Building Customer Relationships

Building Customer Relationships
• The first three steps in the marketing process: • understanding the marketplace and customer needs, • designing a customer driven marketing strategy • constructing marketing programs • all leads up to the fourth and most important step: building profitable customer relationships.

Customer relationship management
• The most important concept of modern marketing. Until recently, CRM has been defined narrowly as a customer data management activity. • In broader sense, customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

Customer perceived value
• The customer′s evaluation of the difference between all benefits and all the costs of a market offering relative to those competing offers. • Customers often do not judge product values and costs accurately or objectively. They act on perceived value.

Customer Satisfaction
• Customer satisfaction depends on product′s perceived performance relative to a buyer′s expectations. If the product′s performance falls short of expectations, the customer is dissatisfied. If performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied. • Most studies show that higher levels of customer satisfaction lead to greater customer loyalty, which in turn in better company performance.

• Smart companies aim to delight customers by promising only what they can deliver, then delivering more than they promise.

The changing nature of customer relationships
• Relating with more carefully selected customers: Many companies now use customer profitability analysis to weed out losing customers and to target winning ones for pampering. Once they identify profitable customers, firms can create attractive offers and special handling to capture customers and earn their loyalty. But what should the company do with unprofitable customers ? (turn them into profitable ones or fire them) • Relating for long term: It can cost 5 to 10 times as much to attract a new customer as it does to keep an existing one. • Relating directly: Some marketers have hailed direct marketing as the “marketing model of the next century.” They envision a day when all buying and selling will involve direct connections between companies and their customers.

Partner relationship management
• When it comes creating customer value and building strong customer relationships, today′s marketers know that they can′t go alone. They must work closely with a variety of marketing partners. • Partners inside the company: Marketing is far too important to be left only to the marketing department. • Marketing partners outside the firm: Changes are also occuring in hoe marketers connect with suppliers, channel partners and even competitors. (networked companies).

Capturing value from customers
• Creating customer loyalty and retention: The aim of customer relationship management is to create not just customer satisfaction, but customer delight. • Customer lifetime value: the value of the entire of purchases that the customer would make over a lifetime of patronage. (Companies are realizing that losing a customer means losing more than a single sale.) • Growing share of customer: The portion of the customer′s purchasing that a company gets in its product categories. (banks want to encrease “share of wallet”) • Building customer equity: the total combined customer lifetime values of all of the company′s customers. (It may be a better measure of firm′s performance than current sales or market share) ......

Capturing value from customers
• Building the right relationship with right customers.
Projected loyalty

Short-term customers Buterflies High profitability Potential profitability Low profitability Good fit between company′s offerings and customer′s needs - high profit potential Strangers Little fit between company′s offerings and customer′s needs - low profit potential

Long-term customers True friends Good fit between company′s offerings and customer′s needs - high profit potential

Barnacles Limited fit between company′s offerings and customer′s needs - high profit potential

• The different types of customers require different relationship management strategies.

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