Download BGS Customer Relationship Management

BGS
Customer Relationship Management
Chapter 3
Relationship Marketing and Customer
Relationship Management
Thomson Publishing 2007 All Rights Reserved
Transaction vs. Relationship
Marketing
Transaction vs. Relationship
Marketing
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Short term focus
Marketing mix
Price sensitive customers
Product quality dominates
Market share
Ad hoc satisfaction studies
Little interdepartmental
interface
• Little internal marketing
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Long-term focus
Interactive marketing
Less price sensitive customers
Interaction quality dominates
Share of wallet focus
Measurement of commitment
Interdepartmental focus
• Extensive internal marketing
There is a Paradigm Shift in Marketing
• The 4-P paradigm
involves marketing to
anonymous masses of
customers
• The relationship marketing
paradigm in:
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industrial marketing
services marketing
managing channel
strategic alliances
consumer packaged goods
marketing deals with
now deals with identifiable
customers.
Six Key Aspects of a Successful
Relationship Marketing Strategy
STRATEGIC ISSUES
• Service business orientation
• Process management perspective
• Partnership/network formation
TACTICAL ISSUES
• Direct customer contacts
• Customer databases
• Customer-oriented service system
Today the Concept of Product Must Be
Expanded to the Extended Product Model
• Today’s companies must enhance value around their
core product. This includes service and commitment
components.
Relationship Marketing (RM)
The Meaning of
Relationship Marketing
Relationship marketing means identifying, establishing,
maintaining, and enhancing relationships with
customers and other stakeholders at a profit, so that the
objectives of all parties involved are met; this is done by
a mutual exchange and fulfillment of promises.
Key Aspects of Relationship
Marketing
1. Getting customers and creating transactions
2. Maintaining and enhancing ongoing
relationships with customers, distributors,
suppliers, networks of cooperating partners,
etc.
3. Replacing products with personnel,
technology, knowledge, and time
Existing Typology of Marketing
Strategies and Tactics
Existing Markets
New Markets
• Existing products
• Existing products
-Market penetration
• Modified products
-Reformulation
• New products
• Product-line extension
• Horizontal diversification
– Market development
• Modified products
– Market extension
• New products
-Mkt segment/prod
differentiation
• Concentric diversification
• Conglomerate diversification
Roots of Relationship Marketing
• Technological advances in IT
• Continued growth of direct marketing
• Using B2B relationship building models in a B2C
environment
• Published findings of consultants
What is Relationship Marketing
All About?
• RM consists of initiating, enhancing, and maintaining
relationships with one’s “customers” and dissolving
them when appropriate.
• RM has three basic features:
– Relational databases
– Integrated marketing communications
– Capabilities for dialogue
Relationship Marketing is Applicable
on at Least Ten Different Levels
1.
2.
3.
4.
5.
6.
7.
Goods suppliers
Service providers
Competitors as in strategic alliances
Nonprofit organizations
Government entities as in joint R&D
Ultimate customers
Intermediate customers:
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franchisees
channel members
8. Functional departments
9. Employees
10. Other company business units
Will Relationship Marketing Benefit
Every Company?
Exchange Continuum
Discrete
Functional
Unemotional
Meat Sauce
Shoelaces
Office Supplies
Continuous
Relational
Emotional
Hotels
Professional Services
Airlines
Sports Teams
Autos
Luxury Items
There Are Three Levels of
Relationship Marketing
Level 1: relies primarily on pricing incentives.
Aim at customers at far left.
Level 2: relies primarily on social bonds
involving customization and personalization.
Level 3: bonds are established by structural
solutions
Choosing a Loyalty Strategy
High Profit
Low Profit
Short Term
Customers
Butterflies
Strangers
Long-Term
Customers
True Friends
Barnacles
Four Types of Customers
1. Loyalists: the most satisfied become apostles for
your company.
2. Mercenaries: only loyal to low prices and are
transaction specific with no intentions of ever
establishing a relationship.
3. Hostages: “stuck” with you for a variety of reasons.
Complainers and prima donnas.
4. Defectors: various types of dissatisfied former
customers.
Customers Can Also Be Arrayed
Based on Relationship Strength
• Intimate relationships: doctor and
patient
• Face-to-face relationships:
customer and retail store
• Distant relationships: interactions over phone or
online
• No relationships: manufacturers with final
customers who buy through middlemen
“I Can’t Get No Satisfaction”
• Overall or cumulative satisfaction vs. transaction
satisfaction
• But satisfaction as a measure does not predict
purchase behavior
• The variables trust and commitment are introduced
A Model of a Long-Term
Relationship
Long term orientation in a buyer-seller relationship
– F(mutual dependence, trust)
– Trust=f(credibility of vendor, benevolence)
– Credibility of vendor=f(reputation for fairness,
satisfaction with outcomes)
– Reputation for fairness=f(reliable and consistent
behavior over time)
– Benevolence=f(caring and making sacrifices for the
channel partner, satisfaction with outcomes)
Relationship Marketing and CRM
CRM is a set of business practices designed to put an
enterprise into closer and closer touch with its
customers, in order to learn more about each one and
to deliver greater and greater value to each one with
the overall goal of making each one more valuable to
the firm.
Peppers and Rogers
Relationship Marketing Will Make
Marketing More Effective by:
• Enabling marketers to learn more about individual
customers and develop customized products and
services
• Allowing customers to help design and develop the
product/service
• Minimizing negative images of marketing
Relationship Marketing Will Make
Marketing More Efficient by:
• Enabling companies to retain customers and drive
profits
• Reducing mass marketing wastes
• Having customers do much of the marketers’ work,
including order processing, product design, etc.
Are Marketers Losing Ground in Their
Ability To Be the Company Focal Point for
Customers?
• Marketing can no longer be confined to a single
department.
– Line managers developed their own customer databases.
– They began to work directly with direct marketers to develop
programs and testing.
– These efforts led to the CRM systems of today.
Is Marketing Loosing Ground?
• Companies today are being organized across functional lines that
decentralizes the marketing function.
• TQC, ERP, in-house venture groups all develop new products
and services.
• Product and brand managers focus on “push” marketing, HOEs,
POP, and sales promotion to sell.
• These are the complete antithesis of what is needed to build class
1:1 relationships based on dialogues. Enter the customer
manager.
• The U.S. recession in the 1990s put a focus on mass media
spending.
• IT-supported approaches to direct marketing were less expensive
and could reach masses of people individually with measurable
results.
• The mass media has fragmented and results are still not
measurable.
CRM Systems Can Provide Added
Value for Customers by:
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Saving time
Providing convenience
Allowing for customization
Providing a positive experience
Have the 4 Ps Outlived Their
Usefulness?
Some new suggestions:
– 4 P’s: People, preferences, permission, and
precision
– 4 C’s: Content, context, collaboration, and
community
– 4 C’s: Customer value, lower costs, better
convenience, and better communications
Organizing for Relationship
Marketing
• Companies organized around products and
markets are not built around one-to-one
relationships. No dialogue with the masses.
• Customer service reps, however, do have
dialogues.
• Some suggest companies organize around
customers in the form of customer portfolios run
by segment managers.
• The rise of the CRM department?
One Scenario of the Future
Marketing/CRM Interface
• How to connect the customer with the
– Product
– Service delivery
– Financial accountability systems?
• Marketing owns the customer-product connection
and is responsible for product strategy, branding
strategy, price, and promotion.
One Scenario of the Future
Marketing/CRM Interface
• CRM is responsible for the relationship between the
customer and
– Service delivery function: CRM responsible for improving
satisfaction and loyalty through management of loyalty
programs
– Financial accountability system: CRM responsible for
managing customer profitability through data mining and
determining the profitability of marketing initiatives
Questions?