chapter 07_building customer relationship

8/3/2019 Chapter 07_Building Customer Relationship

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Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 1

Chapter: 07


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Relationship Marketing, its goals, andbenefits of long term relationship for firmand customers.

1

Customer profitability segments as the strategyfor relationship marketing.2

Relationship development strategies: Coreservice, switching barriers, and relationship

bonds.

3

Challenges in relationship development, ascustomers are not always right.

4


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It represents a paradigm shift within

marketing away from an acquisitions

focus toward a retention/relationshipfocus.

It focuses on keeping and improving

relationship with current customersrather than an acquiring new customers


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Evolution of Customer Relationship

Firms relationship with their

customers like other social

relationships tend to evolve overtime. The relationship between

service customer and provider have

the potential to evolve fromstrangers to acquaintances to fiends

to partners


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Customers as Strangers

ProductOffering

Attractive relative to competitive offering or alternativepurchase

Source ofCompetitive

Advantages

Attractiveness

BuyingActivity

Interest, exploration and trial

Focus of

sellingActivities

Awareness of firm offering

RelationshipTime Horizon

Buyer may have had no previous interactions with orknowledge of the firm


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Customers as Acquaintance

ProductOffering

Parity product as a form of industry standard


Advantages

Satisfaction

BuyingActivity

Satisfaction facilitates and reinforces buying activityand reduces need to search for market

Focus of

sellingActivities

Familiarity and general knowledge of customers


Generally short because the buyer can often switchfirms without much effort of cists


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Customers as Friends

ProductOffering

Differentiated product adapted to specific marketsegments


Advantages

Satisfaction+trust

BuyingActivity

Trust inn firm is needed to continue the buying activitywithout perfect information

Focus of

sellingActivities

Specific knowledge of customers connection to

segment need abd situation facilities selling


Generally longer than acquaintance relationships



Customers as Partners

ProductOffering

Customized product and dedicated resources adaptedto an individual customers or organizations


Advantages

Satisfaction+ trust+ commitment

BuyingActivity

Commitment in the form of information sharing andidiosyncratic investments is needed to achievecustomized product

Focus of

sellingActivities

Specific knowledge of customers need and situation

and idiosyncratic facilitates selling.


Generally long because it takes time to build andreplace interconnected activities and to develop adetail knowledge.



Goal of RelationshipMarketing

1. Acquiring Customer

2. Satisfying Customer

3. Retaining Customer

4. Enhancing Customer



Benefit For Customers

Confidence Benefit(Feeling of trust/confidence, reduced anxiety)

Social Benefit

(Customers develop a sense of familiarity and even asocial relationship with their service providers)

Special Treatment Benefit

(Getting the benefit of the doubt, being given aspecial deal or price/getting preferential treatment

as exemplified by the following quotes from the

research)



Benefits For firms

Economic Benefit

Customer Behavior Benefit

Human Resource Management Benefit



Customer ProfitabilitySegments

All firms are aware at some level that theircustomers differ in profitability, in particular,that a minority of their customers accounts

for the highest proportion of sales or profit.This finding has often been calledthe80/20 rule-20 percent of customersproduce 80 percent of sales or profit.

Different systems and levels can be helpful.One useful 4 tier system includes thefollowing



Customer ProfitabilitySegments..

Platinum Tier

Gold Tier

Iron Tier

Lead Tier



Platinum Tier

It describes the companys most

profitable customers, typically those

who are heavy users of the products arenot overly price sensitive are willing to

invest in and try new offering and the

committed customers of the firm



Gold Tier

Where profitability levels are not as high,

perhaps because the customers want price

discounts that limit margins or are not asloyal. That may be heavy users who

minimizes risks by working with multiple

vendors rather than just local company



Iron Tier

The iron tier contains essential

customers who provide the volume

needed to utilize the firms capacity,but their spending levels, loyalty &

profitability are not substantial

enough for special



Lead Tier

It consists of Customers who are costing

the company money. They demand more

attention than they are due given theirspending & profitability & are sometimes

problem customers-complaining about the

firm to others & tying up the firmsresources.



Most profitable customers

Least Profitable Customers

What segment spendsmore with us over time,

costs less to maintain &spreads positive word ofmouth

What segments costs us intime effort & money yet doesnot provide the return wewant? What segment isdifficult to do business with?

Customer Tier Pyramid



StrongCustomer

Relationship

RelationshipBonds

Firm

BenefitsSwitchingBarriers

CustomerBenefits

CoreService

Provisions

RelationshipDrivers

OutcomesRelationship DevelopmentModel


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Relationship DevelopmentStrategies

1. Core service Provision

A firm need begin to relationshipdevelopment process by providing a

good core service delivery meets

minimum expectation


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2. Switching Barriers

Customer Inertia

Here discussed why dissatisfied customers staywith provider. Because.. People dont like to

change their habit. To retain customer firmconsider increasing the perceived effort is neededto change companies.

Customer cost

Cost involve in changing to and purchasing from adifferent firm. It may be real/perceive, monetary

/non-monetary.


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3.Relationship Bond

Level 1 Financial Bonds

Level 2 Social Bonds

Level 3 Customization Bonds

Level 4 Structural Bonds


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3.Relationship Bond..

Financial Bond

Volume & frequency Rewards

Stable PricingBuilding & Cross Selling


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3.Relationship Bond

Social Bond

Continuous Relationship

Personal RelationshipSocial bonds among Customers


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Customization Bond

Customer intimacy

Mass CustomizationAnticipation/Innovation


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Structural Bond

Integrated information system

Joint InvestmentShared Process and Equipment

chapter 07_building customer relationship

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