Developing and Maintaining LongTerm Customer Relationships

C H A P T E R

Learning Outcomes
1. Define why customer relationship is a holistic process
2. State the importance of customer relationships
3. Select the key role of creating value at each step of

marketing process
4. Develop a strategic plan for customer relationship
management (CRM) and
5. Recommend the key elements for generating customer
satisfaction and customer retention
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The Right Marketing Strategy

Is not about creating a large number of transactions
Is one that attracts and retains customers over the longterm

Considers customer needs, wants, and expectations

Develops long-term relationships

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Customer Relationship
Management (CRM)
Defined as a business philosophy aimed at defining and
increasing customer value in ways that motivate
customers to remain loyal.

About retaining the right customers

12-4

CRM Involves:

Customers
Employees
Supply Chain Partners
External Stakeholders

12-5

Strategic Shift from Acquiring

Customers to Maintaining Clients

Exhibit 12.1

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Developing Relationships
in Consumer Markets
A long-term process
Goal is to move consumers through levels of increasing
relationship intensity
Attempts to create true believers and sponsors of the
company
Recognizes that not all customers have equal value to the
firm
Involves determining the lifetime value (LTV) of
customers
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Stages of Customer
Relationship Development

Exhibit 12.2

12-8

Strategies for Enhancing and

Maintaining Customer Relationships
Financial Incentives
Using financial incentives to increase customer loyalty

Social Bonding
Using social and psychological bonds to maintain a clientele

Enhanced Customization
Using intimate customer knowledge to provide one-to-one solutions or mass
customization

Structural Bonding
Creating customized product offerings that create a unique delivery system
for each client
From Exhibit 12.3

12-9

Developing Relationships
in Business Markets
Like CRM in consumer markets, involves moving
buyers through increasing levels of relationship intensity
Based more on creating structural bonds
Creates win-win scenarios
Is more involving and complex than CRM in consumer
markets
12-10

Recent Changes
in Business Relationships
A change in buyers and sellers roles
An increase in sole sourcing
An increase in team-based buying decisions
An increase in productivity through better integration

12-11

Understanding the Role of Quality

The degree of superiority of a firms goods or services
The Core Product
Satisfies the basic customer need
Core product in services (people, processes, and physical
evidence)

Supplemental Products
Add value to the core product

Symbolic and Experiential Attributes

Usually based on image, prestige, or brand
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Components of the
Total Product Offering

Exhibit 12.4

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Delivering Superior Quality

Understand Customers Expectations

Translate Expectations into Quality Standards
Uphold Quality Standards
Dont Overpromise

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Marketing Strategy in Action

In the face of high quality competition from Japanese
automobile manufacturers, Ford adopted a strategy focused on
quality.
Has that strategy been successful in convincing you of the
quality of Fords products? How would you compare Ford in
quality to Toyota or Honda?

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Understanding the Role of Value

A simple formula for value:

A more useful formula for value:

12-16

Connections Between Value

and the Marketing Program

Exhibit 12.5

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Customer Satisfaction:
The Key to Customer Retention
Understanding Customer Expectations
Ranges of Customer Expectations
The Zone of Tolerance
Customer Delight
Customer Satisfaction
Customer Dissatisfaction

Managing Customer Expectations

Satisfaction vs. Quality vs. Value

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Range of Customer Expectations

Exhibit 12.6

12-19

The Zone of Tolerance

Exhibit 12.7

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Measuring Expectations and Performance

(Hypothetical Health Club)

Exhibit 12.9

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Customer Satisfaction
and Customer Retention

Understand what can go wrong

Focus on controllable issues
Manage customer expectations
Offer satisfaction guarantees
Make it easy for customers to complain
Create relationship programs
Make customer satisfaction measurement an ongoing
priority
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Examples of Satisfaction Guarantees

Exhibit 12.8

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Customer Satisfaction
Measurement

Lifetime Value of a Customer (LTV)

Average Order Value (AOV)
Customer Acquisition/Retention Costs
Customer Conversion Rate
Customer Retention Rate
Customer Attrition Rate
Customer Recovery Rate
Referrals
Viral Marketing
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Internal Efficiency vs. Customer Service

Northwest Airlines has damaged its relationships with
customers through shortsighted attempts to reduce
costs (e.g., cutting magazines, pillows, pretzels, etc.).
What strategic moves can NWA make to fight off
low-cost carriers?

Beyond the Pages 12.2

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Focus Areas and Assigned Readings

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Focus Areas and Assigned Readings

12-27