UCA MKTG 3350 - Building Customer Relationships

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Building Customer RelationshipsRelationship MarketingProvider Gap 1Benefits of Relationship MarketingCustomer LoyaltyBenefits to the Organization of Customer LoyaltySlide 7Figure 7.3 Profit Impact of 5 Percent Increase in Retention RateEffective SegmentationFigure 7.4 The Customer PyramidArt of Attracting and Keeping Profitable Customers“The Customer Is NOT Always Right”Application7ChapterChapterBuilding Customer Relationships•Relationship Marketing•Relationship Value of Customers•Customer Profitability Segments•Relationship Development Strategies•Relationship ChallengesRelationship 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 relationshipsProvider Gap 1When companies have strong relationships with customers gap 1 is _________________CustomerExpectations Gap 1Company Perceptions ofConsumer ExpectationsBenefits of Relationship Marketing•Benefits for Customer s:–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•Benefits for Firms :–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 retentionCustomer LoyaltyRelational Benefits for Customers__________ benefits: feelings of trust or confidence in the provider; comfort in knowing what to expect_________ benefits: familiarity; personal relationship_________________ benefits: preferential treatmentBenefits to the Organizationof Customer LoyaltyEconomic Benefits•Increasing customer purchases - loyal customers tend to spend more with the organization over time•Lower costs - on average costs of relationship maintenance are lower than new customer costsBenefits to the Organizationof Customer LoyaltyCustomer Behavior BenefitsHuman Resource Management BenefitsFigure 7.3Profit Impact of 5 Percent Increase in Retention RateSource: F. F. Reichheld, “Loyalty and the Renaissance of Marketing,” Marketing Management, vol. 2, no. 4 (1994), p. 15.Effective SegmentationCustomer Profitability SegmentsNot all customers are worth attracting and keepingIt is neither practical nor profitable to meet (and certainly not to exceed) all customers expectationsObjective: company divides target market according to current and/or future _______________Most ProfitableCustomersLeast ProfitableCustomersWhat segment spends more withus over time, costs less to maintain,spreads positive word of mouth?What segment costs us intime, effort and money yetdoes not provide the returnwe want? What segment isdifficult to do business with?GoldIronLeadPlatinumFigure 7.4The Customer PyramidArt of Attracting and Keeping Profitable Customers20-80-30 rule: Top 20 percent of customers generate 80 percent of company’s profits, half of which is lost serving the bottom 30 percent of unprofitable customers- William Sherden 1994“The Customer Is NOT Always Right”•Not all customers are good relationship customers:–wrong segment–not profitable in the long term–difficult customersApplicationBuild relationships with the most profitable customers; “fire” the least profitable


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UCA MKTG 3350 - Building Customer Relationships

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