
Integrated Information Systems