Presentation on theme: "Developing and Maintaining Long-Term Customer Relationships"— Presentation transcript:
1 Developing and Maintaining Long-Term Customer Relationships 12C H A P T E R
2 The “Right” Marketing Strategy Is not about creating a large number of transactionsIs one that attracts and retains customers over the long-termConsiders customer needs, wants, and expectationsDevelops long-term relationships
3 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
5 Strategic Shift from Acquiring Customers to Maintaining Clients Exhibit 12.1
6 Developing Relationships in Consumer Markets A long-term processGoal is to move consumers through levels of increasing relationship intensityAttempts to create true believers and sponsors of the companyRecognizes that not all customers have equal value to the firmInvolves determining the lifetime value (LTV) of customers
7 Discussion QuestionA common use of customer relationship management (CRM) in consumer markets is to rank customers on profitability or lifetime value measures. Highly profitable customers get special attention, while unprofitable customers get poor service or are often “fired.” What are the ethical and social issues involved in these practices? Could CRM be misused? How and why?
8 Stages of Customer Relationship Development Exhibit 12.2
9 Strategies for Enhancing and Maintaining Customer Relationships Financial IncentivesUsing financial incentives to increase customer loyaltySocial BondingUsing social and psychological bonds to maintain a clienteleEnhanced CustomizationUsing intimate customer knowledge to provide one-to-one solutions or mass customizationStructural BondingCreating customized product offerings that create a unique delivery system for each clientFrom Exhibit 12.3
10 Developing Relationships in Business Markets Like CRM in consumer markets, involves moving buyers through increasing levels of relationship intensityBased more on creating structural bondsCreates win-win scenariosIs more involving and complex than CRM in consumer markets
11 Recent Changes in Business Relationships A change in buyers’ and sellers’ rolesAn increase in sole sourcingAn increase in team-based buying decisionsAn increase in productivity through better integration
12 Understanding the Role of Quality The degree of superiority of a firm’s goods or servicesThe Core ProductSatisfies the basic customer needCore product in services (people, processes, and physical evidence)Supplemental ProductsAdd value to the core productSymbolic and Experiential AttributesUsually based on image, prestige, or brand
13 Components of the Total Product Offering Exhibit 12.4
14 Delivering Superior Quality Understand Customers’ ExpectationsTranslate Expectations into Quality StandardsUphold Quality StandardsDon’t Overpromise
15 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 Ford’s products? How would you compare Ford in quality to Toyota or Honda?
16 Understanding the Role of Value A simple formula for value:A more useful formula for value:
17 Connections Between Value and the Marketing Program Exhibit 12.5
18 Customer Satisfaction: The Key to Customer Retention Understanding Customer ExpectationsRanges of Customer ExpectationsThe Zone of ToleranceCustomer DelightCustomer SatisfactionCustomer DissatisfactionManaging Customer ExpectationsSatisfaction vs. Quality vs. Value
21 Discussion QuestionOf the two types of customer expectations, adequate performance expectations fluctuate the most. Describe situations that might cause adequate expectations to increase, thereby narrowing the width of the zone of tolerance. What might a firm do in these situations to achieve its satisfaction targets?
22 Customer Satisfaction and Customer Retention Understand what can go wrongFocus on controllable issuesManage customer expectationsOffer satisfaction guaranteesMake it easy for customers to complainCreate relationship programsMake customer satisfaction measurement an ongoing priority
23 Examples of Satisfaction Guarantees Exhibit 12.8
24 Customer Satisfaction Measurement Lifetime Value of a Customer (LTV)Average Order Value (AOV)Customer Acquisition/Retention CostsCustomer Conversion RateCustomer Retention RateCustomer Attrition RateCustomer Recovery RateReferralsViral Marketing
25 Measuring Expectations and Performance (Hypothetical Health Club) Exhibit 12.9
26 Discussion QuestionGiven the commoditized nature of many markets today, does customer relationship management – and its associated focus on quality, value, and satisfaction – make sense? If price is the only true means of differentiation in a commoditized market, why should a firm care about quality? Explain.
27 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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