Chapter 4 principles of marketing

Customer Relationship Management

1. Chapter 4 Customer Relationship Management Mr. Anthony F. Balatar Jr. Subject Instructor

2. Introduction “Customer is always right”. You may have heard of this popular catchphrase, and while it may not always be true, businesses strive to please their customers. If a customer is unhappy with a product or service, chances are the customer will not be coming back for another transaction.

3. Introduction Customers enjoy getting good value for their money. They want to score the best deal when buying – the items they are paying for may not necessarily be the cheapest, but the benefits, features, and services they get out of them are worth more than the actual price. One way of keeping customers happy is by building a relationship with them.

4. Introduction Most retailers nowadays offer better value by offering superb service, or giving customers “rewards” that they can collect and use at a later time. Ensuring a pleasurable experience for the customer will keep a company in their mind.

5. Relationship Marketing It is a strategy that concentrates on keeping and improving relationships with existing customers. It focuses on ensuring that prospective and current customers maintain a long, profitable relationship with the company. Some programs not only enhance the relationship to keep the customers loyal, but also encourage an increase in consumption of the company’s products.

6. Relationship Marketing Companies now understand that marketing no longer aims for a transactional relationship, where customers pay for an item, leave the store, and forget about it. Sales-focused transactions only give emphasis on making a sale for the day.

7. Relationship Marketing Instead, most businesses now appreciate building a full partnership with their customers – where both the customer and the company create a mutually beneficial relationship marketing no longer focus on just making a sale for the day, but ensuring that they make a sale from the same customers over and over again.

8. Customer Value, Satisfaction, and Retention Customers are the lifeblood of every business. As the marketplace becomes saturated with more products, customers are faced with more choices for their needs. A company must offer in order to turn them into loyal customers.

9. Customer Value, Satisfaction, and Retention Customer Value Customer Satisfaction Customer Retention If customers see good value in a product, they are satisfied, making them loyal customers. Relationship of Customer Value, Satisfaction and Retention

10. Customer Value, Satisfaction, and Retention Differences among Customer Value, Satisfaction, and Retention Customer Value Customer Satisfaction Customer Retention The customer’s perception of the benefits that he or she is getting from a product, in relation to the price paid to obtain those benefits The customer’s evaluation of the performance of the product in relation to his or her expectations The company’s effort to maintain loyalty of customers

11. Customer Value, Satisfaction, and Retention Customers want to get their money’s worth when they purchase something. Customer value is the ratio between the perceived benefits and the resources to obtain those benefits. Customer satisfaction is the evaluation of the product’s performance in relation to the expectation set by the customer. Customer retention is an effort made by the companies in order to keep customers happy and loyal.

12. Customer Value, Satisfaction, and Retention Reasons why companies want loyal customers: Loyal customers buy more products . If a customer trusts a company, he or she will buy more products from it, even if these are newly launched products. They are less price sensitive . Customers usually will not mind price increases or premium prices of a product if it meets their needs.

13. Customer Value, Satisfaction, and Retention Reasons why companies want loyal customers: They spread positive word of mouth . Loyal customers usually spread positive feedback about a product or a brand. They may either share their positive experiences about a product or a brand to their circle of friends or post them on their social media accounts.

14. Relationship Development Strategies Companies need to exert effort in order to satisfy the needs of their customers and keep them buying. Three factors affect the rationale of organizations’ strategies in keeping their customers: core service provision , switching barrier , and relationship bonds .

15. Relationship Development Strategies Core service provision includes service foundations that are built upon delivery of excellent service. In order to do so, the company must be able to satisfy the customer by meeting the expectations from a product. This, however, will be influenced by the perceived quality of the product, or the subjective evaluation of a product’s worth by a customer in relation to his or her expectations from the product and its perceived value.

16. Relationship Development Strategies Switching barrier can also affect the loyalty of customers. It is the economic and psychological difficulty perceived by the customers if they switch from one brand to another.

17. Relationship Development Strategies Relationship bonds are retention strategies that keep the customer buying the same brand. Four levels : Financial Bond – at this level, the customer patronizes a brand because of the financial incentives that he or she may receive from the company. These may be in the form of discounts, lower prices, or reward points.

18. Relationship Development Strategies Social Bond – this type of bond focuses on the social and interpersonal relationship between the company and the customer. This may be commonly observed in a customer’s relationship with his or her stylist, massage therapist, or even doctors. Because this bond is not price-sensitive (consumers will not readily switch because of the competitor’s lower price), it may be difficult to make a customer switch to another company.

19. Relationship Development Strategies Customization Bond – customer loyalty may be encouraged when customers are allowed to avail tailored services to fit their individual needs. Elements in 1 and 2 may be combined at this level, because a customer may enjoy the extra service and incentives extended to him or her as a result of the social bond developed with the business.

20. Relationship Development Strategies Structural Bond – at this level, all previous levels are combined in order to deliver services that fit the need of the client or customer. This may apply to business-to-business transactions. Over time, as the relationship develops, the company may provide additional incentives or discounts for its loyalty and continued patronage.

21. Relationship Development Stages Businesses deal with customers on a daily basis. A company’s relationship with various customers differs depending on how well the staff knows the customer, how long the customer has been shopping at the store, and how knowledgeable the customer is of the company’s products, among others.

22. Relationship Development Stages EVOLUTION OF CUSTOMER RELATIONSHIPS Strangers Acquiring Acquaintances Satisfying Friends Retaining Partners Enhancing

23. Relationship Development Stages Customers as Strangers In this stage, the customers are not familiar with the company’s products. They may have heard of the company, but they are not entirely aware how they can benefit from the company. Because the company is introducing itself to its customers, its marketing goal is to acquire customers and earn their confidence.

24. Relationship Development Stages Customers as Acquaintances In this stage, the customers are trying out the products of the company and investing a little by buying a product or two. The goal of the company is to satisfy these new customers. Because the relationship is still fragile at this point, the company should avoid making a mistake and instead focus on providing superior customer service and product quality.

25. Relationship Development Stages Customers as Acquaintances The customers may ask a lot of questions, and may even doubt the effectiveness of the company’s products, but may be willing to take the risk so they can try the products.

26. Relationship Development Stages Customers as Friends Over time, customers who are satisfied with the company’s products and services will develop loyalty. In this stage, the company and the customers become friends. The company’s goal is to retain the customers and keep them close through different marketing activities. Customers will only stay if the company’s products continuously satisfy them.

27. Relationship Development Stages Customers as Friends Maintaining product quality and consistent customer service is important to ensure that customers continue valuing the company’s products, and will not stray to the competitors. Offering sales promotions from time to time gives customers added value to their purchase.

28. Relationship Development Stages Customers as Friends Giving superior customer service, like sending customers a message when new stocks arrive, remembering the customers’ preferences, and knowing them by their first name may seem trivial but are important simple services that the sales staff can be trained to do.

29. Relationship Development Stages Customers as Partners Companies not only want to maintain the loyalty of their customers but also enhance their relationship to ensure that the customer will always choose to buy from them and not from the competitors. Enhancing the customer relationship also strengthens the company’s brand equity, or its credibility in the eyes of the consumers.

30. Relationship Development Stages Customers as Partners They are partners because as the company provides value to the customers through loyalty programs, the customers also provide value to the company by recommending it to the friends, talking about it on social media, promoting it in their social circle, and keeping it in their top-of-mind choice.

31. Relationship Development Stages Evolution Stage Strangers Acquaintances Friends Partners Marketing Goal Acquiring Satisfying Retaining Enhancing Marketing Activities Advertising, sales promotions Superior customer service and product quality Product and service consistency, special offers, sales promotions Rewards, points, incentive programs, exclusive privileges

32. Customer Relationship Management It is the process of building and maintaining profitable customer relationship by delivering customer value and satisfaction (Kotler and Armstrong, 2014) . CRM is now being utilized by companies to enhance their relationship with their “partners” or customers who have become loyal to their products.

33. Customer Relationship Management On the other hand, a full CRM program usually involves the use of a customer database and different customer information in order to systematically monitor consumer purchases and to fully maximize the profit potential of each customer relationship. Most retail stores now offer loyalty cards or rewards program in order to give special benefits to loyal customers.

34. Customer Relationship Management While the CRM program is in place, some companies choose to further segment their customer base. If marketers before focus on mass marketing or one-size-fits-all type of marketing products, now they are finding ways to build lasting relationships with selected customers.

35. Customer Relationship Management Companies now realize that not all customers are profitable, so they choose to focus their resources on the needs of profitable customers. To be able to do this, companies use digital technology to keep track of the purchases of their customers and to offer better benefits to those who are more profitable of the company.

36. Customer Profitability-Focused Marketing Pyramid Four Types: Lead I ron Gold Platinum

37. Customer Profitability-Focused Marketing Pyramid Four Types: Lead customers are unprofitable customers who only spread negative word of mouth. They require more attention, but give very little business to the company. Iron customers may be regular customers, but their purchase volume may not merit special treatment.

38. Customer Profitability-Focused Marketing Pyramid Four Types: Gold customers are heavy users but are price-sensitive. They may buy in bulk, but only when they can enjoy discounts and promotions. Platinum customers are heavy users and are not price-sensitive. They may buy often with big purchases, and would not care whether they are getting discounts on their purchases.

39. The Changing Landscape of Customer Relationships Relating with Carefully Selected Customers . Building a Deeper and More Interactive Relationship . Consumer – Generated Marketing .