Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Relationship Marketing and Customer Relationship Management (CRM) Chapter 6

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 1.Contrast transaction-based marketing with relationship marketing. 2.Identify and explain each of the core elements of relationship marketing. 3.Explain the steps in the development of a marketing relationship and how they lead to enhanced customer satisfaction. 4.Explain customer relationship management (CRM) and the role of technology in building customer relationships. 5.Describe the buyer-seller relationship in business-to-business marketing.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Objectives 6.Compare the different types of business partnerships and explain how they contribute to relationship marketing. 7.Describe how relationship marketing incorporates national account selling, electronic data interchange, vendor-managed inventories, and collaborative planning, forecasting, and replenishment techniques. 8.Identify and evaluate the most common measurement and evaluation techniques within a relationship-marketing program.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Forms of Buyer-Seller Interactions on a Continuum From Conflict to Integration Transaction- Based Marketing Relationship Marketing Customer Relationship Management Conflict CooperationIntegration

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Goal of Relationship Marketing Continuum Converting them from Level 1 purchasers, who focus mainly on price To Level 3 customers, who receive specialized services and value-added benefits that may not be available from another firm.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Association for the Advancement of Relationship Marketing A partial listing of goals of AARM as stated on their web site; –Relationships with Customers, Clients, Vendors, Suppliers, Employees. –AARM is about the Marketing aspects of relationships with all these constituents and more. –AARM is about the Management aspects of relationships with all these constituents and more. –AARM is about knowledge enhancement, about how to manage the CRM process on an enterprise-wide basis. –AARM is about the tools techniques and processes that are required to help make positive things happen as a result of our knowledge and deeper understanding of each other needs.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three Levels of Relationship Marketing

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Three Steps to Measure Customer Satisfaction

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Customer Satisfaction Customer Feedback One of the ways to solicit feedback about the level of customer satisfaction is through questionnaires. The EPA Web site has such a survey for their customers. The basic purpose of the survey is to use the feedback to improve service.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Keeping Customers Frequency marketing –Focuses on a company’s best customers. –The goal, increasing motivation to buy even more of the same or other products from the seller. Affinity marketing –Is a marketing effort sponsored by an organization that solicits involvement by individuals who share common interests and activities. –Create extra value for members and encourage stronger relationships.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Rewards of Retaining Customers Retaining customers is far more profitable than losing them Customers typically generate more profits for firm with each additional year of the relationship It has been noted that a 5 percent gain in customer retention can lead to an 80 percent increase in profits

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Customer Satisfaction & Keeping Customers The Eckerd Way “Eckerd's success is evident: 2,640 Eckerd drug stores in 20 states, including 140 Genovese drug stores in Metropolitan New York, 1,600 Eckerd Express Photo one-hour photo labs in 19 states, and revenue of $13.1 billion in fiscal year Eckerd is the dominant drug chain in Florida, Texas and Pennsylvania.” Source: Eckerd Web Site

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Database Marketing The use of information technology to analyze data about customers and their transactions. Databases can help companies: –Identifying their most profitable customers. –Calculate the lifetime value of each customer’s business. –Create a meaningful dialogue that builds relationships and encourages genuine brand loyalty. –Improve customer retention and referral rates. –Reduce marketing and promotion costs. –Boost sales volume per customer or targeted customer group.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Finding Data for Databases Credit card applications Software registration Product warranties Cash register scanners Customer opinion surveys Sweepstakes entry forms Web sites Interactive television –Information on real consumer behavior and attitudes toward brands –Software tools and services

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Customer Relationship Management The combination of strategies and technologies that empowers relationship programs. CRM software systems are capable of making sense of the vast amounts of customer data. Systems are able to simplify complex business processes while keeping the best interests of customers at heart.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Successful CRM Systems Share the Following Qualities They are results driven. They are implemented from the top down. They require investment in training. They communicate effectively across functions. They are streamlined. They involve end users in creation of software solutions. They constantly seek improvement.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Four Key Types of Partnerships in Business-to-Business Markets 1.Buyer partnership, a firm purchases goods and services from one or more providers. 2.Seller partnerships set up long-term exchanges of goods and services in return for cash or other valuable consideration. 3.Internal partnerships are the foundation of an organization and its ability to meet its commitments to external entities. 4.Lateral partnerships include strategic alliances with other companies or with not-for-profit organization, and research alliances.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Effective Supply-Chain Management Results in: Increased innovation. Decreased costs. Improved conflict resolution within the chain. Improved communication and involvement among members of the chain.

Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Ways of Evaluating Relationship Programs Lifetime value of a customer...the revenues and intangible benefits that a customer brings to the seller over an average lifetime, less the amount the company must spend to acquire, market to, and serve the customer. Tracking rebate request. Monitoring complaints and returned merchandise. Reply cards. Monitoring “click-through on web sites.