CHAPTER10

RelationshipMarketingandCustomer
RelationshipManagement(CRM)
ChapterObjectives
1 Contrasttransaction
basedmarketingwith
relationshipbased
marketing.

4 Explainhowfirmscan 7 DescribehowB2B
enhancecustomer
marketingincorporates
satisfactionandhowthey nationalaccountselling,
buildbuyerseller
electronicdata
relationships.
interchangeandWeb
2 Identifyandexplainthe
services,VMI,CPFaR,
5 ExplainCRMandthe
fourbasicelementsof
managingthesupply
relationshipmarketing,as
roleoftechnologyin
chains,andcreating
wellastheimportanceof
buildingcustomer
alliances.
internalmarketing.
relationships.
Identifyandevaluatethe
3 Identifythethreebasic
6 Describethebuyerseller
8 mostcommon
levelsoftherelationship
relationshipinB2B
measurementand
marketingcontinuum.
marketingandidentify
evaluationtechniques
thefourtypesofbusiness
withinarelationship
partnerships.
marketingprogram.

CHAPTER 10 Relationship Marketing and (CRM)

THE SHIFT FROM TRANSACTION-BASED

MARKETING TO RELATIONSHIP MARKETING
TransactionbasedmarketingBuyerandsellerexchangescharacterized
bylimitedcommunicationsandlittleornoongoingrelationshipbetweenthe
parties.
RelationshipmarketingDevelopment,growth,andmaintenanceoflong
term,costeffectiverelationshipswithindividualcustomers,suppliers,
employees,andotherpartnersformutualbenefit.
Viewscustomersasequalpartnersintransactions.
Encourageslongtermrelationships,repeatpurchases,and
multiplebrandpurchasesfromthefirm.
Collaborativeexchangebetweenbuyerandseller.

CHAPTER 10 Relationship Marketing and (CRM)

ELEMENTSOFRELATIONSHIPMARKETING
Firmsbuildlongtermrelationshipsbygatheringinformationabouttheir
customers,analyzingandusingthedatatomodifythemarketingmix,
monitoringinteractionswithcustomers,andusingknowledgeofcustomers
andtheirpreferencestoorienteverypartoftheorganization.

INTERNALMARKETING
Internalcustomersemployeesordepartmentswithintheorganization
whosesuccessdependsontheworkofotheremployeesordepartments.
Internalmarketingmanagerialactionsthatenableallorganizational
memberstounderstand,accept,andfulfilltheirrespectiverolesin
implementingamarketingstrategy.
Effectiveinternalmarketingalsoincreasesemployeesatisfaction.

CHAPTER 10 Relationship Marketing and (CRM)

THE RELATIONSHIP MARKETING CONTINUUM

Firmstrytomovebuyersellerrelationshipfromthelowesttothehighest
levelofthecontinuumofrelationshipmarketingtostrengthenthemutual
commitmentbetweenthem.

CHAPTER 10 Relationship Marketing and (CRM)

FIRSTLEVEL:FOCUSONPRICE
Mostsuperficiallevel,leastlikelytoleadtolongtermrelationship.
Marketersrelyonpricingtomotivatecustomers.
Competitorscaneasilyduplicatepricingbenefits.

SECONDLEVEL:SOCIALINTERACTIONS
Customerserviceandcommunicationarekeyfactors.
Example:Wineshopholdingawinetastingreception.

THIRDLEVEL:INTERDEPENDENTPARTNERSHIP
Relationshiptransformedintostructuralchangesthatensurepartnership
andinterdependencebetweenbuyerandseller.

CHAPTER 10 Relationship Marketing and (CRM)

ENHANCING CUSTOMER SATISFACTION

Marketersusethreemajorstepstomeasureandimprovehowwellthey
meetcustomerneeds.

UNDERSTANDINGCUSTOMERNEEDS
Firmsmustunderstandwhatcustomersneed,want,and
expect.
Mustmeasurecustomersatisfaction.

OBTAININGCUSTOMERFEEDBACKAND
ENSURINGCUSTOMERSATISAFACTION
Sourcesofinformationincludetollfreenumbers,online
feedback,andevaluatorsposingascustomers.
Complaintshelpfirmsovercomeproblemsand
demonstratecommitmenttoservice.
Firmsmayconductsurveysormonitorblogstoanalyzesatisfaction.

CHAPTER 10 Relationship Marketing and (CRM)

BUILDING BUYER-SELLER RELATIONSHIPS

Consumersformrelationshipstoreducechoicesandsimplifythebuying
process.
Customersmayswitchloyaltiesiftheyperceivebetterbenefitsfroma
competitor.

HOWMARKETERSKEEPCUSTOMERS
Retainingcustomersisfarmoreprofitablethanlosingthem.Accordingto
onestudy,marketershave
Firmsgeneratemoreprofitswitheachadditionalyearofarelationship.
FrequencymarketingFrequentbuyerorusermarketingprogramsthat
rewardcustomerswithcash,rebates,merchandise,orotherpremiums.
AffinitymarketingMarketingeffortsponsoredbyanorganizationthat
solicitsresponsesfromindividualswhosharecommoninterestsand
activities.

CHAPTER 10 Relationship Marketing and (CRM)

DATABASEMARKETING
DatabasemarketingUseofsoftwaretoanalyzemarketinginformation,
identifyingandtargetingmessagestowardspecificgroupsofpotential
customers.
Helpfirmsidentifytheirmostprofitablecustomersandimprovecustomer
retentionandreferralrateswhilereducingmarketingandpromotioncosts.
Datacomesfrommultiplesources,includingcreditapplications,
registrations,pointofsalescansandothersources.
Newtechnologiesareprovidingmoredata.

CHAPTER 10 Relationship Marketing and (CRM)

CUSTOMERSASADVOCATES
Grassrootsmarketingconnectingdirectlywithexistingandpotential
customersthroughnonmainstreamchannels.
Viralmarketingsatisfiedcustomersgetthewordaboutproductsoutto
otherconsumers.
Buzzmarketingreliesonvolunteerstotryproductsandthentalkabut
theirexperienceswithfriendsandcolleagues.
Internettechnologygivesthiswordofmouthapproachfarmore
applicationsthaninthepast.

CHAPTER 10 Relationship Marketing and (CRM)

CUSTOMER RELATIONSHIP MANAGEMENT

Customerrelationshipmanagement(CRM)Combinationofstrategies
andtoolsthatdrivesrelationshipprograms,reorientingtheentire
organizationtoaconcentratedfocusonsatisfyingcustomers.

BENEFITSOFCRM
Softwaresystemscanmakesenseofhugeamountsofdata.
Simplifycomplexbusinessprocesseswhilekeepingcustomersinterestsat
heart.

CHAPTER 10 Relationship Marketing and (CRM)

PROBLEMSWITHCRM
Requirescompanywidecommitmentandknowledgeofhowtousesystem.
Failuresoftenresultfromfailuretoeffectivelyreorganizefirmspeople
andprocessestotakeadvantageofbenefitsCRMsystemoffers.

RETRIEVINGLOSTCUSTOMERS
Customersleaveforavarietyofreasons.
Customerwinbackprocessofrejuvenatinglostrelationshipswith
customers.

CHAPTER 10 Relationship Marketing and (CRM)

BUYER-SELLER RELATIONSHIPS IN
BUSINESS-TO-BUSINESS MARKETS
Businesstobusinessmarketinginvolvesorganizationspurchaseof
goodsandservicestosupportcompanyoperationsorproductionofother
products.
Advantagesofbuyersellerrelationshipcanincludelowerprices,quicker
delivery,improvedqualityandreliability,andothers.
PartnershipAffiliationoftwoormorecompaniesthathelpeachother
achievecommongoals.

CHOOSINGBUSINESSPARTNERS
Partnerfirmsmustaddvaluetotherelationship,complementeachother,
andsharesimilarvaluesandgoals.

CHAPTER 10 Relationship Marketing and (CRM)

TYPESOFPARTNERSHIPS
Buyerpartnerships,sellerpartnerships,internal
partnerships,andlateralpartnerships.

COBRANDINGANDCOMARKETING
CobrandingCooperativearrangementinwhichtwo
ormorebusinessesteamuptocloselylinktheirnames
onasingleproduct.
ComarketingCooperativearrangementinwhichtwo
businessesjointlymarketeachothersproducts.

CHAPTER 10 Relationship Marketing and (CRM)

IMPROVING BUYER-SELLER RELATIONSHIPS

IN BUSINESS-TO-BUSINESS MARKETS
NATIONALACCOUNTSELLING
Techniqueofprovidingspecialattentiontoafirmslargest,most
profitablecustomersbyassemblingateamtoservejustoneormorelarge
accounts.BUSINESSTOBUSINESSDATABASES
Justasindispensableasinconsumermarketing.

ELECTRONICDATAEXCHANGESANDWEBSERVICES
Electronicdatainterchanges(EDI)Computertocomputerexchangesof
invoices,orders,andotherbusinessdocuments.
Webservicesallowcompaniestocommunicateeveniftheyrenot
runningthesameorcompatiblesoftware,hardware,databases,ornetwork
platforms.

CHAPTER 10 Relationship Marketing and (CRM)

VENDORMANAGEDINVENTORY
Vendormanagedinventory(VMI)Inventorymanagementsystemin
whichthesellerbasedonanexistingagreementwithabuyerdetermines
howmuchofaproductisneeded.

MANAGINGTHESUPPLYCHAIN
SupplychainSequenceofsuppliersthatcontributetothecreationand
deliveryofagoodorservice.
Mayoffersincreasedinnovation,decreasedcosts,improvedconflict
resolutionwithinthechainandimprovedcommunicationandinvolvement
amongmembersofthechain.

BUSINESSTOBUSINESSALLIANCES
Strategicalliancespartnershipformedtocreateacompetitiveadvantage.
Maybelessformal,suchasjointlyestablishinganewproductdesign
team.

CHAPTER 10 Relationship Marketing and (CRM)

EVALUATING CUSTOMER
RELATIONSHIP PROGRAMS
LifetimevalueofacustomerRevenuesandintangiblebenefitssuchas
referralsandcustomerfeedbackthatacustomerbringstotheselleroveran
averagelifetime,lesstheamountthecompanymustspendtoacquire,
marketto,andservicethecustomer.
Companymayanalyzelifetimevalueorpaybackfromacustomer
relationship.
Mayinfluencethetypesofcustomersafirmtriestoreach.
Companiesofallsizescanimplementtechnologythathelpsmeasureand
improvecustomervalue.