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Developing and Maintaining Long-

Term Customer Relationships

C H A P T E R

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12-2

Learning Outcomes

1. Define why customer relationship is a holistic process

2. State the importance of customer relationships

3. Select the key role of creating value at each step of

marketing process

4. Develop a strategic plan for customer relationship

management (CRM) and

5. Recommend the key elements for generating customer

satisfaction and customer retention

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12-3

The Right Marketing Strategy

Is not about creating a large number of transactions

Is one that attracts and retains customers over the long-

term

Considers customer needs, wants, and expectations

Develops long-term relationships

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12-4

Customer RelationshipManagement (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

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Strategic Shift from AcquiringCustomers to Maintaining Clients

Exhibit 12.1

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12-7

Developing Relationshipsin Consumer Markets

A long-term process

Goal is to move consumers through levels of increasing

relationship intensity

Attempts to create true believers and sponsors of thecompany

Recognizes that not all customers have equal value to the

firm Involves determining the lifetime value(LTV) of

customers

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Stages of CustomerRelationship Development

Exhibit 12.2

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Financial Incentives

Using financial incentives to increase customer loyalty

Social Bonding

Using social and psychological bonds to maintain a clientele

Enhanced Customization

Using intimate customer knowledge to provide one-to-one solutions or mass

customization

Structural Bonding

Creating customized product offerings that create a unique delivery system

for each client

Strategies for Enhancing andMaintaining Customer Relationships

From Exhibit 12.3

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Developing Relationshipsin Business Markets

Like CRM in consumer markets, involves moving

buyers through increasing levels of relationship intensity

Based more on creating structural bonds

Creates win-win scenarios

Is more involving and complex than CRM in consumer

markets

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12-11

Recent Changesin Business Relationships

A change in buyers and sellers roles

An increase in sole sourcing

An increase in team-based buying decisions

An increase in productivity through better integration

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12-12

Understanding the Role of Quality

The degree of superiority of a firms goods or services

The Core Product

Satisfies the basic customer need

Core product in services (people, processes, and physicalevidence)

Supplemental Products

Add value to the core product

Symbolic and Experiential Attributes

Usually based on image, prestige, or brand

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Components of theTotal Product Offering

Exhibit 12.4

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Delivering Superior Quality

Understand Customers Expectations

Translate Expectations into Quality Standards

Uphold Quality Standards

Dont Overpromise

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12-15

Marketing Strategy in Action

In the face of high quality competition from Japaneseautomobile manufacturers, Ford adopted a strategy focused onquality.

Has that strategy been successful in convincing you of the

quality of Fords products? How would you compare Ford inquality to Toyota or Honda?

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12-16

Understanding the Role of Value

A simple formula for value:

A more useful formula for value:

C i B V l

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12-17

Connections Between Valueand the Marketing Program

Exhibit 12.5

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12-18

Customer Satisfaction:The Key to Customer Retention

Understanding Customer Expectations

Ranges of Customer Expectations

The Zone of Tolerance

Customer Delight Customer Satisfaction

Customer Dissatisfaction

Managing Customer Expectations

Satisfaction vs. Quality vs. Value

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Range of Customer Expectations

Exhibit 12.6

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The Zone of Tolerance

Exhibit 12.7

M i E i d P f

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Measuring Expectations and Performance(Hypothetical Health Club)

Exhibit 12.9

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Customer Satisfactionand Customer Retention

Understand what can go wrong

Focus on controllable issues

Manage customer expectations

Offer satisfaction guarantees

Make it easy for customers to complain

Create relationship programs

Make customer satisfaction measurement an ongoingpriority

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Examples of Satisfaction Guarantees

Exhibit 12.8

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Customer SatisfactionMeasurement

Lifetime Value of a Customer (LTV)

Average Order Value (AOV)

Customer Acquisition/Retention Costs

Customer Conversion Rate

Customer Retention Rate

Customer Attrition Rate

Customer Recovery Rate

Referrals

Viral Marketing

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12-25

Internal Efficiency vs. Customer Service

Northwest Airlines has damaged its relationships withcustomers through shortsighted attempts to reduce

costs (e.g., cutting magazines, pillows, pretzels, etc.).

What strategic moves can NWA make to fight offlow-cost carriers?

Beyond the Pages 12.2

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Focus Areas and Assigned Readings

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Focus Areas and Assigned Readings