1. CHAPTER 16 Customer Retention and Maximization

2. Chapter 16 - Customer Retention and Maximization THE CUSTOMER RELATIONSHIP CONTINUUM Always-A-Share Customer Lost-For-Good Customers SWITCHING COSTS The Direct and Indirect costs a buyer will have to pay to go to another supplier

3. Chapter 16 - Customer Retention and Maximization LOST-FOR-GOOD ALWAYS-A-SHARE Customers are tied to a system. Switching costs may include: Specific investments Cancellation penalties Setup costs for a new supplier Retraining Finding/Evaluating a new supplier Customers can allocate their purchases to several vendors. A period of no purchases can be followed by a number of purchases. Doesn’t want to rely on a single vendor. Suppliers are largely interchangeable DEFINING CUSTOMER NATURE

4. Chapter 16 - Customer Retention and Maximization PAYOFFS FROM LONG-TERM RELATIONSHIPS Grow additional business opportunities for new products or increased purchases Premium prices result from giving first-rate service and product quality Reduced selling costs from tighter coordination of production and logistics (efficiencies) Additional revenues possible from customers’ referrals and joint sales calls with customers

5. Chapter 16 - Customer Retention and Maximization WHY COMPANIES STAY IN A RELATIONSHIP THEY HAVE TO – No alternative, binding actions such as contracts, product ties THEY WANT TO – Relationship is satisfying because of cooperation and meeting financial objectives

6. Chapter 16 - Customer Retention and Maximization TIES THAT BUILD RELATIONSHIPS SUPERIOR PERFORMANCE at a good price (value) SOCIAL RELATIONSHIPS created by frequent interaction TECHNICAL DEPENDENCIES brought about by reliance on a supplier’s products or support FORMAL AGREEMENTS involving investments or contracts

7. Chapter 16 - Customer Retention and Maximization Relationship Termination Costs Relationship Benefits Shared Values Communication Opportunistic Behavior Uncertainty Functional Conflict Cooperation Propensity To leave Acquiescence Relationship Commitment Trust + + + + + - - - + + + + TRUST AND COMMITMENT IN BUSINESS +

8. Chapter 16 - Customer Retention and Maximization Process 5 (etc.) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement Process 4 (Technical Support ) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement Process 3 (Service manuals Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement Process 2 (Parts reps) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement Process 1 (Parts handling) Attribute 1 Attribute 2 Attribute 3 Suggest change for improvement Loyalty questions Willingness to recommend Repurchase intentions General overall Satisfaction question 2 1 3 4 CUSTOMER SATISFACTION SURVEY

9. Chapter 16 - Customer Retention and Maximization MEASURING SATISFACTION AFTER THE SURVEYS MANAGEMENT QUESTIONS 1. What do the surveys tell us? 2. How do we use the information we have? 3. How reliable is the information?

10. Chapter 16 - Customer Retention and Maximization STRENGTHENING GOOD RELATIONSHIPS Develop and strive for shared goals (SUPRAGOALS) Anticipate customer needs LAGNIAPPE (lan – yapp) – giving without obligation (sending birthday cards to clients)