1. Chapter 5 Developing Customer Relationships Through Quality, Value & Satisfaction

2. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Customer Relationship Management (CRM)... Move from ‘acquiring customers’ to ‘maintaining clients’ Process of identifying, attracting, differentiating & retaining customers Integrating a firm’s entire supply chain to create customer value at each phase (increased benefits &/or lower costs) Producing high profits through increased business from the firm’s customer base

3. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. CRM Considers Key Stakeholders… Employees must be satisfied if they are to serve customers needs Supply chain partner relationships are key to satisfying customers Lateral partners including government, nonprofit organizations & facilitating firm relationships must be managed

4. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. CRM’s Goal is to Increase the Share of Customers Focusing on serving the needs of current customers Requires an understanding that all customers have different needs & therefore not all customers have equal value to a firm –80/20 Rule: 80% of your profits may come from as little as 20% of your customers

5. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Requirements for Customized Marketing Mixes... Marketing mix (product, price, promotion & distribution) delivery must be automated to a degree that makes it cost efficient Personalization –giving customers choices in marketing mix variables Firms must build ‘relationship capital’ –ability to build & maintain customer, supplier & partner relationships

6. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Identify Several Companies that Excel at Offering Customized Marketing Mixes... How does the target market for these companies vary from that of their competitors? How do you defend developing customized marketing mixes for customers?

7. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Quality Considerations in CRM Core product-part of the product that delivers the key benefits desired by consumers Customer services-activities that add value to the core product, further differentiating it from competitors Symbolic attributes-image, style, prestige, & brand (i.e.-Rolls Royce, Mont Blanc, & Neiman Marcus)

8. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Identify Companies that Excel in Each of the Following Areas... Core product Customer services Symbolic attributes

9. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Ways Businesses Can Improve the Quality of their Services... Understand customers’ expectations, needs & wants Translate customer research into specifications for quality Deliver on quality specifications –involves training & motivating employees Promise only what you can deliver

10. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Value in CRM... Value is the customer’s subjective evaluation of benefits relative to costs Helps determine the worth of a firm’s product relative to the offerings of other firms

11. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Perceived Value Customer Benefits –core product quality features, brand, styling, image, durability –customer service quality reliability, responsiveness, timeliness, friendliness –experience based quality retail atmosphere & décor, advertising & publicity, entertainment benefits Customer Costs –monetary costs transactional –price, add’l charges, taxes life cycle costs –maintenance, repairs, & replacement cost –non-monetary costs time effort risk safety & security opportunity

12. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Maintaining Long Term Customer Satisfaction... Understand what can go wrong Focus on issues that are controllable Make customer satisfaction measurement an ongoing priority

13. COPYRIGHT © 2002 Thomson Learning, Inc. All rights reserved. Ways to Measure Customer Satisfaction... Lifetime value of a customer Average order value Customer acquisition/retention costs Customer retention rate Referrals Viral marketing