BGS Customer Relationship Management Chapter 3 Relationship Marketing

Transaction vs. Relationship Marketing

Transaction vs. Relationship Marketing • • Short term focus Marketing mix Price sensitive customers Product quality dominates Market share Ad hoc satisfaction studies Little interdepartmental interface • Little internal marketing • • Long-term focus Interactive marketing Less price sensitive customers Interaction quality dominates Share of wallet focus Measurement of commitment Interdepartmental focus • Extensive internal marketing

Key Aspects of Relationship Marketing 1. Getting customers and creating transactions 2. Maintaining and enhancing ongoing relationships with customers, distributors, suppliers, networks of cooperating partners, etc. 3. Replacing products with personnel, technology, knowledge, and time

Roots of Relationship Marketing • Technological advances in IT • Continued growth of direct marketing • Using B 2 B relationship building models in a B 2 C environment • Published findings of consultants

3. 2 What is Relationship Marketing All About? • RM consists of initiating, enhancing, and maintaining relationships with one’s “customers” and dissolving them when appropriate. • RM has three basic features: – Relational databases – Integrated marketing communications – Capabilities for dialogue

Relationship Marketing is Applicable on at Least Ten Different Levels 1. 2. 3. 4. 5. 6. 7. Goods suppliers Service providers Competitors as in strategic alliances Nonprofit organizations Government entities as in joint R&D Ultimate customers Intermediate customers: • • franchisees channel members 8. Functional departments 9. Employees 10. Other company business units

3. 4 Will Relationship Marketing Benefit Every Company? Exchange Continuum Discrete Continuous Functional Relational Unemotional Emotional Meat Sauce Shoelaces Office Supplies Hotels Airlines Autos Professional Services Sports Teams Luxury Items

There Are Three Levels of Relationship Marketing Level 1: relies primarily on pricing incentives. Aim at customers at far left. Level 2: relies primarily on social bonds involving customization and personalization. Level 3: bonds are established by structural solutions

Choosing a Loyalty Strategy

Four Types of Customers 1. Loyalists: the most satisfied become apostles for your company. 2. Mercenaries: only loyal to low prices and are transaction specific with no intentions of ever establishing a relationship. 3. Hostages: “stuck” with you for a variety of reasons. Complainers and prima donnas. 4. Defectors: various types of dissatisfied former customers.

Customers Can Also Be Arrayed Based on Relationship Strength • Intimate relationships: doctor and patient • Face-to-face relationships: customer and retail store • Distant relationships: interactions over phone or online • No relationships: manufacturers with final customers who buy through middlemen

3. 6 Relationship Marketing and CRM is a set of business practices designed to put an enterprise into closer and closer touch with its customers, in order to learn more about each one and to deliver greater and greater value to each one with the overall goal of making each one more valuable to the firm. Peppers and Rogers

The Meaning of Relationship Marketing Relationship marketing means identifying, establishing, maintaining, and enhancing relationships with customers and other stakeholders at a profit, so that the objectives of all parties involved are met; this is done by a mutual exchange and fulfillment of promises.

Relationship Marketing Will Make Marketing More Effective by: • Enabling marketers to learn more about individual customers and develop customized products and services • Allowing customers to help design and develop the product/service • Minimizing negative images of marketing

Relationship Marketing Will Make Marketing More Efficient by: • Enabling companies to retain customers and drive profits • Reducing mass marketing wastes • Having customers do much of the marketers’ work, including order processing, product design, etc.

Are Marketers Losing Ground in Their Ability To Be the Company Focal Point for Customers? • Marketing can no longer be confined to a single department. – Line managers developed their own customer databases. – They began to work directly with direct marketers to develop programs and testing. – These efforts led to the CRM systems of today.

CRM Systems Can Provide Added Value for Customers by: • • Saving time Providing convenience Allowing for customization Providing a positive experience

3. 7 Have the 4 Ps Outlived Their Usefulness? Some new suggestions: – 4 P’s: People, preferences, permission, and precision – 4 C’s: Content, context, collaboration, and community – 4 C’s: Customer value, lower costs, better convenience, and better communications

3. 8 Organizing for Relationship Marketing • Companies organized around products and markets are not built around one-to-one relationships. No dialogue with the masses. • Customer service reps, however, do have dialogues. • Some suggest companies organize around customers in the form of customer portfolios run by segment managers. • The rise of the CRM department?