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CHAPTER 6

CHAPTER 6. BUILDING CUSTOMER RELATIONSHIPS. RELATIONSHIP MARKETING. Relationship marketing is a philosophy of doing business that focuses on keeping and improving current customers rather than on acquiring new customers.

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CHAPTER 6

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  1. CHAPTER 6 BUILDING CUSTOMER RELATIONSHIPS www.AssignmentPoint.com

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  4. RELATIONSHIP MARKETING • Relationship marketing is a philosophy of doing business that focuses on keepingandimproving current customers rather than on acquiring new customers. • It represents a shift within marketing – away from an acquisitions/transaction focus toward a retention/relationship focus. www.AssignmentPoint.com

  5. Goals of relationship marketing • Primary goal- To build & maintain a base of committed customers who are profitable for the organization. • Identifying the best target market through market segmentation, and attract them who are profitable. • Providing quality products & services and good value over time. • Providing more/new products over time to increase market share and profits www.AssignmentPoint.com

  6. Benefits for customer • Benefits of receiving greater value: Value represents a trade-off between the “give” and “get”components. Consumers are likely to stay in a relationship when the gets exceed the gives. • Confidence benefits: These benefits comprise feelings of trust & confidence in the provider. They free up time for other concerns and priorities. www.AssignmentPoint.com

  7. Social benefits: A service provider may actually become part of the consumer’s social support system. The close personal and professional relationships are the basis for the customer loyalty. There is a risk of losing customers when a valued employee leaves the firm and takes customer with him. • Special treatment benefits: • Getting the benefit of doubt • Receiving a special deal or price • Getting other preferential treatment www.AssignmentPoint.com

  8. Benefits for the organization • Increased purchases over time • Lower costs • Free advertising through word-of-mouth • Employee retention www.AssignmentPoint.com

  9. FOUNDATIONS FOR RELATIONSHIP STRATEGIES 1. Quality in the core service Retention strategies will have little long-term success unless there is a solid base of service quality and customer satisfaction to build on. It must be competitive and frequently better than that. www.AssignmentPoint.com

  10. 2. Market segmentation and targeting • Some service firms treat customers as individuals and develop individual marketing plans for each customer. • Some service firms offer one service to all potential customers as if their expectations, needs and preferences were homogeneous. • Most service marketers offer different services to different group of customers by segmentation and targeting process. www.AssignmentPoint.com

  11. Process of segmentation & targeting in services • Demographic segmentation • Geographic segmentation • Psychographic segmentation • Behavioral segmentation 1. Identify bases for segmenting the market www.AssignmentPoint.com

  12. Develop profiles of resulting segments In consumer markets, the profiles usually involve demographic characterization or psychographic or usage segments. • Develop measures of segment attractive-ness • Measurability • Accessibility • Substantiality • Actionability www.AssignmentPoint.com

  13. Select the target segments • Segment size and growth • Segment structural attractiveness • Company objectives and resources • Ensure that the target segments are compatible As services are often performed in the presence of the customer, the service marketer must be certain that the customers are compatible with each other. www.AssignmentPoint.com

  14. 3. Monitoring relationships • Customer survey to determine their perception of value, quality, satisfaction with services & provider. Regular communication with its best customers in person or over the telephone. • Designing customer database to tailor the product/service according to the expectations. • Other types of marketing research (complaint monitoring, lost customer survey, customer visit) www.AssignmentPoint.com

  15. THE CUSTOMER ISN’T ALWAYS RIGHT The wrong segment It would not be beneficial to establish a relationship with a customer whose needs the company cannot meet. It would not be wise to forge relationships simultaneously with incompatible market segments. www.AssignmentPoint.com

  16. Not profitable in the long term Some segments of customers will not be profitable for the company even if their needs can be met - • There are not enough customers in the segment to make it profitable to develop a marketing approach. • The segment cannot afford to pay the cost of the service. • The projected revenues flows from the segment would not cover the costs. • The particular customer who has bad credit. • There can be substantial time investment in some customers. www.AssignmentPoint.com

  17. Difficult customers Beyond the monetary and time loss, there are customers who are simply difficult to work with for a variety of reasons. Although employees can be trained to recognized and deal with them appropriately, at time the best choice may to not maintain the relationship at all. www.AssignmentPoint.com

  18. Should firms “fire” their customers? Firms should get rid of wrong customers because – • Troublesome customers are less profitable and less loyal. • These customers can have negative effects on employee quality of life and moral. www.AssignmentPoint.com

  19. Firms should fire customers in a way that avoids negative publicity or negative word-of-mouth – • Raising prices or charging for services that were free • Helping a client find a new supplier who can better meet its needs • Finding an agreeable way to end the relationship (negotiation) www.AssignmentPoint.com

  20. CUSTOMER PROFITABILITY SEGMENTS The 80/20 customer pyramid A two-tier scheme What segment spends more over time, costs less to maintain & spread positive word-of-mouth? Most profitable customers Best customers What segment cost us in time, effort and money yet does not provide the return we want? What segment is difficult to do business with? Other customers Least profitable customers www.AssignmentPoint.com

  21. The expanded customer pyramidA four-tier scheme Most profitable customers Platinum Gold Iron Least profitable customers Lead www.AssignmentPoint.com

  22. Platinum tier - Most profitable customers Committed customers Heavy users of the product Less price sensitive Invest in and try new offerings Gold tier - Low level of profitability - Prefer price discount - Heavy users of the product - Work with multiple vendors to minimize risks www.AssignmentPoint.com

  23. Iron tier - Provide the volume needed to utilize the firm’s capacity - Spending level, loyalty & profitability are not substantial enough for special treatment Lead tier - costing the company money - Demand more attention - Problem customers www.AssignmentPoint.com

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