Download Relationship Marketing

Session 1
Changes in Marketing
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OLD MARKETING
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Transaction oriented
Market share oriented
All customers are equal
Marketers sell
4P marketing
Mass marketing
Sell to the customer
Focus on new
customers
– Offensive
– Broadcast oriented
– Transaction profit
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NEW MARKETING
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Relationship oriented
Share of wallet oriented
All customers are not equal
Marketers manage demand
Relationship marketing
Individual marketing
Manage customer
experience
Focus on existing
customers
Defensive
Dialogue oriented
Customer lifetime value
Offensive vs. Defensive Marketing
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OM refers to increasing your customer base.
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DM refers to activities aimed at existing
customers.
– Defensive marketing has become more
profitable. “Mass and Blast” is being replaced by
1:1.
Customer ?
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Human being
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Person-who has acquired or thinking of
acquiring our product or service
CRM Case of a Bank Manager.doc
Importance of Customer Focus
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Let us hear Mr. Jayant Kochar
..\Importance of customer focus\start.exe
Organizational Charts
The Customer Development Process
Suspects
Prospects
First-time
customers
Dissatisfied
Disqualified
Repeat
customers
Dissatisfied
Dissatisfied
Clients
Members
Dissatisfied
Partners
Ex-customers
Dissatisfied
What is Perceived Customer
Value?
Product value
Services value
Personnel value
Total
customer
benefit
Customer
delivered
value
Image value
Monetary cost
Time cost
Energy cost
Psychic cost
Total
customer
cost
Customer Satisfaction
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The extent to which a product or service’s perceived performance
matches a buyer’s expectations.
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What are expectations based on?
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Past buying experiences
Friends, family and other associates
Information about the competition
Promises made in marketing materials (your brand)
Word of Caution
 If you promise too little…people won’t try your product!
 If you promise too much…customers will be dissatisfied
Measuring Satisfaction
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Complaint System / Telephone Hot Line / Email
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Customer Surveys
– 25% of customers not satisfied
– 5% will complain
– 95% just switch or buy less
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Lost Customer Analysis
– Follow up with customers who have stopped buying
– Monitor lost customer rate
Go for TCS
Techniques for Exceeding Customers’
Expectations
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Live up to their expectations.
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Become familiar with your customers.
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Ask your customers what their expectations are.
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Tell your customers what they can expect.
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Maintain consistency.
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Ask “ Why are they using your product”
Delivering customer value &
satisfaction
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Not just the people in charge of marketing are in charge
of marketing.
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Must have an effective value chain focused on serving
the customer.
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Employees need to be trained and understand what
expectations are for customer service – and
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Need to be empowered to address certain situations.
Profit Generated by a Customer Over Time
Source: An exhibit from F. F. Reichheld and W. E. Sasser, Jr., “Zero Defection: Quality Comes to Services,’’ Harvard
Business Review, September–October 1990.
Customer Satisfaction
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Highly satisfied customers are:
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Less price sensitive
More likely to talk favorably about you
More likely to refer you to others
Remain loyal for longer
Superior Customer Satisfaction
Affects Bottom Line
Greater
Pricing
Leverage
Increased
Customer
Loyalty
Increased
Market
Share
Increased
Financial
Performance
Superior
Customer
Satisfaction
Increased
Sales
Increased
Usage
Superior
Operating
Results
Competitive
Advantage
Churn (or Churn Rate)
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The number of customers who leave a business in a
year’s time divided by the number of new customers
in the same period.
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e.g 17 Doctors stopped Rxing Becosules & 34 new
Doctors started Rxing it in 2008
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Churn Rate = 17/34 = 0.5
Lower Churn Rate indicates Customer Satisfaction ?
Different time period for different products( B2B,B2C)
Defection Rate
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The percentage of customers who leave a business in
one year.
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If 17 out of 255 Doctors have stopped Rxing Becosules
so
Defection Rate = 17/255*100 = 6.67 %
Higher Defection Rate indicates Customer Dissatisfaction ?
Annual Defection Rates
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Newspaper subscriptions
Residential tree and lawn care
U.S. long distance telephone
Clothing catalogues
Internet service providers
Griffen and Lowenstein 2001
66 percent
32 percent
30 percent
25 percent
22 percent
Outcomes of Commitment & Trust
Retention
Positive Word of Mouth
Cooperation
Ease of Complaining
Reduced Uncertainty
 Increased Share of Wallet
 Faster New Product Adoption
How do we generate Commitment &
Trust?
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Economic Content
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Resource Content
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Social Content
Understanding How Customer Relationships
Develop
Relationships’
Economic
Content
Relationships’
Resource
Content
Relationships’
Social
Content
Attitudinal
Outcomes
Relationship
Attitudes
Behavioral
Outcomes
Building Relationships
Relationships’
Economic
Content
Relationships’
Resource
Content
Relationships’
Social
Content
First, let’s look at the
fundamental drivers of
relationships, the
economic, resource, and
social contents.
Attitudinal
Outcomes
Relationship
Attitudes
Behavioral
Outcomes
Economic Content
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The purely economic costs and benefits of
participating in the relationships
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Examples:
– Service fees
– Interest rates
– Costs saved due to superior management of
customer’s wealth
Resource Content
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Benefits gained that match/complement the needs
or resources held by the partner.
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Examples:
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Professional competence
Comprehensive financial services
Business development assistance
Convenience (time as a resource)
Tangibles
Brand equity
Social Content
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Psychic benefits gained due to feelings of
compatibility -- similar values, goals, etc. -- that
result in a feeling of comfort.
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Examples:
– Relationships with employees
– Fit of firm’s mission and actions with customers’
values
– High quality communication programs
Building Relationships
Relationships’
Economic
Content
Relationships’
Resource
Content
Relationships’
Social
Content
Next, let’s look at the
ultimate outcomes of
relationships, which
impact firm’s business
performance.
Attitudinal
Outcomes
Relationship
Attitudes
Behavioral
Outcomes
Attitudinal Outcomes
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Customer beliefs that result from relationship
dynamics, these attitudes can go on to impact
behaviors and the development of even stronger
attitudes.
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Examples:
Reduced uncertainty
Brand equity
Cooperation
Behavioral Outcomes
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Partner behaviors and intended behaviors that
directly or indirectly impact the firm’s performance.
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Examples:
– Retention
– Positive word of mouth
– Complaining
– Faster New Product Adoption
– Increased Share of Wallet
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Consumer Buying Behavior
Video: Marketing Psychology & Consumer Buying Behavior
Exercise
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Think of a service provider/product to whom you
are loyal.
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What do you do (your behaviors, actions,
feelings) that indicates you are loyal?
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Why are you loyal to this provider?
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What factors have influenced the formation of
your loyalty?
Loyalty
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Loyality is an emotion
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Helps in maintaining a close relationship
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A series of positive experiences
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Leads to commitment & trust
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Leads to Customer Alchemy
A Loyal Customer is one who…
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Show Behavioral Commitment
– Buys from one supplier (sole loyalty)
– Buys a large proportion, increasingly buys
more
– Provides constructive feedback/suggestions
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Exhibits Psychological Commitment
– Commitment-doesn’t consider terminating the
relationship
– Has a positive attitude toward
– Say good things about
The Wheel of Loyalty
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1. Build a Foundation for Loyalty
• Deliver quality service
• Segment the market to match customer needs and firm
capabilities
• Be selective; only acquire customers who fit the core
value proposition
• Manage the customer base via effective tiering of
service
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2. Create Loyalty Bonds
Deepen the relationship
 Cross-selling/Bundling
Build higher level bonds
 Social
 Customization
 Structural bonds
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Social Bonds
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Personal Relationships
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Memberships/ Formal & Informal
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Affinity Programs
Customization
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Mass Customization – Dell computer
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Customer Intimacy- Infosys, Accenture
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Anticipation/ innovation – Apple
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Nectar – Stretch Discounts
Structural Bonds
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Integrated information systems
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Joint investments
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Shared processes and equipment
Example
 Adding financial benefits (e.g., frequent flyer programs)
 Add social benefits (e.g., recognizing repeats guests and
greats them by name)
 Add structural ties (e.g. reservation systems for travel agents,
special phone lines, flexible check-in, check-out time for best
customers, send limousine)
 Add Customization ( e.g food, movies of choice, special
packages)
3. Reduce Churn Drivers
• Conduct churn diagnostic and monitor declining/
churning customers
• Address key churn drivers:
 Proactive retention measures
 Reactive retention measures
• Put effective complaint handling and service
recovery processes in place
• Increase switching costs
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Dating your Customer