1. Chapter – 7 Building Customer Relationships

2. Objectives
Explain relationship marketing, its goals, and the benefits of long-term relationships for firms and customers
Explain why and how to estimate customer lifetime value
Introduce the concept of customer profitability segments as a strategy for focusing relationship marketing efforts
Present relationship development strategies-including quality core service, switching barriers, and relationship bonds.
Identify challenges in relationship development, including the somewhat controversial idea that “the customer isn’t always right”

3. Industry view on CRM
Helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns with clear goals and objectives, and generate quality leads for the sales team.
Assisting the organization to improve telesales, account, and sales management by optimizing information shared by multiple employees, and streamlining existing processes (for example, taking orders using mobile devices)
Formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; identifying the most profitable customers and providing them the highest level of service.
Providing employees with the information and processes necessary to know their customers, understand their needs, and effectively build relationships between the company, its customer base, and distribution partners

4. Relationship Marketing
The Shift from a transactions to a relationship focus in Marketing.
Customers become partners and firm must make long-term commitments to maintaining those relationships with quality, service and innovation

5. Relationship Marketing
Is a philosophy of doing business that focuses on keeping and improving current customers rather than acquiring new customers
Does not necessarily emphasize acquiring new customers
Is usually cheaper (for the firm) to keep a current customer costs less than to attract a new one
Bucket Theory of Marketing – Sales Advertising & marketing

6. The Evolution of Customer Relationships
Customers as Strangers
Customers as Acquaintances
Customers as friends
Customers as partners

7. Goals of Relationship Marketing
The primary goal is build and maintain committed customers who are profitable for the organization
Focus is on the attraction, retention, and enhancement of customer relationships
Customers goals of Relationship Marketing
Getting Customers,
Satisfying,
Retaining, and
Enhancing

8. Customer Goals of Relationship Marketing
Enhancing
Retaining
Satisfying
Getting

9. Benefits Benefits for Customers and firms To the Customers Value
Building & maintain a loyal customer base which benefit both firm & customers.
To the Customers
Value
When they gets (quality, satisfaction, specific benefits) more than they give
Long term service relationships
confidence benefits – trust of confidence
social benefits – sense of familiarity and social relationship with service providers
special treatment benefits – getting benefit of doubt, special deal or price or getting preferential treatment

10. Relationship value of Customers
Benefits for the firm
Economic Benefits
Customer Behavior Benefits
Human Resource Management Benefits
Life time revenue and profitability
Building long term relationships with their customers
Factors influencing relationship value
The length of an average revenue generated per relevant time period over the Life Time
Referrals
Life value – life time revenue – life time profitability
Estimating Customer Lifetime Value
Loyal customers – Increase value/profits
Customers who remains loyal in the average life time
Linking Customer Relationship Value to firm Value

11. Customer Retention Benefits to the Organization
Customer Satisfaction
Customer Retention &
Increased Profits
Quality
Service
Employee Loyalty

12. Customer Profitability Segments
The 80/20 Customer Pyramid
Best and Other Customers
Profitability Tiers – The Customer Pyramid
Platinum Tier
Gold Tier
Iron Tier
Lead Tier
The Customer’s View of profitability Tiers
Making Business Decisions Using Profitability Tiers

13. The “80/20” Customer Pyramid
Most Profitable
What segment spends more with
Customers
us over time, costs less to maintain,
Best
Customers
spreads positive word of mouth?
Other
Customers
What segment costs us in
time, effort and money yet
does not provide the return
we want? What segment is
Least Profitable
difficult to do business with?
Customers

14. The Expanded Customer Pyramid
Most Profitable
What segment spends more with
Customers
Platinum
us over time, costs less to maintain,
spreads positive word of mouth?
Gold
Iron
What segment costs us in
Lead
time, effort and money yet
does not provide the return
we want? What segment is
Least Profitable
difficult to do business with?
Customers

15. Levels of Relationship Strategies
Foundations:
Excellent Quality/Value
Careful Segmentation
Bonding Strategies:
Financial Bonds
Social & Psychological Bonds
Structural Bonds
Customization Bonds
Customer Appreciation

16. Relationship Development strategies
Core Service Provision
Switching Barriers
Customer Inertia
Switching Costs
Time, Money, Efforts (Setup cost, Search cost. Learning cost, Contractual cost)
Relationship Bonds
Level – 1- Financial Bonds
Level – 2- Social & Psychological Bonds
Level – 3- Customization Bonds
Level – 4- Structural Bonds

17. Levels of Retention Strategies
Stable Pricing
Volume and Frequency Rewards
Bundling and Cross Selling
I. Financial Bonds
Continuous Relationships
Integrated Information Systems
Excellent
Quality
and
Value
IV.
Structural Bonds
II.
Social Bonds
Personal relationships
Joint Investments
Shared
Processes and Equipment
Social Bonds Among Customers
III. Customization
Bonds
Anticipation/ Innovation
Customer Intimacy
Mass Customization

18. Relationship Challenges
The Customer Isn’t Always Right
Wrong segment
Not profitable in the long term
Difficult customers
Ending Business Relationships
Relationship Endings
Should firms fire their Customers?

19. END