7-1
BUILDING
CUSTOMER
RELATIONSHIPS
7-2
Objectives:
Explain relationship marketing, its goals, and the benefits of
long-term relationships for firms and customers.
Explain why and how to estimate customer relationship value.
Introduce the concept of customer profitability segments as a
strategy for focusing relationship marketing efforts.
Present relationship development strategiesincluding quality
core service, switching barriers, and relationship bonds.
Identify challenges in relationship development, including the
somewhat controversial idea that the customer is not always
right.
7-3
Transaction Marketing is best suited
for commodities
&
relationship marketing to services
Case Study:
Service Excellence at Sheraton Suites
.What people really remember is the guest experience.
o Service interaction key to customer loyalty
Carefully selected and trained staf
Brand-specific programs
Building World Class Brands
Staf empowerment
Strong service culture
Awards for service
o Relationship marketing
Tailored to each guest
Personable, non-intrusive attention
Its Our Pleasure program
Starwood Preferred Guest program
Loyalty reward point system
Social media monitoring
7-4
7-5
Relationship Marketing
is a philosophy of doing business, a strategic orientation,
that focuses on keeping current customers and improving
relationships with them
does not necessarily emphasize acquiring new customers
is usually cheaper (for the firm)
keeping a current customer costs less than attracting a new one
thus, the focus is less on attraction, and more on retention
and enhancement of customer relationships
A taxonomy of casino
customer segments
Figure 7.6 (Source: Watson and Kale, 2003)
7-6
7-7
The Bucket Theory of Marketing
7-8
Customer Goals of Relationship Marketing
7-9
Benefits of Relationship Marketing
Benefits for Customers: Benefits for Firms:
Receipt of greater value
Confidence benefits:
trust
confidence in provider
reduced anxiety
Social benefits:
familiarity
social support
personal relationships
Special treatment benefits:
special deals
price breaks
Economic benefits:
increased revenues
reduced marketing and administrative
costs
regular revenue stream
Customer behavior benefits:
strong word-of-mouth endorsements
customer voluntary performance
social benefits to other customers
mentors to other customers
Human resource management
benefits:
easier jobs for employees
social benefits for employees
employee retention
7-10
The Customer Pyramid
7-11
Segmenting Customers Based on
Commitment and Profitability
(Behavioral Loyalty)
CLV
High
Low
BUTTERFLIES
TRUE FRIENDS
Good fit of company offering and
customer needs
High profit potential
Action:
Good fit of company offering and
customer needs
Highest profit potential
Actions:
Aim to achieve transactional satisfaction, not
attitudinal loyalty
Milk the accounts as long as they are active
Key challenge: cease investment once
inflection point is reached
Consistent intermittently spaced
communication
Achieve attitudinal and behavioural loyalty
Invest to nurture/defend/retain
STRANGERS
BARNACLES
Little fit of company offering and
customer needs
Lowest profit potential
Action:
Limited fit of company offering and
customer needs
Low profit potential
Action:
No relationship investment
Profitize every transaction
Low
Measure size and share-of-wallet
If share-of-wallet is low, specific up and
cross-selling
If size of wallet is small, strict cost control
Relationship Commitment
(Attitudinal Loyalty)
High
W. Reinhartz & V. Kumar, "The Mismanagement of Customer Loyalty," Harvard Business Review 80 (July 2002), pp. 86-94.
7-12
Relationship Development Model
7-13
Strategies for Building Relationships
Core Service Provision:
service foundations built upon delivery of excellent
service:
satisfaction, perceived service quality, perceived value
Switching Barriers:
customer inertia
switching costs:
set up costs, search costs, learning costs, contractual costs
Relationship Bonds:
financial bonds
social bonds
customization bonds
structural bonds
Levels of Retention Strategies
Volume and
Frequency
Rewards
Stable
Pricing
Bundling and
Cross Selling
Continuous
Relationships
I. Financial
Bonds
Integrated
Information
Systems
IV.
Joint
Structural
Investments
Bonds
Shared
Processes
and
Equipment
Excellent
Quality
and
Value
II.
Social
Bonds
III. Customization
Bonds
Anticipation
/ Innovation
Mass
Customization
Personal
Relationships
Social Bonds
Among
Customers
Customer
Intimacy
7-14
7-15
The Customer Is NOT Always Right
Not all customers are good relationship
customers:
wrong segment
not profitable in the long term
difficult customers
