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Customer Relationship Management Strategies in the Digital Era
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DOI: 10.4018/978-1-4666-8231-3
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Customer Relationship
Management Strategies in
the Digital Era
Süphan Nasır
Istanbul University, Turkey
A volume in the Advances in Marketing, Customer

Relationship Management, and E-Services
(AMCRMES) Book Series
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Nasir, Suphan, 1978-
Customer relationship management strategies in the digital era / by Suphan Nasir.
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Includes bibliographical references and index.
Summary: “This book blends the literature from the fields of marketing and information technology in an effort to exam-
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Mission
Business processes, services, and communications are important factors in the management of good
customer relationship, which is the foundation of any well organized business. Technology continues to
play a vital role in the organization and automation of business processes for marketing, sales, and cus-
tomer service. These features aid in the attraction of new clients and maintaining existing relationships.
The Advances in Marketing, Customer Relationship Management, and E-Services (AMCRMES)
Book Series addresses success factors for customer relationship management, marketing, and electronic
services and its performance outcomes. This collection of reference source covers aspects of consumer
behavior and marketing business strategies aiming towards researchers, scholars, and practitioners in
the fields of marketing management.
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Handbook of Research on Effective Marketing in Contemporary Globalism

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2007.

Table of Contents
Preface.................................................................................................................................................... ix
Chapter 1
Marketing Strategies in Competitive Markets and Challenging Times................................................... 1
INTRODUCTION..............................................................................................................................................................1
CREATING SUPERIOR VALUE......................................................................................................................................3
MAINTAIN MARKETING COMMUNICATION AND ADVERTISING.......................................................................6
DIFFERENTIATE AND INNOVATE.............................................................................................................................10
FIND ALTERNATIVE TO PRICE CUT.........................................................................................................................12
BRAND VALUE..............................................................................................................................................................13
CUSTOMER INSIGHT....................................................................................................................................................15
FOCUS ON EXISTING CUSTOMER BASE AND CUSTOMER RETENTION..........................................................16
TOWARDS A MARKETING FRAMEWORK FOR CHALLENGING AND COMPETITIVE MARKETS................18
CONCLUSION.................................................................................................................................................................19
Chapter 2
The Evolution of Relationship Marketing Orientations......................................................................... 25
INTRODUCTION............................................................................................................................................................25
THE EMERGENCE OF THE RELATIONSHIP MARKETING PRACTICES..............................................................26
THE EMERGENCE OF THE RELATIONSHIP MARKETING SCHOOL OF THOUGHT.........................................29
KEY DIFFERENCES BETWEEN TRANSACTIONAL MARKETING AND RELATIONSHIP MARKETING.......31
CONCLUSION.................................................................................................................................................................33
Chapter 3
The Conceptual Framework of Relationship Marketing........................................................................ 38
INTRODUCTION............................................................................................................................................................38
TOWARDS A COMPREHENSIVE DEFINITION OF RELATIONSHIP MARKETING.............................................39
A BROADER PERSPECTIVE OF MANAGING RELATIONSHIPS............................................................................41
DIMENSIONS OF RELATIONSHIP MARKETING.....................................................................................................43
MOTIVATIONS OF CUSTOMERS TO ENGAGE IN RELATIONSHIPS....................................................................51
RELATIONSHIP TERMINATION REASONS..............................................................................................................52
FOUNDATIONS OF RELATIONSHIP MARKETING SUCCESS................................................................................52
CONCLUSION.................................................................................................................................................................57

Chapter 4
Managing Relationships in Business Markets and Role of Information Communication
Technologies.......................................................................................................................................... 64
INTRODUCTION............................................................................................................................................................64
NATURE OF RELATIONSHIPS IN BUSINESS MARKETS........................................................................................65
DETERMINANTS OF BUSINESS TO BUSINESS RELATIONSHIP DEVELOPMENT PROCESS.........................70
VALUE CREATING BUSINESS ALLIANCES AND NETWORKS............................................................................73
MANAGING RELATIONSHIPS IN STRATEGIC ALLIANCES..................................................................................76
MANAGING RELATIONSHIPS WITH SUPPLIERS....................................................................................................79
IMPACT OF ICTs ON VALUE CREATING NETWORKS............................................................................................82
CONCLUSION.................................................................................................................................................................85
Chapter 5
Customer Service in Digital Era and Role of Internal Markets............................................................. 89
INTRODUCTION............................................................................................................................................................89
CREATING RELATIONSHIP MARKETING CULTURE IN INTERNAL MARKETS...............................................90
ROLE OF INTERNAL MARKET IN SERVICE PROFIT CHAIN................................................................................93
CUSTOMER EXPERIENCE MANAGEMENT..............................................................................................................95
CUSTOMER SERVICE IN THE DIGITAL ERA.........................................................................................................113
KEY BUSINESS TRENDS ABOUT FUTURE OF CUSTOMER SERVICE..............................................................120
CONCLUSION...............................................................................................................................................................122
Chapter 6
A Framework for CRM: Understanding CRM Concepts and Ecosystem............................................ 131
INTRODUCTION..........................................................................................................................................................131
DEFINING CRM FROM DIFFERENT PERSPECTIVES............................................................................................132
WHAT CRM IS NOT.....................................................................................................................................................136
CRM IMPLEMENTATION FRAMEWORK................................................................................................................137
BENEFITS OF IMPLEMENTING CRM......................................................................................................................143
ARCHITECTURE OF CRM ECOSYSTEM..................................................................................................................146
CUSTOMER MANAGEMENT TECHNOLOGIES......................................................................................................156
CONCLUSION...............................................................................................................................................................173
Chapter 7
Customer Relationship Management as a Customer-Centric Business Strategy................................. 182
INTRODUCTION..........................................................................................................................................................182
CRM AS A COMPETITIVE STRATEGY....................................................................................................................184
CUSTOMER LIFE CYCLE MANAGEMENT..............................................................................................................196
CONCLUSION...............................................................................................................................................................212

Chapter 8
Customer Acquisition Management Strategies.................................................................................... 219
INTRODUCTION..........................................................................................................................................................219
PHASES OF LEAD MANAGEMENT PROCESS........................................................................................................221
LEAD MANAGEMENT AUTOMATION....................................................................................................................237
CONCLUSION...............................................................................................................................................................238
Chapter 9
Customer Retention Strategies and Customer Loyalty........................................................................ 244
INTRODUCTION..........................................................................................................................................................244
CUSTOMER RETENTION STRATEGIES...................................................................................................................246
CUSTOMER COMMITMENT......................................................................................................................................253
LOYALTY PROGRAMS...............................................................................................................................................258
WIN BACK STRATEGIES............................................................................................................................................260
CONCLUSION...............................................................................................................................................................261
Related References............................................................................................................................. 268
Compilation of References................................................................................................................ 298
About the Author............................................................................................................................... 319
Index.................................................................................................................................................... 320
ix
Preface
In today’s global economy there is high competition and customers have more and better choices than
ever before; therefore, it is difficult to retain customers and create customer loyalty. Businesses will be
successful only if they adopt a management approach that puts the customer at the core of the com-
pany’s processes. As customer loyalty increasingly becomes important for the businesses, Customer
Relationship Management (CRM) has become one of today’s hottest topics. Companies have been
increasingly implementing CRM systems. According to the Gartner’s report (2014), worldwide CRM
software market grew 13.7 percent from $18 billion in 2012 to $20.4 billion in 2013. Gartner forecasts
that it will increase to a $36.5 billion worldwide market by 2017. The top five CRM vendors accounted
for 50 percent of CRM software revenue in 2013. The Gartner’s report on CRM market share indicates
that Salesforce.com continued to be the largest vendor overall in the CRM market with 16.1 percent of
the market, followed by SAP (12.8%), Oracle (10.2%), Microsoft (6.8%), and IBM (3.9%). During the
period of 2012-2013, Salesforce attained 30.3% growth in worldwide revenues. On the other hand, for
the same period of time Microsoft achieved 22.8% growth, followed by IBM (22%), SAP (12.7%), and
Oracle (4%) (Gartner, 2014).
Forbes (2013) indicates the key take-away from the Gartner report on “market share analysis: cus-
tomer relationship management software, worldwide, 2012.” According to the report, worldwide CRM
market experienced 12% growth in 2012, three times the average of all enterprise software categories.
Clients of the vendor demand CRM software that can help them acquire customers, analyze and act
on customer behaviors, and increase all-channel management performance. The report also provides
worldwide CRM software spending by sub-segment. Enterprises have spent $6.6 billion on customer
service and support software and it is the 36.8% of all CRM software spending in 2012. It is followed
by sales (26.3%), marketing (20%) and e-commerce (16.9%) (Forbes, 2013).
Successful implementation and use of CRM systems can provide significant benefits to the enterprise,
but often there are difficulties that create barrier for the user from using the system to its full potential.
According to the CRM statistics, 43% of CRM customers have been realizing that they use less than half
of the features of CRM, %35 of CRM users enter the data into their systems manually when handling
CRM integration, and 72% of CRM users indicate that they would give up all the extra features just to
get a CRM which is easier to use (Klingshirn, 2013). Ease of use is an important factor for successful
implementation and use of CRM systems. Gartner report reveals the fact that 40% of all CRM software
sold in 2012 worldwide were SaaS-based and enterprises seek out easier-to-deploy CRM systems com-
pared to on premise alternative (Forbes, 2013). Gartner estimates that use of SaaS will grow to over 50%
by 2020 according to their projections (Forbes, 2012).

Preface
Gartner’s report on “what’s hot in CRM applications in 2013” indicates the highest CRM applica-
tion priorities for 2013. The report covers areas of interest by clients in the four areas: marketing, sales,
customer service and e-commerce. The report indicates interests of clients, not their current CRM
spending. Social campaigns, predictive analytics on big data, marketing performance measurement,
and mobile marketing applications are among the hottest interest in the marketing area. On the other
hand, social-internal collaboration, social-integration with social data, sales coaching, and gamification
are the hottest interests of sales area. The hottest interests of customer service area are mobile support,
SaaS based CSS, customer engagement center including social, intelligent agent interface, voice of the
customer, and video for customer service. Lastly, distributed order management, recommendations
engine, and mobile application are among the hottest interest areas of e-commerce (Columbus, 2013).
The communications, media and IT services industries spent most on CRM systems in 2013 with the
need of providing more consistent customer experiences. Manufacturing companies including consumer
packaged goods manufacturers were the second largest spending industry in 2013. They invested more
in CRM for the coordination of product and channel management. Third largest spending industry was
the banking and securities industry, in which customer service and upselling financial products are seen
as high priorities for investing (Gartner, 2014).
With the widespread use of social media, CRM has been redefined. Initially, CRM has been defined
as a business strategy that seeks to identify, attain, and retain customers by developing relationships
through consistent and relevant communications. CRM tools have been used in order to sell and market.
Traditional CRM focuses on customer insight in order to generate more targeted campaigns and convert
leads into customers. Thus, traditional CRM focuses on one way communication with customers, sell-
ing activity, and marketing campaigns that target profitable customers in order to maintain customer
loyalty. However, the rise of social media is changing the CRM landscape by offering new channels for
finding and connecting with customers. With the social CRM, enterprises focus on creating content and
conversation in order to develop and maintain relationships with customers. Social CRM focuses on
more listening, sharing, and participating; however, it focuses on less talking, selling, and marketing.
Social CRM tools allow businesses to better engage with their customers. Social media provides benefits
for managing customer relationship effectively and it enables the enterprise to connect with customers
in social settings. 65% of small businesses that use social business tools expect positive return on their
social CRM investment (Nelson, 2014).
Gartner report indicates that by 2017 25% of companies adopting CRM will have extended their
customer service contact centers to include social media including Facebook, Twitter, and other emerg-
ing online communities. As of 2012, only 1% of companies integrate social media to ensure a consistent
customer experience (Forbes, 2012). According to the how social media is transforming CRM infographic,
more than 60% of users interact with brands on social channels and Twitter users post an average of
more than 500 million tweets per day. Social media is transforming CRM, and one in four Facebook and
Twitter users thinks that companies should reply to their complaints on social media within one hour, and
two-thirds expect a same-day response. Social media is generating a higher value of data on customer
brand interactions, which can be used for better insights and more targeted marketing (Bennett, 2014).
CRMs have created tremendous value for the enterprises. Implementing the right CRM can increase
the sales efficiency. CRM applications provide many benefits for managing customer interactions ef-
fectively. CRM application organizes scores of customers’ data from a variety of sources into one,
gathers all of this data instantly, provides real time and simple feed, and responds to customers faster.
Moreover, CRM applications help enterprises organize leads, track and managing leads, and managing
x
Preface
lead conversion. Using social media, CRM systems enable the enterprise to know customers better and
generate leads. Task management functionality of CRM systems also helps the enterprise organize tasks
according to priority and keep customers happy by responding to customer requests quickly. Having all
accounts and their history in one place through CRM systems reduces search time, increases productivity,
and can take enterprise’s business to the next level. Enterprise can close more deals, increase sales, and
improve forecast accuracy. If it is used correctly, a CRM application can increase sales by up to 29%,
sales productivity by up to 34%, and forecast accuracy by 42% (Leung, 2013).
According to the Salesforce and Pardot infographics, 68% of companies have not identified or at-
tempted to measure their sales funnel, 65% of companies have not defined lead nurturing processes
or toolset, 79% of all marketing leads have never converted to sales, and only 56% of companies have
system in place to qualify marketing leads (Wesson, 2013). Thus, it is important to implement integrated
CRM systems. Integrated CRM improves marketing performance through measuring and improving lead
quality. Integrated CRM system also allows the company to manage its lead funnel better and improve
its lead conversion to sales. CRM enables the enterprise to automate its lead qualification, nurturing
and assignment, send targeted messages, track ROI, get more value from the campaign, and measure
campaign performance. With improved lead assignment, prospect tracking, and real time alerts, enter-
prise’s sales team can focus on what matters most. In return this allows closing more deals. Integrated
CRM systems help the company identify better opportunities and get better response (Wesson, 2013).
Although implementation of CRM applications provides valuable benefits to enterprises, it is impor-
tant to keep in mind that only 28% of enterprises and 47% of the midmarket organizations agreed that
their expected business results were met or exceeded with their CRM project (Forrester, 2008). Hence
this book aims to provide a guide for successful CRM implementation.
Customer Relationship Management Strategies in the Digital Era provides extensive contents to the
topic of customer relationship management in the fast changing digital market. The book includes a
wide range of various interesting topics related to Customer Relationship Management (CRM) as well
as relationship management. The book covers the topics of relationship marketing and customer relation-
ship management from the business as well as technology perspective in a detailed way. The book aims
to help businesses to stay up to date with the newest strategies, developments, and technologies about
CRM. Moreover, it provides comprehensive insight on how CRM can be used throughout the stages of
customer acquisition, retention, and customer service.
The book starts with discussing marketing strategies that will help companies survive in competitive
markets and challenging times. The main contribution of Chapter 1 is to underline the significance of
CRM and customer centric business strategies that help enterprises maintain their financial health in
challenging times such as during the period of recessions or in rapidly changing competitive markets.
Chapter 1 indicates the several mistakes that companies do most of times in order to cope with competition
and challenges. The most common mistake that the companies make in challenging times is to cut prices
and marketing expenditures. Reducing the marketing expenses such as advertising and communication
may give short-term relief to the enterprise. However, in the long run enterprise may have the risk of
losing its customer base and market share. Chapter 1 continues with proposing a framework of strategies,
which may enable enterprises to sustain and thrive their profitability in challenging and competitive
markets. The proposed marketing strategies for challenging and competitive markets include creating
customer value, differentiation and innovation, finding alternative ways to price cut, emphasizing brand
value, maintaining marketing and advertising, focusing on targeted marketing communication, reviewing
and measuring marketing budget effectiveness, understanding marketplace, developing strategies based
xi
Preface
upon customer insight, becoming customer centred, focusing on customer retention and loyalty, and re-
evaluating and prioritizing customer segments. The first chapter of the book emphasizes the importance
of implementing CRM and customer centric business strategies in competitive and challenging markets.
Concentrating on customers and retaining existing customers are seen as the key to success in com-
petitive markets. As companies notice the need to get close to customers in order to achieve customer
retention, maximize profits and keep costs low; relationship marketing becomes an essential strategic
tool for the enterprises in today’s dynamic market. The evolution of relationship marketing practices is
discussed in the second chapter in attempt to get an idea about the past, present and future relationship
marketing practices. Although relationship marketing has been becoming popular and has been consid-
ered as an emerging new phenomenon; the relationship marketing literature argues that the antecedents
of relationship marketing practices go back to the pre-industrial era. Chapter 2 reviews the marketing
practices of pre-industrial, industrial, and post-industrial period with the purpose of demonstrating that
relationship orientation in the post-industrial era is the rebirth of marketing practices of the pre-industrial
age. After outlining the factors that cause re-emergence of relationship orientation in the post-industrial
era, the emergence of the relationship marketing school of thought is briefly discussed. This chapter ends
with comparing the transactional marketing practices with relationship marketing practices.
Chapter 3 gives background of relationship marketing concepts and provides the conceptual frame-
work of relationship marketing. This chapter reviews the relationship marketing definitions, which are
made by different streams of marketing with the purpose of providing a comprehensive understanding
of relationship marketing. Although, there are many definitions of relationship marketing and they differ
somehow from each other, the common denominator of most of these definitions is that they emphasize
the development and maintenance of long term relationships with customers and parties that are involved
in value creation. Thus this chapter handles the relationship marketing concept beyond the typical
supplier-buyer relationships and analyses all collaborative relationships that allow company to deliver
the superior customer value. Since the term of relationship marketing refers to all marketing activities
that are directed towards establishing, developing and maintaining successful relational exchanges;
chapter 3 indicates that companies need to focus on developing cooperative and collaborative relation-
ships with its consumers, supplier markets, distribution channel members, internal markets, recruitment
markets, referral markets, influence markets, and business to business customers. Chapter 3 continues
with outlining the determinants that foster building successful relationship marketing practices. Commit-
ment, trust, and satisfaction with relationship benefits are explained as main dimensions of developing
successful relationships. It also discusses main motivations of customers to engage in a relationship and
their relationship termination reasons. This chapter ends with identifying the facilitators and barriers
for relationship marketing success.
Chapter 4 discusses the significance of managing relationships in business to business markets and
indicates the role of Information Communication Technologies (ICTs) in value creating networks. Chap-
ter 4 starts with analysing the nature of relationships in business markets, identifies different forms of
relationships between the supplier and customer in business markets, and classifies value creation func-
tion of business relationships. It is demonstrated that relationships between the buyer and seller in the
business markets are not identical. There are different forms of relationships between the supplier and
customer in business markets because relational dimensions, competition in supply markets, purchase
decision complexity, existence of procurement obstacles for the buying firm, purchase importance and
other situational determinants can cause formation of different types of relationships in business markets.
xii
Preface
Chapter 4 continues with identifying the determinants of relationship development process in business
to business markets. Commitment, trust, cooperation, mutual goals, interdependence and power, perfor-
mance satisfaction, structural bonds, existence of alternatives, adaptation, non-retrievable investments,
shared technology and social bonds are indicated as essential determinants for continuation of a business
relationships. As it is known that business alliance starts with the objective of creating superior customer
value and core capabilities of the network member firms come together to create superior customer
value. Chapter 4 indicates the importance of value creating business alliances and networks in customer
value creation and outlines the main motivations for forming strategic business alliances. This chapter
explains the competition based on time and quality, effective and efficient performance, the creation of
value-added services, the vision of top management, strategic interface teams, organizational issues,
partnership technology, asset specificity, joint programs, global partnering and agreement on partner-
ship objectives and performance measures as the critical factors that contribute to the establishment of
successful supplier-customer relationships. This chapter ends up with discussing the impact of ICTs on
value creating networks.
Since establishing long-term and profitable relationships with customers can be possible by delivering
superior value and experience to the customers, the broad perspective of relationship marketing is not only
limited with the management of standard buyer and seller relationships but also includes management of
relationships with the parties that are involved in the value creation process. Internal marketing activities
play a critical role in creating an organizational climate that supports customer relationship management
strategies. Therefore managing relationships in internal markets is also important for the value creation.
Internal marketing activities include the creation of a customer oriented internal environment in order
to serve customers effectively. Chapter 5 starts with underlying the importance of creating relationship
marketing culture in internal markets and mentions about the role of internal markets in service profit
chain. It identifies the requirements for creating customer centric culture in organizations. Chapter 5
continues with explaining the significance of customer experience management in creating customer
satisfaction as well as customer retention. This chapter outlines the main motivations for enterprises to
improve customer service experience, explains the three “Ds” of customer experience that are critical
for improving customer experience, and identifies the reqirements for achieving excellence in customer
service experience. Creating customer keeping culture, getting 360 degree of customer insight, using big
data and predictive analysis, engaging customers through social media, and managing experience across
multi-channel are indicated as the requirements for achieving excellence in customer service experience.
This chapter ends up with discussing the characteristics of customer service in the digital era and key
business trends about the future of customer service.
Customer Relationship Management Strategies in the Digital Era provides background of relation-
ship marketing and CRM concepts for the audiences. Overall, Chapter 2, 3, 4, and 5 cover all important
issues related to the relationship marketing. On the other hand, the rest of the book outlines important
aspects of CRM. Understanding the fundamental ideas that underline the concept of CRM is important
to understand the role and function of CRM in the enterprises. Although, information technology fa-
cilitates the implementation of CRM strategies, most of the enterprises believe that implementing CRM
technologies makes them a customer-centric organization. They ignore the importance of organizational
culture, people and processes in the implementation of CRM strategies. Perceiving the CRM exclusively
as a technology or software application is among the common misunderstandings about the nature of
CRM. The technology is only a part of the whole picture of CRM. Therefore, CRM has to be considered
xiii
Preface
as a business strategy that allows the company to maximize profitability, revenue and customer satisfac-
tion by organizing around customer segments, encouraging the practices that satisfy its customers, and
implementing customer centric processes. Since CRM is a technology enabled strategy; in this book
CRM is explained from three different perspectives:
• Business philosophy,
• Business strategy,
• Technology.
Chapter 6 provides a framework for CRM in order to understand CRM concepts and ecosystem better.
Chapter 6 starts with giving definitions of CRM from different perspectives, defines the essential pillars
of CRM implementation, indicates what CRM is not, and explains the fundamental elements of success-
ful CRM implementations. A well-developed CRM implementation framework can help companies see
the big picture and develop successful CRM implementations. Creating CRM vision, developing CRM
strategies, designing customer experience, enabling organizational collaboration, redesigning processes,
creating customer information strategy, enabling CRM through technology, defining and monitoring
CRM metrics are identified as the fundamental elements of successful CRM implementations. After
indicating the benefits of CRM implementations, this chapter continues with analysing the architecture of
CRM ecosystem. Within the context of CRM ecosystem, Chapter 6 demonstrates the key functionalities
and the role of analytical, operational, and collaborative CRM in managing relationships.
Chapter 6 continues with discussing the functionalities of CRM technologies in understanding custom-
ers, customer targeting, customer acquisition and retention, and customer service and support. Customer
understanding CRM software applications (e.g., feedback management, customer data management, and
customer contact management) help the company collect feedback from customers, analysing and report-
ing on customer information, and maintaining up-to-date and accurate data about customers and their
interactions with a company. Since the main objective of CRM is to build profitable relationships with
customers, customer profitability management becomes a critical issue in the management of customer
relationships. In order to build right relationship with right customers and make right offers to them,
company needs to identify its target markets as well as its target customers. Analytical CRM tools enable
the company to identify its target customers through data mining, customer knowledge management,
customer profiling and segmentation, customer analysis, and enterprise marketing management. Analysis
of customer knowledge, customer profiling and segmenting, and targeting are essential for successful
execution of the campaign management. Campaign management software allows the company to use
customer-related data in order to develop, execute and evaluate targeted communications and offers.
Customer acquisition applications (e.g. sales force automation, opportunity management, lead manage-
ment, and sales pipeline management) can be used to support the lead management, selling and ordering
activities of the company. On the other hand, customer service and support technologies include appli-
cations that allow the company to deliver outstanding customer service and experience from anywhere,
anytime and on any device. Customer service automation software includes applications such as agent
assisted customer service, self-service, field service, multi-channel service, and social customer service
modules. Chapter 6 concludes that CRM as a business strategy utilizes information technologies with
the purpose of creating value for both company and customers and building and maintaining profitable
customer relationships.
xiv
Preface
The book continues with explaining CRM as a customer centric business strategy. CRM is funda-
mentally essential for the future of the company. CRM technologies enable the company to understand
customer behavior better, predict their future behavior, deliver customized customer experience, and
establish and maintain long-term customer relationships. However, Chapter 7 indicates that considering
the CRM only limited with the technology would be a fatal mistake for the company; because compa-
nies cannot deliver outstanding customer value, service and experiences only through investing in CRM
technologies. Strategic integration of CRM philosophy into company’s culture and operating processes is
required to deliver superior customer service and experience. This chapter points out that in the absence
of CRM strategy, companies fail to harvest the benefits of CRM and get satisfactory return on CRM in-
vestments. Chapter 7 also indicates that CRM is a strategy not a tactic and companies require to consider
CRM as an ongoing process of managing collaboration between the company and selected customers
for mutual value creation and sharing. This chapter identifies the facilitators of developing relationship
with customers and outlines the benefits of implementing customer centric CRM strategy. Chapter 7
continues with explaining the customer life cycle management and provides a holistic framework for
customer life cycle management. This chapter ends up with discussing the strategies to turn customers
into assets and create devoted customers.
The ultimate purpose of CRM strategy is to maintain customer retention and loyalty in order to
survive in competitive markets. However, in the absence of a well-developed, focused and successful
customer acquisition management, companies cannot achieve their ultimate purpose of customer retention
and development. Chapter 8 deals with the customer acquisition management strategies. This chapter
mentions about the critical stages in securing new customer acquisition and explains the phases of lead
management process. Since understanding the customer’s position at the buying cycle allows the com-
pany to develop effective lead management strategies, company should develop different interactions
and provide different offerings depending on the customer’s position at the buying cycle. Chapter 8
explains the sales approach based on the customer’s position at the buying cycle and indicates strategies
for different phases of lead management process. This chapter defines lead generation as the process of
creating sales opportunities that may come from various sources and activities such as advertisements,
social media, marketing campaigns, events, and customer referrals with the hope of converting them
into a sale for a company. Chapter 8 outlines the lead generation channels and explains lead nurturing
strategies. Lead nurturing can be used as lead management strategy to convert prospects into customers.
Without lead qualification and lead nurturing programs, it is not easy to convert prospective customers
into customers. Lead nurturing is the process of engaging with qualified prospective customers, regard-
less of their purchase timing, with the aim of earning their business when they are ready to buy. Within
the context of lead nurturing, this chapter mentions about drip marketing and trigger marketing, which
are the two main tactics for nurturing leads. Chapter 8 concludes with explaining automation of lead
management process.
Customers are the most important assets of a firm. Therefore, they should be valued and managed.
CRM focuses on using information about customers to create marketing strategies that develop and
maintain desirable customer relationships. Companies have been increasingly focusing on developing
long term profitable relationships in business, internal and consumer markets in order to enhance the
value that they deliver to their customers. The fundamental purpose of customer retention efforts is to
ensure maintaining relationships with value-adding customers by reducing their defection rate. Creating
xv
Preface
customer loyalty is essential for the survival of the company in highly competitive markets. Thus, this
chapter starts with indicating the significance of customer retention marketing strategies for the company
by revealing economics of retention marketing programs. Chapter 9 indicates that companies have to
focus on the most profitable customers; but they should also focus on attracting and retaining custom-
ers who will act as advocates for the company’s growth and encourage others to buy from the company.
Understanding customer needs and preferences, meeting and even exceeding customer expectations,
delivering high customer value, making customization, maintaining and measuring customer satisfaction,
and increasing quality of customer service are considered as significant to retain customers. Chapter 9
discusses the nature of commitment types. Finally, after discussing types of commitment, this chapter ends
with explaining the role of loyalty programs and win back strategies in maintaining customer retention.
Customer Relationship Management Strategies in the Digital Era provides readers insights on impor-
tance of CRM and customer centric marketing. It discusses the role of CRM from various perspectives
and provides detailed information about the role of information technologies in supporting CRM. The
book provides up-to-date valuable information to readers and helps businesses develop their CRM vision.
Managers who are responsible for developing CRM programmes and those who want to pursue profes-
sional career in marketing and sales are within the audience of this book. Especially, enterprises, which
want to acquire and retain customers, can benefit from the most recent strategies and technologies that
are presented in this book. They may become aware of CRM concepts and discover the tools which are
compatible for their businesses to acquire and retain customers. The book aims to present CRM strate-
gies that are compatible not only for corporates, but also for the small and medium sized enterprises.
The book also aims to serve graduate and undergraduate students who study CRM. Reading the book
enables graduate and undergraduate students to understand the theoretical and conceptual foundations
of CRM, the significance of being customer centric, and the value of building and maintaining long
term customer relationships. Moreover, they can become aware of the latest ICT tools that can be used
in establishing profitable relationships with customers as well as they can be informed about the op-
portunities and challenges provided by CRM applications.
Customer Relationship Management Strategies in the Digital Era is definitely a high-quality research
source for other researchers. It contains a comprehensive review of the relationship marketing and CRM
literature. Those who are working in the area of customer relationship management definitely enjoy the
book because the issues discussed in the book are practical and realistic. This book synthesizes material
from several sources, not just the academic oriented journals, but also from more practical sources, such
as recommendation from IT consulting firms or success stories from CRM vendors.
The book blends the literature from the marketing as well as information technology literature with the
purpose of handling the CRM at the strategic level. It aims to guide companies to achieving competitive
advantage through implementing relationship marketing practices and being customer centric. The book
also provides real-world mini cases in order to highlight the real world application of CRM. Briefly,
CRM is a business strategy that every small or large business must handle in some way. Successfully
implemented CRM strategies can deliver benefits for businesses. Reading this book helps the businesses
understand the philosophies behind the CRM, develop customer driven enterprises, and discover modern
strategies and tools to develop long term profitable relationships with customers.
Süphan Nasır
Istanbul University, Turkey
xvi
Preface
REFERENCES
Bennett, S. (2014). How social media is transforming customer relationship management (infographic).
Retrieved May 30, 2014, from http://www.mediabistro.com/alltwitter/social-media-crm_b57437
Columbus, L. (2013). What’s hot in CRM 2013: Strong interest in mobile for sales and service? Retrieved
May 15, 2014, from http://www.cloudcomputing-news.net/news/2013/jul/09/whats-hot-in-crm-2013-
strong-interest-in-mobile-for-sales-and-service/
Forbes. (2012). Gartner hype cycle for CRM sales, 2012: Sales turns to the cloud for quick relief. Re-
trieved May 12, 2014, from http://www.forbes.com/sites/louiscolumbus/2012/07/27/gartner-hype-cycle-
for-crm-sales-2012-sales-turns-to-the-cloud-for-quick-relief/
Forbes. (2013). 2013 CRM market share update: 40% of CRM systems sold are SaaS based. Retrieved
May 14, 2014, from http://www.forbes.com/sites/louiscolumbus/2013/04/26/2013-crm-market-share-
update-40-of-crm-systems-sold-are-saas-based/
Forrester. (2008). Answers to five frequently asked questions about CRM projects. Retrieved May 11,
2014, from https://www.forrester.com/Answers+To+Five+Frequently+Asked+Questions+About+CR
M+Projects/fulltext/-/E-RES46432
Gartner Inc. (2014). Gartner says customer relationship management software market grew 13.7 percent
in 2013. Retrieved May 14, 2014, from http://www.gartner.com/newsroom/id/2730317
Klingshirn, G. (2013). CRM statistics: The good, the bad, and the ugly (an infographic). Retrieved May
10, 2014, from http://blog.salesloft.com/crm-statistictics-forecast-infographic
Leung, S. (2013). 7 ways CRM can increase your sales [Infographic]. Retrieved May 11, 2014, from
http://blogs.salesforce.com/company/2013/03/accounting-crm-increase-sales-productivity.html
Nelson, A. (2014). The best CRM: New vs odd. Retrieved May 17, 2014, from http://blogs.salesforce.
com/company/2014/04/crm-infographic.html
Wesson, M. (2013). Marketing automation and your CRM: The dynamic duo. Retrieved May 10, 2014,
from http://www.pardot.com/infographic/marketing-automation-crm-infographic/
xvii
1
Chapter 1
Marketing Strategies in
Competitive Markets and
Challenging Times
ABSTRACT
The challenging times and competition pose a serious threat to the survival of enterprises. The main
objective of this chapter is to discuss the marketing strategies that help enterprises to continue their
financial health in challenging times such as during the period of recessions or in rapidly changing
competitive markets. A framework of strategies, which may enable enterprises to sustain and thrive their
profitability in challenging and competitive markets, is proposed based upon the strategies on which
the literature has reached a broad consensus. The proposed marketing strategies for challenging and
competitive markets include creating customer value, differentiation and innovation, finding alternative
ways to price cut, emphasizing brand value, maintaining marketing and advertising, focusing on targeted
marketing communication, reviewing and measuring marketing budget effectiveness, understanding
marketplace, developing strategies based upon customer insight, becoming customer-centered, focusing
on customer retention and loyalty, and re-evaluating and prioritizing customer segments.
INTRODUCTION nities and promotional offers to their advantage

(Nielsen, 2012).
Marketplace has been changing continually. Chal- Forrester report states that enterprises have
lenging times cause change-in customer purchase been entering a new era, which is called the age
behaviour and also shift in customer needs. The of the customer. Forrester report defines the age
change in markets and economic conditions affects of the customer as (Cooperstein, 2013, p. 3):
various customer segments differently. Nielsen
report indicated that in downturn times, customers A 20-year business cycle in which the most suc-
are becoming more value conscious, showing a cessful enterprises will reinvent themselves to
new norm of purchasing behavior, and they are systematically understand and serve increasingly
using channel proliferation, new media opportu- powerful customers.
DOI: 10.4018/978-1-4666-8231-3.ch001
Copyright © 2015, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.

Marketing Strategies in Competitive Markets and Challenging Times
Forrester report on competitive strategy in remain competitive. Thus, in the age of custom-
the age of the customer tries to explain the char- ers employees are critical for the performance
acteristics of this new era with Michael Porter’s of an enterprise. If they are not satisfied with
Five Forces. Figure 1 outlines the characteristics their jobs, they can leave and work for another
of the customer age. Forrester report indicates enterprise. While they are leaving the company,
that in the age of customer, customers have been they also carry knowledge, ideas and relation-
becoming more powerful. Barriers to entry are ships with them. Competition is much fiercer in
minimal in the customer age because outsourced the industry. In the age of customer, companies
manufacturing and digital connections make new have instant access to real-time information about
entry easier. Online reviews and internet access competitors’ pricing and policies from the web.
enable customers to get information about products This increases the competition, since companies
and prices and make comparisons easily. This in- can watch or react to each other’s move instantly
creases the bargaining power of customers in the (Cooperstein, 2013).
age of customers. Digital products are considered Changing market conditions require changing
as threat of substitutes. Digital products overtake approaches. As the pace of change increases, en-
physical offerings and digital substitution erases terprises have to understand purchasing behavior
profits across multiple industries. In the customer of customers and adopt more flexible new busi-
age, customers easily switch to the substitute ness models in order to respond to the shifting
products that offer them more value. Employ- customer needs. Success of an enterprise depends
ees play a critical role in bringing knowledge, on its ability to:
ideas, and relationships that companies need to
Figure 1. Characteristics of the age of customer

Source: Adapted from Cooperstein, D. M. (2013). Competitive strategy in the age of the customer. Forrester. Retrieved October,
10, 2013, from http://solutions.forrester.com/Global/FileLib/Reports/Competitive_Strategy_In_The_Age_Of_The_Customer
2

• Understand customer needs and wants, the suggested marketing strategies for challenging
• Deliver products that fulfil these needs and and competitive markets.
wants, Ultimately the purpose of this chapter is to
• Discover new insights about the dynamics outline marketing strategies that are necessary
of the marketplace and for the enterprises to survive in challenging times
• Capitalize on the opportunities presented and competitive markets. This chapter is not an
by the changing market. extensive review of the literature on marketing
strategies in challenging times, instead it outlines
Marketing academicians and practitioners have the strategies on which there is strong consensus
been studying the impact of recessions, challeng- in the literature. At the end a framework will be
ing times and competitive markets on business proposed for the challenging and competitive
performance and suggesting marketing strategies markets based upon the strategies on which the
to overcome the adversity. Table 1 represents a literature has reached a broad consensus.
review of these marketing strategies that are sug-
gested from the point of view of both academi-
cians and practitioners. As can be seen in Table CREATING SUPERIOR VALUE
1, becoming customer centered (Hollis, April
2008, May 2008; Quelch, 2008; Cravens, Piercy, In today’s markets the value concept and value
& Baldauf, 2009), researching customers (Quelch, adding to product offer seem to be one of the
2008; Kotler & Caslione, 2009; Scaringi, 2009) most current issues. Demanding customers, global
to identify customer value requirements (Cravens, competition and slow-growth economies lead
Piercy, & Baldauf, 2009; Piercy, Cravens, & Lane, many enterprises to look for new ways to achieve
2010), making segmentation analysis to prioritize competitive advantage. In the 21st century, creat-
customer segments (Hollis, April 2008, May ing customer value is seen as the major source for
2008; Cravens, Piercy, & Baldauf, 2009; Kotler & competitive advantage (Woodruff, 1997). In order
Caslione, 2009; Piercy, Cravens, & Lane, 2010); to survive in competitive and turbulent markets,
creating customer loyalty (Kotler & Caslione, enterprises have to deliver superior value to their
2009; Scaringi, 2009), finding alternatives to price customers.
cuts (Pearce II & Michael, 2006; Hollis, April Strong marketing assets can create competitive
2008, May 2008; Kotler & Caslione, 2009) such advantage and growth options for the enterprises.
as emphasizing core value of the brand (Hollis, New product development expertise, marketing
April 2008, May 2008), improving affordability knowledge, strong brand portfolio, loyal customer
(Quelch & Jocz, 2009), introducing innovative base and strategic partnerships can be considered
products (Pearce II & Michael, 2006; Quelch, as marketing assets of an enterprise. Doyle (2000)
2008; Quelch & Jocz, 2009; Piercy, Cravens, indicates that two-thirds of the market value of
& Lane, 2010) are among the strategies that are Britain’s largest companies lie in intangible assets
suggested by most of the studies. The importance such as marketing assets. Doyle (2000) identifies
of maintaining communication and advertising marketing knowledge, brands, customer loyalty,
(Pearce II & Michael, 2006; Hollis, April 2008, and strategic relationships as the four major mar-
May 2008; Scaringi, 2009) and reviewing the keting assets that contribute to the market value
effectiveness of communication budgets (Hollis, creation of an enterprise.
April 2008, May 2008; Quelch & Jocz, 2009; Offering of an enterprise will be successful if
Piercy, Cravens, & Lane, 2010) are also among it delivers value and satisfaction to its customers.
The findings of Nielsen’s 2011 Global Online
3

Table 1. Suggested marketing strategies for competitive and challenging markets
• Position the company in multiple markets and geographies

• Making strategic plans to confront declining sales
• Promoting the enterprise’s products and services
Pearce II and Michael (2006) list the strategies to • Maintaining advertising
prevent business failure in tough times • Introducing new products
• Finding alternatives to price cuts
• Attracting new customers
• Preparing for economic recovery
• Focus on competition
• Analyse company and brand health
• Anticipate competitors’ actions
• Concentrate on core brands and products
• Support core proposition and emphasize its value
Hollis (April 2008, May 2008) mentions about the • Don’t price promote
survival tactics in a downturn • Don’t cut quality
• Think internal branding and morale
• Focus on customers
• Review consumer segmentation
• Focus on communication
• Review communication budget allocation
• Research the customer
• Focus on family value
• Maintain marketing spending
Quelch (2008) points out eight factors for • Adjust product portfolio
marketing in recession • Support distributors
• Adjust pricing tactics
• Stress market share
• Emphasize core values
• Creating a market-oriented culture
• Developing effective market sensing
• Becoming customer centred
Cravens, Piercy, and Baldauf (2009) outline • Identifying the nature of fast changing markets such as new forms of competition
management framework guiding strategic thinking and business model
in rapidly changing markets • Creativity & innovation
• Identifying new market space
• Making segmentation analysis
• Identifying customer value requirements
• Secure your market share from core customer segments.
• Push aggressively for greater market share from competitors. .
• Invest more time and resources in customer research.
Kotler and Caslione (2009) emphasize eight
• Seek to increase—or at least maintain—your marketing budget.
strategies for mindful marketing in the age of
• Focus on all that’s safe.
turbulence
• Quickly drop programs that aren’t working.
• Don’t discount your best brands.
• Save the strong; lose the weak.
• Assess opportunities
• Allocate for the long term
Quelch and Jocz (2009) mention about the • Balance the communication budget
marketing strategies in a downturn • Streamline product portfolios
• Improve affordability
• Bolster trust
continued on following page
4

Table 1. Continued
• Keep existing clients loyal
• Be opportunistic
• Understand your audience
• Partnering
• Continue advertising
Scaringi (2009) points out 12 smart and cost
• Outsource
effective marketing strategies for surviving and
• Keep market share
thriving through a down economy
• Word of mouth
• Search engine optimization
• Web analytics
• Utilize E-newsletters
• Measure return on investment
• Overcoming behaviour lags
• Reinventing marketing strategy
• Innovating radically in product strategy
Piercy, Cravens, and Lane (2010) propose an action
• Re-thinking marketing communications
agenda for the challenges of economic recovery
• Prioritising market sensing
• Developing value-based competitive advantage
• Repairing and rebuilding value chain relationships
Survey show that while factors related to value and well as long-term relationships with customers.
price are important in determining where to shop Value is considered to be an important constituent
and what to buy, getting good value is much more of relationship marketing because the ability of a
important for the customers who try to balance company to provide superior value to its customers
their budget in a tough economy (Nielsen, 2011). is regarded as one of the most successful strategies
The customer chooses among different of- to achieve a sustainable competitive advantage
ferings by considering perceived value of these (Ravald & Grönroos, 1996). Since loyal customers
offerings. Kotler (2000, p. 6) defines perceived are the most important assets of the enterprises,
value as the ratio of benefits that the customer to achieve customer loyalty, enterprises have to
gets relative to costs that the customer bears when maintain customer satisfaction by adding more
making a purchase. The perceived cost includes value to their offerings.
all the costs that the customer confronts when Building an effective, differentiated customer
making a purchase: such as monetary costs, time value is also seen as the core requirement for build-
costs, energy costs and psychics costs. However, ing a successful brand. Differentiated customer
benefit of an offering includes functional and value provides many advantages to the brand.
emotional benefits. The customer gets benefits When a brand possesses such a differentiated
and assumes costs in order to get these benefits. advantage it should be able to charge premium
The main objective of relationship marketing is prices and increase its market share (Doyle, 2001).
to create customer retention and loyalty; because To increase the value of the offering, either the
an enterprise can gain competitive advantage by enterprise may provide more benefits or reduce
sustaining long-term relationships with its custom- the costs of the offering. Increasing the benefits
ers (Kandampully, 1997). Marketing in a relational of the offering means adding something that
context is seen as a process that should support the the customer perceives important, beneficial
value creation activities for customers in order to and unique value to the core product. Ravald
create loyal customer base and build profitable as and Grönroos (1996) discuss the value-adding
5

strategies and they indicate that expression “add during recession and grow faster once recovery
value” gives the impression that something has starts. During a market recession, improving
to be added such as an additional product feature, customer perceived quality of offering relative
a supporting service, etc. However, they argue to competitors also pays off in better profits
that it is also worth to examine how a company and growth (Roberts, 2003). Even in a turbulent
can increase the value of offering by reducing the economy, consumers around the world favor value
perceived cost of customer. Reducing the cost of over price when choosing where to shop. Accord-
the customer to purchase a product involves activi- ing to Nielsen’s 2011 Global Online Survey, 61
ties such as lowering the actual price, increasing percent of global respondents rated “good value”
the convenience of the purchase etc. (Ravald & over “low price” (58%) as the most influential
Grönroos, 1996). reason to shop at a particular retailer (Nielsen,
Quality, innovativeness, reliability of the mar- 2011). Given the recent economic realities, the
ket offering and the degree to which the market “value-conscious” shopper becomes more visible
offering can be customized to meet customer trend than ever before. Value and quality are the
needs are the factors that customers consider key attributes that today’s consumers seek and
while comparing the product and services (Hunt, this trend will continue.
Arnett, & Madhavaram, 2006). Doyle (2001) Enterprises have to follow value requirement
indicates that a customer value proposition of a trends of the customers in order to deliver unique
successful brand consists of three components: and superior value. Conducting market research
effective product, differentiation and added val- and gaining customer insight are essential dur-
ues. These three components help customers to ing a recession and competitive times because
build confidence in the functional or emotional customers’ needs and preferences are continu-
benefits of the brand. Therefore, building a suc- ously changing, and this has to lead enterprises
cessful brand starts with developing an effective to re-evaluate the perceptions of value (Quelch,
product or service. Developing an effective product 2008). Enterprises have to differentiate their brand
or service is important but in order to gain and from competitor brands; in order to differentiate
retain customers, enterprises need to differentiate their offer, they have to find something meaning-
their offerings. Besides differentiation of the offer, ful and different to add value to their brand and
adding values to the offer is also considered to be communicate this value to others consistently
crucial for the success of the brand. Doyle (2001) (Rigby, 2009).
lists the requirements of an effective customer
value proposition as follows:
MAINTAIN MARKETING
• The offer must provide important benefit to COMMUNICATION AND
customers, ADVERTISING
• The benefit must be unique and not offered
by competitors, Communication is one of the major contributors to
• The unique benefit advantage must be sus- build and sustain long term relationships. Finding
tainable and not easily imitated and out what company’s customers and prospects really
• The value of the offering must be effective- value and building the communication on it will
ly communicated to the market. help companies to retain existing customers and
also attract new customers. Through marketing
Enterprises that provide better value-for-money communication brands can retain their existing
than their competitors, are both more profitable customers by reminding them the value that the
6

brand provides. Companies have to offer better more important to the enterprise during a reces-
products and services and they have to also com- sion than at any other time. This study argues that
municate the real advantages of their offer in a marketing budgets are cut because of a short-term
clear and compelling way. focus by top management and the absence of a
It is important to maintain communication market orientation and enterprises who cut their
with customers and suppliers as well as employ- marketing expenditure are likely to risk future
ees. As Pearce II and Michael (2006) argue that sales and profits. Enterprises that spend more
employee issues are critically important in tough on marketing during a recession do particularly
times because employees are often overworked well, not only during the recession but also in
and threatened with job loss during the downturn the years following recession. O’Malley, Story,
economy. This uncertainty causes anxiety among and Sullivan (2011) demonstrate the relation-
them and they suffer from low morale. With the ship between recessionary advertising spend and
anxiety and low morale, they may not perform well business performance. Enterprises that increase
during their interaction with customers and this or even maintain advertising spend during reces-
may lead customer dissatisfaction and customer sions benefit from higher rates of sales growth,
loss. It is important to maintain communications profitability and market share than those that cut
with these employees to emphasize the company’s advertising spend. Moreover, enterprises that cut
strength as a going concern and the opportunities advertising face with sales and profits fall and
that a recession creates; because communication continue to lag behind firms that maintain adver-
with employees improves morale and credibility tising spend after the recession ends (O’Malley,
among employees (Pearce II & Michael, 2006). Story, & Sullivan, 2011).
Tough times and changing market conditions Marketing investment during a recession cre-
can severely affect the performance and survival ates opportunities to the enterprise and enterprise
of enterprises. Some enterprises view tough times gains competitive advantage in sales, market
as opportunity to strengthen their businesses. share and returns during recession (Kamber,
Therefore they try to establish their advantage 2002; Roberts, 2003). Roberts (2003) divides the
over the competitors by investing aggressively in 1,000 PIMS (Profit Impact of Market Strategy)
marketing activities, research and development businesses into those that cut, maintained and
and developing new products whereas some enter- increased marketing budgets during recession.
prises cut their marketing expenditures and wait for Roberts (2003) indicated that those enterprises
the recession to pass. In challenging times, most which increased their marketing expenditures
frequent response of enterprises to recession is were not significantly less profitable during the
retrenchment of marketing investments in order to recession than those, which only maintained their
survive until the economy recovers (Deleersnyder, marketing spending, or which cut it. Profitability
Dekimpe, Steenkamp, & Leeflang, 2009). Reduc- averaged 10% for those that cut their marketing
ing the marketing expenses such as advertising and spending, 9% for those maintaining their marketing
communication may give short-term relief to the spending, and 8% for those that increasing their
enterprise. However, in the long run enterprise marketing expenditure. However, profitability of
may have the risk of losing its customer base and marketing budget cutters fell when recovery began.
market share. On the other hand, enterprises that increased their
O’Malley, Story, and Sullivan (2011) use a marketing spending dramatically increased their
modified meta-analysis to evaluate marketing ex- profitability once recovery started. Furthermore,
penditures during recessions. The findings of this the findings of the study also indicate that enter-
study confirm that marketing can be significantly prises that increased their marketing expenditure
7

in recession, gained market share three times as seminar (IPA, 2008). In this seminar, Millward
fast as marketing budget cutters once recovery Brown presented evidence that there is a strong
began. During, the recovery the enterprises which link between market share and customer loyalty.
cut their marketing spending in the recession aver- According to him cutting marketing spending
aged a fall in profits of 0.8%. Enterprises which leads to decline in customer loyalty to the brand,
maintained their spending had an increase in profit and also decreases the market share. Brand image
of 0.6% during the recovery, but enterprises which and brand usage are the two essential elements in
increased their marketing spending in the recession creating customer loyalty and customer bonding
experienced an average increase in profit of 4.3% activities suffered considerably when brands cut
during the recovery (Roberts, 2003). their marketing communications spending for a
Srinivasan, Rangaswamy and Lilien (2005) period of six months or more (IPA, 2008).
conducted a survey with 154 senior marketing According to Binet (2009) cutting advertise-
executives and the result of the study reveals the ment expenditures puts the brand at risk and
fact that enterprises that have a strategic empha- depresses sales and market share of the brand.
sis on marketing, an entrepreneurial culture, and Binet (2009) indicates that without advertising
slack resources are proactive in their marketing support, a brand confronts difficulty in maintain-
activities during a recession. Moreover, enterprises ing distribution and it is difficult for the brand to
that have a proactive marketing activities in a resist the pressures to cut prices. Non-advertised
recession achieve superior business performance brands with low sales volume and low margins
even during the recession. often suffer declining profits. Financial markets
On the other hand, Tellis and Tellis (2009) know all these things and tend to punish enter-
provide a synthesis of the findings from the lit- prises that cut advertising (Doyle, 2000). Thus
erature of advertising in a recession. They identify marketing activities can be considered significant
ten primary empirical studies about the effects in determining the value of the brand.
of advertising in a recession. A review of these Cutting the brand communication during an
empirical studies suggests that there is strong economic downturn weakens the brand and makes
and consistent evidence that cutting advertising brand less profitable after recession. Business to
budgets during recession can hurt sales during and Business Media Study Final Report (2001) also
after the recession. Moreover, cutting advertis- shows that over 85% of executives believe adver-
ing during a recession does not increase profits. tising in a turbulent economy is very crucial and
Studies also indicate that not cutting advertising 86% of executives believe that when customers
during a recession can increase sales during and see a brand continues to advertise in tough times,
after the recession. Besides, enterprises that in- customers develop more positive feelings about the
crease advertising during a recession experienced brand and executives also believe that continuing
higher sales, market share, or earnings during or to give advertising keeps the brand top of mind
after the recession (Tellis & Tellis, 2009). Binet for purchase decisions (Yankelovich Partners &
(2009) mentions about the research findings that Harris Interactive, 2001).
support the fact that advertising has long-term Ehrenberg-Bass Institute for Marketing
effects on sales up to five years after the ads are Science (2008) reviews appropriate marketing
shown. So cutting advertising budget causes long- strategies during a recession. It points out that
term damage to enterprises. a recession may provide opportunities for enter-
Institute of Practitioners in Advertising (IPA) prises to increase their share of voice. Reduced
presented evidences that it was worth to maintain marketing activity of competitors during the
advertising during recession in the 2008 UK recession period allows a brand to increase its
8

share of voice by simply keeping its marketing help enterprises to perform better and carry them
expenditure. Decrease in media revenue in down- through the economic downturn and competi-
turn economy can provide opportunity for the tion. According to Maser (2008), an essential but
enterprises to make their brand communication sometimes ignored marketing ability is to “fish
without making high media expenditure. Binet where the fish are.” This means that investing
(2009) argues that the combination of low media in specific and targeted media is very crucial to
prices and weak competition gives companies a get more out of marketing investments. Use of
unique opportunity to buy market share on the creative and targeted media alternatives may help
cheap. Moreover, as the media prices tend to fall enterprises in down economies and as well as in
and the ROI from advertising often increases in competitive markets. Instead of cutting advertis-
a recession (Binet, 2009). ing enterprises may try to maintain frequency by
Ultimately, tough times offer some opportu- cutting length of advertisements and also target
nities for proactive enterprises to improve their their advertising more effectively.
competitive advantage through considered and Enterprises have to measure effectiveness of
carefully tailored marketing efforts (O’Malley, their marketing activities and find out what works
Story, & Sullivan, 2011). Enterprises have to and what doesn’t and they have to spend on the
consider to use more cost efficient marketing marketing activities that will generate more return
communication tools (such as stimulating word on investment. It is important for the enterprises
of mouth communication among consumers and to develop a comprehensive marketing activity
using online media channels) rather than reduc- plan, this will facilitate making projections, mea-
ing their marketing budget, this may help them surement and evaluation of marketing activities
to maintain relationship with their customers because without a plan it is difficult to be success-
and to cultivate a stronger relationship in the ful. Lake (2013) suggests that in each marketing
long run. Enterprises have to re-allocate some of activity an enterprise must develop a plan and
their marketing budgets to measurable programs strategy that cover quantitative and qualitative
in competitive markets and downturn economy. goals, campaign budget, fulfilment and response
Integration of online media to marketing strategy strategy, follow-up strategy, and also tracking and
and a consistent online presence where the cus- testing criteria for the campaign. Depending on
tomers and prospects are looking for information marketing campaign objective, goals have to be
such as websites, directories, search engines and measured effectively by using cost per sale, cost
e-newsletters will help enterprises stay visible per qualified lead, and cost per visitor (Lake,
as well as provide measurable lead generation 2013). Measuring the marketing activities will
benefits through online contact (Maser, 2008). give enterprises the feedback that they need for
Digital advertising can be also considered future campaigns as well as they will find out
among the cost efficient marketing tools. Digital what works and what doesn’t about the campaigns.
advertising is targeted and relatively cheap, and its There are many reasons for unsuccessful marketing
efficiency can be easily measured. Digital adver- campaigns, by measuring the marketing activities
tising spending has been growing very rapidly as an enterprise may determine the reasons that cause
a result of consumers’ migration to social media. failure and this contributes to the success of future
During the recession, marketers spent 14% more marketing activities.
on online advertising over the first three quarters Binet (2009) points out the optimum market-
of 2008 than they did over the same time period in ing strategies for dealing with the downturn and
the previous year (Quelch & Jocz, 2009). Maser argues that enterprises have to cut the right costs.
(2008) also indicates that getting targeted will He mentions that some cost-cutting strategies
9

are more helpful than others. Enterprises that profitable and meet sales and profit objectives
cut manufacturing and administrative costs and (Kleinschmidt & Cooper, 1991). Challenging
spare capacity tend to perform well; however, times lead enterprises to reduce costs and most
enterprises that reduce their product quality or of the enterprises cut Research &Development
cut budgets for marketing and new product de- (R&D) budgets to cope with tough economy.
velopment tend to underperform (Binet, 2009). In fact, maintaining or increasing investment
Enterprises especially do not consider to cut costs in R&D during a downturn has a very positive
that are associated with product quality because effect on market share during the downturn and
customers do not like this and their sales may even in the recovery. Roberts (2003) indicates
drop dramatically. that R&D expenditures are particularly good
PIMS research findings also show that invest- costs during recession because successful new
ing in marketing, innovation and customer quality product introductions during recession are crucial
in a recession are the critical success factors dur- for profitability and growth during the recovery.
ing and after the downturn. Roberts (2003), based Enterprises that increase and improve R&D and
on the PIMS Database of business performance, new product introductions achieve higher growth
points the strategies to maintain profitability and in performance than firms that cut such spending
achieve sustainable growth during recovery. The (Roberts, 2003).
PIMS study investigates “good costs”, “bad costs” Some enterprises may emerge from a reces-
and “it depends costs” during a market recession. sion stronger and more highly valued that they
Good costs are associated with the expenditures were before the recession. Dobbs, Karakolev, and
that should be intensified during recession and Tomas (2002) studied nearly 1,000 US industrial
expenditures about marketing, quality and new companies over an 18 year period from 1982
products/services can be considered as good to1999, including the US recession of 1990 to
costs. On the other hand, bad costs are those that 91. This study identified companies that either
need to be decreased during downturn economy remained industry leaders (those that stayed in the
and high manufacturing and administration costs top quartile of performance in their industries) or
can be considered among the bad costs. Strategic became successful challengers (those that moved
position of an enterprise in the time of recession
determines what actions should be taken to decide
which costs to be decreased. Table 2 lists the losing Table 2. Losing and winning recession strategies
and winning recession strategies. As can be seen
Cost Area Winning Strategy
in Table 2, marketing, research & development
Marketing Increase
and new product costs are worth to increase. The
PIMS analysis proves that while maintaining or Research & Development Increase
cutting fixed costs is desirable, the opposite is New products Increase
true for new product development and research Product pricing Maintain –relative to market
average
and development (R&D).
Customer preference Improve –relative to market
average
Admin Cut
DIFFERENTIATE AND INNOVATE
Fixed assets Maintain/cut
Working capital Maintain/cut
Innovation is increasingly seen as a significant
Source: IPA (2008). Advertising in a downturn report. A
factor for the success of a business’s performance. Report of key findings from 2008 UK IPA seminar. Retrieved
Innovative products tend to be more successful, October, 12, 2013, from www.ipa.co.uk
10

up into the top quartile). The findings of this study which had increased their R&D spending in the
showed that successful industrial leaders seeked recession experienced an average increase in profit
to extend their position through innovation, more of 2.8% during the recovery (Roberts, 2003).
than doubled their already higher-than-average Business to Business Media Study Final Report
level of spending on R&D during the recession (2001) indicates that 97% of executives believe that
relative to their former peers. The financial markets even in tough times, it’s important to continue to
rewarded these enterprises during the downturn. invest in order to stay competitive in the long run
By the end of the 1990–91 recession, successful and 99% of executives agree that it’s important
challengers had market-to-book ratios that were to introduce new products and services for their
25 percent higher than those of the unsuccessful long term success. Therefore they keep invest-
challengers and successful leaders increased their ing in R&D and new product development in a
market-to-book advantage over their former peers down economy (Yankelovich Partners & Harris
by more than 38 percent (Dobbs, Karakolev, & Interactive, 2001).
Tomas, 2002). Hollis (April, 2008) also argues that a new
In tough times, enterprises need to continue to product launch may actually create greater impact
innovate and invest in R&D; because enterprises during a recession than at any other times. If an
get a greater percentage of sales from new products enterprise has unique and better products than
and they perform better once the recovery begins the competitors have, this enterprise may able to
(Roberts, 2003). Successful new product introduc- charge premium prices for its products and even
tions during a recession are vital for recovering price conscious shoppers may be willing to buy
quickly after the downturn ends. Most consumers these unique products at a high price. Colvin
are ready to try new products once the economy (2009) believes that product differentiation greatly
improves. Therefore, even during a recession, new influences a brand’s pricing power. According to
product introductions have a significant impact Colvin, if a brand makes its products or services
on profitability. Quelch and Jocz (2009) men- more outstanding than its competitors by value
tion that new product activity slows in recessions adding benefits that no competing product has,
overall and enterprises that invest in and launch then the brand will able to charge premium price.
new products can economically gain visibility. Henard and Szymanski (2001) conduct a
Many customers often appreciate, get interested meta-analysis of the new product performance
in novelty and welcome new products that offer literature in order to identify the determinants
compelling value compared to the alternatives that have an impact on new product performance
(Quelch & Jocz, 2009). and success. The findings of this study reveal
Roberts (2003) indicates that those enterprises that product advantage (superiority and/or dif-
which increased their R&D and new product ferentiation of the offering over competitors’
development spending are not significantly less offerings), market potential (expected growth in
profitable during the recession compare to the the demand), meeting customer needs, predevel-
R&D expenditure cutters. Profitability averaged opment task proficiencies (ability of the firm to
10% for R&D spending cutters, 9% for those main- execute pre-launch new product activities such as
taining it and increasing it. However, during the idea generation, idea screening, market research,
recovery enterprises which cut their R&D and new and financial analysis), and dedicated resources
product development spending in the recession had (access to R&D and human resources to initiate
an increase in profits of 0.6%. Enterprises which the new product development) have the most
maintained their R&D spending had an increase significant impact on new product performance
in profit of 0.8% during the recovery, but those (Henard & Szymanski, 2001).
11

O’Cass and Ngo (2007) state the relative im- that they have switched to another company be-
portance of innovative culture in affecting brand cause of poor customer experience. More interest-
performance. They argue that building a successful ingly, enterprises underestimate the opportunity
brand depends on the brand’s ability of deliver- of delivering great customer experience. 44%
ing unique and innovative value to customers. of enterprises believe that customers are will-
Enterprises must develop business processes that ing to pay premium price for great experience;
are open to generate promising innovative ideas. however, 86% of customers say they are willing
Innovation, R&D and new product development to pay more for outstanding customer experience
are vital for the success and sustainable prosper- (Oracle, 2013).
ity of the enterprise. Therefore, even in difficult
economic times and highly competitive markets,
an enterprise must highlight the value that makes FIND ALTERNATIVE TO PRICE CUT
the product appealing and differentiated in the
eyes of its customers. Price promotions and price cuts can be seen a
In today’s competitive markets, customers have strategy to cope with downturn and high competi-
lots of choices and as the result of globalization, tion. However, enterprises have to avoid promo-
competition and internet technologies power has tions that are just based on price cuts because
shifted from companies to customers. SAS In- price promotions and cuts are likely to damage
stitute Inc. and Peppers & Rogers Group (2009) not only profits but also brand values in the long
indicate that the power shift makes it difficult term (Ehrenberg-Bass Institute for Marketing
for enterprises to sustain differentiation based Science, 2008). Brand values that are damaged
only on price or product. Since, customers are in tough times will be hard to restore when the
increasingly making comparative shopping and economy recovers (Consterdine, 2009). Binet
the unique product differentiation of a brand can (2009) indicates that trade promotions may help
be quickly copied by competitors; pure reliance retailers to generate extra sales in the short term
on product differentiation undermines long-term and the net effect of trade promotions on profits
customer loyalty of the brand. Customers can also is often negative. Therefore, heavy reliance on
easily make price comparisons through shopping promotions may tend to erode brand values and
bot to find the best price. Under these conditions, destroy profit margins.
customer service and customer’s experience with Cutting prices is not an effective strategy unless
the brand are becoming the new differentiator. enterprises find a way to cut costs. Hollis (May
Differentiation through outstanding customer 2008) argues that if a brand offers a compelling
service and experience is more important than low rational or emotional advantage over the competi-
prices; because according the Harris Interactive tors, customers who are compelled to switch to
(2007) Customer Experience Impact Report, 80% cheaper brands during the recession are likely to
of customers quit the company after a negative buy the brand again when the recession is over. But
experience, and that is up from %68 in 2006. Most once a price premium advantage of the brand is
of the enterprises underestimate the significance lost, it is difficult to regain those switchers (Hollis,
of the customer experience on customer retention May 2008). Therefore, premium-brands should not
and profitability. According to the Oracle (2013) move their brands down-market by cutting prices
report 49% of enterprises believe that customers or making price promotions, they can introduce
switch to another company due to poor customer a fighter brand that is a lower-priced version of
experience; however 89% of customers indicate the premium offering sold under a different brand
12

name with minimal advertising effort (Quelch & average as the winning strategy in the recession
Jocz, 2009). Kotler and Caslione (2009) claim that (IPA, 2008). Price promotions weaken the brand
when an enterprise discounts its premium brands, and with price promotions a brand only achieves
this gives the market two messages: enterprise’s short term gains; because, price effects fade
prices were too high before and secondly its brands quickly (Rigby, 2009).
won’t be worth premium price when the economy Price promotions encourage customers to con-
in a downturn. It is much more meaningful to create sider the price cut as normal and this makes very
a distinct and affordable product or service under difficult to return prices to normal levels when
a new brand name with lower prices. the economy recovers. Frequent price promotions
Cutting prices may also give the impression train customers to expect lower prices and to buy
that the brand is in trouble. Moreover, customers only on deal. Enterprises must carefully analyze
often perceive the price as a signal of quality. By customers’ perceptions of normal price levels
cutting prices, a brand may weaken perceptions of because excessive promotions lead customers to
quality. Instead of making price cutting, enterprises revise their expectations about prices downward
can develop alternatives that fit more in with the and this can threaten profitability in the recovery
customers’ budget. Enterprises may improve the period because customers’ resist increases as
affordability of their offerings. Quelch and Jocz prices return to normal level (Quelch & Jocz,
(2009) indicate that enterprises can improve af- 2009). Even for non-premium products it is esti-
fordability by reducing the thresholds for quantity mated that once discounting has started it takes
discounts, extending credit to their customers, three to five years to get consumers to pay the full
reducing item or serving sizes, and then pricing price again (Gapper 2009).
them accordingly and these strategies can be used Successful brands have the ability to charge a
as alternative to price cuts. Depending on whether premium price; however price promotions may
customers are seeking the lowest absolute price destroy this ability. Instead of making price re-
or the more value, enterprises can unbundle their ductions, enterprises may provide more value to
offerings and then price their offers accordingly customers and this will help brand in the long-run.
or fold more services into the bundle (Quelch & As it is indicated in Box 1, enterprises have to find
Jocz, 2009). For example instead of cutting the out what customers and prospective customers
full-day spa package, enterprises may offer a really value and have to build their strategies on
three-hour version at half the price or may give a it. Therefore, branding and customer insight are
complimentary drink and fruit basket. two important factors that will help enterprises to
Customers in particular are looking for the best gain competitive advantage in competitive markets
deals while shopping. By knowing this fact, all and though times.
businesses are increasingly competing on price.
However, the result of price promotions causes
loss of profit margin, and loss of profit margins BRAND VALUE
affects not only the enterprise itself but also the
entire industry. Extreme price deals can also Colvin (2009) indicates that brands that attempt to
cause destructive price wars and competition in cut their prices in order to increase their revenue
the industry. If one enterprise starts to reduce its may only get a short-term increase in sales, but for
price or begins price promotions, its competitors the long-term their brand value will be eroded in the
will react by reducing prices. The PIMS analysis eyes of customers. Colvin (2009) uses the purchas-
suggested maintaining price relative to market ing power matrix to reveal that brands, which are
13

Box 1. Mercedes Taiwan Case: Using brand charm to avoid price wars
The case from Ogilvy and Mather Taiwan (2009) shows that using brand charm can be more powerful than joining price wars. As the
global financial crisis struck automobile industry in 2008, the market became chaotic and unpredictable. In order to attract customers,
almost all automobile brands began to offer price promotions. They frequently offered free packages and/or regularly lowered their
prices. Even Volvo, which is considered among the luxury brands, directly cut its prices by 30%. However, instead of joining the price
war, Mercedes Taiwan decided to offer a number of flexible payment plans and a lucky draw event as sales promotion. Sales promotion
campaign was developed by Ogilvy & Mather Taiwan. The objective of this campaign was to propose a unique claim to distinguish
Mercedes’ sales promotion campaign from the bloody price wars and to make customers feel that this is the best time to own Mercedes.
As a result of market research, they discovered two significant customer insights about luxury car buyers. First, luxury car buyers were
confused to remember the different offerings in the sales promotion advertisements, since for them the real negotiation points of offers
were seen in dealerships rather than in advertisements. Second, luxury car buyer segment hesitated to buy brands which made big sales
promotion offers in advertisements because this made them view the brands as cheap and value declining. Therefore, based on these two
important customer insights they developed their sales promotion campaign strategy. First, they did not need to communicate the content
of the sales promotion program in the advertisements; they simply let consumers to know that this was the best time to buy a Mercedes.
Second, they had to stir their passion to own a new Mercedes and provide them a good reason in this recession. Instead of joining price
war, Mercedes Taiwan used the strongest emotional weapon in the luxury car segment which was “brand” in order to leverage it to
distinguish and empower their sales promotion campaign. “The closest you can come to the Star” was the key claim and with this claim
they emphasized that this was a rare chance to get the best offerings from Mercedes and urged consumers to visit a showroom to learn
more about their various payment options. The results of the campaign was very interesting. As the total automobile market shrank by
41% and the luxury segment by 28%, Mercedes was the only luxury brand that increased its market share during this difficult period
(from 26% in 2007 to 28% in 2008), while it still maintained the highest selling price among its competitors. Marketing director of
Mercedes Benz Taiwan, evaluated the results of this SP campaign and stated that, “the campaign cleverly removed Mercedes from a
bloody competition, allowing Mercedes to stand out and win both in terms of business and branding. Moreover, it is proved that branding
is a crucial and worthy investment, even in a recession.”
Source: Ogilvy & Mather Taiwan (2009). We sell in recession or else. Retrieved December 02, 2013 from https://assets.ogilvy.com/
truffles_email/wesellorelse/Ogilvy_Mercedes.pdf
perceived as unique and as well as necessary, are effectiveness, reliable quality and empathy.
currently in the best position to charge premium Therefore, an enterprise has to give reasons why
price. In this study, brands that are considered to customers have to use its brand. Binet and Field
be both commodities and discretionary are not in (2009) claim that advertising campaigns that aim
the position to charge high price. However, brands to reduce price sensitivity are more effective and
that are considered as either “unique and discre- they are more likely to lead to big increases in
tionary” or “commodities and necessary” are in profits than campaigns that aim to increase sales
the position of grey areas that must be analyzed or market share. Binet and Field (2009) argue that
further (Colvin, 2009). Therefore, brands have to emotional focused advertising campaigns tend to
focus on creating a unique value that meets the be more profitable than advertising campaigns
customers’ needs. Enterprises can gain competi- that give rational messages such as low prices or
tive advantage at the marketplace by providing promotional offers. Therefore the key to creating
more value to their customers (Hunt & Morgan, a profitable and strong brand is possible by main-
1995) and creating a unique and necessary value taining a strong emotional bond with customers.
to customers, this may enable the brand to com- The stronger the relationship between brand and
mand the price. its customers, the more likely customers keep us-
In turbulent times, customers prefer to do ing the brand. Strong brands enjoy the advantage
business with brands they know and can rely of customer loyalty and they have the ability to
on because of this reason it is important for the attract repeat purchase and recoup their market-
brands to communicate the real value that they ing investments. Communication and superior
offer to their customers with a relevant and com- product experience are the important contributors
pelling message. Customers are likely to prefer of building and sustaining the brand relationship.
the brands that are communicating the brands’
14

CUSTOMER INSIGHT information, an enterprise can make its decisions,

determine the implications of information and
Change which has become the norm in contempo- take actions to deliver superior value to custom-
rary markets and understanding customers’ chang- ers (Cravens, Piercy, & Baldauf, 2009). Market-
ing habits, needs, wants, and value requirements, oriented enterprises track and respond customer
will enable firms to improve their strategies so needs and preferences in order to create value for
that they can survive in competitive and turbulent their customers. There is a positive relationship
markets. In order to create superior value for the between market orientation and organisational
consumers, enterprises need to know about con- performance and market orientation enables an
sumers’ needs, wants, expectations and how they enterprise to outperform competitors who are less
define value. Customer insight helps enterprises market-oriented (Kohli & Jaworski, 1990; Narver
to deliver value-based products and services. & Slater, 1990; Baker & Sinkula, 1999).
Developing a management framework is in- Cravens, Piercy, and Baldauf (2009) propose a
creasingly critical in coping with the competitive framework for turbulent and fast changing markets.
and rapidly changing markets. An enterprise has to As can be seen in Figure 2, the proposed conceptual
gather information about customers, competitors, framework consists of four inter-related stages. In
and markets; and has to distribute the acquired first stage, they propose that an enterprise has to
information all across the enterprise. Based on this develop three market-based strategic capabilities:
Figure 2. Management framework in rapidly changing markets

Source: Cravens, D. W., Piercy, N. F., & Baldauf, A. (2009). Management framework guiding strategic thinking in rapidly
changing markets. Journal of Marketing Management, 25(1-2), p. 33.
15

(1) market-oriented culture, (2) effective market has been much more important for enterprises to
sensing and (3) customer centered focus in order gather information about customers with the hope
to provide superior customer value. These three that using this information to predict customers’
market-based capabilities are used to determine purchase behaviour. Leveraged information about
the nature of market changes and to identify new a customer’s purchase behaviour could also help
opportunities, markets, and competitive space. At an enterprise in its cross-selling activities (Iy-
the second stage, the nature of market changes engar, Ansari, & Gupta, 2003). Enterprises that
and their impact on customer value requirements have leverage information about the customer can
must be identified. In the later stage an enterprise satisfy their customer and create customer loyalty.
has to determine if new market opportunities have
emerged, apply strategic segmentation analysis,
and examine the emerging customer value require- FOCUS ON EXISTING CUSTOMER
ments. Lastly, market-focused strategies must BASE AND CUSTOMER RETENTION
be developed for the relevant markets (Cravens,
Piercy, & Baldauf, 2009). It is even much more difficult to acquire new cus-
In the new economy, new customer segments tomers in rapidly changing markets and downturn
are emerging and enterprises need to understand times. Kotler and Caslione (2009) emphasize that
the new customer segments. Typical demographic turbulence is not a good time for venturing into
segmentation is no longer relevant and enough to new customer segments. In challenging times and
explain consumer behavior, enterprises have to competitive markets, it’s more important than
take into consideration lifestyle and psychological ever to see loyal customers as the primary and
segmentation in order to understand and predict enduring source of cash flow and organic growth
consumer buying behavior. (Quelch &Jocz, 2009). According to Kotler and
Quelch and Jocz (2009) argue that customers Caslione (2009) acquiring market share from core
do not stop spending during economic downturn, customer segments has to be the first priority of an
they just look for better deals and spend their enterprise and enterprises must prevent their core
money more carefully; therefore opportunities source of revenue from the attacks of their competi-
may arise from the change in consumer behavior. tors. Therefore, it is important to retain loyal and
Enterprises need to adapt their strategies in order profitable customers that are at the hand because
to meet consumers’ needs and preferences. Effec- keeping existing customers loyal is a cost effective
tive market research is essential during a recession marketing strategy for surviving and thriving in
because customers’ needs and preferences are competitive markets (Reichheld & Teal, 1996).
subject to dramatic changes, which lead them to Loyal customers can encourage positive word of
re-evaluate perceptions of value. It is important to mouth and help enterprise to attract new customers
know how customers are making their purchasing at a no cost. Moreover, getting additional value
decision, reassessing their priorities, redefining from existing customers is less expensive than
value, allocating budgets, and switching among developing business for prospect customers. It is
brands and product categories. Therefore it is es- critical to keep the customers that the enterprise
sential to investing in customer insight (Quelch has by building loyalty through excellent products,
& Jocz, 2009). services and customer experience.
Customer insight is very critical. Enterprises Remarketing to existing and past customers and
need to understand the evolving consumption asking referrals from them help enterprise to grow
patterns and modify their strategies according their business (Lake, 2013). Lake (2011) argues
to emerging opportunities. In recent times, it that with reactivation and remarketing, enterprises
16

can increase their sales by 50% without increasing more important than selling to large number of
their marketing budget. Enterprises have to spend customers. Enterprises need to identify the cus-
much more time and effort to maintain and grow tomer groups which they can better serve than
the relationships with their current customer base the competitors, and modify product offerings,
in order to get business growth and profitability. prices, distribution, promotional efforts and ser-
This is a strategy that will increase enterprises’ vices according to the needs of these segments.
sales by 50% without increasing their budget. However, enterprises have to be sure that their
Acquiring new customers is more costly than marketing activities are focused correctly on
retaining and reactivating them. Therefore, it is their most valuable and loyal customers because
meaningful to retain and maintain existing rela- not all customers are profitable to serve. Some
tionships instead of spending time, money and customers are too costly to do business and have
effort for looking new customers because repeat no potential to become profitable. Therefore in
customers spend 33% more than new customers, challenging times, enterprises may re-evaluate
referrals among repeat customers are 107% greater their target markets based on their profitability
than non-customers, and it costs six times more and after re-evaluating target markets, enterprises
to sell something to a prospect than to sell that have to focus much more on profitable customers
same thing to an existing customer (Lake, 2011). and make investment to them in order to deepen
Delivering superior value to customers is an their loyalty. At the same time, enterprises have to
essential requirement of market- oriented com- discontinue to serve customers that are no longer
panies. To create excellent customer experience profitable. Enterprises have limited resources
and develop long term relationship with custom- to devote to marketing; however, through target
ers, enterprises need a deep understanding of marketing an enterprise can still expect satisfac-
customers’ value requirements. Enterprises can tory returns. By concentrating efforts on one or a
build and develop customer relationships by few profitable market segments, an enterprise can
showing customers that they really care about gain the most from small investments.
them. It’s also important to satisfy customers with Enterprises also need to consider their inactive
the right products and services by making them customers. There are many reasons for a customer
available at the right time and location. However, to leave the brand such as high or unfair pricing,
customer value requirements have been altering unresolved complaint, attractive competitors’ offer
due to changes in the market. Cravens, Piercy, and etc. Enterprises have to learn the reasons for the
Baldauf (2009) indicate that enterprises have to do customer churn and develop win back strategies to
strategic segmentation analysis in order to identify reactivate inactive customers. Enterprises can care
opportunities and changing value requirements and about them and reactivate them by special offers.
then offer new value to markets and segments that Focusing on inactive and ex-customers makes
are not being served. Market segmentation is also sense because once upon a time those customers
essential in identifying the customers who offer have developed a relationship with the brand.
the most promising value and cost opportunities A referral program should be included in
to an enterprise. By making market segmentation marketing activities of an enterprise. Referrals
analysis enterprises identify and focus resources are the most effective form of marketing that
on high-value customers (Cravens, Piercy, & enterprises can use them for acquisition of new
Baldauf, 2009). customers and they are also not expensive. Ac-
In order to grow their businesses successfully, cording to Lake (2012), referrals have more impact
enterprises need to attract and retain profitable on customers’ purchase decision than any other
customers. Selling to profitable customers is marketing strategies and advertisement. Most
17

people rely on their friends’ and families’ advices keting framework (see Figure 3) can be proposed
because of that reason enterprises can grow their for the challenging and competitive markets. In
business through referrals. Enterprises can ask today’s competitive environment an enterprise’s
referrals from their existing customers (Lake, competitive advantage derives from its ability to
2013) and they have to develop a referral program sustain long-term relationships with customers and
that rewards current customers for sending them create customer loyalty (Kandampully, 1997). It
new customers. Effective referral program should is important to note the 80/20 rule, 80% of busi-
make it worth their customers time, be creative, ness come from 20% of customers. Therefore
be generous, and be reliable; and also make sure enterprises have to focus much more on current
what the referral program offers has value to customers in order to maintain customer retention
customers (Lake, 2012). Customer retention is and loyalty in challenging and competitive mar-
not only a cost effective and profitable strategy, kets. Customer satisfaction is supposed to be one
but in today’s competitive markets it’s necessary. of the most important requirement for customer
loyalty because a satisfied customer is not sup-
posed to defect but to stay loyal to the company
TOWARDS A MARKETING for a long period of time (Heskett & Schlesinger,
FRAMEWORK FOR CHALLENGING 1994). A highly satisfied customer is expected to
AND COMPETITIVE MARKETS stay loyal longer and tend to buy more, buy more
as the firm introduces new products, talk favorably
Based upon the strategies on which the literature about the firm, show less sensitivity to price, pay
has reached a broad consensus, the following mar- less attention to competing firms, and cost less
Figure 3. Marketing strategies in challenging markets
18

expensive to serve than new ones (Kotler, 2000, of their marketing activities and have to spend on
p.48). Therefore, the most important mission of the marketing activities that will generate more
an enterprise is to maintain customer retention return on investment.
through becoming customer centered and creating
superior value for customers since loyal customers
are the most important assets of an enterprise. CONCLUSION
Creating superior customer value is possible
by understanding what customers really want. It is The realities of today’s turbulent world also
apparent that successful marketing strategies will change the market structure. Enterprises should
depend on deep understanding of the priorities and pay attention to the changing value requirements
buying behavior of the customers. Enterprises have of new markets and focus on the changing cus-
to understand both marketplace and customers tomer buying patterns. It is now more important
in order to develop their strategies. By analyz- to know how customers are redefining value and
ing the customer information, the enterprise can changing their buying preferences and behaviors.
re-evaluate and prioritize customer segments to Enterprises have to continuously follow trends,
identify its most valuable customers. Therefore opportunities and threats in the markets. All the
in challenging times, to increase the efficiency of strategies should be directed toward satisfying
marketing activities, an enterprise may re-evaluate customer needs and enterprises should determine
its target markets based on their profitability and the needs of their customers through market
after re-evaluating target markets, enterprise research. Market research provides timely and
may focus much more on profitable customers relevant market information for enterprises to
and make investment to them in order to deepen develop effective strategies.
their loyalty. Moreover, instead of making price The challenging times and intense competition
promotions and cutting prices, enterprises can threaten the survival of enterprises. Some enter-
add value to their offerings. Emphasizing core prises recognize challenging times as opportunity
value of the brand, improving affordability, and to strengthen their businesses. Instead of cutting
introducing innovative products can be considered marketing activities, they prefer to invest aggres-
among the alternatives to price cuts. sively in marketing activities to gain competitive
Communication constantly and consistently is advantage over their competitors. Marketing is
also important to establish long term relationships often considered as an expense that can be cut
with customers. By maintaining advertising and during the challenging times. However, literature
communication, enterprises can inform customers review supports the fact that marketing has to be
about the value of their brands. Enterprises have considered as an investment in customers and
to consider to use more cost efficient, targeted business. Enterprises that increase their marketing
and tailored marketing communication tools spending perform substantially better than those
rather than reducing their marketing budget, this that cut or maintain their marketing spending in
may help them to maintain relationship with their demanding times. Enterprises that cut marketing
customers in the long run. Targeted communica- activities may hold their profit during the recession
tion will help enterprises to perform efficiently but could lose out during the recovery. However,
in economic downturn and competition. Investing enterprises that continue to their marketing activi-
in targeted marketing communications is very ties increase both market share and profit more
crucial to get more out of marketing investments. than the others during the recovery period.
Enterprises have to also measure the effectiveness
19

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23

access enable customers to get information about benefits of the offering can be possible by adding
products and prices and make comparisons easily. something that the customer perceives important,
This increases the bargaining power of customers. beneficial and unique value to the core product.
They can easily switch to the substitute products Marketing Strategies in Challenging Mar-
that offer them more value. kets: Understanding priorities and buying behav-
Customer Insight: Companies can create ior of customers; creating superior customer value;
superior value for their customers by understand- analyzing the customer information; re-evaluating
ing customers’ changing habits, needs, wants, and prioritizing customer segments to identify
expectations and value requirements. Therefore, most valuable customers; focusing much more
customer insight help companies to survive in on profitable customers and making investment
competitive and turbulent markets. to them in order to deepen their loyalty; avoiding
Customer Value: Perceived value is defined as price promotions and cutting prices; adding value
the ratio of benefits that the customer gets relative to the offerings and emphasizing core value of the
to costs that the customer bears when making a brand; maintaining communication; and introduc-
purchase. The perceived cost includes e.g. mon- ing innovative products can be considered among
etary costs, time costs, energy costs and psychics the marketing strategies in challenging markets.
costs. However, benefit of an offering includes Winning Recession Strategies: Increasing
functional and emotional benefits. The customer marketing, research & development, and new
gets benefits and assumes costs in order to get these product development expenditures; decreasing
benefits. The customer chooses among different high manufacturing and administration costs;
offerings by considering perceived value of these maintaining pricing relative to market average;
offerings. To increase the value of the offering, and improving quality and customer value are
either the enterprise may provide more benefits among the winning recession strategies.
or reduce the costs of the offering. Increasing the
24
25
Chapter 2
The Evolution of Relationship
Marketing Orientations
ABSTRACT
There has been a shift in the business focus from transactional to relationship marketing. Companies
have been increasingly implementing relationship-marketing practices in order to survive in highly com-
petitive markets. The main objective of this chapter is to understand the emergence of the relationship-
marketing orientations. This chapter starts with examining the marketing practices of the pre-industrial,
industrial, and post-industrial periods with the purpose of demonstrating that relationship orientation
in the post-industrial era is rebirth of marketing practices of the pre-industrial age. After outlining the
factors that cause re-emergence of relationship orientation in the post-industrial era, the emergence of
the relationship-marketing school of thought is briefly discussed. This chapter ends with comparing the
transactional marketing practices with relationship marketing practices.
INTRODUCTION encourages repeated and increased frequency in

buying activities and protects long-term interests
The business environment is changing very radi- of the enterprise (Payne, 1994; Yau et al., 2000).
cally. While times have been tough and competi- As potential advantages of reducing the level of
tive, traditional approach to marketing is no longer customer churn by improving the retention rates
sufficient to cope with the challenge because one of profitable customers (Reichheld & Sasser,
shot sales focused transaction marketing practices 1990; Webster, 1992; Reichheld & Teal, 1996)
can jeopardize the long-term interest of the com- have been realized, many enterprises have been
pany. On the other hand, in the relationship market- increasingly implementing relationship marketing
ing philosophy, the attraction of new customers is practices in order to survive in highly competitive
the first step in the marketing process, but the most markets. Concentrating on customers and retaining
important key is to retain these customers because existing customers are seen as the key to success.
customer retention allows the company to develop As the traditional transactional approach to mar-
long-term relationships with customers and this keting has been increasingly questioned in past
DOI: 10.4018/978-1-4666-8231-3.ch002

The Evolution of Relationship Marketing Orientations
decades, the concept of relationship marketing post-industrial era, which was a clear paradigm
has been gaining popularity although the ideas shift from the transactional orientation of the
behind it are not new. industrial era, was really a rebirth of marketing
There has been a shift in the business focus practices of the pre-industrial age.
from transactional to relationship marketing Sheth and Parvatiyar (1995) demonstrated the
where the customer is at the center of business existence of relational marketing practices between
activities. Relationship marketing moves the the traders and customers and also among traders
dyadic exchange from a short-term transaction by explaining the characteristics of business prac-
orientation to a life-long process in order to meet tices of pre-industrial era. Pre-industrial society
the customer needs more effectively. Relationship was largely based on agricultural economy and
marketing becomes an essential strategic tool the trade of art and artifacts. Farmers sold their
for the enterprises in today’s dynamic market in products directly in bazaars, artisans produced
which customer needs are changing continuously. customized products according to the needs of
As enterprises notice the need to get close to their customers so there was a direct interaction
customers in order to achieve customer retention, between traders and their customers. During the
maximize profits and keep costs low, the domain trade of products, consumers and producers met
of CRM extends into many area of marketing and together face to face. This direct interaction led
strategic decisions. The evolution and diffusion of to relational bonding between the producer and
relationship marketing practices will be discussed consumers and the producer functioned as both
in this chapter in attempt to get an idea about the manufacturer and retailer (seller) of its own prod-
past, present and future relationship marketing ucts (Sheth & Parvatiyar, 1995).
practices. Relational bonding not only existed between
the producers and consumers but also existed
among traders in the pre-industrial era. Sheth and
THE EMERGENCE OF Parvatiyar (2000) explained the significance of
THE RELATIONSHIP relational bonding among the traders by giving
MARKETING PRACTICES examples from business practices of pre-industrial
period. Clan oriented trading and trading activities
Although relationship marketing has been be- on silk route were the important business practices
coming popular and has been considered as an of pre-industrial era and these business practices
emerging new phenomenon in the last decades; required ongoing trade relationships. As, hit and
pioneers of the relationship marketing literature run sellers were also part of the market system,
argue that the antecedents of relationship mar- ongoing trade relationships became a crucial
keting practices go back to the pre-industrial era element of business practices of pre-industrial
(Sheth & Parvatiyar, 1995; Parvatiyar & Sheth, societies. Traders wanted to do business with
2000; Sheth and Parvatiyar, 2000; Parvatiyar & trusted partners. The economic history of the silk
Sheth, 2001; Palmer, 2002). Sheth and Parvatiyar trade route was a good example that proved the
(1995) tried to trace the evolution of relation- importance of ongoing business relationships in
ship marketing and identified its antecedents in pre-industrial era. Chinese silk producers cooper-
order to demonstrate that relationship marketing ated with the designers and weavers in order to
practices date back to the pre-industrial era. They facilitate future trade and these business relation-
reviewed the history of marketing practices and ship practices created interdependencies between
they concluded that relationship orientation in the marketing actors. Therefore it can be concluded
26

that direct interaction between producers and men, there were less frequent interaction between
consumers necessitated cooperation, reliance and producers and customers. As result, the production
trust among marketing actors of pre-industrial and consumption functions got separated which
societies (Sheth & Parvatiyar, 2000). led to middlemen to perform marketing functions
Retaining customers, influencing repeat and middlemen focused on economic aspects of
purchases, fostering trust and facilitating future buying since the cost of selling goods such as the
marketing were also concerns of marketers in risk and cost of inventory belong to middlemen
the preindustrial era (Sheth & Parvatiyar, 1995). (Parvatiyar & Sheth, 2001). Since the middlemen
Sheth and Parvatiyar (1995) cited the develop- aimed to absorb the excess production, industrial
ment of branding as a marketing practice of this era also witnessed the development of new market-
concern. During the pre-industrial era such as in ing practices such as sales, advertising and promo-
clan oriented trading, family names were used as tion. As the marketing practices of industrial era
brands, not only to identify the product, but also became transaction-oriented, firms became more
to give the consumer the confidence of knowing concerned with sales and promotion of goods and
the name carried a certain warranty of quality less with building ongoing relationships (Sheth
because the pre-industrial era producers were & Parvatiyar, 1995). During the industrial age,
willing to ascribe their family name to the product marketing was considered successful only when
as the quality assurance to establish trust, provide it resulted in a sale and increased sales volume.
continuity and security for the repeat purchase Measures of marketing performance were linked
(Sheth & Parvatiyar, 1995). to sales and market share because of this short-
It is apparent that relationship orientation in term oriented marketing practices such as extreme
marketing was evident during the pre-industrial era practices of persuasive selling including decep-
and the relationship orientation in marketing and tive advertising and false claims were prevalent
trade continued into the early years of the Industrial in industrial period (Sheth & Parvatiyar, 1995).
Revolution. It was only after the industrial era’s As it is observed by Sheth and Parvatiyar
mass production society, transactional marketing (2000), in the later period of industrial era mar-
practices seen (Parvatiyar & Sheth, 2001). The keters began to realize the importance of repeat
initiation of mass production, the emergence of purchases in order to be competitive in highly
middlemen, and the separation of the producer challenging markets. Marketers were interested in
from the consumer in the industrial era led to brand loyalty because they realized the fact that
transactional focus of marketing. the repeat purchases could be possible by creating
With the industrial revolution, manufacturers brand loyalty. Marketers also noticed the benefits
began to produce in mass quantities in order to of targeting and serving specific groups of custom-
benefit from the advantages of economies of scale. ers for whom they could satisfy their needs and
As the production increased, producers became wants better than competitors. Therefore, in the
unable to sell their entire stocks, so they needed to later stages of industrial era, the development of
expand geographically and find new markets to sell market segmentation and targeting became impor-
their excess production. These market conditions tant tools for marketing planning. These current
led to the emergence of marketing intermediar- developments that took place in the later period of
ies such as retailers, distributors and wholesalers the industrialization era caused the necessity for
(Sheth & Parvatiyar, 2000). The separation of the a re-emergence of establishing and maintaining
producers from the users was a natural outgrowth long-term relationships with customers (Sheth &
of the industrial era. With the emergence of middle- Parvatiyar, 2000).
27

Relationship marketing is not new and there are ticated information communication technologies
meaningful reasons to explain its re-emergence. enable enterprises to build relational bond with
In the post-industrial era several factors caused their customers directly. The growth of service
the development and re-emergence of relation- economy also increases the significance of rela-
ship orientation in marketing activities. These tionship marketing because services are produced
factors can be outlined as follows (Parvatiyar & and delivered at the same place. This minimizes
Sheth, 2000): the role of middlemen and increases the need of
establishing relationships between customers and
• A growing de-intermediation process, service providers (Parvatiyar & Sheth, 2000).
• Technological improvements, Another major force that causes the adoption
• The growth of service economy, of relationship marketing orientations is the total
• Total Quality Movement (TQM), quality movement. Companies aimed to serve qual-
• Intense competition. ity products and services to customers at lowest
possible prices. When companies implemented
The link between producer and customer was Total Quality Management (TQM) to improve
weakened due to the mass marketing in the era of quality and reduce costs, the collaborative work
industrialization. Because of poor IT infrastruc- of customers, suppliers and other members of
ture, businesses could not keep in touch with their marketing infrastructure became necessary. There-
customers. IT developments during the 1990s fore, in order to sustain quality standardization,
enabled companies to establish relationships that the establishment of relationships with suppliers
had slipped away during the period of industrializa- and other members of marketing infrastructures
tion (Palmer, 2002). A growing de-intermediation are necessary (Sheth & Parvatiyar, 1995).
process due to the improvements in computer and Intense competition and economic benefits of
telecommunication technologies allows producers relationship marketing have also contributed to the
to interact directly with customers and to establish emergence of relationship marketing practices.
long-term relationships with customers. Gathering As it is known it is more cost effective to retain
and storing customer information in databases, existing customers than to continually attract new
and use of databases and direct marketing tools customers to replace customer churn (Evans &
give the enterprises the means to customize their Laskin 1994); because companies have to spend
product and marketing activities (Parvatiyar & on communication, advertising and promotion in
Sheth, 2001). order to attract new customers. Marketers realized
As a result of technological developments, that it costs less to retain customers than to compete
loyalty programs emerged as a means of gathering for new ones (Rosenberg & Czepiel, 1984; Barnes,
information about customers and with the help of 1994). As a result of competition, customer reten-
loyalty programs businesses have been creating tion becomes crucial for the marketers. Marketers
data warehouses from which they can mine po- begin to be concerned about keeping customers
tentially useful information to deliver their value rather than making a one-time sale. Moreover,
propositions (Palmer, 2002). Producers are also customers’ expectations have been also changing
becoming more informed about their consum- with the intense competition. The characteristics
ers’ needs and wants with the help of accessing of consumers have also been changing. Customers
sophisticated databases that capture information have become more sophisticated and demanding,
related to each individual consumer, at a very requiring customized products. Therefore, estab-
low cost. De-intermediation process and sophis- lishing cooperative and collaborative relationships
28

with customers is much more essential to keep a dramatic change in marketing thinking and ac-
following the changing expectations and meet cepted as a paradigm shift by most of the authors
these expectations (Parvatiyar & Sheth, 2000). (Grönroos, 1994; Gummesson, 1997; Aijo, 1996);
These are the forces that encourage the re- however, the appropriateness of this paradigm
emergence of direct interaction between customers shift as a norm for all businesses has also been
and producers in the post-industrial era. Briefly, questioned (Palmer, 1996). Gummesson (1997)
the increase in the intensity of competition, rapidly argues that relationship marketing brings a radi-
changing markets, the fragmentation of consumer cal change in marketing thinking and behaviour;
markets, changing customer buying patterns, more because relationship marketing breaks the exis-
demanding customers, the continuous increase in tence patterns, so Gummesson (1997) considers
standards of quality, a complex array of technolo- relationship marketing as a paradigm shift, not an
gies and the unreliability of traditional marketing add on to the traditional marketing management.
are the factors that contribute to the development On the other hand, Palmer (1996) challenges the
and growth of relationship marketing (Kandam- emerging conventional wisdom that relational
pully & Duddy, 1999). Consequently, as it is men- exchange should be uncritically considered as the
tioned by Sheth and Parvatiyar (2000), the popular- norm for both business to business and personal
ity of relationship marketing is a reincarnation of consumer exchanges. Although relationship mar-
the marketing practices of the pre-industrial era. keting may be very attractive for many products
Mass production and industrialization weakened and markets, Palmer (1996) suggests that the
the relationship between producers and customers. universal applicability of relationship marketing
With the emergence of middlemen and separation may be inappropriate under some circumstances.
of producers and customers, marketing practices Relationship marketing took its origins from
shifted toward a transactional marketing orienta- industrial and services marketing. In the 1980(s),
tion in industrial era. the term relationship marketing was used in the
literature of industrial and services marketing.
Due to the emergence and growth of the service
THE EMERGENCE OF THE industry, the concept of relationship marketing first
RELATIONSHIP MARKETING became evident in service marketing because ser-
SCHOOL OF THOUGHT vices marketing necessitates a close relationship
between the service provider and the customer. In
The transactional marketing paradigm, which is service marketing there is no separation between
based on the marketing mix and exchange, has been delivery and consumption of the service, thus
increasingly questioned because transactional this interaction between buyer-seller gave rise to
marketing has limitations to deal with current relationship marketing. An emphasis on relation-
marketing challenges. Emergence and evolution ships emerged in the marketing literature during
of relationship marketing during the past three 1970s and the 1980s and researchers started to
decades are based on the change in the business evaluate the relationships in the context of dyadic
environment and market. The rapid revolutionary transaction.
changes in the economy and technology made the Although Berry (1983) introduced the term of
fundamental paradigm shift from transactional relationship marketing into the services marketing
marketing orientation towards relationship market- literature in 1983, early ideas of relationship mar-
ing orientation in business and marketing possible keting emerged in the studies of Adler (1966) and
and necessary. Relationship marketing is seen as Arndt (1979). Adler (1966) introduced the idea of
29

symbiotic relationships between firms and Arndt The simple buyer-seller dyadic relationship in
(1979) pointed the tendency of firms in develop- relationship marketing literature has been ex-
ing long-lasting relationships within the context tended to other relationships. Nordic School of
of domesticated markets. Arndt (1979) believed Services has extended the notion of relationship
that the long-term buyer-seller relationship is an marketing from service marketing to general
important factor in the growth of domesticated marketing. Grönroos has already mentioned the
markets. Berry (1983, p. 25) introduced the term emergence of relationship marketing in service
relationship marketing into the services marketing marketing and also expanded the concept to in-
literature and defined relationship marketing as corporate marketing in general. Morgan and Hunt
attracting, maintaining and enhancing customer (1994) concluded that relationship marketing
relationships. This definition was confirmed by has to include all marketing activities that aim
services marketing literature (Grönroos, 1994; to establish, develop, and maintain successful
Berry, 1995). The services marketing literature relational exchanges. Moreover, Nordic school
agreed that the objective of the firm should not believes that for effective marketing and delivery
only be to attract customers, but the firm should of services, companies need to pay attention to
also focus on keeping customers and the services “internal marketing” and the entire organization
marketing literature believed that firms can be has to be involved in developing relationships
competitive and perform better by developing with their customers (Grönroos 1981). There was
long-term relationship with their customers a growing consensus that, a firm should focus
(Berry, 1983; Levitt, 1983; Jackson, 1985; Gum- not only developing relationship with customers,
messon, 1987; Grönroos, 1991; Cravens & Piercy, it should also consider to develop relationships
1994). with suppliers, internal customers, institutions
Later, Jackson (1985) used the term of rela- and intermediaries.
tionship marketing in the context of business to Healy, Hastings, Brown, and Gardiner (2001)
business markets. These studies were followed by try to identify the themes of marketing relation-
the studies of Industrial Marketing and Purchas- ships to demonstrate the gradual evolution of mar-
ing (IMP) group which began to study long-term keting relationship theories. Authors considered
inter-organizational relationships and networks relationship marketing phenomenon under three
in business-to-business markets (Dwyer, Schurr, strands: relationship marketing, neo-relationship
& Oh, 1987; Anderson, Håkansson, & Johanson, marketing, and network theory and then they
1994). IMP Group, extended the buyer-seller mar- suggested a framework for differentiating them.
keting relationship dyad to structures of complex The common point of these three themes is that
nets. IMP also emphasized the role and impor- marketing management needs to be built on
tance of business relationships and networks in interdependent relationships rather than on one
the value creation and delivery in the industrial time transactions. This trilogy of the marketing
marketing literature (Anderson, Håkansson, & relationships framework demonstrates the evolu-
Johanson, 1994; Snehota & Håkansson, 1995; tion and development of marketing relationship
Möller & Halinen, 1999). They considered the theories from the relationship marketing of the
firm’s relationships as one of the most valuable 1970s to neo-relationship marketing and network
resources of a company (Håkansson, 1987). theory of today. Healy et al. (2001) characterised
Although the concept of relationship marketing relationship marketing as a dyadic buyer-seller re-
was firstly appeared in services marketing, Aijo lationship which ignores the role of other elements
(1996) argues that the concept of relationship in the distribution channel and the role of other
marketing is not limited to services marketing. stakeholders. However, they characterised neo-
30

relationship marketing as dyadic that includes all marketing practices (Payne, Christopher, Clark, &
marketing activities directed towards establishing, Peck, 2000; Grönroos, 1991, 1994). Relationship-
developing, and maintaining successful relational oriented marketing practices emphasize the im-
exchanges. Lastly, network theory is characterised portance of value creation and process; whereas
as a more complex structure of networks involving the transactional-oriented marketing practices
three or more actors (Healy et al., 2001). pointed to the significance of value distribution
Aijo (1996) discusses the theoretical and philo- and outcome (Sheth & Parvatiyar, 2000).
sophical foundations of relationship marketing and Marketing practices of the transactional ap-
argues that relationship marketing is one of the proach are focused on selling and acquiring new
major manifestation of the ongoing paradigm shift customers. Traditional marketers focus on single
in business and marketing. Further, Aijo (1996) sales, build the business on deals and they give
argues that paradigm shift itself can be seen as incentives for doing the deal. In transactional
a logical end result of the realization of the im- oriented companies salary policy is based on low
portance of building long term relationships with basic salaries plus commission. Sales staff earns
customers and widen the scope of business and commission from making sales to new custom-
marketing towards a holistic view of the supplier- ers. Because of this reason, transactional oriented
manufacturer-customer chain and processes. companies put emphasize on attracting prospects
Service is considered as a major competitive and turning them into customers. Mass advertis-
tool and basis for differentiation in most indus- ing and sales promotions are used to sell as many
tries today. In that sense, in today’s competitive products as possible (Little & Marandi, 2007).
markets most industries are becoming service Sales volume is seen as an important criteria for the
industries. To create customer retention and performance evaluation. Transactional marketing
customer loyalty, most companies are forced to focuses on one shot transaction instead of ongoing
establish close relationships with customers. The relationships; therefore short-term thinking and
holistic relationship marketing view has claimed acting is predominant in transactional marketing
that there is also need to create close networks of (Stone & Mason, 1997). While making the deal,
relationships with other parties such employees they seek to maximize the outcome in their own
and suppliers in order to be successful and effective favour. In transactional marketing after sales
in satisfying the customer needs. Marketing and support and service are poor, and seen as a cost.
business scholars and practitioners have agreed Traditional marketing has not been concerned with
on importance of developing close and long term customer and quality. Gummesson (2002) defines
customer and other business relationships. All the core values and beliefs on which relationship
these necessities gave rise to relationship market- marketing is grounded. He concludes that rela-
ing orientations. tionship marketing is geared toward collaboration
and co-production of value; the individual is in
focus instead of masses; long term relationships
KEY DIFFERENCES BETWEEN are found to be more profitable than one shot
TRANSACTIONAL MARKETING transactions; all parties are winners and not just
AND RELATIONSHIP MARKETING one party; and interaction is preferred to one-way
persuasion (Gummesson, 2002).
The changing face of the business causes a trans- Furthermore, Payne et al. (2000) indicate
formation from transactional marketing to relation- relationship marketing practices are based on
ship marketing. Transactional marketing practices maintaining and enhancing ongoing customer
are significantly different from the relationship relationships in order to meet the objectives of the
31

parties that engage in relationships and this is ac- becomes the dominating part of the mar-
complished by the mutual exchange and fulfilment keting function.
of promises. The relationship marketing orienta- • Since firms offer merely core product, cus-
tion provides a win-win sale situation and gives tomers are price sensitive in transactional
incentives for maintaining long-term relationships. marketing. Customers can easily switch
Lifetime value of a customer to a company is to the competitor that offers a lower price
much more important than the value of a single or better terms. In relationship marketing,
sale. Therefore relational oriented companies put firms create more value to their customers.
emphasize on customer service, quality and value Providing added value enables firms to de-
rather than product features, sales promotions and velop strong bonds with customers and this
gimmicks (Little & Marandi, 2007). Relationship makes customers less price sensitive.
marketing practices are concerned with maximiz- • Perceived quality is basically a function
ing the life time value of profitable customers. of what the customer receives (technical
Moreover, in relationship marketing, customer quality) and how customers interact with
service, quality and marketing are linked and the firm (functional quality). Since, trans-
managed as one because relationships are built on action marketing includes no or limited
service and quality. Quality is the concern of entire customer contacts, the technical quality of
organization rather than production department. the product (what the customer receives as
During the selling stage they promote the value an outcome) becomes important in trans-
instead of pushing the price. After sales support actional marketing. As interactions are
and service are seen as an investment in the re- significant in relationship marketing, firms
lationship. The relationship marketing practices focus on quality of interactions (functional
focus on the expectations and perception of the quality) in relational marketing.
people (Payne et al., 2000). Relationship marketing • In relationship marketing success of inter-
concerns about customers’ needs and wants and a active marketing requires that all parts of
relationship in a value added context is examined the firms have to collaborate and involved
from the perspective of customers not just from the in taking care of customers to make cus-
perspective of the firm (Stone & Mason, 1997). In tomers satisfied. Thus, the internal inter-
relationship marketing, customer satisfaction can face between marketing, operations, per-
be measured by directly managing the customer sonnel and other functions is important to
base. This requires customer feedback and the be successful. Interdependency between
real time customer feedback system allows firms marketing, operations and personnel has
to gather information about customer satisfaction a limited importance and also the role of
(Grönroos, 1994). internal marketing is not seen as an im-
Grönroos (2004) discusses the differences portant factor for success in transactional
between transactional and relational marketing marketing.
as follows: • On-going internal marketing process is
required to make relationship marketing
• Customer’s contacts with people, technol- successful. Employees have to be moti-
ogy and systems of operations determines vated for service mindedness and customer
whether the customer will continue doing oriented in order to increase the quality of
business with a firm. Therefore, in rela- interactions.
tionship, marketing interactive marketing
32

Grönroos (1996) also explains the shift from of the important differences among these two
transactional based marketing approach to rela- marketing practices.
tional based approach. Grönroos (1996) indicates Eventually, the primary objective of an enter-
that the firm, the market and the product are prise is to maximize its profit. Rather than reaching
three dominant parties of transactional market- that objective through using transactional market-
ing approach. In transactional market approach, ing’s conventional tools that are product, price,
a department of specialists is responsible for the place, and promotion; in relational marketing, an
marketing and customers are seen as markets in enterprise can maximize its profit through build-
other words anonymous individuals or organiza- ing relationships and seeing the customer as its
tions. The offering revolves around products and primary asset. That asset should be cultivated in
services. Firm gives promises through external order to reduce the effects of increased competition
marketing activities such as 4Ps of marketing, and potential pressure on pricing (Rich, 2000).
mass marketing and keeps its promises through
product features, and the fulfilment of promises
is maintained through continuous product devel- CONCLUSION
opment (Grönroos, 1996). However, in relational
market approach markets are not seen as masses The examination of evolution of relationship
of anonymous individuals or organizations. Cus- marketing practices demonstrate that although
tomers are treated on a much more individual relationship marketing practices are among the
basis and they are not anonymous to the firm. popular strategies of today’s market, antecedents
In relational marketing approach, firm manages of relationship marketing practices go back to the
its key resources that are personnel, technology, pre-industrial era. This means that the relation-
knowledge and time to develop a successful ship focus of the post-industrial era is a rebirth
offering. This offering should include a core of marketing practices of the pre-industrial age.
product that fulfils the customer’s needs, wants, Transactional marketing practices are signifi-
desires and expectations, so that promises given cantly different from the relationship marketing
by external marketing and sales can be successful practices. In transactional marketing, marketers
(Grönroos, 1996). As it is indicated by Grönroos focus on selling and getting new customers. The
(1996) people who are the personnel of the firm dominating marketing function of transactional
have an effect on the total quality perception and marketing is the marketing mix and it is narrowly
satisfaction of customers, and the other types of limited to functions. On the other hand, relation-
resources such as technology, knowledge and time ship marketing is based on a broader perspective
also influence satisfaction and the perceived qual- and the purpose of relationship marketing is to
ity. Thus how promises are fulfilled that is called establish, maintain and enhance customer relation-
interactive marketing becomes an important factor ships in order to meet the objectives of the parties
in relational marketing. In relational marketing that engage in relationships. Interactive market-
approach, continuous product development is ing supported by the marketing mix activities is
no longer sufficient for successful execution of the dominant marketing function of relationship
marketing; however continuous development marketing. The role of internal marketing and
of all resources, including internal marketing is interdependency between marketing, operation
necessary for the success of marketing (Grönroos, and personnel are strategically important in re-
1996). There are significant contrasts between the lationship marketing and also seen as important
transactional marketing approach and relationship for the success of enterprises.
marketing approach. Table 1 demonstrates some
33

Table 1. Differences between transactional marketing and relationship marketing
Transactional Marketing Relationship Marketing

Primary object is single transaction Primary object is customer retention
Short term focus Long term focus
Focus on product features Focus on customer value
Limited commitment to meeting customer expectations High commitment to meeting customer expectations
Mass production Mass customization
Little emphasis on customer service High emphasis on customer service
Discontinuous customer contact Continuous customer contact
Mass communication Personal communication
Quality is concerned of production staff Quality is concerned of all staff
Quality of output Quality of interactions
Customers sensitive to price Customers less sensitive to price
Market share considered as measurement of customer satisfaction Managing the customer base considered as measurement of
satisfaction
No or limited interdependency between marketing, operations and High interdependency between marketing, operations and
personnel personnel
No or limited importance of internal marketing for success Strategic importance of internal marketing for success
Source: Adapted from Payne et al. (2000), Grönroos (1991, 1994)
The business environment is changing very exceeding customer expectations, providing higher
radically. The traditional marketing approach, quality and better services, making continuous
which is based on the marketing mix and exchange, product improvement, product innovation, and
is no longer sufficient to cope with current mar- customization. These winning marketing practices
keting challenges. The marketing practices of can be actualized through relationship marketing
today’s markets are different from transactional practices that place customer at the centre of all
marketing practices. Enterprises have been re- business activities. The changing face of the busi-
alizing that their success in the marketplace is ness causes a transformation from transactional
largely dependent on the network of relationships marketing to relationship marketing.
they maintain. Relationship marketing provides
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fections: Quality comes to services. Harvard Busi-
ness Review, 68(5), 105–111. PMID:10107082 Industrial Era Marketing Practices: The link
between producer and customer was weakened due
Reichheld, F. F., & Teal, T. (1996). The loyalty ef- to the mass marketing in the era of industrializa-
fect. Boston, MA: Harvard Business School Press. tion. With the mass production in the industrial
Rich, M. K. (2000). The direction of mar- era, manufacturers became unable to sell their
keting relationships. Journal of Business entire stocks and they expand geographically in
and Industrial Marketing, 15(2/3), 170–191. order to find new markets and sell their excess
doi:10.1108/08858620010316877 production. These market conditions led to the
emergence of marketing intermediaries. With the
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keting approach for customer retention. Journal of keep in touch with their customers directly. Since
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eb008094 marketing share and sales; marketing practices
36

of industrial era became transaction-oriented Relationship Marketing: The aim of re-

and firms became more concerned with sales lationship marketing is maintaining customer
and promotion of goods and less with building retention. Relationship marketing practices focus
ongoing relationships. on delivering customer value, meeting customer
Pre-Industrial Era Marketing Practices: expectations, and building ongoing relationships.
Pre-industrial society was largely based on Lifetime value of a customer to a company is
agricultural economy and the trade of art and much more important than the value of a single
artifacts. Farmers sold their products directly in sale. Therefore relational oriented companies put
bazaars and artisans produced customized prod- emphasize on customer service, quality and value
ucts according to the needs of their customers. rather than product features and sales promotions.
There was a direct interaction between traders Transactional Marketing: Transactional
and their customers; and this direct interaction marketing focuses on selling and acquiring new
led to relational bonding between the producer customers. Sales volume is seen as an important
and consumers. As, hit and run sellers were also criteria for the performance evaluation. Transac-
part of the market system, traders wanted to do tional marketing focuses on one shot transaction
business with trusted partners. It is apparent that instead of ongoing relationships. In transactional
relationship orientation in marketing was evident marketing after sales support and service are poor,
during the pre-industrial era and the relationship and seen as a cost. Traditional marketing has not
orientation in marketing continued into the early been concerned with quality and meeting customer
years of the Industrial Revolution. expectations.
37
38
Chapter 3
The Conceptual Framework
of Relationship Marketing
ABSTRACT
Relationship marketing has been receiving widespread attention in the business world as well as in
the literature. Different streams of marketing handle the concept of relationship marketing from their
perspective; because of this reason, various definitions of relationship marketing have emerged in the
marketing literature. This chapter aims to review the different definitions of relationship marketing and
provide a comprehensive understanding of the relationship marketing concept. Based on the literature,
basic constituents of relationship marketing have been analysed in a detailed way. This chapter handles
the relationship marketing concept beyond the typical supplier-buyer relationships and analyses all
collaborative relationships that allow companies to deliver superior customer value. Main motivations
of customers to engage in a relationship and their relationship termination reasons are also examined.
This chapter ends with identifying the facilitators and barriers for relationship marketing success.
INTRODUCTION ture. The review finally generated 209 research

papers related to relationship marketing. This
As the competition increases in today’s dynamic study concludes that relationship marketing has
world, business and markets have been chang- gained the attention of businesses and institutions
ing and marketing has been also undergoing a and research activity in the area of relationship
paradigmatic shift from transactional orientation marketing has rapidly increased over the years
to relational marketing orientation and requiring especially after 2000 (Das, 2009).
a new marketing theory, which has to focus on Hence, the main focus of marketers in post-2000
the value of the total offering; a balance between era has been shifting towards relational market-
production-centric and customer-centric aspects; ing, Gummesson (2002a) indicates that consumer
and should recognize relationships, networks and goods marketing, services marketing and business
interaction as core variables (Gummesson, 2002a). to business marketing currently converge under
Das (2009) reviews the relationship marketing the concept of relationship marketing. There are
literature from 1994 to 2006 to classify the litera- various definitions of relationship marketing in
DOI: 10.4018/978-1-4666-8231-3.ch003

The Conceptual Framework of Relationship Marketing
the marketing literature. Agariya and Singh (2011) relationships with individual accounts” (Jackson,
use content analysis to provide an overview of 1985. p. 2). Berry and Parasuraman (1991, p.
the existing academic literature on relationship 133) define the relationship marketing from the
marketing and identify relationship marketing perspective of services marketing and define it as
definitions and major defining constructs based “a process of attracting, developing, and retaining
on the previous research findings. In this study, customer relationships”. A comprehensive and
they identify a total of 72 relationship marketing widely used definition of relationship marketing is
definitions from 1982 to 2010. These definitions done by Grönroos (1991) and he explains relation-
vary in scope and emphasis. Relationship market- ship marketing as “identifying and establishing,
ing has been receiving widespread attention in the maintaining, and enhancing relationships with
literature and the different streams of marketing customers and other stake holders, at a profit, so
such as industrial marketing, network marketing that the objective of all parties involved are met,
and services marketing handle the concept of and that is done by a mutual exchange and fulfil-
relationship marketing from their perspective ment of promises”. The definition of Grönroos
because of this reason alternative definitions of involves not only customer-supplier relationships
relationships emerged in the literature. Although but also includes relationships between stakehold-
some of the definitions are narrow in scope, they ers (Grönroos, 1996a).
provide initial guidance about relationship market- Morgan and Hunt (1994) examine the nature
ing (Gummesson, 1999a, p. 242). The definitions of relationship marketing and classify a firm’s
of relationship marketing will be examined in at- relational exchanges into four categories: supplier,
tempt to get an extensive idea and a comprehensive lateral, buyer, and internal partnerships. Morgan
understanding of relationship marketing. and Hunt (1994) identify ten discrete forms of
relationship marketing. Supplier partnerships
include (1) the relational exchanges between
TOWARDS A COMPREHENSIVE manufacturers and their goods’ suppliers and (2)
DEFINITION OF RELATIONSHIP relational exchanges between the firm and its
MARKETING service providers such as advertising or marketing
research agencies. Morgan and Hunt (1994) indi-
Different authors, who have various academic cate that lateral partnerships involve (3) strategic
background, make different contributions to the alliances between firm and their competitors for
definition of relationship marketing. Berry’s the purpose of technology alliances, co-marketing
definition of relationship marketing is developed alliances, and global strategic alliances, (4) alli-
within services marketing and he defines relation- ances between a firm and non-profit organizations,
ship marketing as “attracting, maintaining and – in and (5) partnerships between the firm and govern-
multi service organizations- enhancing customer ments. Furthermore, buyer partnerships include
relationships” (Berry, 1983, p. 25). Berry’s defi- (6) long-term relationships between firms and
nition of relationship marketing emphasizes the consumers and (7) relational exchanges between
importance of customer retention and the alloca- the firm and its intermediaries such as distribution
tion of resources to keep existent customers as well channel members. Lastly, Morgan and Hunt (1994)
as attract new customers (Gummesson, 1999a, mention about the internal partnerships that cover
pp. 242-243). Jackson’s definition of relation- (8) exchanges among functional departments of
ship marketing, which is grounded in industrial the firm, (9) exchanges between a firm and its
marketing, defines the relationship marketing employees, and (10) exchanges with business units.
as “marketing oriented toward strong, lasting Considering the nature and forms of relationship
39

marketing, Morgan and Hunt (1994) argue that organizations etc. However, nano relationships
conceptualizing relationship marketing requires are found on the organizational level and concern
a definition that contains all forms of relational relationships between internal customers (Gum-
exchanges and focuses on the process of relation- messon, 1999b).
ship marketing. Therefore, Morgan and Hunt As it can be seen from the above definitions of
(1994, p.22) propose the following definition of relationship marketing, authors attempt to define
relationship marketing “Relationship marketing core constitutes of relationship marketing from
refers to all marketing activities directed toward different perspectives. After a comprehensive
establishing, developing, and maintaining suc- review of relationship marketing literature, Harker
cessful relational exchanges.” (1999) gets 26 definitions of relationship market-
Gummesson (2002b) argues that relationship ing and Harker conducts content analysis in order
marketing is fundamentally different from tradi- to identify the key constructs of the relationship
tional marketing and that successful relationship marketing definitions. The result of this analysis
marketing implementation requires new mindsets. reveals seven relationship marketing conceptual
Gummesson (2002b) presents the relationships, categories that get general support by authors
networks and interactions as the core value of the in defining relationship marketing. These seven
concept of relationship marketing. Gummesson key constructs that are found in most definitions
(1999a) develops the total relationship market- are listed in Table 1. Based on the content analy-
ing concept and defines the total relationship as sis, Harker (1999) develops a new definition of
“marketing based on relationships, networks and relationship marketing that involves the seven
interaction, recognizing that marketing is embed- relationship marketing constructs that are found
ded in the total management of the networks of commonly in most relationship marketing defi-
the selling organization, the market and society. nitions. Harker (1999, p. 16) proposes that “an
It is directed to long term win-win relationships organization engaged in proactively creating, de-
with individual customers, and value is jointly veloping, and maintaining committed, interactive,
created between the parties involved. It transcends
the boundaries between specialist functions and
disciplines”. Table 1. Seven conceptual categories of relation-
The definition of Gummesson is based on ship marketing
a relationship perspective and this definition is
Primary Construct Other Common Constructs
founded on relationships, networks and interaction,
Creation Attracting, establishing,
which are the variables common to both industrial getting
and consumer marketing. Relationship market-
Development Enhancing, strengthening
ing definition of Gummesson not only includes
Maintenance Sustaining, stable, keeping
relationships between seller and customer but
Interactive Exchange, mutually,
also covers all forms of market relationships such cooperative
as relationships between firm and its suppliers, Long-term Lasting, permanent, retaining
competitors and middlemen. Moreover, total re- Emotional Content Commitment, trust, promises
lationship marketing definition includes the mega
Output Profitable, rewarding,
and nano relationships (Gummesson, 1999b). efficiency
Mega relationships refer to the relationships that Source: Harker, M. J. (1999). Relationship marketing defined?
operate on the societal level and have influence An examination of current relationship marketing definitions,
Marketing Intelligence & Planning, 17(1), p. 14.
on market behavior such as relationships with
public authorities, media, and non-governmental
40

and profitable exchanges with selected customers tinuous cooperative effort between firm and its
(partners) over time is engaged in relationship customers and seeks to build a chain of relation-
marketing.” ships within the organization, and between the
As it was mentioned before, the definitions of organization and its main stakeholders, suppliers
relationship marketing vary in scope and emphasis. in order to create the value that customers want
Some of the relationship marketing definitions are to get (Gordon, 1998).
based on a consumer-seller dyad and some of them
include stakeholders and non-market relation-
ships. Moreover, some of these definitions limit A BROADER PERSPECTIVE OF
relationship marketing to a specific application MANAGING RELATIONSHIPS
such as services marketing, industrial marketing
or a technique such as the use of databases or Relationship marketing can be seen as a philoso-
information technologies (Gummesson, 1999a). phy of doing business successfully that places the
Although, there are many definitions of re- customer at the centre of firm’s strategic thinking.
lationship marketing and they differ somehow Relationship marketing approach moves beyond
from each other, the common denominator of the typical supplier-buyer relationships (Kavali,
most of these definitions is that they emphasize Tzokas, & Saren, 1999). In relationship marketing
the development and maintenance of long term literature, there is a growing interest in studying
relationships with customers and parties that are a broader array of intra- and inter-organizational
involved in value creation (Gummesson, 2002b) relationships because the term of relationship
and majority of these definitions revolve around marketing refers to all marketing activities that
acquisition, retention, profitability, a long-term are directed toward establishing, developing and
orientation, and a win–win situation for all stake- maintaining successful relational exchanges. Rela-
holders of the company (Harker, 1999; Agariya tionship marketing is concerned with cooperative
& Singh, 2011). and collaborative relationships between the firm
The concept of relationship marketing has and its customers. These collaborative relation-
become very popular in recent years. Although, ships are more than buyer seller relationships.
some use relationship marketing interchangeably Collaborative relationships between the firm and
with customer relationship management, database its customers include consumers, supplier markets,
marketing or loyalty programs; relationship mar- distribution channel members, internal markets
keting does not only mean database marketing, and business to business customers (Parvatiyar and
customer relationship management or loyalty Sheth, 2000). Attracting, enhancing and maintain-
programs. They are valuable component of rela- ing long-term and profitable relationships with
tionship marketing but they do not fully describe customers can be possible by delivering superior
or substitute for relationship marketing. Relation- customer value to the customers. To deliver the
ship marketing helps the company to provide the superior customer value and increase the efficiency
benefit that the customer values. Relationship of business performance and profitability, firm
marketing is a new discipline that offers firms new has to develop and maintain long-term relation-
opportunities to create value and both parties that ships not only with customers but also parties
are involved in the relationship share the created that involve in the value creation process such as
value mutually. Relationship marketing recognizes suppliers, internal markets, intermediaries, non-
the significance of customers’ lifetime value and governmental organizations and so on.
seeks to develop progressively close relationships Payne (2000) illustrates this broad and expand-
with customers. Relationship marketing is a con- ed perspective of relationship marketing with the
41

six markets model. Payne’s six markets model not firms have to give special emphasis on supplier
only includes standard buyer and seller relation- markets. Building closer and mutually beneficial
ships but also includes other types of relationships relationships with suppliers provides improved
that help firms to deliver superior value to their quality, just in time delivery, lower levels of
customers and these relationships also foster the inventory etc. Hence, strategic partnerships with
enhancement of relationships with customers. suppliers enable a firm to create value to its cus-
Payne (2000) identifies the six key markets where tomers by offering high and consistent quality in
organizations can direct their marketing activities a timely manner and this leads to customer sat-
because the management of relationships in each isfaction. Employees, departments and business
of the six markets is critical for the achievement of units of the firm constitute the internal markets.
customer retention objectives and the enhancement Managing relationships in internal markets is the
of relationships. As shown in Figure 1, the six crucial requirement for the success of relationship
market model includes customer markets, referral marketing because employees and organization
markets, influence markets, internal markets, sup- structure play a major role in the formation of
plier markets and recruitment markets that have customer oriented corporate culture. Referral
an impact on performance in consumer markets markets includes professionals, networks, and
(Payne, 2000). satisfied customers who may have the potential to
In the six market model, customers are at the recommend the firm to the prospective customers
centre of marketing activities; therefore, “customer and make positive word of mouth about the firm.
market” is considered as central market within the Building relationships with the sources of referral
model. To create value for the customer markets, markets can be effective to attract new customers
Figure 1. The six-markets model

Source: Payne, A. (2000). Relationship marketing: the UK perspective. In J. N. Sheth & A. Parvatiyar (Eds.), Handbook of
relationship marketing (pp.39-67). USA: Sage, p. 48.
42

at a no cost. Influence markets embody entities satisfaction and communication when a market-
and individuals, which have the ability to influence ing relationship is managed, researchers appear
the marketing environment of a company. Firms to differ on the specific position of each of these
have to manage its relationships with recruitment variables in a marketing relationship (Theron &
markets such as commercial recruitment agencies Terblanche, 2010).
and universities in order to have access to potential Morgan and Hunt’s (1994) key mediating
employees who possess the required skills for variable (KMV) model of relationship market-
the job position. Thus, managing relationships ing tries to point out the factors that contribute
in recruitment markets help firms to attract the to the success or failure of specific relationship
right employees for the organization (Payne, marketing efforts. According to their theory, the
Christopher, Clark, & Peck, 2000). presence of relationship commitment and trust
The six markets model suggests that an en- is central to successful relationship marketing.
terprise must coordinate its activities and aim at Parties that are involved in relational exchanges
developing appropriate relationships with each of commit to the established relationship if trust
the market domains because the management of exists. Thus, trust is a major determinant of a
relationships in each of the six markets is critical relationship commitment in this KMV model. In
for the achievement of successful relationship this model relationship termination cost, relation-
marketing implementations and customer reten- ship benefits, shared values, communication, and
tion objectives. opportunistic behavior are proposed as antecedents
of relationship commitment and trust. Morgan and
Hunt (1994) propose acquiescence, propensity
DIMENSIONS OF RELATIONSHIP to leave, cooperation, functional conflict, and
MARKETING decision-making uncertainty as the outcomes of
KMV model.
Relationship marketing strategies include all mar- Based on extant literature, Lindgreen (2001)
keting efforts that are directed toward establishing identifies the important constructs in relationship
and maintaining successful relational exchanges. marketing as dependence, trust, commitment,
The development and enhancement of successful cooperation, communication, shared values,
relationships lead to an increase in the marketing conflict, power, non-opportunistic behaviour and
efficiency and effectiveness of the organizations. interdependence. Furthermore, Lindgreen (2001)
Moreover, organizations can enhance customer finds that the quality of a relationship as the key
satisfaction and their organizational performance for the successful implementation of relationship
through establishing relationships. There are marketing and indicates trust in credibility, trust
many determinants that contribute to the process in benevolence, affective commitment, affective
of building and maintaining successful relation- conflict, satisfaction and social bonding as six
ships. In marketing literature, different academi- key constructs of relationship quality.
cians emphasize various determinants that foster Palmatier et al. (2006) systematically review
building successful relationships. The existing and analyze the relationship marketing litera-
literature offers a wide range of antecedents ture on relational mediators in a meta-analytic
for the relational mediators (Lindgreen, 2001; framework in order to identify the most effective
Palmatier, Dant, Grewal, & Evans, 2006; Das, relationship marketing strategies for building cus-
2009; Agariya & Singh, 2011). Although there tomer relationships. After reviewing the literature
appears to be an agreement on the importance on relational mediators, authors investigate the
of some dimensions such as trust, commitment, antecedents and outcomes of these mediators.
43

Antecedents and outcomes of relational me- In another study, Damkuvienė and Virvilaitė
diators are illustrated in Figure 2. In this study, (2007) analyse the relationship definitions in
commitment, trust, relationship satisfaction the literature and identify essential elements
and quality are identified as relational media- and dimensions of the relationship concept. The
tors; while relationship benefits, dependence on analysis reveals the fact that relationship concept
seller, relationship investment, seller expertise, in scholarly gains two interpretations: oriented to-
communication, similarity, relationship dura- wards behaviour and oriented towards perception.
tion, interaction frequency, and conflict as the Behaviour oriented relationship approach defines
antecedents of relationships. Furthermore, authors relationship as a repeated interactions with the firm
indicate expectation of continuity, word of mouth, while perception oriented relationship approach
and customer loyalty as the customer focused emphasizes the importance of emotional bonds
outcomes; seller objective performance as seller with the firm. The literature review reveals that
focused outcomes; and cooperation as the dyadic relationships need a mutual interaction, long-term
outcome (Palmatier et al., 2006). orientation, interdependence, mutual benefit, col-
Figure 2. Antecedents and outcomes of relational mediators

Source: Palmatier, R. W., Dant, R. P., Grewal, D., & Evans, K. R. (2006). Factors influencing the effectiveness of relationship
marketing: a meta-analysis. Journal of Marketing, 70 (4), p.137.
44

laboration, emotional bonding, commitment and constructs for banking, insurance, and health care
trust. They conclude that long-term orientation, industry. Authors choose these three industries
trust, commitment and interdependence are the because the majority of the research in relationship
essential elements of relationship (Damkuvienė marketing are found under one of these industries.
& Virvilaitė, 2007). The result of the analysis reveals 18, 15, and 20
As a result of comprehensive review of the defining constructs respectively for the banking,
relationship marketing literature, Theron and insurance and health care industry. Among the
Terblanche (2010) develop a list of 23 dimensions identified defining constructs in general as well
that can have impact on marketing relationships as the industry specific defining constructs, trust,
between a firm and its customers. In order to satisfaction, and service quality are in the top five.
reduce the number of dimensions and identify Maintaining customer retention, loyalty,
the most accepted dimensions that are necessary satisfaction and customer delight have been
for the establishment and management of mar- considered as the major objectives for firms to
keting relationships, authors use the frequency develop relationships and implement relation-
as the evaluation criteria. Since the frequency ship marketing practices (Lindgreen, 2001; Das,
is considered as an indication of the importance 2009; Agariya & Singh, 2011). Loyal customers
that researchers attach to each dimension, Theron are the most valuable assets of the firm; because
and Terblanche (2010) include 13 dimensions that loyal customers have high repurchase intention,
are cited most frequently in the literature. These show less price sensitivity, do more business with
dimensions are trust, commitment, satisfaction, the firm and pay less attention to competitors
communication, power, shared values, bonding, (Zeithaml, Berry, & Parasuraman, 1996). As the
cooperation, customization, relationship benefits, firms recognize the benefits of customer reten-
switching costs, competence and attractiveness of tion and loyalty, they are increasingly engaging
alternatives. Moreover, the findings of the study in relationship marketing practices. Relationship
reveal that trust, commitment, satisfaction and marketing practices create value through mutual
communication are the dimensions that are most cooperation and interdependence. Enterprises
frequently cited in empirical research and they should give special attention to the drivers that
were researched and cited at least twice as many contribute to the success of relationship market-
times as any of the other dimensions. ing efforts; so they can get a better idea about the
Agariya and Singh (2011) provide valuable necessary conditions for the development and
insights about general as well as sector-specific maintenance of successful relationships.
constructs of relationship marketing. Based on As can be seen in literature review above,
the literature review, Agariya and Singh (2011) there is no overall agreement on the complete set
identify 146 defining constructs that lead to rela- of dimensions that lead success of relationship
tionship marketing and as a result of the elimina- marketing practices; however, there is evident
tion of defining constructs that received below and overwhelming support in the literature for
10 citation, they specify 50 defining constructs the importance of some dimensions such as trust,
about relationship marketing. The six most often commitment, and satisfaction (see Figure 3). It
cited defining constructs in general are specified is clear that, to maintain customer loyalty, a firm
as trust, satisfaction/experience, loyalty, com- may enhance relationship quality through trust,
mitment, service quality, and communication commitment, and satisfaction (Rauyruen, Miller,
(Agariya & Singh, 2011). They also do a further & Barrett, 2007) and trust and satisfaction with
classification of the papers in order to identify the the relationship benefits are the antecedents and
sector-specific relationship marketing defining prerequisites of the relationship commitment.
45

Figure 3. Relationship commitment

commitment as a two-dimensional construct
such as calculative and affective commitment
(Geyskens et al., 1996; De Ryter, Moorman, &
Lemmink, 2001; Gounaris, 2005; Rauyruen,
Miller, & Barrett, 2007) or continuance and affec-
tive commitment (Fullerton, 2005). Relationship
commitment is also considered as multidimen-
sional in the commitment literature (Kelly, 2004;
Bansal, Irving, & Taylor, 2004).
Bansal et al. (2004) study a three component
model of consumer commitment and these com-
mitment types are affective, continuance, and
Commitment normative. Affective commitment refers to a
desire based, continuance commitment refers to
A review of the relationship marketing literature cost based, and normative commitment refers to
reveals the fact that commitment is the one of obligation based attachment to the firm. Kelly
these keys mediating constructs in the develop- (2004) mentions about instrumental, affective
ment of successful relational exchanges (Morgan and normative commitment. While instrumental
& Hunt, 1994; Geyskens, Steenkamp, & Scheer, commitment (refers to calculative or continuance
1996; Wetzels, De Ruyter, & Van Birgelen, 1998; commitment) is based on rational and economic
Gounaris, 2005). Commitment has been defined as calculation; affective commitment is driven by
an enduring desire to maintain a valued relation- an emotional and social attachment. However,
ship (Moorman, Zaltman, & Deshpande, 1992; normative commitment (refers to moral commit-
Morgan & Hunt, 1994) and the willingness to ment) is an attachment driven by felt obligation.
invest resources into a relationship (Gounaris, In calculative (instrumental) commitment cus-
2005). Since commitment refers to the motivation tomer commits to the relationship due to extrinsic
to continue a relationship (Moorman et al., 1992), reasons such as switching or termination costs, lack
an exchange partner who believes that an ongoing of alternatives, and dependence. Since, customer
relationship is so important wants to maintain that calculates the benefits associated with continuing
relationship. In other words, commitment exists the relationship and the costs of relationship ter-
only when the relationship is considered important mination; calculative commitment is based on task
and if there is no commitment, the relationship oriented and rational bond. Sometimes customers
will soon come to an end. Therefore, a relationship prefer to maintain the relationship if there is no
commitment is crucial in developing all types of alternative and lack of alternatives causes custom-
relational exchanges (Morgan & Hunt, 1994) and ers to feel that they are trapped in the relationship.
customer commitment to the relationship is also Relationship termination costs that result from the
seen as an important driver of customer loyalty perceived lack of potential alternative partners,
(Geyskens et al., 1996; Fullerton, 2003; Rauyruen, relationship dissolution expenses and switching
Miller, & Barrett, 2007). costs make the relationship important and these
In some studies relationship commitment is termination costs lead to dependence and gener-
considered as a uni-dimensional construct that ate commitment to the relationship. Customers
measures the intent to maintain relationship (An- are more likely to stay in existing relationships
derson & Weitz, 1992; Scheer & Stern, 1992). On when switching costs are greater (Bhattacharya &
the other hand some scholars view relationship Bolton, 2000). Although calculative commitment
46

maintains continuance, there is no relational bond commitment, which is also referred as moral or
because of this reason, customer may terminate normative commitment, arises from a sense of
the relationship if he receives an economically moral duty and responsibility toward a relation-
attractive offer from competitors (Gilliland & ship partner. Ought refers to standards that are
Bello, 2002). In affective commitment customer beyond the personal concerns and it is related to
attaches the relationship due to the liking or feel- a sense of duty arising from formal and informal
ing of positive affect towards the firm. Affectively rules (e.g. social norms and customs) (Sharma et
committed customers stay in relationship because al., 2006). However, the behavioral dimensions of
they want to and they like and enjoy working with commitment refer to the explicit expressions of
the firm (Fullerton, 2005). However, in normative relationship continuation and associated invest-
(moral) commitment compliance is due to the felt ments such as the allocation and development of
obligations, identification with or internalization resources, including human, financial, and physi-
of partner’s value. cal, in a particular relationship. Figure 4 briefly
On the other hand, Sharma, Young, and outlines the attitudinal forms of commitment.
Wilkinson (2006) conceptualize commitment as As the commitment to the relationship in-
value-based, affective, locked-in, obligation, and creases, the probability of termination of the rela-
behavioral commitment. Sharma et al. (2006) pro- tionship decreases and the degree of acquiescence
pose that commitment is a tendency to continue a increases. Relationship commitment positively
relationship that involves both psychological and influences the degree of relationship compliance
behavioral dimensions. The psychological dimen- (Morgan & Hunt, 1994). Cooperation of parties is
sion of commitment means attitudes and beliefs also one of the outcomes of relationship commit-
about the relationship, degree of preference, desire ment. Trust and commitment lead to cooperation
for relational continuity and long-term orientation. between parties. Value creation is essential for
Authors handle psychological dimension of com- customer satisfaction and cooperation promotes
mitment as attitudinal commitment and suggest value creation. Once trust is established and parties
that there are different motives to develop relation- committed to relationship, parties of the relation-
ship and the variety of motives causes formation ship coordinate and join their efforts to create
of different forms of attitudinal commitment such the value that exceed what the each party could
as value-based, affective, locked-in, and obliga- achieve separately (Anderson & Narus, 1990).
tion commitment. In this study, authors identify Equity is another critical dimension for build-
two types of calculative commitment: negative ing relational commitment. Fairness is essential
and positive calculative commitment. Negative for mutually satisfying exchanges and ongoing
calculative commitment is referred as locked-in relationships. Exchange partners should estab-
commitment which arises due to the perceived lack lish fair and equal relations because fairness
of alternatives or perceived switching and termina- determines satisfaction judgements in exchange
tion costs. Locked-in commitment tends to arise and also determines the future direction of the
as a result of irretrievable relationship-specific relationship. Lack of equity in the relational ex-
investments. Whereas Sharma et al. (2006) call change can decrease the relationship commitment
positive calculative commitment as value-based and damage the relationship. Inequity lowers
commitment, which represents the rational cal- the satisfaction, commitment and causes loss of
culation of benefits arising from continuing the trust between exchange partners. Thus, exchange
relationship. In value-based commitment, custom- partners that try to build relational commitment
ers continue their relationship because they benefit should rely on equity as a cornerstone (Gundlach
from staying in the relationship. Obligation based & Murphy, 1993).
47

Figure 4. Attitudinal commitment forms
Trust trust theory of relationship marketing, commit-

ment and trust are also essential for the process
Trust is seen as an important dimension of a re- of building cooperative marketing relationships.
lationship marketing and considered as essential Customers need to feel safe in dealing with the
for the development of successful relationships firm and seek trustworthy partners (Parasuraman
and the achievement of customer loyalty in the et al., 1985). Relational commitment cannot be
marketing literature (Parasuraman, Zeithaml, & maintained without establishment of trust; there-
Berry, 1985; Spekman, 1988; Morgan & Hunt, fore, trust is the antecedent of commitment in the
1994; Geyskens, Steenkamp, & Kumar, 1998; marketing literature (Garbarino & Johson, 1999).
Reichheld & Schefter, 2000). Trust is defined Reichheld and Schefter (2000, p.107) indicate that
as willingness to rely on an exchange partner in “to gain loyalty of customers, a company has to
whom one has confidence (Moorman, Deshpandé, first gain trust”. Geyskens et al. (1998) suggest
& Zaltman, 1993, p. 82) and Morgan and Hunt that loyalty is based on a developed trust and trust
(1994, p. 23) conceptualize trust as confidence in contributes to satisfaction, long term orientation
an exchange partner’s reliability and integrity. In and relationship marketing success.
the light of these definitions, confidence and reli- Trust exists in relationships when one party has
ability is seen important in the conception of trust confidence in an exchange partner’s reliability and
(Garbarino & Johson, 1999). .As it is emphasized integrity. Trustworthiness of a party is associated
in Morgan and Hunt’s (1994) commitment and with such qualities as consistency, competency,
48

honesty, fairness, responsibility and helpfulness opportunistically. It can be concluded that long-
(Morgan and Hunt, 1994). Although trust is an term relationships carry the seeds of their own
important construct in the process of building destruction and this creates barriers to successful
and maintaining relationships, it is also difficult relationship marketing. Therefore, managerial
to manage because the act of selling destroys the strategies must be developed to cope with this
conditions under which trust can develop (Bejou, tendency (Grayson & Ambler, 1999) because
Ennew, & Palmer 1998). The quality and continu- when the customer believes that the company
ity of the relationship can be maintained through engages in opportunistic behavior, or self- inter-
keeping promises. est maximization, such perceptions will lead to a
Firms can demonstrate and improve their decrease in the relationship commitment and also
trustworthiness by opening lines of communica- opportunistic behavior in a long-term relationship
tion, giving guarantee, and implementing a higher may erode the trust between exchange partners
standard of conduct (Berry, 2000). Communica- (Smith & Barclay, 1997).
tion links customers and firm together, fosters Shared values contribute to the development
trust and creates ongoing relationships. Two way of both trust and commitment. When exchange
communication plays a crucial role in building partners share more values and have common
trust. Firms should focus on communication not beliefs, goals and policies, they will be more
just for persuasion, because persuasion is more committed to their relationships and they will
limited in impact and scope. During communica- trust each other (Morgan & Hunt, 1994). Ethical
tion firms have to give much more importance to principles are also considered as prerequisite for
listening rather than telling because interactive fostering trust and collaborative atmosphere for
communication is crucial in relationship building relationship marketing to flourish. In order to build
and creates trust. Especially, timely communica- effective relationships, participants of exchange
tion fosters trust by resolving disputes (Duncan relationships should follow ethical issues by obey-
& Moriarty, 1998). Giving guarantee is an im- ing the ethics of keeping promises, the ethics of
portant factor in developing trust because it is truth telling, the ethics of equal treatment and the
an indication of a company’s commitment to fair ethics of communication. Ethical behavior fosters
play with customers. Furthermore, firms have to a relationship climate where exchange partners
operate with a higher standard of conduct than internalize ethical philosophy for the success of
just legality. Corporate practices that rob custom- the relationship. The absence of ethics creates the
ers may be legal but these practices destroy trust biggest obstacle for the success of relationship
and relationship. So, to be legal is not enough for marketing. Unethical behaviors can damage the
building trust, every policy and strategy must be trust that exists between the exchange partners
fair and right (Berry, 2000). and also the relationship commitment (Kavali,
Trust is important in long-term relationships Tzokas, & Saren, 1999).
and it is especially essential early in the formation
of relationships. However, as Grayson and Am- Satisfaction with the
bler (1999) indicate long-term relationships also Relationship Benefits
have a dark side that negatively affects existing
trust between partners in relationship marketing. Trust, satisfaction and commitment are among the
In long-term relationships, customer and the most frequently cited dimensions of relationship
company know each other very well, which may marketing (Theron & Terblanche, 2010; Agariya
cause customers to feel that the company is taking & Singh, 2011) and they are considered as the sig-
the advantage of trust between them and acting nificant constructs of relationship quality (Moor-
49

man et al, 1992; Morgan & Hunt, 1994). There is considered to be a tool for creating customer
is a stream of empirical research that stresses the satisfaction, building loyalty and establishing
link between satisfaction and customer loyalty. In relationships when a mass market is no longer a
consumer marketing, there is consistent evidence sufficient differentiator (Gilmore & Pine, 1997).
that satisfaction contributes to repurchase inten- It can be concluded that companies that better
tions, behavioural intentions, increase in share of know and better satisfy its customers’ individual
wallet, customer retention and customer loyalty needs can establish relationship commitment and
(Rust & Zahorik, 1993; Anderson & Sullivan, this leads to better sales.
1993; Anderson & Mittal, 2000; Cooil, Keining- Companies that want to maintain customer
ham, Aksoy, & Hsu, 2007) satisfaction should understand their customers’
Value is considered to be an important con- need and wants by establishing two way commu-
stituent of satisfaction with the relationship. nication. Interaction is one of the key constructs
Delivering superior value to customers provides for building long-term successful relationships.
competitive advantage to the company. Commit- One way communication, such as mass advertis-
ment to a relationship increases as the company ing, and promotional offers, is used mostly in
adds value to their offerings. Firms that provide mass marketing. However, in fragmented markets,
superior benefits, which are related with product one way communication is not an effective way
profitability, customer satisfaction and product to communicate with customers. Thus, one way
performance, will generate commitment to the communication must be replaced with two way
relationship (Morgan & Hunt, 1994). However, if communication in fragmented markets. Two way
the company alienates itself from the customers interaction can be possible by involving customers
and their actual needs, a constant adding more in the communication process. Customers interact
value approach can be questioned because the with the firm in store and as well as they contact
ultimate aim of adding more value will be only with the firm through e-mail, phone, and com-
achieved by being customer oriented. To establish pany’s web site, etc. Companies have to manage
and maintain long-term relationships, the delivered and coordinate all customer touch points carefully.
superior value has to satisfy the customers’ needs Companies have to respond to the customers who
and wants (Ravald & Grönroos, 1996). contact them in order to foster relationships and
Customization is the essential component of take feedback from them because timely, person-
relationship marketing because firms are operating alized and customized two-way communication
in a competitive markets where they can no longer helps firms in understanding individual customer
compete on the basis of standardized products and preferences, needs and wants as well as satisfac-
services (Kotha, 1995). Mass customization is tion and dissatisfaction points. In this way, firms
the process of providing and supporting uniquely can learn more about their customers and can
individualized products and services according to build satisfying exchange relationships (Gordon,
the each customer’s preferences in a cost effective 1998). As companies commit to two-way com-
way (Radder & Louw, 1999). In today’s markets, munication, they can get a response from custom-
markets are fragmented into many different seg- ers and they can adapt their offerings according
ments that consist of different customer needs and to the customer’s needs. Feedback is central to
preferences. In order to be competitive, firms have two-way communication. Receiving feedback is
to recognize the differences in customers’ needs not enough; it must be interpreted and retained
and wants and they have to offer differentiated for future use. In this way, ongoing satisfying
products and services that will satisfy the custom- relationships can be established. A healthy and
ers. Therefore, a strategy of mass customization satisfying relationship depends on meaning-
50

ful bilateral communication (Sisodia & Wolfe, ongoing relationships if there is greater (Sheth &
2000). Empathy is also seen as the dimension of Parvatiyar, 1995):
a satisfying exchange relationship that enables
two parties to see the situation from the other’s • Need to simplify buying tasks and infor-
perspective, this leads to an understanding of each mation processing,
other’s desires and goals. Empathy is a necessary • Expectations for the future reinforcements
condition for fostering a satisfying relationship and gains,
between two parties (Yau et al., 2000). • Consumer inertia,
Customer intimacy plays an important role in • Need for information and expertise in mak-
the development of satisfying relationships. Not ing choices,
only do economic benefits play an important role • Perceived risk in making choice, and
in the formation of satisfying relationships be- • Need to maintain cognitive consistency
tween organizations and customers, but emotions and psychological comfort by reducing
and recognition do as well. Customer intimacy cognitive dissonance and psychological
fosters the formation of satisfying relationships tension.
and increases the commitment to the relationship.
Providing personalized services to the customers Furthermore, customers engage in relational
can influence the customers’ perceptions of the market behavior because of sociological reasons
helpfulness and friendliness of an organization. such as influence of family, social norms, reference
These perceptions evoke emotions such as hap- groups and word of mouth communication; and
piness and satisfaction and these emotions cause their willingness to engage ongoing relationships
the development of customer intimacy that fosters is also influenced by institutional factors such as
the formation of relationships (Surprenant & government mandates, religious tenets, employers,
Solomon, 1987). and marketer policies. Institutions are the most
powerful mechanism in influencing consumers’
engagement of relational behavior and their influ-
MOTIVATIONS OF CUSTOMERS ences are both coercive and aspirational (Sheth
TO ENGAGE IN RELATIONSHIPS & Parvatiyar (1995).
Similarly, Hunt, Arnett and Madhavaram
Analysis of the motivations that lead customers to (2006) indicate that customers enter into relational
engage in ongoing relationships with the firm is exchanges with firms when customers believe that
critical for the firms to develop effective relation- the benefit and value derived from the relational
ship marketing strategies and practices. Sheth and exchanges exceeds the costs. Hunt et al. (2006)
Parvatiyar (1995) review the consumer behavior suggest that customers engage in relational market
literature and suggest that customers engage in behaviour with:
relational market behavior because of personal,
social, and institutional influences. They identify • The trusted firm which provides mar-
the personal motivations that lead customers to ket offer reliably, competently, and
engage in relational market behavior based on non-opportunistically,
consumer decision, learning, information process- • The firm that shares similar values with
ing, and cognitive consistency theories. Based them,
on these theories, they suggest that customers • The firm which decreases customers’
are willing to reduce their choices and engage in search costs,
51

• The firm that decreases customers’ per- Although customers are satisfied with the
ceived risks associated with the offering, firm and its offerings, they may terminate the
• The firm which is consistent with moral relationship and switch to competitive firm due to
obligation, the boredom and looking for novelty and variety
• The firm that allows customization and sat- or they may switch to alternatives that provide
isfies the customer’s needs and wants. much more value (Sheth & Parvatiyar, 1995). To
cope with this type of defections, firms have to
make continuous innovations, product improve-
RELATIONSHIP TERMINATION ments and market research to offer superior value
REASONS compared to their competitors.
Under some conditions, customers terminate the

relationship. DeSouza (1992) indicates that cus- FOUNDATIONS OF RELATIONSHIP
tomers terminate the relationship with the firm MARKETING SUCCESS
for various reasons and categorizes the customer
defection reasons as follows: Relationships are the fundamental asset of an
enterprise. Relationships determine the future
• Price Related Defections: Customers success of enterprises because if customers are
terminate the relationship because of the satisfied, they will do more business with the
high price and switch to a low-priced enterprise or if employees happy to work there,
competitor. they will be more productive and this may lead
• Product Related Defections: to customer satisfaction. If investors are satisfied
Dissatisfaction with the product, which with their returns, they will keep their funds in
does not meet the expectations of custom- the company. It can be concluded that relation-
ers, may cause termination of the relationships are essential for success of an enterprise
ship. Dissatisfied customers leave the firm in doing business. Therefore, enterprises should
and switch to a competitor that offers supe- manage their relationship marketing practices
rior product. effectively and create an atmosphere that enables
• Service Related Defections: Although enterprises to implement relationship marketing
customers are satisfied with the product, practices successfully. Facilitators of relationship
they may terminate the relationship with marketing have to be sustained in order provide
the firm because of its poor customer superior value to the customers. Facilitators and
services. barriers for relationship marketing success can
• Market Related Defections: When the be seen in Figure 5.
customers go out of business or move out An enterprise that wants to adopt relationship
of the market area, firm loses its customers. marketing as its core strategy, this enterprise needs
• Technology Related Defections: to align the way of doing business, organizational
Customers terminate the relationship with culture, leadership, management and each of its
the firm and convert to a product offered by capabilities such as people, process, technology
firms from outside the industry. and knowledge in order to facilitate implementa-
• Organizational Related Defections: Firm tion of relationship marketing practices; because
loses its customers because of its internal the main barriers for relationship marketing come
and external political considerations. from inside of the enterprise itself. There are
some barriers that limit the enterprise’s ability
52

Figure 5. Facilitators and barriers for relationship marketing success
to implement relationship marketing strategies marketing. They may show resistance

successfully, such as (Gordon, 1998): to the transformation of an organization
from traditional marketing to relationship
• The culture of the enterprise can be a bar- marketing in order to protect their status.
rier for the execution of relationship mar- Determined and strong leaders are needed
keting successfully. If the culture of an en- to sweep away the barriers in the mind of
terprise is not customer oriented, a cultural their staff.
change is needed to overcome barriers of • Technological capability of an organiza-
relationship marketing implementation. tion can also cause problems in the adap-
• The firm’s leadership is another barrier tation process of relationship marketing.
for establishing successful relationships. An organization must establish necessary
Satisfying and successful relationships can technologies that support the application
be formed if the top managers are capable of relationship marketing efficiently. A
of supporting the formation of these rela- Company must make investments in its
tionships. Top managers must be capable technologies and processes in order to help
of leading others in the organization to be- relationship marketing function properly.
come customer centric and adopt relation-
ship marketing practices. An enterprise Relational, resource, competence, internal
can face barriers in the presence of indeci- marketing, information technology, marketing
sive leaders who has not customer centric offering, historical and public policy factors are
vision. considered as the factors that influence relationship
• The people in the organization with their marketing based strategies’ success. Relationship
existing skills and knowledge can be a based strategy success depends on firms’ ability
barrier for the formation of relationship to (Hunt et al., 2006):
53

• Develop relationships based on trust, com- in the long term regarding relationship marketing
mitment, communication, keeping prom- practices.
ises, shared values, and cooperation; The business strategy of an enterprise may
• Search for partners with complementary re- facilitates or impede its relationship marketing
sources and create idiosyncratic resources; practices, because marketing strategies of an
• Develop alliance competences, improve its enterprise enable the company to deliver supe-
market-relating capabilities, and manage rior value to the customers. The strategy of an
well its relationship portfolios; organization has to ensure that organization as a
• Ensure that all employees of the firm whole works together to achieve the realization
participate in developing the intra-firm of its relationship marketing vision. An enterprise
relationships; should adopt customer centric strategies in order
• Build inter-organizational information sys- to establish and maintain strong relationships with
tems, integrate its information and com- customers and to deliver the value that customers
munication infrastructures, and implement want. The primary focus of the enterprise has to
CRM programs to manage efficiently and be relationships not be transactions. Strategies and
effectively its customer relationships; objectives of the enterprise must be compatible
• Focus on relationships that can contribute with the philosophy of relationship marketing
to the development of high-equity market and the enterprise should develop its strategies
offerings; with an understanding of the opportunities that
• Manage the interactions with all relation- relationship marketing provides. This means that,
ship partners to minimize opportunistic organizations must internalize the relationship
behavior, distribute benefits equally, and marketing practices as their business strategy in
monitor termination costs; and order to be successful (Morgan, 2000).
• Understand the antitrust, property, and Leadership support contributes to the suc-
contract law and to revise laws that inhibit cess of relationship marketing practices. The top
the adoption and implementation of soci- management plays a crucial role in transforming
etally beneficial relational exchange. the organization from transactional marketing to
relationship marketing practices. Leaders that
Vision of the organization is very important have a strong belief in the benefits of relationship
in creating an atmosphere that supports the rela- marketing facilitate the adaptation of relation-
tionship marketing practices within the enterprise ship marketing practices within the organization.
(Payne & Frow, 2005). Vision of the organization Only if the managers commit to the relationship
is defined as top management commitment to marketing strategies, implementation of rela-
customer centricity as a path to business success tionship marketing will be successful. If the top
(Peelen, Montfort, Beltman, & Klerkx, 2009). management of the organization focuses on the
Vision is considered as the first component for sales, short term gains and costs, relationship
the success of relationship marketing practices marketing practices of the organization cannot be
because vision determines the scope and direc- successful (Peelen, 2005). Organizations cannot
tion of relationship marketing practices within the successfully implement a relationship marketing
organization and also the development of other initiative unless the leadership in the company
components (Peelen et al., 2009). Therefore, the creates and shares value with customers rather
vision of the organization has to reflect an enter- than focus on the zero-sum game. Leaders must
prise’s ideal future state that it wants to achieve align their companies in support of building
54

relationships. Thus, leadership must view shar- delivery of goods and services. In addition to the
ing value as a virtue and must understand the operational excellence, enterprises also consider
significance of establishing a relationship before to create customer oriented culture and customer
implementing relationship marketing strategies. intimacy by the creating the empathy towards the
Leaders should initiate relationship marketing by customer and communicating with customers.
protecting the interests of the firm, customers and This will enable the enterprise to learn about its
suppliers (Gordon, 1998). Top management has customers and their needs (Peelen et al., 2009).
to be determined in following customer centric- In order to maintain successful ongoing relation-
ity as a path to business success. Determination ships with the customers, enterprises have to
of the top management is important in creating build a customer centric culture, organize around
a stable environment for the implementation of customers and be responsive to customers’ needs.
relationship marketing practices. Top management Enterprises need to develop and align a chain of
of an organization must integrate the company’s relationships within the organization to support
processes and other capabilities to create customer relationship marketing practices.
value and they should develop, sustain and control People in the organization may facilitate or
the aspects of relationships to facilitate relation- block the delivery of a valued customer experience.
ship marketing People are indispensable component of relation-
The structure of an organization has to be ship marketing practices because they play key role
organized to facilitate the implementation of in building satisfying ongoing relationships. The
relationship marketing practices. Traditional attitudes and performance of the employees may
organization structures such as business units influence the success of relationship marketing
organized by product are not compatible with practices. If they are not motivated to perform
relationship marketing. Organizational design in a customer-centric fashion, the relationship
must support forming and securing relationships marketing strategy will not be successful. There-
(Gordon, 1998). The structure of an organization fore, being successful in the external marketing
should be redesigned around target customer seg- activities requires initial success internally in
ment’s needs and organization structure requires motivating employees and getting their commit-
a leading role for customer management, rather ment to the pursuit of a relationship marketing
than product or brand management (Peelen, Belt- strategy (Grönroos, 1996b). Employees must be
man, Montfort, & Klerkx, 2006). Enterprises supported by technologies and processes in order
have to organize the structure of the company by to make them more effective during their interac-
building capabilities that are needed to enhance tion with customers. Customer information must
relationships. The design of an organization must be provided to employees within the organization
ensure the requirements of relationship marketing. especially who are at the front line because front
Enterprises should not consider the increase in line is the platform where customers and the com-
sales or efficiency as the evaluation criteria for pany interact. The people at the front line must
the success by themselves. Success of business has have the ability to communicate with customers
to be evaluated on the basis of increase in profit- in a manner that recognizes them, understands
ability as well as increase in customer satisfaction customer issues and suggests appropriate solutions
levels and customer retention rates, and decrease and responses (Gordon, 1998). There are a grow-
in customer churn. Structure of the organization ing number of channels by which an organization
can be organized to maintain operational excel- can interact with its customers. Effective and ef-
lence, which involves the timely and accurate ficient communications in face-to-face contacts,
55

by phone, internet or other interactive media en- just in time delivery, electronic data interchange,
able the organization to improve its accessibility inventory systems and computerized order place-
to customers and its understanding of customer ment technologies help firms to perform marketing
needs and wants (Peelen et al, 2009). To ensure functions efficiently while reducing the costs in
great customer experiences during the interac- the value adding process (Frazier, Spekman, &
tions, organization has to maintain the same high O’neal, 1988; Cannon & Perreault, 1999). The
standards across multiple and different channels establishment of shared technology helps firm to
within the organization. Therefore multichannel communicate with its suppliers efficiently, reduce
integration is critical in relationship marketing inventory and transaction costs, and foster long-
because it represents the point of customer value term business relationship formation (Wilson,
creation. An organization’s ability to manage 2000). Use of technologies enables enterprises
multichannel integration depends on its ability to implement many essential aspects of relation-
to gather customer information from all channels ship marketing.
and to integrate it with other relevant information Access to customer information enables en-
(Payne & Frow, 2005). In order to maintain cus- terprises to implement relationship marketing
tomer satisfaction, all people within the organiza- practices successfully. Lack of correct, current,
tion have to work together to develop the value and complete customer information is a barrier
that customers want. People in the organization for the relationship marketing. Customer knowl-
should be trained to communicate, build effective edge is essential for the value creation process.
relationships, gather customer information and Customer knowledge is one of the major assets of
use this information during the interaction with the organization. Analysis of customer information
the customers. helps firms to understand customer needs, wants
Technology facilitates the implementation and preferences, by this way they can offer satisfy-
of relationship marketing practices within the ing products and services. Customer knowledge
organization. Enterprises can benefit from the enables firms to identify and profile their pros-
technology in building successful relationships pects as well as enable firms to keep profitable
with customers. Advances in information commu- customers. Firms can use customer knowledge to
nication technologies enable two-way interaction find out cross-sell opportunities. The ability of
between the customer and company. Technology an enterprise to know its customer’s preferences
also plays an important role in gathering, sorting, and needs helps enterprise to serve them the way
sharing and using of customer data and informa- they wish to be served and also helps enterprise
tion that come from all customer contact points to to deliver superior value to the customers and
generate customer insight (Payne & Frow, 2005). build long lasting relationships with its custom-
With the help of technology enterprises store and ers (Reichheld, 2000). In relationship marketing,
retrieve data about the customers that describe information about customers is gathered on an
the customer demographics, buying behavior, individual basis and used to establish relation-
profitability, usage patterns, order frequency and ships. In today’s high volume sales environment
preferences (Gordon, 1998). Enterprises can use it is not easy to know much about the individual
this data to provide better value and customer customers; however, sophisticated information
service, which in return contribute to advance- technology enables companies to get information
ment of the relationships. Organizations also need about the individual customers that is used for
technology to build effective relationships with building and enriching relationships over a time
their suppliers. The use of technology between the (Sisodia & Wolfe, 2000). Organizations have to
organization and its suppliers is essential because make investment to acquire customer knowledge
56

and insight. At this point, marketing information customers and places the customer at the centre of
systems become important because information firm’s strategic thinking. The term of relationship
technology allows firms to anticipate the needs marketing refers to all marketing activities that
of individual customers. Thus, a company should are directed toward establishing, developing and
build an infrastructure of technology that captures, maintaining successful relational exchanges. Rela-
stores and processes the data that are needed to tionship marketing approach has to be considered
derive customer knowledge. The infrastructure beyond the typical supplier-buyer relationships,
technology of an organization should include because to deliver superior customer value and
a data warehouse, data mining tools, and other increase the efficiency of business performance
technologies that enable data gathering about the and profitability, firm has to develop and maintain
customer transactions, perceptions, communica- long-term relationships not only with customers
tions and behaviors. Thus, investing in customer but also parties that involve in the value creation
knowledge and insight is necessary for building process such as suppliers, internal markets, recruit-
successful relationships (Gordon, 1998). Customer ment markets, referral markets, intermediaries,
database can be used to develop and maintain non-governmental organizations and so on.
customer relationships by supporting marketing A relationship develops between exchange
activities such as segmenting the customer base, partners when mutual benefit exists for both
profiling customers, identifying the profitability partners. The implementation of relationship
of customers and cross-sell opportunities, and marketing provides advantages to customers as
supporting service activities (Vavra, 1994). well as to the firms. Relationship marketing pro-
An ongoing relationship with customers vides benefits to the firms through economies of
requires internal integration and collaboration retention. On the other hand, for the customers the
among functions and departments of the orga- benefits of relationships arise from dealing with
nization. The whole chain of activities has to known suppliers that lower search costs and risks.
be coordinated and managed as one total value Therefore, organizations are increasingly applying
creating process which enables and strengthens relationship marketing practices and trying to de-
relationship building and management (Grönroos, velop strong bonds with their customers. Although
1996b). Briefly, relationship marketing requires there are many determinants that contribute to the
a process that is engineered around the customer process of building and maintaining successful
and this leads to changes in existing process of relationships; trust, commitment and satisfaction
organizations. Communication processes and are among the most essential dimensions that lead
selling processes, together with other various success of relationship marketing practices. En-
processes should be adapted to the requirements terprises can enhance relationship quality through
of relationship marketing. Processes should be trust, commitment, and satisfaction.
focused around the customers and processes of An enterprise, which wants to adopt rela-
an organization must deliver the value that cus- tionship marketing as its core strategy, needs to
tomers want. align the way of doing business, organizational
culture, leadership, management and each of its
capabilities such as people, process, technology
CONCLUSION and knowledge in order to facilitate implementa-
tion of relationship marketing practices; because
Relationship marketing recognizes the signifi- the main barriers for relationship marketing come
cance of customers’ lifetime value and seeks to from inside of the enterprise itself.
develop progressively close relationships with
57

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KEY TERMS AND DEFINITIONS
to attract new customers at a no cost.
Relationship Commitment: Commitment has
Influence Markets: Influence markets em-
been defined as an enduring desire to maintain a
body entities and individuals, which have the
valued relationship and the willingness to invest
ability to influence the marketing environment
resources into a relationship. Commitment is the
of a company.
one the key mediating constructs in the develop-
Key Mediating Variable (KMV) Model:
ment of successful relational exchanges. Commit-
Morgan and Hunt’s (1994) key mediating variable
ment exists when the relationship is considered
(KMV) model of relationship marketing tries to
important.
point out the factors that contribute to the success
Relationship Termination Cost: Relationship
or failure of specific relationship marketing efforts.
termination costs can result from the perceived
According to this model, the presence of relation-
lack of potential alternatives, relationship dissolu-
ship commitment and trust is central to successful
tion expenses and switching costs. Relationship
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termination costs make the relationship important Six Market Model: Six markets model not only
and these termination costs lead to dependence includes standard buyer and seller relationships but
and generate commitment to the relationship. also includes other types of relationships that help
Relationship Trust: Trust is defined as will- firms to deliver superior value to their customers.
ingness to rely on an exchange partner in whom The six market model includes customer markets,
one has confidence. Trust exists in relationships referral markets, influence markets, internal mar-
when one party has confidence in an exchange kets, supplier markets and recruitment markets
partner’s reliability and integrity. Trust is seen as that have an impact on performance in consumer
an important dimension of a relationship marketing markets. Establishing relationships with these
and considered as essential for the development markets foster the enhancement of relationships
of successful relationships and the achievement with customers.
of customer loyalty.
63
64
Chapter 4
Managing Relationships
in Business Markets
and Role of Information
Communication Technologies
ABSTRACT
Companies can deliver superior customer value through managing their relationships in business mar-
kets. Information communication technologies play a critical role in developing effective relationships in
business markets. This chapter starts with analysing the nature of relationships in business markets and
continues with identifying the determinants of relationship development process in business-to-business
markets. Commitment, trust, cooperation, mutual goals, interdependence and power, performance sat-
isfaction, structural bonds, existence of alternatives, adaptation, non-retrievable investments, shared
technology, and social bonds are explained as essential determinants for continuation of business rela-
tionships. After indicating the significance of value-creating business alliances and networks in customer
value creation, main motivations for forming strategic business alliances are outlined. Factors that are
critical for the establishment of successful ongoing supplier-customer relationships are also analysed.
This chapter ends up with discussing the impact of ICTs on value-creating networks.
INTRODUCTION competitors. The role and contribution of busi-

ness markets in the chain of value creation is very
Managing relationships in business markets consti- significant. A company should be concerned with
tutes a major domain of relationship marketing and developing and managing relationships in business
it is also essential for successful customer relation- markets in order to create value to its customers
ship management. The concept of value has been and be successful in competitive markets. There is
recently attracting attention of enterprises and seen a tendency to improve the efficiency and effective-
as important to gain competitive advantage over ness of marketing by managing relationships in
DOI: 10.4018/978-1-4666-8231-3.ch004

Managing Relationships in Business Markets and Role of Information Communication Technologies
business markets because firms want to achieve relationships. Business relationships not actual-
competitive advantage and function better while ize only between two persons, many people that
reducing the costs in the value adding process. have different status and organizational roles get
The process of managing relationships in busi- involved in the business relationship. In contrast
ness markets cannot be seen only as cooperation to consumer markets, the parties in a business
with other companies, managing relationships in relationship tend to have resources and capabilities
business markets also involves working against that are more balanced. Business relationships are
them, through them, and in spite of them. This is relatively symmetrical and balanced in terms of
the complex reality for companies that operate in the control over resources, exercising influence,
business markets (Ford et al., 1998). In business taking the initiative and promoting changes. Busi-
markets, the focus has been shifting from indi- ness relationships often involve a low degree of
vidual firms to value creating networks that are formalization. Reliance on informal bonding,
developed to deliver value to the end consumer. which is built on past experience such as trust
Firms come together to form a value creating and confidence, is common in supplier-customer
network through developing strong relationships relationships. Informal bonding is considered as
with key partners who can add value to their market being more effective for the development of rela-
offering. Value creating networks have been also tionships than formal contractual arrangements.
referred as supply chains, market networks, value Briefly, in business markets, supplier and customer
chains and value nets or value creating networks are tied together by apparently long-lasting, broad,
in the business market literature (Kothandaraman relatively balanced and informal relationships
& Wilson, 2001). (Snehota & Hakansson, 1995).
Although business relationships are often com-
plex and informal, they become institutionalized
NATURE OF RELATIONSHIPS over time. During the life time of the relationships,
IN BUSINESS MARKETS routines and explicit and implied rules of behavior
emerge. The routines facilitate the interaction
Contribution of business markets to the value chain between the supplier and customer, help in coping
has been continuously increasing and relationships with the complexities and resolution of possible
in business markets have been considered as means conflicts (Snehota & Hakansson, 1995).
of value creation. Business relationships are often In business markets, customer and supplier
characterized as (Snehota & Hakansson, 1995): relationships may be present at a variety of levels
and in various compositions (Peelen, 2005). The
• Continuity context of business relationship and the firm’s
• Complexity position within the relationship influence the
• Symmetry outcomes of the relationship and generate different
• Informality relationship forms in the business markets. Dif-
ferences between the parties that are involved in
Supplier-customer relationship in business business relationships generate the variety of level
markets often demonstrates continuity and a rela- and various compositions of supplier-customer
tive stability. Complexity of business relationships relationships. Peelen (2005) explains the differ-
is derived from the number, type and the contact ences in supplier-customer relationships with the
pattern of individuals who are involved in the existence of:
65

• Cooperation or competition, linkages, legal bonds, cooperative norms, and

• Equal or unequal distribution of power, relationship-specific adaptations by suppliers and
• Dependence or independence, customers are specified as relationship aspects.
• Task or social-emotional orientation, and Based on these six relationship connectors, they
• Formal or informal form of contact. identify eight different relationship types for the
business markets (Cannon & Perreault, 1999):
The existence of cooperation or competition
leads to differences in supplier-customer relation- • Basic Buying and Selling Relationships:
ships because a relationship based on competition Basic buying and selling relationship has
evokes different value network, transaction and the lowest level of operational linkages,
cost structures compared to a cooperative relation- selling adaptations, buyer adaptations and
ship. In competitive relationships, the customer legal bonds between the exchange par-
compares the number of suppliers and looks ties. The characteristic of this type of re-
for best offer; however in cooperative relation- lationship is based on a relatively simple
ship, both supplier and customer work together exchange and the annual expenditures on
to achieve best result for both parties. Unequal the supply are the lowest in annual dollar
distribution of power in relationship may result volume.
if one party has expertise in one issue or if there • Bare Bones Relationships: Bare bones
is no other alternative. Existence of unequal relationships have the low level of legal
distribution of power creates dependence of one bonds and buyer adaptations. However, in
of the parties on the other. The powerful party in bare bones relationships operational link-
the relationship is independent and functions as a ages are notably higher, and there is more
leader who manages and shapes the relationship. adaptation by the seller. There is substan-
However, the less powerful party is the dependent tively less cooperation and information
one who plays a minor role in the relationship exchange between the buyer and seller and
and is shaped by the relationship. Whether the a substantially lower level of trust to the
interaction between the supplier and customer is supplier. Thus, bare bones relationships
task or social oriented or the interaction between are based primarily on a modest degree of
them formal or informal leads to formation of routinized structural linkages.
various compositions of business relationships • Contractual Transaction Relationships:
(Peelen, 2005). This type of relationship has highest lev-
Business relationships are context driven el of legal bonds and modest level of op-
and therefore, each relationship must be treated erational linkage; however, cooperation,
as unique to maintain continuity of successful buyer adaptation, trust to the supplier are
relationships. low in contractual relationships. Thus,
Cannon and Perreault (1999) identify the there is a high level of active market moni-
relationship connectors based on a review of toring and less reliance on sole sourcing.
key theories and frameworks that have guided Use of competitive bidding and contracts
empirical research in B2B relationships. They minimizes the interpersonal social contact.
develop an extensive set of potential relationship Contractual transaction relationships are
characteristics that reflect the manner in which formalized by a legal contract; therefore
the two parties interrelate and conduct commer- cooperation, interaction, and linkage are
cial exchange. Information exchange, operational minimal.
66

• Custom Supply Relationships: The dis- ment in mutually adaptive relationships.

tinguishing feature of custom supply rela- The buying firm’s trust in the supplier is
tionship is the relatively high level of seller the lowest of all the relationship types.
adaptation. In this type of relationship • Customer is King: The philosophy of
there is low levels of trust, least reliance on “customer is the king” is accepted and
sole sourcing, and a relatively high moni- this leads to emergence of highest level of
toring of the supply market. In custom sup- seller adaptations. However, reciprocal ad-
ply relationships, there is a tendency of us- aptations by the buyer are much lower in
ing multiple suppliers rather than focusing customer is king type of relationships com-
on collaboration with sole source. pared to mutually adaptive relationships.
• Cooperative Systems: Cooperative sys- Furthermore, this type of relationships
tems have the high level of operational involve operational linkages, informa-
linkages and cooperation, but there is low tion exchange, legal bonds, and coopera-
level of legal bonds and buyer adaptations. tion at or near the highest levels. Annual
Cooperative systems have the highest level expenditures on the supply and trust are
of trust to supplier. Although parties of also high. Buyers in this type of relation-
cooperative systems work closely to in- ship are bonded by a close and cooperative
crease the efficiency of operations, there relationship.
is no structural commitment through legal
bonds or relationship specific adaptation As can be seen from the above, relationships
between the parties. between the buyer and seller in the business mar-
• Collaborative: Collaborative relationships kets are not identical. There are different forms
are highly collaborative, have the highest of relationships between the supplier-customer in
level of cooperation and a high informa- business markets. As Cannon and Perreault (1999)
tion exchange. Buying firms have a high indicate, relational dimensions, competition in
degree of trust in their supplier, and more supply markets, purchase decision complexity,
frequently make single sourcing arrange- existence of procurement obstacles for the buying
ments than any other relationship types firm, purchase importance and other situational
do. Although parties in this type of rela- determinants cause formation of different types
tionship are not at the extreme in making of relationships in business markets. For instance,
specific adaptations to one another, the bare bones, basic buying and selling, and contrac-
partnering philosophy is dominant in the tual transactions relationships are more likely to
collaborative relationships. occur when there is a competitive supply market,
• Mutually Adaptive: A remarkable char- the purchase decision is not complex and supply is
acteristic of mutually adaptive relationship less important; however, the closest partnerships
type is the high degree of relationship spe- such mutually adaptive and customer is king rela-
cific adaptations made by both buyers and tional forms are more likely to emerge when there
sellers. As a result of high level of adap- is a need to overcome procurement obstacles, the
tation, this type of relationship is charac- purchase is important, there are few alternative
terized with a high degree of operational suppliers, the supply market is dynamic, and the
linkages and information exchange. The supply complexity is high. Therefore, the greater
annual expenditure on the supply is high, the procurement obstacles, the more likely the
single sourcing is more common, and in- customer develops a closer relational form with
terdependence created by mutual invest- the supplier. When the purchase is less important,
67

the need to manage uncertainty and dependence relationships, sellers need information about the
is minimal and involves less uncertainty and more market to be successful in value creation. Buyers
potential suppliers; simpler or distant relational of business markets are scout in the marketplace
forms are preferred (Cannon & Perreault, 1999). and able to follow market developments; therefore
Walter, Ritter, & Gemünden (2001) identify they can provide the relevant information to the
value-creating functions of buyer-seller relation- seller. Lastly, buyers who have experience in deal-
ships through seller’s perspective and argue that ing with official authorities of business markets,
fulfillment of the functions creates value for the may also realize access function and help seller
seller firm. The authors distinguish functions of to its contact with official authorities. Based on
business relationships as direct and indirect func- the indirect functions of business relationships,
tions. The direct functions of buyer- seller relation- Walter et al. (2001) suggest that value of the
ships in business markets have direct impact on the perceived relationship will be greater as business
seller firm’s performance. The profitable buyer- relationship fulfills indirect functions. Empirical
seller relationships are considered as important evidences indicate that both direct and indirect
functions of business relationships and necessary functions have impact on overall value perception
for the survival of the seller firm. Enterprises of business relationships (Walter et al., 2001).
are not only interested in profitability, but also Creating value through business relationships
in selling a certain quantity of products, because is becoming one of the most important issues. As
enterprises need to exceed a specific threshold can be seen from Figure 1, Walter et al. (2001)
to achieve economies of scale. Hence, volume classify business relationships into four types
function is essential for the success of seller firm. according to their value creation functions from
Safeguard function also contributes the success of the perspective of seller. Low performing rela-
seller firm by maintaining stability and control in tionships are ineffective relationships with low
sales terms within a dynamic marketplace. Walter direct and indirect value creating functions. The
et al. (2001) suggest the profitability, volume and value of selling relationship is directly derived
safeguard functions as direct value creator func- from the business relationship that provides high
tions of business relationships and they conclude profits and/or economies of scale. Networking
that if a relationship fulfills direct functions, the relationships have a strong influence on value
perceived value of the relationship will be greater creation in connected relationships. Within net-
for the seller firm. working relationships valuable resources (e.g.,
Walter et al. (2001) consider innovation, mar- technological know-how, access to new markets,
ket, scout and access as the indirect functions of gathering market information) are created. It is the
business relationships. Technological know-how, seller firm’s task to transform the relationship’s
creative ideas, product and process innovations that outcome into results elsewhere in the network.
are obtained from the buyer firm may improve the However, high performing relationships provide
value of the seller firm’s offerings. Referrals and high value for the seller firm that fulfill direct
recommendations from current buyers enable a as well as indirect value functions (Walter et al.,
seller to establish new business relationships and 2001). The relationships in business markets may
access to new markets. Therefore, market func- be managed according to what degree functions
tion is one of the indirect functions of business are fulfilled in a given relationship.
relationships, because referrals from existing The scope, depth, and realities of the business
buyers contribute the value of the relationship relationships lead to emergence of different forms
indirectly. Another indirect function of business of business relationships. The situational deter-
relationships is scout function. In buyer-seller minants shape the formation of relational types
68

Figure 1. Classifiyng value creation function of business relationships

Source: Adapted from Walter, A., Ritter, T., & Gemünden, H. G. (2001). Value creation in buyer–seller relationships: Theoretical
considerations and empirical results from a supplier’s perspective. Industrial Marketing Management, 30(4), 373.
between the parties in business markets. In similar buy large volumes and the proportion of the
situations firms prefer to cope in quite different quantity discount cannot be same for all buy-
ways. Thus, it is evident that there is no uniform ers. All kinds of favors (e.g. price reductions,
relationships and different forms of relationships customizations, loyalty programs) create a cost
may arise between the buyer and seller in response to the firm; therefore while providing privileges,
to situational and market conditions. firms have to consider the life time value of the
In supplier-customer relationships, all custom- customers. Firms have limited resources and they
ers do not deserve same treatment. For instance, should use these limited resources efficiently and
under some conditions firms adjust their basic effectively. Firms should primarily focus on their
price to reward customers; but they do not make key accounts. Key accounts are the customers
the price adjustments for all of their customers. that have strategic importance to the seller and
Even price adjustments cannot be the same for key accounts purchase a large volume from the
each customer. In business markets, suppliers seller and have the potential to lower a seller’s cost
may use quantity discounts as price adjustment (Krapfel, Salmond, & Spekman, 1991).
strategies in order to provide an incentive to the One of the most predominant relationship
customer to repurchase from the same seller. marketing strategies for business markets is Key
Sellers make a price reduction to buyers who Account Management (KAM) that attempts to
69

manage relationships with the largest and most tunistically or fails to meet customer preferences,
important business customers. In KAM, the guid- customer’s trust and confidence will be eroded.
ing principle is the 80/20 rule. This means that Social bonds can emerge especially between em-
when 20% of a firm’s customers provides 80% ployees in companies having similar sizes, cultures
of its business, that 20% deserves special atten- and locations. On the other hand, mutual invest-
tion. Firms want to maintain long-term profitable ments in business relationships create structural
relationships with the top 20% of customers that bonding. Successful structural bonding requires
accounts for 80% of the seller’s total revenue. supplier and customer collaboration to improve
The main objective of KAM is to provide value the quality of compliance and relationship specific
and in turn keep the buying firm from viewing adaptations in investments. Structural customer
the exchange as a commodity purchase (Cannon bonding can be created through (Buttle, 2009):
& Narayandas, 2000).
Firms make specific adaptations and invest- • Financial incentives that are provided by
ments in the relationships that are developed with the seller to retain the customer,
their key accounts. These adaptations involve • Legal links such as in the form of contracts
investments in the customization of products, or common ownership,
pricing and inventory management policies, • Equity of both parties’ contributions to de-
information sharing routines, and production velop an offer for the market,
processes to meet the needs of their largest and • Having leveraged knowledge and un-
most important business customers. Key account derstanding of the each parties’ pro-
customers expect more than just quality product, cesses, structures, policies, strengths and
on time delivery and reasonable price. They expect weaknesses.
more customized services and support from their • Mutual investments in technologies,
sellers such as vendor managed inventory, joint • Aligning the processes of the two
product development, unique ordering systems organization,
and customized products. KAM must be used as • Creating a buyer-seller- referral trading
a business strategy in order to develop efficient network in a specific geography,
relationships with the largest and most important • Engaging in a specific project such as new
business customers. Successful KAM can enhance product development project,
customer satisfaction, lower costs, increase rev- • Supplying multi-product to customer
enues and gain control in a relationship (Cannon makes difficult to break the bond.
& Narayandas, 2000).
Customer bonding in B2B context can be
created in the form of interpersonal, technology, DETERMINANTS OF BUSINESS
legal and process bonds between the customer and TO BUSINESS RELATIONSHIP
supplier. Buttle, Ahmad, and Aldlaigan (2002) DEVELOPMENT PROCESS
discuss customer bonding forms under two cat-
egories as social and structural bonds. Developing In order to build ongoing successful relationships
social bonds between the customer and supplier in business markets, enterprises have to be careful
can be possible by building positive interpersonal in selecting their partners because not all pros-
relationships. Interpersonal relationships take time pects are appropriate for developing cooperative
to evolve and interpersonal relationships are based relationship. While finding out ideal prospects
on high level of commitment and trust. However, for establishing in-depth business relationships,
supplier should keep in mind that if he acts oppor- an enterprise may consider the amount of value
70

that the prospect partner adds to its market offer the potential to add value, but working with them
and the degree of operational risks (e.g. risks is risky. A high risk operating partner who has the
result from the failure of providing consistent potential to add value to the market offering can
quality or on time delivery) associated working be selected as a partner and then their ability can
with that prospect. Kothandaraman and Wilson be improved in order to make them a low-risk op-
(2001) evaluate attractiveness and compatibility erating partner (Kothandaraman &Wilson, 2001).
of potential partners based on the degree of op- Enterprises may engage in long term relation-
erating risk and value contribution of the partner. ships with the parties, who have potential of high
As can be seen in Figure 2, authors categorize value adding and low operating risks. In business
the potential partners into four broad categories: markets, enterprises engage in inter-organizational
integrative, facilitative, developmental and losers. relationships to gain competitive advantage. Thus,
Facilitative and integrative partners are low-risk enterprises have to engage in relationships with
operating partners. Facilitative partners are easy to parties who will best complement their needs.
work with, but they do not add significant value to Commitment, trust, cooperation, mutual goals,
the market offering. They only facilitate low-cost interdependence and power, performance satisfac-
transaction. However, integrative partners are ideal tion, structural bonds, existence of alternatives,
partners in the value creating network because adaptation, non-retrievable investments, shared
they add significant value to the market offering technology and social bonds are among factors
and they are low-risk partners. Losers do not add that influence formation, performance and fu-
value to the market offering and they are high risk ture of business to business (B2B) relationships
operating partners. Developmental partners have (Wilson, 2000).
Figure 2. Evaluation of potential partners

Source: Kothandaraman, P., & Wilson, D. T. (2001). The future of competition: value-creating networks. Industrial Marketing
Management, 30(4), p.383.
71

Figure 3 lists the determinants of relationship and cooperation of multiple functional areas of
development process in B2B Markets. Continu- both supplier and customer firm. Internal and
ation of a business relationship depends on the inter firm integration and coordination are nec-
coordination of activities between B2B parties. essary for effective management of key account
Mutual adaptations can be seen as the prerequisite relationships Thus, information technologies must
of continuation of the relationship. B2B parties be integrated to enhance coordination efforts and
in a relationship tend to modify and adapt the maintain timely and effective communication
products or services exchanged as well as the among functional areas. This will foster coor-
processes and rules of conduct in order to function dination among firms and bring success of key
better with each other. The mutual adaptations, account relationships.
which bind the companies together and generate As indicated by Swaminathan and Reddy
mutual commitment, also constrain and empower (2000), degree of interdependence, amount of
the companies (Snehota & Hakansson, 1995). investment and exclusivity are among the crucial
Investments and adaptations, which encourage relationship characteristics that are considered as
commitment to the relationship and deepen the essential for the ongoing successful B2B relation-
interdependence, is necessary especially for the ship formation. Interdependence among B2B
success of key account relationships. Firms make parties in the relationship is one of the factors that
investments in their key accounts in attempt to en- influence the continuation of business relationship.
hance customer satisfaction, lower costs, increase As the interdependence between parties increases,
revenues and gain control in a relationship (Cannon in turn this will lead to greater commitment to
& Narayandas, 2000). Effective management of the B2B relationship. The role of exclusivity is
key accounts can be possible by the involvement critical in the formation of business relationships.
Figure 3. Determinants of relationship development process in B2B markets
72

The term of partner exclusivity means that parties transaction specific assets. Although, dependence
engage in a specific relationship by excluding the plays a role in determining long-term orientation,
other relationships. An exclusive agreement with it is not sufficient to explain it. Trust is necessary
a business party leads to increase commitment for parties to have a long term orientation (Gane-
to the relationship. Although exit barriers and san, 1994). The level of trust is likely to have an
exclusivity constraints that are imposed upon impact on relationship characteristics. The more
parties may serve to increase interdependence, the parties of the B2B relationship trust each other,
asymmetries between parties may create power the less will be the intentional managerial action
imbalances and lead to a reduction in the ef- towards control of external interdependencies; on
fectiveness of the B2B relationship. The degree the other hand, low trust among parties is likely
of investment in a B2B relationship influences to lead to high management control and result in
the success of the relationship. As the parties greater degree of internalization of interdepen-
make a greater investment of assets, time, and dence and use of power (Sheth & Parvatiyar, 1992).
managerial resources in a relationship, they can Distance is another significant determinant in
maintain a greater commitment to the relation- the formation of B2B relationships. The greater
ship. However, investments in assets may lead to the social (differences in the way of thinking and
opportunistic behavior and power imbalances. working of two organizations), technological (the
Firms can undertake measures to overcome the differences between the product and production
risk of opportunistic behavior in a relationship. technologies of the two organizations) and cul-
Firms can avoid these opportunistic behaviors by tural (differences in the norms and values of the
making contractual governance (Swaminathan & two organizations) distance between the parties
Reddy, 2000). of the relationship, the more it is likely that there
Decisions about the relationship specific will be problems in the interactions between the
investments are strategically important in devel- parties and this distance between the parties can
oping and maintaining key account relationships. lead to a dissolution of business relationships
Systematic and proper selection of right accounts (Ford et al., 1998).
in order to make investments is very important
for continuation of key account relationships
because sellers can lose a significant amount of VALUE CREATING BUSINESS
money serving the wrong set of customers as ALLIANCES AND NETWORKS
key accounts. These decisions can be based on
an analysis of a customers’ cost to serve. In this In today’s market conditions, enterprises are
analysis, firms consider their customer base as moving into an environment in which they do
a portfolio and choose customers that yield the not compete against each other but they become
highest return. The strategic importance of the a member of a value creating network of enter-
customer can be determined using sales volumes, prises in order to create value for the customer and
account’s market leadership, future potential, and they begin to compete against another network of
the prestige of the customer. Sellers may give the enterprises (Kothandaraman & Wilson, 2001).
decision of making relationship specific invest- Business alliances in B2B markets facilitate the
ments after an identification of the key accounts creation of superior value and satisfaction in
(Cannon & Narayandas, 2000). business to consumer (B2C) markets. The term
Firms concentrate on developing long-term business alliance is used to describe various inter-
relationships through dependence and locking in organizational relationships such as relationships
relationship parties by getting them to invest in with suppliers, distribution relationships, strategic
73

alliances and horizontal alliances. Sheth and Par- Value creating business alliances and networks
vatiyar (1992, p.72) define business alliance as an are considered as important forms of relationship
ongoing, formal, business relationship between marketing and defined as collaborative efforts be-
two or more independent firms to achieve common tween two or more firms that bring their resources
goals (Sheth & Parvatiyar, 1992, p. 72). As can be together in order to achieve their mutually compat-
seen from the definition, business alliance is more ible goals that they could not achieve easily alone
than a standard supplier-customer relationship. (Hunt, Lambe, & Wittmann, 2002). Business alli-
To consider a relationship as business alliance, ance starts with the objective of creating superior
parties of the relationship have a purpose to form customer value. Core capabilities of the network
the alliance. Joint ventures, R&D consortia, cross- member firms come together to create superior
licensing, cross-distribution, supply purchasing, customer value (Kothandaraman & Wilson, 2001).
franchising, co-manufacturing, cross marketing, Hunt et al. (2002) develop an integrative model
buying groups, and so on, are all considered as of alliance success by using the resource based,
within the scope of business alliances as far as they competence based, relational factor and competi-
are formed to achieve common purpose (Sheth & tive advantage perspectives. The resource based
Parvatiyar, 1992). Briefly, an alliance emerges perspective explains that alliance success results
as a result of inter-organizational cooperative from bringing the complementary resources to the
strategies that aim to combine specific resources alliance (complementary resources enable alliance
and competences of cooperating organizations in partners to complete their resource assortments)
order to achieve common goals (Varadarajan & and developing idiosyncratic resources (during the
Cunningham, 2000). life of the alliance idiosyncratic resources are cre-
The popularity of business alliances has been ated by combining the resources of partner firms
increasing and alliances are becoming an important and they are unique to the alliance) during the life
form of business activity. Macro environmental of alliance. The competence based view focuses
factors (e.g. globalization, competition, techno- on the role of alliance management capabilities
logical advancements) contribute to the current and argues that alliances are successful when
popularity of business alliances. Enterprises the partners develop an organizational culture
form ongoing and formal business relationships that has the capability for securing, developing,
in order to realize a variety of corporate level and managing alliances. On the other hand, the
of purposes. An enterprise may prefer to form relational factors perspective focuses on charac-
a business alliance for strategic intentions that teristics of the alliance relationship and suggest
are related with the enterprise’s future position that alliance relationship must be based on as
and competitiveness such as maintaining growth cooperation, trust, commitment, shared values
opportunities, strategic intent, protection against and communication in order to form successful
external threats and diversification. As can be alliances. Lastly and may be most importantly
seen from Figure 4, an enterprise may also enter the competitive advantage perspective indicates
into a business alliance in order to ensure resource that successful alliances result from alliances that
efficiency, increase asset utilization, enhance core enable firms to create superior marketing offering
competence and close performance gaps, which and value to their customers. Successful alliances
are the operational purposes of business alliances must provide partners with some advantage over
that have an influence on the corporate operational their competitors. In order to provide an integra-
efficiency (Sheth & Parvatiyar, 2000). tive theory of alliance success, authors put forth
74

Figure 4. Objectives of business alliance formation

Source: Sheth, J. N. & Parvatiyar, A. (2000). Toward a Theory of Business Alliance Formation. In J. N. Sheth & A. Parvatiyar
(Eds.), Handbook of relationship marketing (pp. 303-323). Thousand Oaks, CA: Sage, p. 310.
a theory based model that integrates all these four or effectively market offerings that have value
perspectives and conclude that resource advantage for their customers. Therefore, to form success-
theory provides a theoretical foundation for the ful alliances firms have to consider whether the
integrative model of alliance success (Hunt et alliance contributes to its financial (e.g. increase
al., 2002). its financial opportunities), physical (e.g. allow
More efficiently producing value, efficiently access to equipment or materials), legal (e.g. per-
producing more value or more efficiently produc- mit to use trademarks and licences), human (e.g.
ing more value provide competitive advantage to benefit from the competencies and knowledge
the firm. Therefore, firms can gain competitive of employees), organizational (e.g. improve its
advantage through improving its efficiency advan- know-how, competences, expertise), informational
tage, effectiveness advantage or both efficiency (e.g. access to market, customer, or technology
and effectiveness advantage. Inter organizational knowledge), and relational (e.g. enable to build
alliances may allow firms to gain competitive relationships with customers) resources and abili-
advantage; however business alliances can be ties (Hunt et al. 2002).
complex and risky. Although there are some suc- The core resources and capabilities are not the
cessful alliances; there is also high failure rates sole determinant of value creation in the network.
for alliances. Success of the alliance depends The nature of relationships that the firms have
on the ability of the alliance to contribute the between themselves in the value creating network
partners’ resources to produce efficiently and/ also influence the value creation process. Problems
75

between the inter-firm relations may negatively non-competitors) and they propose requirements
influence the value creation in the network. There- of successful alliance formation as follows:
fore, the availability of the capabilities is meaning-
ful with the quality of relationships between the • A successful strategic alliance (among
firms. The quality of relationship facilitates the competitors or non-competitors) requires
creation of value. The nature of relationships also a high degree of commitment among al-
contributes to the continuation of the network and liance parties and customizes investments
enables the firms to continue investing in order that are exclusive to the alliance
to improve their core capabilities in the network • A successful operations alliance (among
(Kothandaraman & Wilson, 2001). competitors or non-competitors) requires a
The characteristics of the parties that engage high degree of co-ordination and resource
in a relationship and partnership are the anteced- sharing on an ongoing basis. Processes of
ents of a successful business alliance formation. alliance parties must be compatible with
Characteristics of the potential partners must be each parties to achieve operational efficien-
evaluated before entering a relationship. In order cy; thus operations alliance also requires
to establish successful business alliances, parties re-organizing of business processes of al-
are expected to be compatible with norms, values, liance parties.
managerial styles, goals and expectations. Com- • A successful competitive alliance (for
patibility of goals is the primary feature of the strategic or operations purpose) requires a
successful partnership. Partners who share similar high degree of management control and al-
goals and expectations are the ideal candidates liance must be limited to specific functions.
for the successful partnerships, because having Competitive alliances have to be organized
similar goals and expectations leads to effective for mutual learning among competitors.
cooperation among alliance partners. Cultural dif- • A successful non-competitive alliance
ferences or similarities can be considered as a key (for strategic of operations purpose) re-
variable that influences the success of alliances. quires a high degree of autonomy, cross-
Corporate culture compatibility especially plays functional co-operation and learning.
a critical role in ensuring the success of business Non-competitive alliances must encourage
relationships because incompatibility in cultures flow of communication among the alliance
of alliance partners can be damaging to alliance parties.
formation and performance. Partners of an alli-
ance must complement each other in terms of
strengths and weaknesses and business alliance MANAGING RELATIONSHIPS
must provide a potential for value enhancement. IN STRATEGIC ALLIANCES
Lack of complementarity is considered as one of
the reasons for the failure of an alliance. Business In the literature some authors use strategic alli-
alliances may also fail when the partners do not ance as a common term to refer to all types of
significantly enhance the perceived value of the business alliances. However, according to Sheth
products and services (Swaminathan & Reddy, and Parvatiyar (1992) this creates confusion and
2000). they argue that strategic alliance must not be used
Sheth and Parvatiyar (1992) try to explain busi- as a generic term for all alliances because not all
ness alliance formation based on purpose (strategic business alliances are formed with a strategic pur-
versus operations) and parties (competitors versus pose. They conclude that use of strategic alliance
in business is best suited for competitive alliances
76

and it must not be used as a generic term for all hance its competitive position in the home
alliances. Inter-organizational partnership can be market.
viewed as a strategic alliance only if it enables • Product Related Motives: Enterprises
the cooperating firms to achieve competitive that desire to broaden their product line, fill
advantage in the marketplace. Strategic alliance gaps in their product line and differentiate
is the best way for some firms to enhance their or add value to their current products en-
competitive position in the environments that are ter into strategic alliances with enterprises
characterized by scarce resources, large capital that possess complementary skills and re-
requirements, and rapid technological change. In sources. Strategic alliances help firms to
the face of these challenging environments firms create differentiation advantage and firms
engage in strategic alliances with other firms can offer goods or services that customers
that possess complementary skills and resources perceive as consistently different from the
(Achrol, 1991). Inter-organizational cooperative competitors’ offerings. Firms can broaden
relationships can exist between two firms that their product line and fill product line gaps
are at the same level in the value-added system by joining their capabilities. In turn, this
or between two firms whose primary economic will lead to end customer satisfaction.
commitments are in the adjacent stages of the • Product/Market Related Motives: As
value chain. The former type of strategic alliance industries become mature and growth op-
is called a horizontal alliance and the latter one portunities of the firms are limited, firms
is called a vertical alliance (Varadarajan & Cun- engage in strategic alliance formation in
ningham, 2000). attempt to diversify and take advantage of
There are many motives that lead enterprises growth opportunities in new product-mar-
to engage in strategic alliances. Varadarajan and ket domain. Also, by forming strategic alli-
Cunningham (2000) categorize the motives for ances firms try to gain a foothold in evolv-
forming strategic alliances as following: ing industries whose product offerings may
emerge as either substitutes for or comple-
• Market Entry and Market Position ments to the firm’s product offerings.
Motives: Enterprises, which want to gain • Market Structure Modification Motives:
access to international markets and by-pass Enterprises form strategic alliances in or-
entering barriers of international markets der to join their forces and gain additional
posed by legal or political factors, often strength; by this way, members of the stra-
prefer to form strategic alliances to reduce tegic alliance build entry barriers. Firms
the economic risk when they enter new in- also enter into strategic alliances in order to
ternational markets. By forming alliances overcome the entry barriers that exist in the
with the local firms that are familiar with market. Thus, strategic alliance formation
the local environment, a firm may over- enables the firm to shape industry structure
come the political, legal and regulatory by creating barriers to entry in order to re-
barriers and also may reduce the political duce the potential threat of future compe-
risks. Moreover, in depth knowledge of tition. Furthermore, engaging in strategic
the domestic firm about the local markets alliance helps enterprises to develop new
enhances the effectiveness of the market- technological standards and technological
ing effort. Enterprises also prefer to enter revolution that lead to changes in consum-
into a strategic alliance to defend and en- ers’ preferences. In turn, this alters the bas-
es of competition.
77

• Market Entry Timing Motives: Engaging ing their skills. As a result of strategic al-
in strategic alliances with enterprises, liances, firms acquire new skills that lead
which possess complementary skills and firms to gain competitive advantage and to
resources, accelerates pace of entry into perform efficiently.
new product domain by accelerating pace
of R&D, product development and market There is a close link between firm resources
entry. and competitive advantage. Firm resources are
• Motives Related to Resource Use composed of assets, capabilities, organizational
Efficiency: The desire to lower manufac- processes, firm attributes, information and knowl-
turing and marketing costs leads enterpris- edge that enable firms to sustain competitive
es to form strategic alliances. Establishing advantage. Through strategic alliances parties join
inter-organizational strategic relationships their resources to enhance their effectiveness and
provides cost leadership. Alliance part- efficiency in the market. In order to form efficient
ners perform value chain activities at a and effective strategic alliances, resources of the
lower cost by joining their firm resources. firms that engage in strategic alliances must be
Sharing the resource capabilities may al- sources of sustainable competitive advantage. The
low alliance parties to benefit from the bundle of resources that are pulled in an alliance
economies of scale and experience effects must be valuable and must help the partners of
which lower costs and increase efficiency. the alliance to improve their effectiveness and
• Resource Extension and Risk Reduction efficiency. The resources that are pulled in alli-
Motives: Strategic alliances create an op- ance can be sources of sustainable competitive
portunity for resource extension. Superior advantage if (Barney, 2000):
and unique resources are created through
pooling resources of alliance partners in • Resources of the alliance partners are
a strategic alliance. In turn, this leads to valuable,
competitive advantage. Thus, resource ex- • Resources of the alliance partners are rare
tension is one of the benefits of the stra- among the firm’s current and potential
tegic alliances. Especially small firms that competitors,
lack the necessary resources to invest in • Resources of the alliance partners are im-
R&D, new products, and other competitive perfectly imitable, and
activities that are critical to gain a foothold • There are not strategically equivalent sub-
in the market or enhance their market po- stitutes for the resources.
sition prefer to form strategic alliances. In
addition, in the case of technological, mar- As competition in global markets increases,
ket and other uncertainties to cope with un- more firms find themselves lacking in resources
certainties, alliance parties combine their to compete effectively in today’s markets. Market
resources. uncertainty, a desire to increase efficiency, skill
• Skill Enhancement Motives: A firm en- and resource dependence, and imperfect market
ters into strategic alliances in order to ac- conditions force firms to form strategic alliances
quire new skills and enhance present skills to gain a competitive advantage. Varadarajan and
by collaborating with alliance partners. Cunningham (2000) outline the firm, industry
Developing strategic relationships enables and environmental that influence the propensity
firms to create superior skills. Firms create of firms to enter into strategic alliances. Product
distinctive and superior skills by integrat- diversity of the firm, firm size and its ability to
78

mobilize resources independently, prior involve- such as just in time delivery, inventory systems and
ment in strategic alliances and outcomes of these computerized order placement technologies help
alliances, top management attitudes towards stra- firms to perform marketing functions efficiently
tegic alliances, and corporate culture are among (Frazier, Spekman, & O’neal, 1988). Establish-
characteristics of the firm that influence the firm’s ing close relationships between firms and their
tendency to enter into alliance. Characteristics suppliers provides a positional advantage to the
of the industry also play a role in influencing firms; therefore, firms must pursue a strategic
the propensity of a firm to engage in alliances. approach to manage their supplier relationships
Minimum efficient scale, cost structure of the (Day & Wensley, 1988).
industry, threat of new entrants and competition The establishment of relationships with
from substitutes are some of the business char- suppliers leads to improvement in the overall
acteristics that affect the decision of firms about performance of the focal firm. Effective supply
entering into an alliance. Moreover, environmental chain management provides benefits in terms of
characteristics such as change in buying patterns, costs, quality, delivery, lead time and reliability
technology, political and legal environment and (Scott & Westbrook, 1991). The development of
market uncertainty influence the tendency of firms supplier partnerships plays an important role not
to enter into strategic alliances. Especially in the only in reducing costs but also in creating customer
face of rapid technological changes, firms find value and satisfaction. Customer satisfaction can
themselves lacking in some skills and resources arise from the better quality products with zero
that they need to compete in the changing mar- defects and faster product delivery. Establishing
ketplace. Thus, this influences the tendency of relationships with suppliers plays a vital role in
firms to enter into alliances with firms that possess improving customer satisfaction and retention,
complementary resources and skills (Varadarajan and enhancing profitability and competitiveness.
& Cunningham, 2000). Thus, building successful relationships with sup-
pliers is critical for success in consumer markets,
creating customer satisfaction and for servicing
MANAGING RELATIONSHIPS customers effectively (Buchanan & Gillies, 2000).
WITH SUPPLIERS As a result of increase in customer satisfaction,
supplier-customer relationship performance has an
In today’s competitive markets, enterprises impact on return on assets, return on investment,
have been increasingly realizing the importance return on sales, sales growth, and new product
of the supply side of their operations because sales (Mentzer, 2000). Firms want to work with
managing relationships with suppliers provides trustworthy suppliers who deliver high quality
a major contribution for the success of company products just in time. Therefore, firms engage in
in B2C markets. Building close relationships close collaborative relationships with suppliers in
with suppliers helps firms to serve their custom- order to reduce risks (Payne, 2000). Collaborative
ers more effectively and efficiently. To meet the supplier-customer relationships allow firms to
commitments about quality, cost, and delivery, deliver unique value-added services to the custom-
businesses have to include suppliers as an integral ers that cannot be imitated by competitor firms.
part of their product delivery process (Sharma, Competition based on time and quality, effec-
Krishnan, & Grewal, 2001). As the firms want to tive and efficient performance, the creation of val-
achieve marketing efficiency and effectiveness, ue-added services, the vision of top management,
supplier-customer relationship management has strategic interface teams, organizational issues,
been becoming important. Advanced technologies partnership technology, asset specificity, joint
79

programs, global partnering and agreement on serving the customer are the factors that in-
partnership objectives and performance measures fluence the future of the supplier-customer
are among the critical factors that contribute to relationships. In a successful supplier-
the establishment of successful supplier-customer customer relationships, the supplier must
relationships (Mentzer, 2000). In order to create function its operational activities efficient-
superior value for the business to consumer mar- ly with a minimum cost and also the sup-
kets, an enterprise has to develop and maintain plier must meet the needs of focal firms by
successful relationships with its suppliers. Factors giving them superior service.
that are critical for the establishment of successful • Creation of Value-Added Services: The
ongoing supplier-customer relationships can be long-term successful supplier-customer
outlined as following and summarized in Figure relationship can be possible if the supplier
5 (Mentzer, 2000): provides value-added services to the fo-
cal firm that cannot be achievable in other
• Time and Quality-Based Competition: ways. The combination of more effective
Time and quality-based competition is the time and quality-based delivery and lower
most important component of establishing costs leads to the creation of value in the
successful supplier-customer relationships supplier-customer relationship. As the cre-
because time and quality-based competi- ation of value-added services increases in
tion focus on achieving positional advan- a specific supplier-customer relationship,
tage by eliminating waste in the form of the commitment to the relationship also
time, effort, defective units and inventory. increases. An effective supplier-customer
Time and quality- based systems, such as relationship generates benefits to the focal
just in time (JIT), quick response (QR), and firm, such as better quality products, faster
vendor managed inventory (VMI) must be product delivery and consistent product
established with key suppliers in order to availability. The focal firm can serve effec-
serve customers better and maintain high tively and efficiently their customers and
customer satisfaction. Successfully estab- achieve positional advantage as a result of
lished time and quality systems with sup- value-added services that are provided by a
pliers allow better quality products with supplier-customer relationship.
zero defects, more consistent product avail- • Top Management Vision: The suppli-
ability, and faster product delivery from ers’ ability to lower costs, maintain quality
the supplier. Such benefits provide a po- and control inventory, increases competi-
sitional advantage to the focal firm. Thus, tive advantage of the focal firm and lead
there must be coordination between the to an increase in final consumer satisfac-
firm and its key suppliers because effective tion. Therefore, firms have to be careful
long-term supplier-customer relationships in selecting their supplier partners. At this
reduce the cost of inventory, improve as- point, top management vision plays an im-
set utilization, provide consistent product portant role in supplier partnering success.
availability and allow focal firms to deliver Top management must consider the sig-
superior customer service. nificant operational and market impacts of
• Efficiency and Effectiveness: Operational supplier partnerships while selecting their
performance of the supplier (providing suppliers.
products just in time and with high qual- • Strategic Interface Teams: Successful
ity) and the effectiveness of the supplier in supplier-customer relationship can be
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Figure 5. Critical factors for successful supplier partnerships

Source: Adapted from Mentzer, J. T. (2000). Supplier Partnering. In J. N. Sheth & A. Parvatiyar (Eds.), Handbook of relation-
ship marketing (pp. 457-477). Thousand Oaks, CA: Sage, p. 459.
81

achievable only when all parties in the fo- nological infrastructure investments (e.g.
cal and supplier firm integrate and work to- electronic data interchange (EDI), tracking
gether to create final consumer satisfaction. systems). For instance, EDI systems allow
• Organizational Alignment: The suc- the supplier to deliver the products just in
cessful continuance of supplier-customer time. In turn, just in time delivery leads to
relationship depends on the establishment a reduction in inventory costs because with
of hierarchies and reporting relationships the help of the EDI, suppliers can receive
both within each firm and between the accurate, real time demand information.
supplier and customer firm. To increase Both focal firm and supplier have to make
the collaboration between the supplier and investments in technology that may allow
customer, organizational alignment of two communication and cooperation between
firms must be compatible with each other. the parties of the relationship.
Organizational alignment is needed to es- • Asset Specificity: The formation of suc-
tablish effective communication between cessful supplier partnership requires in-
the focal firm and supplier, which in turn vestment in assets both by suppliers and
leads to long-term successful supplier the focal firm. Asset investments, such as
partnering. technology-based investments, provide po-
• Agreement on Performance Dimensions: tential for the creation of value-added ser-
Supplier-customer relationships do not vices for the focal firm and the customers
function successfully in the absence of of the focal firm. However, these invest-
agreement on performance dimensions. ments are idiosyncratic that cannot be used
There are financial (e.g. return on invest- with other customers and non-fungible that
ment and direct product profit) and non- cannot be sold to any other firm. Thus, to
financial (reliability of order lead times, make such an investment is risky because
customer satisfaction scores) performance if the relationship breaks down, the sup-
measurements. Supplier and customer have plier may be left with millions of dollars of
to agree on performance dimensions and investment that are not compatible with the
according to these dimensions firm may systems of other customers. On the other
evaluate the performance of the supplier. hand, these asset specificity investments
Performance measurements are essential also enable long-term relationship success.
for the establishment of trust and fairness
in the relationship with the supplier.
• Technological Investments: Supplier- IMPACT OF ICTs ON VALUE
customer relationships can be successful CREATING NETWORKS
if the supply chain performs its functions
efficiently and effectively. Making techno- In today’s market conditions information commu-
logical investments, which enable collabo- nication technologies (ICTs) are essential for doing
ration of the supplier and customer, is nec- business and enterprises have been increasingly
essary to increase the performance of the integrating ICTs to their processes. Information
supply chain and also essential for the suc- and internet technologies enable new ways of
cess of supplier partnerships. Information managing business relationships and new models
about the orders, demand, and/or order for doing business. Technological advancements
status can be shared between the parties of in ICTs foster the emergence of value networks,
supplier partnership with the help of tech- which allow firms to increase their efficiency
82

and effectiveness in business markets. Firms have ing innovation through the value chain, allow
been increasingly integrating web technologies companies to reduce their costs and launch new
for the successful management of supply chains. products to the market faster (Manyika, Roberts,
Web technologies are being used in managing & Sprague, 2008).
transportation, order processing, purchasing, Businesses can create value through their tech-
customer service and inventory in supply chains. nology delivery, product delivery, and customer
As value network members connect to each delivery processes (Sharma et al., 2001). Product
other with the implementation ICTs, there is no delivery process is concerned with delivering
need for holding large amount of inventories and value that meet customer requirements through
this reduces costs associated with holding large product development and delivery. Sharma et al.
physical inventories and length of supply chain. (2001) indicate some instances about the use of
In today’s business markets value can be defined technology in value creation to reveal the major
in terms of cycle time reduction (e.g. fast deliv- role of technology in creating product delivery
ery, quick response), cost savings, and superior as follows:
customer service. Therefore, web technologies
are seen as a way to reduce transaction costs as • Customization of the market offering
well as a means of creating value through in- is considered as a way to create value in
depth interaction that reduces redundancies in order to satisfy the needs of customers
the transaction process. Increased connectivity better. Technological advancements en-
that is offered by the technologies, allows value able the firm to make product and service
network members come together to perform customization.
business activity efficiently and effectively. The • Flexible manufacturing systems and just in
ICTs also facilitate relationships by increasing time production allow enterprises to mass-
communications within the organizations and customize products that provide better
between the organizations. Use of ICTs among quality at lower prices.
the value creating network members may build • CAD-CAM technology is used for design-
structural bonds that are difficult and expensive ing and manufacturing the products with
to terminate. the assistance of computers and softwares
While ICTs contribute to cutting existing costs, that allow better and more customized
ICTs enable emergence of new services and new products.
ways of working within value chains and networks. • Innovations in production technology have
New and emerging technologies have been shaping been also allowing firms to reduce costs,
the markets and also changing the way companies increase quality, and provide increased
innovate and give decisions. In business markets customization.
enterprises combine technology with new ways • Technology also plays an important role at
of doing business in order to realize new business the stage of product design. As a result of
opportunities. Internet and related technologies advanced technologies such as photoreal-
enable firms to benefit from talents of innovators istic visualization, 3-D physical modeling
(e.g. customers and suppliers), who are outside of technologies including stereolithography
the organization, in the creation of new products. and virtual reality, allow firms to visualize
Internet technologies allow network members to the final product before the assembly.
work together for the co-creation of the product
development. Involving the value chain members According to the E-Business Watch (2008)
into product development process and distribut- report, ICT and e-business are used widely in all
83

sectors; however, the reasons for their use, and with customers individually. With the use of web
their focus can differ widely. Enterprises in the technologies, the cost of serving customers over
chemical products industry have been using ICT internet becomes less expensive and firms are
and e-business, and increasingly replacing paper able to provide faster customer response. From
based manual processes by electronic exchanges. the customer perspective, ICTs enable custom-
The industry has developed a technical standard ers to reach the firm easily and conveniently and
for data exchange in buying, selling and delivering they can track their orders status and shipment
chemical products that is called Chem eStandards. information. Web based communication also
The main impact of ICT in the steel industry is allows sales people to access information when
to improve process efficiency. In steel industry they are outside of the organization.
procurement between supplier and customer is Information technology is restructuring the
based on long-term relationships. Hence, com- distribution channels to serve business markets
munication with customers can be enhanced better. Advances in web technologies lead firms
through e-applications. ICTs implementation in to use e-commerce as an alternative distribution
the furniture industry plays a pivotal role for prod- channel that eliminates middlemen and their
uct innovation and reduces lead times. Furniture margins and create disintermediation. Web-based
industry has been using advanced technologies communication tools are used to assist vendors
such as CAD software and 3D tools for design- in sales of various products and services. These
ing and manufacturing. However, in the retail methods reduce the cost of sales interactions and
sector, e-business is being used for the manage- increase the value that firms provide.
ment of supply chain processes between retailers Vendor reduction programs, category man-
and suppliers. The transport and logistics sector agement, product development alliances and
enterprises have been integrating sophisticated electronic procurement are considered as trends
ICT systems to manage their operations. In the in supplier relationship management that enable
transport and logistics industry, e-business allows companies to improve the value for themselves
new paperless models (e.g. e-ticketing, shipment as well as for their customers (Buttle, 2009). In
tracking) to reduce costs and improve the transpar- the short term focus, in order to get the best deal
ency of the supply chain. ICTs also have major companies prefer to work with many suppliers
impact on business models in the banking sector. and suppliers that compete against each other to
Most importantly, the internet has made it possible supply the inputs. However, this short-term focus
for banks to cut costs by offering online banking has been replaced by a relational approach in which
(E-business Watch, 2008). companies prefer vendor reduction through stra-
The increase in customer information requires tegic sourcing or supplier partnering. Companies
more sophisticated analytical systems to identify prefer to engage in vendor reduction programs in
how customers make decisions. Information tech- order to reduce transaction costs, get additional
nologies help firms to collect data about custom- volume discounts, improve performance compli-
ers and with the use of data mining technologies, ance and increase technical cooperation. Category
firms can identify needs of customers and use the management has been becoming another trend
data as input to deliver superior value. Information in supplier-customer relationship and with the
technologies are considered as one of the major implementation of category management, a group
facilitation technologies that allow businesses to of related or substitutable products is managed as
have the ability to store vast amounts of informa- a single strategic business unit in order to improve
tion, provide customized information and interact business performance. Since suppliers with their
84

competencies can be source of new product ideas or partners and form alliances when they do not
improve the product specifications, it is becoming have the necessary skills and resources to pursue
more prevalent for companies to cooperate with a specific activity independently. In other words,
their suppliers in product improvement and new motivations for forming business alliances include
product development. Electronic procurement the aim of filling resources and skill gaps in order
is going to be another trend in supplier relation- to overcome the difficulties of doing business in
ship management. Online purchasing leads to a highly turbulent environment. Collaborative
disintermediation in the supply chain and allows relationships among two or more independent
buyers to interact directly with suppliers, enjoy organizations allow firms to gain a competitive
cost savings, and communicate directly with sup- advantage. Relationship marketing practices in
pliers (Buttle, 2009). B2B markets help to link the parties at higher levels
of cooperation and interdependence, and thus lead
to higher levels of satisfaction and performance.
CONCLUSION Business alliance success results from the
alliance potential that enables a firm to achieve
In recent years, relationship marketing practices superior financial performance and competitive
have been becoming increasingly important and advantage through relational resources. Therefore,
popular in B2B markets. Firms try to improve their competitive advantage of the alliance derives from
competitiveness by developing efficient business the alliance partner’s complementary resources
relationships. Firms are also looking for ways to and alliance competence, the creation of idiosyn-
leverage their suppliers’ capabilities in order to en- cratic resources during the life of alliance and the
hance the value that they deliver to their customers. characteristics of the alliance that are based on
Firms try to enhance the customer value through trust, commitment, cooperation, shared values,
making technological investments in the areas and communication.
of vendor managed inventory, joint production Emerging ICTs shape the way of doing busi-
planning, collaborative quality improvement, just ness and formulate new business models in B2B
in time (JIT) delivery, key account management markets. Web technologies and ICTs provide in-
and concurrent engineering that are developed as formation in a timely fashion and at the same time
a result of collaborative relationships among the reduce the transaction costs for buyers and sellers.
actors of the business markets.
Enterprises have been increasingly concen-
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S0019-8501(01)00153-5 Bare Bones Relationships: In bare bones
relationships the level of legal bonds is low;
Sheth, J. N., & Parvatiyar, A. (1992). Towards a whereas, operational linkages are notably higher.
theory of business alliance formation. Scandina- There is more adaptation by the seller. There is
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Sheth, J. N., & Parvatiyar, A. (2000). Toward a Business Alliance: The term business alliance
theory of business alliance formation. In J. N. Sheth refers to ongoing and formal business relation-
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marketing (pp. 303–323). Thousand Oaks, CA: achieve common goals. To consider a relationship
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need to have a purpose to form the alliance.
Snehota, I., & Hakansson, H. (Eds.). (1995). Business alliances in business markets facilitate
Developing relationships in business networks. the creation of superior value and satisfaction in
Londres: Routledge. consumer markets.
Swaminathan, V., & Reddy, S. K. (2000). Affinity Collaborative Relationships: Collaborative
partnering: Conceptualization and issues. In J. N. relationships are highly collaborative, have the
Sheth & A. Parvatiyar (Eds.), Handbook of rela- highest level of cooperation and a high informa-
tionship marketing (pp. 381–405). Thousand Oaks, tion exchange. Buying firms have a high degree
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Strategic alliances: A synthesis of concep- Contractual transaction relationship is formalized
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(Eds.), Handbook of relationship marketing ship has highest level of legal bonds and modest
(pp. 271–302). Thousand Oaks, CA: Sage. level of operational linkage. However, coopera-
doi:10.4135/9781452231310.n10 tion, interaction, buyer adaptation, and trust to the
Walter, A., Ritter, T., & Gemünden, H. G. (2001). supplier are minimal in contractual relationships.
Value creation in buyer–seller relationships: Cooperative Systems: Cooperative systems
Theoretical considerations and empirical results have the high level of operational linkages and
from a supplier’s perspective. Industrial Market- cooperation, but there is low level of legal bonds
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S0019-8501(01)00156-0 the highest level of trust to supplier. Although
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parties of cooperative systems work closely to buyers and sellers. As a result of high level of
increase the efficiency of operations, there is no adaptation, this type of relationship is character-
structural commitment through legal bonds. ized with a high degree of operational linkages
Key Account Management (KAM): KAM and information exchange.
aims to manage relationships with the largest and Value Creating Networks: Value creating
most important business customers. In KAM, the networks are considered as important forms of re-
guiding principle is the 80/20 rule. This means lationship marketing and defined as collaborative
that when 20% of a firm’s customers provides 80% efforts between two or more firms that bring their
of its business, that 20% deserves special atten- resources together in order to achieve their mutu-
tion. Firms want to maintain long-term profitable ally compatible goals that they could not achieve
relationships with the top 20% of customers that easily alone. In business markets, core capabilities
accounts for 80% of the seller’s total revenue. of the network member firms come together to
Mutually Adaptive Relationship: In mutually create superior value for the end consumer.
adaptive relationship there is the high degree of
relationship specific adaptations made by both
88
89
Chapter 5
Customer Service in Digital Era
and Role of Internal Markets
ABSTRACT
Enterprises require focusing on managing relationships in internal markets because internal marketing
activities play a critical role in creating an organizational climate that supports customer relation-
ship management strategies. The main objective of this chapter is to identify requirements for creating
customer-centric culture in organizations. Customer service can cause the success or failure of a com-
pany; hence, the role of internal market in service profit chain cannot be ignored. After explaining the
significance of the service profit chain for the company, the chapter continues with clarifying the role
of customer experience management in creating customer retention. In this chapter, creating customer-
keeping culture, getting 360 degrees of customer insight, using big data and predictive analysis, engag-
ing customers through social media, and managing experience across multi-channels are explained
as requirements for achieving excellence in customer service experience. This chapter ends up with
discussing the characteristics of customer service in the digital era and key business trends about the
future of customer service.
INTRODUCTION ence to the customers. Therefore, management of

relationships with the parties that are involved in
The broad perspective of relationship marketing is the value creation process is critical for the achieve-
not only limited with the management of standard ment of customer satisfaction and retention.
buyer and seller relationships but also includes Managing relationships in internal markets also
management of relationships with the parties that contributes to the value creation because internal
are involved in the value creation process (e.g. marketing activities play a critical role in creat-
suppliers, internal markets, non-governmental ing an organizational climate that is compatible
organizations and influence and referral parties). with the relationship marketing philosophy (Bal-
Attracting, enhancing and maintaining long-term lantyne, 2000; 2003). Marketing culture, internal
and profitable relationships with customers can be marketing and business strategy built on customer
possible by delivering superior value and experi- experience and service are seen as the prerequisite
DOI: 10.4018/978-1-4666-8231-3.ch005

Customer Service in Digital Era and Role of Internal Markets
of implementing relationship marketing (Ben- Inter-functional cooperation is needed in all

nett & Durkin, 2002). The employee-customer forms of value creation. Motivated and customer
interaction has an impact on satisfaction with conscious employee at all levels of the firm can
the customer service; therefore it is important to be possible by improving the open two way com-
ensure that employees have the traits of customer munications and coordinating tasks between the
service orientation. The main objective of inter- front line and support staff. When the various
nal marketing is to hire, train and motivate able parts of an organization act without cohesion,
employees who want to serve customers well in this will constrain the performance of employees
order to maintain customer satisfaction (Kotler, and front line employee (Ballantyne, 2000). Thus
2000). Internal marketing activities include the firms that want to create high customer value by
creation of a customer oriented internal environ- adopting relationship marketing strategies must
ment in which all functions of the organization create an internal environment where all functions
proactively communicate, understand and inform of the organization proactively communicate,
each other to serve customers effectively (Gilmore understand and inform each other.
& Carson, 1995). Delivering consistently higher Bennett and Durkin (2002) highlight that a
quality customer service and achieving a loyal relational organizational culture requires, spon-
customer base are possible by maintaining a base taneity, flexibility, creativity and employees
of loyal and stable employees (Sisodia & Wolfe, who have team, relational and initiative skills.
2000) because findings of the research indicate Focusing on results, exercising loose control, and
that employee’s job performance is directly tied being employee oriented, open, parochial, and
to their level of commitment to the organization pragmatic are considered as the cornerstones of
(Payne & Frow, 2006). At this point, internal relationship marketing culture (Bennett & Durkin,
marketing is becoming important. Therefore, firms 2002). Relationship marketing culture is expected
must train their employees in order to teach them to emphasize results over processes because a
how to interact with customers. process oriented culture is characterized by the
regularity and repetitive nature of the work cycle;
however result oriented cultures are more likely
CREATING RELATIONSHIP to be characterized by initiating behavior and a
MARKETING CULTURE IN dynamic work context that is more compatible
INTERNAL MARKETS with relationship marketing philosophy. Relational
culture much more concerns about people rather
The focus of internal marketing is to get and than concern about getting the job done. If a culture
retain customer conscious employees (Grönroos, only interested in the work which people do, in
1990). Organizational culture significantly af- that culture decision making will become central-
fects employees’ eagerness to serve customers ized and changes will be imposed by authorities.
(Bellou, 2007). Thus, as Bellou (2007) indicates, Centralization of decision making creates barrier
it is important to establish a culture that allows for implementation of relationship marketing.
employee involvement, facilitative management However, in order to facilitate the relationship
styles, and decentralized decision-making. The culture, empowerment has to be given to the
organizational culture has to reward customer employees and the organizational culture should
orientation practices; especially promoting the be employee oriented rather than job oriented. In
customer service orientation practices among a relationship culture, employees have to derive
front-line employees is essential. their identity mainly from association with the
organization and customer base (parochial) rather
90

than the nature of their job (professional). As, ployees can deepen with the help of the employee
Bennett and Durkin (2002) indicate that bankers centric database. This employee centric database
have seen themselves as belonging to a “banking facilitates the profiling of the employees, under-
profession”; however intense competition has been standing the meaning each seeks, knowing the
eroding the view about deriving identity from barriers each faces and the level of bonding with
the nature of job. In order to survive in a highly the enterprise. This human resource information
competitive market, they notice that rather than system helps firms to match right employees with
being in the “banking profession”, they are actu- appropriate processes, functions and customers
ally operating in the financial services industry, (Gordon, 1998).
in which their primary objective is to provide Empowerment, as an internal market rela-
high quality service. Parochial dimension of re- tionship management strategy, contributes to the
lationship culture is also the guiding principle of creation of relationship marketing culture within
Starbucks. Starbucks has been spending lots of the organization. Empowerment means giving
efforts to contribute positively to the communities employees the power, freedom, knowledge and
it serves and the environments in which it oper- skills to make decisions and perform effectively
ates. Howard Schultz emphasized the Starbucks’ (Daft, 2000; p. 42). Empowerment is also consid-
guiding principles as follows: ered as a motivation tool (Hollander & Offermann,
1990) for task accomplishment because employees
We aren’t in the coffee business, serving people. improve their own effectiveness by choosing how
We are in the people business, serving coffee to do task and using their creativity. Companies
that empower their employees increase motiva-
Being parochial and responding primarily to tion and creativity in return (Conger & Kanungo,
customer needs can be seen as essential for the 1988). Service providers should be empowered
successful creation of relational organizational to resolve any service failure quickly. As Donald
culture. The communication climate and infor- Porter from British Airways says that “customers
mation sharing within the company have to be don’t expect you to be perfect. They do expect you
open. There has to be continuous communication to fix things when they go wrong” (Brookes, 2013).
within the internal market and as well as with the Immediate service failure recovery is significant
external markets. On the other hand, tight control for customer retention because 50% of customers
and traditional bureaucratic hierarchies can be give a company only one week to respond to a
seen as barriers for the relationship marketing problem before they stop doing business with the
culture. Relationship culture should depend on company (Harris Interactive, 2011). Companies
employee empowerment. Roles of employees have been spending billions of dollars for service
have to be defined clearly in order to minimize improvements in order to solve the problem at
potential conflicts. Furthermore, in a relation- the first time. If the company is able to solve the
ship culture, organization’s orientation towards problem of customers at the first time, customer
organizational issues and customers must be much churn drops down 15% and 20% and it is expected
more pragmatic rather than normative (Bennett that customers who experience problems and then
& Durkin, 2002). get a solution are actually more loyal to the com-
Companies that adopt relationship marketing pany than those who never experience a problem
as a key business strategy need to consider their (Bernoff, 2011). Thus, in order to prevent customer
human resources because relationships with cus- churn and create customer loyalty, enterprises
tomers will not be enduring until the relationships have to handle customer complaints and service
with employees deepen. Relationships with em- failure effectively by empowering their employees.
91

Benefits of employee empowerment can be provide a basis for great word of mouth
summarized as follows (Bowen & Lawler, 2000): communication and customer retention.
• Empowerment of employees provides Especially empowerment of frontline employ-

quicker responses to customer needs dur- ees is extremely important because empowering
ing service delivery. Customers want quick frontline employees is a key component for
responses and want immediate solutions to breaking the cycle of failure in service delivery
their problems and empowerment may lead (Schlesinger & Heskett, 1991). Call centers
to spontaneous and creative rule breaking are also important for the creation of customer
responses to satisfy the needs of customers. centric organization and delivering outstand-
• Empowerment is especially important ing customer experience. Call centers perform
during the service recovery. Service em- sales, support, and customer service functions.
ployees have to be empowered to make Call centers need to handle customer complaints
necessary recovery acts. Empowerment and fix the problems at the first time in order to
provides quick recovery to the service fail- create meaningful connections with customers,
ures. Recovering service failures may turn increase customer loyalty and generate revenue.
dissatisfied customers into a satisfied cus- Therefore, it is important to reinvent call center
tomer. If the employees do not have power culture to handle customer problems effectively
and knowledge to recover service failures, and create outstanding customer experience.
customers will remain dissatisfied. Figure 1 illustrates requirements of creating re-
• With the empowerment, employees feel lationship marketing culture. Enterprises need to
responsible for their job and find the work adjust their hiring and training practices, seek out
meaningful. Employees will be more sat- people who love working in customer service, hire
isfied as their sense of control increases employees who have problem-solving mentality,
because this will make the work more train employees to improve their conversation
meaningful. skills (e.g. how to create emotional connection
• Customers’ perceptions of service qual- during the conversation and what to say and how
ity are shaped by the courtesy, empathy to say it skills), motivate them with meaningful
and responsiveness of service employees. incentives (e.g. giving titles and perks that make
Employee attitudes are a key part of ser- employees feel important, providing recognition
vice; thus, if employees feel that they are and bonuses for great service, creating frontline
empowered they will interact with custom- career progression plan and developing employee
ers with empathy and this leads to custom- loyalty programs) and abandon metrics that foster
er satisfaction. Empowered employees can bad customer experience (e.g. measure and reward
provide better care for the customers. problem-solving excellence over speed or number
• Empowered employees can be a great of calls) (Bodine, 2011).
source of service ideas. If employees are Briefly, all employees within an organization,
encouraged to tell their opinions about the not just front-line employees, have to work together
work, this can lead to improved service for delivering experiences that delight custom-
quality and ideas for new services. ers. As indicated by Hitachi Consulting (2009)
• Empowered employees will provide better it is critical for every employee to understand
service to the customers and satisfied cus- the role that they play in delivering experiences
tomers spread their appreciation to other and enterprises have to create a customer centric
people. Thus, empowered employees may organization (Hitachi Consulting, 2009) by:
92

Figure 1. Creating relationship marketing culture in internal markets
• Training employees in order to build the the success or failure of a company. According to
knowledge, skills, and behaviors that Harris Interactive Customer Experience Impact
enable employees to serve customers Report, customer experience is a high priority for
successfully, consumers and 60% of consumers indicate that
• Giving the right incentives and rewards to they are willing to pay more for a better service
employees in order to encourage them to experience (ClickSoftware, 2011). Since selection,
perform desired behaviors that will lead to training and motivation of employees can make a
superior customer experience, and worthwhile difference in delivering better service
• Empowering employees and giving them experience, service firms should attract, develop,
the freedom to make real-time decisions motivate and retain qualified employees (Berry,
in order to enable them to deliver positive 2000). Internal market needs to be informed about
customer experience the organization’s mission, products, services and
the expectations of its customers. In turn, this
will provide success in the delivery of marketing
ROLE OF INTERNAL MARKET activities to external customers (Gilmore & Car-
IN SERVICE PROFIT CHAIN son, 1995). Unhappy employees mean unhappy
customers, so a company has to treat its staff as it
The concept of internal marketing has been treats its customers. If a company wants customer
emphasized in the services marketing literature satisfaction, firstly it has to ensure employee sat-
because the service is a performance product and isfaction. Management of an organization must
the performer is employee and only when the carry out internal marketing and provide employee
service provider performs well, the satisfaction support and reward for good performance because
of external customer increases. Service can cause
93

employee relations will affect customer relations serving customers play a crucial role in creating
(Kotler, 2000) superior customer service experience. Thus, firms
Employee motivation through incentives, re- have to provide the necessary knowledge about
wards and a compensation system is crucial for the processes, technologies and customers to the
building stronger relationships with customers employees. First of all, firms have to identify
and creating customer commitment. However, relationship marketing skills that are required
enterprises underestimate the importance of the from employees who participate in delivering
customer experience on customer behavior. The customer value processes. Then, firms have to
survey results of Forrester’s the state of customer assess the performance of their employees accord-
experience, indicate that less than one-third of the ing to these skills and firms have to determine if
companies have employees who share a common any knowledge gap exists. Finally, firms have to
view of the customer, make decisions that take develop training programs and technology sup-
the customer into consideration, and reward em- port to reskill processes where employees require
ployees for improving customer experience (For- additional knowledge (Gordon, 1998).
rester, 2010). Thus, firms must give importance Highly satisfied customers means growth and
to internal marketing activities such as training profitability for the companies. Heskett et al.
and motivating employees. In this way, employees (2008) develop a “service-profit chain” model and
can handle customer relationships professionally. this model describes the linkages among employee
Internal marketing activities of a firm must also satisfaction, customer satisfaction, customer re-
include proper monitoring processes that include tention, sales and profitability. According to the
periodic performance evaluation of employees service profit chain model, to keep profitability
in order to prevent failures (Parvatiyar & Sheth, of the company, it is important to manage all the
2000). links in the company that may affect customer
Employees need mastery of processes, tech- satisfaction. As can be seen in Figure 2, enhancing
nologies and people with whom they interact in internal service quality by equipping employees
order to provide superior service and customer with the skills, power and tools to serve customers
experience. Improving the employees’ knowledge increases employee satisfaction. If an employee
and providing necessary tools to employees for is satisfied with his job, employee tends to be
Figure 2. Service profit chain

Source: Adapted from Heskett, J. L., Jones, T.O., Loveman, G. W., Sasser, W. E., & Schlesinger, L. A. (2008). Putting the
service-profit chain to work. Harvard Business Review, July-August, 118-129.
94

loyal to his job and he will be more productive. trigger high employee turnover. It is important to
In return this will foster value of external service keep in mind that employee retention is the key
which leads to increase in customer satisfaction to customer retention, and as Reichheld (1993)
and retention (Heskett et al., 2008). Quality of indicates that customer retention can quickly com-
external relationships is so dependent on the pensate satisfied salaries and other incentives that
quality of internal relationships. are designed to maintain employee retention. As
Harris Interactive Customer Experience Impact the employees stay longer with a company, they
Report indicates that 86% of consumers stop doing are able to serve customers better than new-comer
business with a company because of a bad customer employees because employees become more famil-
experience and TARP findings reveal the fact that iar with the business and customers, know what
68% of the customer churn are caused by customer customers prefer and this enable them to develop
feelings of poor treatment (ClickSoftware, 2011). trustful relationships with customers. Employees’
It is clear that most customers quit a company due overall job satisfaction, combined with their ex-
to bad customer service experience. A qualified perience, helps them serve customers better and
and skilled employee who is committed to deliver- this leads to customer loyalty. Customers contact
ing customer satisfaction is a valuable asset in an with the firm through employees, so customers
organization. Employees of an organization can build a relationship based on trust and expectations
be significant sources of competitive advantage. with employees, and when the employee leaves
Therefore, employee retention is also an impor- the firm, the bond is broken (Reichheld, 1993).
tant part of the relationship marketing equation Employee engagement is considered as one
because employee retention is an antecedent of of the key CRM implementation elements and
customer retention (Payne, Christopher, Clark, employees play a significant role within the CRM
& Peck, 2000). processes and implementations. It is impossible
High employee turnover can be seen as a central to achieve customer-focused organizations and
factor for the cycle of failure in service delivery. processes without motivated and trained employ-
High employee turnover discourages firms from ees. Recruiting and selecting the best employees,
investing in hiring, training and other commitment training and motivating them and providing ef-
building activities, which in turn causes ineffective fective leadership can be seen as the surest way to
employee performance. Moreover, high employee enhance employees’ engagement and commitment
turnover negatively affects service quality and to deliver an outstanding customer experience and
customer retention. As customer churn increases increase the effectiveness of employee-customer
with the poor service, profitability of the company interaction (Payne & Frow, 2006).
decreases and this leads to a reduction in the re-
sources of the company to invest in employees’
success (Schlesinger & Heskett, 1991). CUSTOMER EXPERIENCE
To sustain customer loyalty, a company must MANAGEMENT
understand the relationships between customer
retention and the other parts of the business and Delivering outstanding customer service experi-
align four important aspects of the business: cus- ence contributes to increase in revenue and profit-
tomers, product/service offering, employees, and ability of an organization and as well as the entire
measurement systems (Reichheld, 1993). Firms industry. Through better customer experience,
that cannot understand and quantify the economics United States airline industry and wireless carriers
of retaining employees, may lose their profitabil- could earn an additional $8.94 and $14.65 billion
ity because of their human resource policies that in 2010, respectively (Harris Interactive, 2011). On
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the other hand, enterprises estimate that if firms do on social networks such as Twitter or Facebook
not offer a positive, consistent and brand relevant and thousands of their friends and followers see
experience, their potential revenue loss would be this post (Harris Interactive, 2011).
20% of their annual revenue (Oracle, 2013). Rising expectation of customers and wide-
A poor service experience leads to customer spread use of social media by customers to share
frustration and negative perceptions about the their good and poor experience lead firms to focus
product as well as the company and causes loss of on delivering exceptional customer experience
customer. SAS Institute Inc. and Peppers & Rogers (Oracle, 2013). Moreover, companies are defi-
Group (2009) indicate that if enterprises don’t do nitely making a push to improve their customer
customer experience management, they will go service experience because Forrester (2010) re-
out of business. Customer experience has to be port shows that customer experience correlates
the strategic priority of the company, especially to loyalty. Aberdeen Group (2009) explores the
during the economic downturns. As indicated by adoption of customer experience management and
Jerry Gregoire from Dell Computer “the customer the study suggests improving customer retention
experience is the next competitive battleground” (42%), customer satisfaction (33%) and increas-
(Brookes, 2013). Satisfying customer experience ing cross-selling and up-selling (32%) as the top
is seen as an opportunity to influence customer three drivers for companies to invest in customer
acquisition, customer retention, loyalty, and ad- experience management.
vocacy and enable firms to outperform and gain With the globalization, competition and ad-
competitive advantage. Customer experience vancements in internet technologies, power has
impacts future buying decisions of customers shifted from companies to customers. The power
and whether or not they will recommend the firm shift makes it difficult for companies to sustain
to their friends or family. It is important to note differentiation based only on price or product.
that customer experience is the way to get more Forrester’s the state of customer experience report
recommendations. Getting recommendation can indicates that 90% of firms see customer experi-
be seen as outcome from a good experience. ence as important and 80% of them consider to
Jeff Bezos, CEO of Amazon.com indicates use customer experience as a form of differen-
that “If you do build a great experience, customers tiation (Forrester, 2010). Differentiation through
tell each other about that. Word of mouth is very outstanding customer service and experience is
powerful” (Zaibak, 2013). On the other hand, poor much more essential in today’s competitive mar-
experience creates negative word of mouth. Dis- kets because customers have lots of choices and
satisfied customers can tell their bad experiences they can easily switch to another brand in case
to other people which can be dangerous for the of dissatisfaction. Outstanding customer service
future of the firm. White house office of consumer experience creates differentiation for the company
affairs report indicates that a dissatisfied customer and allows the company to get competitive ad-
tells the disappointing experience approximately vantage compared to its competitors. Exceptional
9-15 people. More dramatically 13% of dissatisfied customer service experience fosters customer
customers tell their dissatisfaction more than 20 satisfaction and satisfied customers tend to stay
people (ClickSoftware, 2011). Harris Interactive loyal, deepen their interactions, buy more and
(2011) Customer Experience Report supports the make positive word of mouth. Therefore, as can
fact that negative word of mouth turns into world be seen in Figure 3, creating customer satisfaction,
of mouth with the use of internet technologies. improving customer retention and loyalty, increas-
After a poor customer experience 26% of custom- ing cross-sell and up-sell, encouraging positive
ers post a negative comment about the company word of mouth, creating differentiation and getting
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competitive advantage may be considered as the A Lack of a strategy, process, and cooperation
main motivation for the enterprises to focus on across the organization is seen as the obstacle
improving customer service experience. to improve the company’s customer experience
In today’s competitive markets, customers are (Forrester, 2010). Technology, people and pro-
becoming more demanding and revolting. Cus- cesses of an organization may cause problems
tomers do not tolerance any failure. According the in delivering outstanding customer experience.
Harris Interactive (2011) Customer Experience Especially, technology is considered as the big-
Impact Report, 89% of customers quit the company gest constraint for delivering superior customer
after a negative experience, and that is up from experience. Limited technology and application
80% in 2007 and 68% in 2006 (Harris Interactive, infrastructure, difficulty in tracking performance
2007). Customer experience can cause success or measures and customer feedback, and lack of 360-
failure of a business. Therefore, 97% of executives degree customer view across all touchpoint may
believe that delivering a superior customer service create barriers for providing successful customer
experience is critical for their business success. experiences (Oracle, 2013).
Although, customer experience management is Customer Experience Maturity Monitor report
top of mind for many companies, most companies indicates that achieving excellence in the design
fail to fulfill even basic practices of customer ex- and delivery of the customer experience requires
perience management. Forrester report indicates capabilities and competencies that focus on deep-
that only 53% of companies measure customer ening customer insight, strengthening customer in-
experience quality consistently, 40% of them track teractions, and improving marketing performance.
what happens during customer interactions, %34 An enterprise’s customer experience maturity
of companies review customer experience metrics impacts its likelihood of achieving competitive
regularly (Burns, 2013). advantage. In this report getting customer experi-
Figure 3. Main motivations for enterprises to improve customer service experience
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ence excellence is seen as a journey that starts from across the entire enterprise. Customer enthusiast
a product-focused business model and ends with a enterprises have limited capabilities and customer
customer-centric business model that is designed profiles contain only basic descriptive information,
to develop long-term profitable relationships with and customer metrics. Customer activist level is
valuable customers. Companies progress in their the next level of the customer experience maturity
customer experience maturity through five stages, model. At this stage insights are transformed into
based on how well they perform the encompassing knowledge across channels. Customer activist en-
insight, interactions and improvement. In this cus- terprises have the capabilities to link the customer
tomer experience excellence journey, enterprises data across all touch-points and there is a holistic
progress along a continuum ranging from product view of the customer across channel interactions
centricity to experiential mastery (see Figure 4). throughout the enterprise. Enterprise is able to
Enterprises that are at the first level of customer make analytic investigations to get both descrip-
experience maturity model are primarily product tive and predictive customer insight. Companies
driven. Enterprises do not have the ability to take at the fourth level, which is called experiential
action on customer experience strategy because champion, have mature capability, strong customer
they have no capabilities to take action. Since, data management processes and sophisticated
customer data is not collected and distributed customer insight practices. Processes are opti-
across the organization, company is unable to mized using quantitative techniques. Enterprises
consistently identify customers across touch- establish customer centric strategy and customer
points and channels, and this lack of customer insights are robust and predictive. At the fifth
knowledge prohibits the company from efficiently and last level customer experience is a primary
and effectively treating different customers differ- source of competitive advantage. Experiential
ently. This level is called product hostage. At the master enterprises focus on continually improv-
second level, which is called customer enthusiast, ing process performance; therefore at this stage
companies collect customer data across limited continuous customer learning and improvement
touch-points and customer data is not prevalent is automated and optimized. The findings of Cus-
Figure 4. Customer experience maturity model

Source: SAS Institute Inc., & Peppers & Rogers Group (2009). Customer experience maturity monitor: The state of customer
experience capabilities and competencies. Retrieved from http://www.sas.com/en_us/whitepapers/customer-experience-maturity-
monitor-103820.html
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tomer Experience Maturity Monitor report reveal ally led and informed by their customers’ voices.
that most of the enterprises are still at the level 1 Aberdeen’s (2009) study indicates that in order
through 3 on the customer experience maturity to improve customer satisfaction and customer
continuum. Since they are in the early stages of experience enterprises have to:
execution of customer experience strategy, there
is a considerable need for improvement. The • Develop customer experience metrics to
findings also indicate that companies that are at measure customer experience management
the high levels of customer experience maturity performance,
continuum and executing a strong customer experi- • Collect customer feedback across customer
ence strategy are more likely to outperform their touchpoint,
key competitors. Customer experience maturity • Aggregate disparate data to have a more
leads to competitive advantage. (SAS and Peppers holistic view of the customer,
& Rogers Group, 2009). • Establish a centralized database that in-
To improve customer experience, companies cludes a 360 degree view of the customer
have to consider the three “Ds” of customer ex- and make it accessible to across the com-
perience that are (Allen, Reichheld, Hamilton, & pany especially marketing, sales and ser-
Markey, 2005): vices employees,
• Use customer feedback and data to give
• Designing the right offers and experiences strategic decisions,
for the right customers (Identify the most • Identify profitable customers and based on
important customers and understand their their needs and preferences deliver them
needs and what they value. Then, design outstanding experiences, and
a unique proposition to meet their needs). • Make technology investments to enable
• Delivering these propositions with an em- successful customer experience manage-
phasis on cross-functional collaboration
(Treat every customer interaction as a valu-
able resource to get customer insight and Figure 5. Three D’s of customer experience
create cross-functional teams to deliver a management
compelling experience based on the gath-
ered customer insights).
• Developing the organizational capabili-
ties to satisfy customers again and again
(Develop an institutional capability to
identify important customers, deliver an
experience tailored to their needs and de-
velop feedback loops. Align company’s
goals, measures, systems and organiza-
tional structure to become a customer-led
organization).
Together, with implementing three “Ds” of cus-

tomer experience (see Figure 5), companies may
transform the company into one that is continu-
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ment (e.g., database management, business Across all channels and touch-points, custom-
intelligence, customer feedback manage- ers experience the brand. Customers interact face
ment, web experience management, back- to face with the brand as well as through Web,
front office integration systems, enterprise call center, phone or email. They experientially
resource planning) evaluate the value of the relationship with the
brand based on their experiences during the
Enterprises may deliver superior customer interactions and these experiences collectively
service experience by considering 4P’s of cus- may strengthen relationships if the brand deliv-
tomer service (Leggett, 2012b). Leggett (2012b) ers superior customer service and experience.
proposes 4P’s of customer service experience as However, if the brand fails to satisfy customers,
pain, personalization, productivity, and proactiv- the relationship between the brand and custom-
ity. Enterprises have to provide services without ers weakens. Enterprises have to consider the
causing pain for the customer. Customers want customer journey from an emotional perspective
effortless service from the touchpoints and com- and create great customer experiences by focusing
munication channels. Customers also expect to on the moments that matter most. Although, it is
receive an accurate, relevant, and complete answer important to map customer journey for deliver-
to their queries upon first contact with a company. ing outstanding customer experience, the results
According to the Forrester (2012) report 45% of of state of customer experience management
US online adults prefer to abandon their online report demonstrate that only %27 of companies
purchase if they cannot find a quick response consistently map customer interactions from the
to their queries. Therefore, enterprises have to customer’s perspective (Burns, 2013). Mapping
provide painless service and enable customers to the customer journey starts with the identification
start a conversation on one channel and continue of touchpoint (key moments) and thought points
it on another without having to repeat themselves. (e.g., customer’s questions and doubts) that may
Personalization is another critical dimension of have impact on customer experience. Then enter-
outstanding services. Customers are now expect- prises have to discover tragic (what can go wrong)
ing to receive personalized services based on their during the customer journey and try to focus on
needs, preferences, and past interaction history fixing and preventing tragic results and creating
with the company. They do not want a one size more magic for the customer (GDLN, 2011).
fits all service experience. Enterprises have to Creating remarkable and amazing moments and
maintain productivity by considering the balance exceeding customers’ expectations during the in-
between customer satisfaction and cost of service teraction may lead delighted customers to tell their
experience. While enterprises delivering great experiences to their friends and which in return
service experience that creates high customer attract new customers as well as turn customers
satisfaction, it has to be provided at a cost that into a lifelong customer. Figure 6 illustrates the
makes sense to the business. The last 4 P’s of requirements for achieving excellence in customer
customer service is proactivity. Customers want service experience. Creating customer keeping
to feel that the company is considering themselves culture, establishing 360 degree customer view,
and they expect to receive proactive services and analyzing big data, engaging customers through
solutions. Customers want to be notified before social media and management of customer experi-
they expose to a problem. Enterprises have to focus ence across multi-channels are the requirements
on potential problems that may annoy customers for achieving excellence in customer service
and these problems have to be addressed before experience and will be discussed below.
they happen (Leggett, 2012b).
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Figure 6. Reqirements for achieving excellence in customer service experience
Creating Customer Keeping Culture Willingness is important for delivering great

customer service and experience. To work with
Creating customer centric organization and right employees is the starting point of deliver-
culture is the most important business trends of ing great service. First of all employees have to
today’s markets. Tjosvold (1993) emphasizes the be willing to serve. Delivering service requires
importance of creating pull organization that is some personality traits such as being active, out-
organized around the needs of customers and pulls going, empathic, friendly, helpful, and gentle etc.
out the resources and staff of the entire organiza- It is impossible to change someone’s personality.
tion to better serve customers and meet the needs Therefore, to deliver great customer experience,
of customers. In contrast to the pull organizations, enterprises have to hire right people who have
traditional push organizations are organized these personality traits and then firms may teach
around the needs of production, push work from them about their products, processes and culture.
one functional department to the next and rely Harris Interactive (2011) Customer Experience
on management from top to bottom. However, Impact Report indicates that 73% of customers
traditional push organizations can be a barrier to want to deal with friendly customer service rep-
the creation of customer keeping vision. Creating resentatives, 55% of customers want to access the
a pull organization, which focuses on creating a information or help that they need easily, and 36%
customer-keeping vision and listening the voice of them want personalized experiences.
of the customer, is essential for delivering great Although, customer-centric culture is seen as
customer service experience. Tjosvold (1993) key to customer experience management adoption,
states that to achieve customer keeping vision, most of the companies fail to take steps to foster
teamwork is necessary in the organization. People a customer-centric culture. The state of customer
in the organization have to work together in a experience management 2013 report reveals the
structured and customer centric way to increase fact that only 17% of companies consistently
the value of the customer experience. screen employee candidates for customer-centric
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values and specific skills needed to deliver the engage with customers and consider the voice of
customer experience as part of the hiring process. customers. Identifying the barriers to delivering a
Moreover, only 21% of companies consistently great experience will help enterprises to improve
train employees to ensure delivery of the organi- their processes. Enterprises should consider the
zation’s customer experience strategy and 25% of improving customer experience as an ongoing
companies consistently use informal rewards to process and continuously work to improve cus-
highlight ideal customer-centric behavior (Burns, tomer service experience.
2013). Figure 7 illustrates the requirements for Employee engagement (employees who are
creating customer keeping culture. fully committed to the creation of customer
It is important to foster a customer-centric experience) is considered as one of the core
culture by integrating information technologies in competencies of an enterprise in delivering great
order to enable frontline employees’ easy access customer experiences. Employee engagement can
to a complete view of each customer relation- be sustained by (Temkin Group, 2013b):
ship. With the help of information technologies,
companies are able to provide superior, differenti- • Motivating employees with intrinsic
ated and competitive services across all channels, rewards,
touch point, and interactions in order to keep • Creating a mission that inspires employees,
customers loyal. Enterprises should also ensure • Developing simple service standards,
easy access to information and customer support • Making employee engagement as one of
and create personalized experiences. Enterprises the key metrics,
have to invest in customer relationships and care • Sharing comparative customer experi-
for their customers. As John Russell, President of ence metrics with employees to evaluate
Harley-Davidson Europe, indicates “the more you performance,
engage with customers the clearer things become • Using employees as customer experience
and the easier it is to determine what you should evangelists who identify opportunities for
be doing” (Brookes, 2013). In order to create a improving customer experience based on
customer keeping culture, enterprises have to the voice of the customer,
Figure 7. Creating customer keeping culture
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• Encouraging employees to share their in- on processes that enhance knowledge of and en-
sights about customers, gagement with customers” (Bernoff, 2011). Since,
• Training employees for management of in the age of the customer, the only sustainable
key moments (touchpoint), competitive advantage is considered as knowledge
• Empowering employees to create memo- of and engagement with customers, it is essential
rable moments, to leverage customer insights to personalize cus-
• Building teams based on collective respon- tomer service experiences.
sibility, and Enterprises need 360 degree customer view
• Encouraging two way communication in order to enable frontline employees to ac-
among employees. cess right information across various channels
and deliver satisfying services. Since, failing to
Enterprises can foster customer keeping culture meet customers’ growing expectations causes
in the organization by making customer service disloyalty and defection, enterprises need to
everybody’s business. This means that every understand each individual customers as well as
employee in the organization must be responsible they need to understand customers as a whole
for delivering outstanding customer experience. because without having a deeper insight about
Customer keeping culture requires a clear vision customers’ sentiment, trends and changing needs,
and everyone in the organization should carry the business strategies cannot be successful. Creating
responsibility of this vision. 80% of companies a 360 degree view of customers enables customer
believe that they deliver a superior experience to information to be kept in one place and supports
their customers. However, customers believe that front-line employees in delivering service. 360
only 8% of companies really delivering superior degree of customer insight can be gathered dur-
experience (Allen et al, 2005). Businesses fall ing the marketing, sales, and service activities
short on delivering the experiences that customers through various tools such as data warehouse,
want. Businesses that want to deliver outstand- ERP, CRM, legacy data, e-Commerce, orders,
ing customer experience need to build a training invoice, customer requests and complaints, and
program and incentives for employees in order to through various channels such as email, phone,
encourage them to offer a great experience, update face to face, web, mail, point of purchase, and
company core values to provide the most appli- social networks, etc. Supply chains are expected
cable customer experience to all their customers, to become a source of customer insight. As the
and implement specific technologies to improve customer data increasingly determines companies’
customer service experience (Oracle, 2013). future success, supply chain will begin to function
as data chains. Supply chain management today
360-Degree Customer Insight focuses on getting the right product with the right
quantity at the right time to the place where people
Businesses as well as customers are entering a want to buy it; but supply chains don’t provide
new era that Forrester calls the age of the cus- enough information about customers to suppli-
tomer and in this new era customers have been ers. Next-generation supply chains won’t just get
increasingly becoming powerful and enterprises product on shelves but will deliver upstream data
have to reinvent themselves to systematically in about customers to the suppliers. (Bernoff, 2011).
order to understand and serve customers better. A 360 degree view in the company is necessity
In this new era, it is no longer sufficient to be to understand what customers really want and in
simply customer-centric. Enterprises have to be return deliver outstanding customer experience.
customer-obsessed which means that “focusing Everyone involved in customer touchpoint should
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contribute towards better understanding custom- through social media channels can lead to up to
ers. Companies that are unresponsive to the real 15% increase in churn rate for existing customers.
voices of target customers cannot tailor their prod- It is important to spend time to listen to customers
ucts and services to the needs of customers, and across social channels. Tracking customers across
in order to be responsive to voice of customers, social channels and listening what they are talk-
companies have to maintain effective customer ing about the company allow the brand to turn a
feedback loops (Allen et al., 2005). Customer customer’s negative experience into a positive
feedback contributes to the creation of outstanding one. Early detection of a problem may prevent
customer experience and value creation process. a potential disaster. If the company responds to
Taking customer feedback allows companies to customer complaints on social channels in a proper
know what their customers really want, identify and personal manner, they may prevent customer
the dissatisfaction of their customers and track how churn and win its customers back.
customers’ needs are changing. Hence, employees Listening posts, social networks and blogs can
must be encouraged to report customer concerns. be used as tools for obtaining feedback as well as
Encouraging the customers to complain is also a real time insight from customers. Listening social
way to learn about dissatisfaction of customers. platforms is a significant source of getting feed-
If the customers do not complain, an enterprise back and real-time insight. Companies have been
cannot know the problem and fix the problem. A establishing social listening centers to track real-
company should measure customer satisfaction time insights about their brands in order to find out
continuously and evaluate the results in order to customer needs that change by the moment, track
improve its services and processes. It is important competitors’ moves and word of mouth. Listening
to have feedback about customer defections. En- customer conversations on social platforms can
terprises need to find out why customers defect. be the early-warning system about the customer
Customer defection can be caused by poor service, defection or troublesome changes that may happen
price or value. Identifying the defection reasons (Bernoff, 2011). Harris Interactive (2007) report
enables firm to improve its products, services argues that to exceed customer expectations, com-
and processes. panies need to know what customer expectations
Social media seen as a key driver for the future are and take appropriate action. According to the
and customer voice has been becoming louder and report 9% of consumers continue to do business
noticed with the help of social media. Although with a company because it cares about customer
81% of enterprises believe that delivering an out- feedback and takes action to improve service based
standing customer experience requires leveraging on customer feedback. Therefore, it is important to
the social media effectively; 35% of firms do not gather customer feedback across communication
have social media for customer service (Oracle, channels and touchpoint and gathered customer
2013). Enterprises need to integrate social service feedback have to be operationalized to increase
platform that helps customers in finding answers the success of the enterprise. Enterprises have
that they can trust and social media has to be to use customer feedback about their products,
used as a channel to identify customer service services, and processes in order to improve their
problems. Many customers immediately post quality of products and services.
their complaints to various social networks about The results of state of customer experience
a poor customer experience and enterprises have management report demonstrate that 60% of
to use social networks as problem identification companies consistently gather customer feedback
and also resolution platform. According to Gartner about customers’ interactions with the company;
(2012), failure to respond customers’ inquiries however only 19% of companies consistently share
104

what they know about customers with employees from general to contextualized customer experi-
at all levels of the company, 26% of companies ences and they have to spend on experience maps
consistently gather input from employees about for point-in-time relevance and touchpoint specific
their interactions with customers and 31% of com- behavior analysis. Forrester report highlights the
panies consistently document customer insights to importance of spending on persona creation, sales
make it easy for employees to understand (Burns, and service scripts focused on customer value and
2013). Thus, enterprises need to focus not only post-sales engagement in order to tie the selling
developing and improving customer feedback effort to the buyer’s process. The report also ad-
loops, but also they consider to disseminate the vices companies spend less on mass advertising
gathered feedback about the customers across and reallocate their budgets to support content
the touchpoints and make it easy for employee creation (Cooperstein, 2013).
to access and understand. In addition to sharing Enterprises require to create a multidimension-
customer insight with employees, an enterprise al view of the customer to predict next actions of
has to encourage its employees to take feedback the customer. Since, delivering pleasant customer
from customers and save this input to improve service experience requires enterprises to under-
its processes. stand the needs and preferences of each customer
Achieving enterprise-level customer insight and address them in a relevant and timely manner,
begins with data which is accurate, timely and it is important to combine multi-channel customer
complete across channels. Enterprises need to data with the enterprise’s internal data to estab-
manage the data in a manner that facilitates re- lish cross-channel 360 degree customer insight.
porting and analysis. With the accurate, timely Multidimensional customer data management
and complete data, enterprises give healthy and platform can be maintained by integration of big
precise decisions and they shape and coordinate data, predictive analytics, in-memory technologies
their customer interactions (SAS Institute Inc. and data virtualization. These four key technolo-
and Peppers & Rogers Group, 2009). Although gies enable enterprises to overcome limitations of
a 360-degree view of the customer can be use- traditional data management platforms and benefit
ful to track customer history, enterprises need to from real-time data integration, exploitation of
know more than just historical data about their new data sources, and faster predictive customer
customers. They need to expand their analysis insights (Yuhanna & Gualtieri, 2013).
to predict the next step that a customer may take Empowering agents with multi-channel in-
and use predictive analysis to inform customers sights improves business performance. Companies
about new products, make cross-selling offers, that support customer representatives with detailed
serve customers better, and deliver real-time and multi-channel customer data achieve decrease
more personal engagement (Cooperstein, 2013). in agent overtime costs (8.9%), decrease in the
Forrester report indicates that enterprises can average cost per customer contact (6.2%) and
maintain customer engagement by investing in improve fist contact resolution rate (6.1%) year
real-time data sharing for actionable customer over year. In addition, companies that extend
intelligence, contextualized customer experiences, contact center information to non-contact center
tying selling effort to the buyer’s processes, and staff in order to help them do their jobs better
content-led marketing. To obtain real time data, achieve more than twice greater year over year
enterprises need to spend more on integrating increase in annual company revenue compared to
customer data sources, building predictive algo- companies where there is no information sharing
rithms, and developing multidimensional views of among contact center and non-contact center staff
customers. Enterprises have to shift their spending (Minkara, 2012).
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Enterprises can maintain customer connect- Forrester report on competitive strategy in the
edness and deliver outstanding customer service age of customer states that to become a customer-
experience by finding out what customers want, obsessed enterprise, enterprises have to transform
helping customers to achieve their goals, measur- the enterprise from one of slow-moving silos into
ing the value of key customer experience metrics, an agile evolving organization that is able to adapt
releasing customer insights from unstructured data quickly to the changing needs of customers. It is
(e.g., open ended comments, call center conversa- believed that companies that focus on embracing
tions, emails from customers), reviewing trends business technologies, which enable companies to
and insights from across all customer feedback improve customer relationships and experience,
channels, using online advisory boards to gather will be more agile to changes and better positioned
customer feedback, sharing the customer insight in the future (Cooperstein, 2013). Therefore, it is
within the organization, predicting and preempting becoming necessary for an enterprise to integrate
obstacles to customer value, developing customer new technologies to gather, manage and store
journey maps in order to identify gaps and op- data. With these analytical insights enterprises
portunities of customers’ experience with the can better anticipate and proactively respond to
enterprise, analyzing the customers’ unhappiness, the needs of customers (SAS Institute Inc., 2008).
discovering what makes customers loyal, setting Ensuring data quality and creating a single and
service targets based on customer expectations, comprehensive view of each customer are also
training employees for the management of key essential for effective customer data management.
moments, developing simple service standards, Enterprises that want to deliver excellent cus-
communicating courteously with customer, and tomer experience through big data analytics need to
listening customers (Temkin, 2013b). Briefly, the also focus on customer data quality management.
ability of integration of customer feedback and For delivering outstanding customer experiences,
customer insight throughout the organization is enterprises need to (Rogers & Gilleland, 2009):
considered as one of the customer experience core
competencies that help an enterprise to deliver • Have information on each customer’s prod-
outstanding customer experiences. uct ownership and usage.
• Establish a complete and integrated view
Big Data Analytics of customers’ contact history.
• Create a complete and integrated view of
Enterprises deliver poor experience if they do not each customer across multiple channels
understand customers and the purpose of being with a view of the entire customer history.
in the business. Understanding what customers • Capture the customers’ expressed needs
want is the first step in creating superior customer during live customer interaction.
service experiences. Customer insight is a primary • Update customer profiles continuously to
source of competitive advantage and if customer reflect all customer activity as well as out-
data is managed properly, it can affect the success bound and inbound contact.
of an enterprise. Since the data volumes have been • Make current view of necessary customer
exploding in recent years, enterprises need to man- information available to all touch-points.
age data effectively. 4 out of 5 companies have • Measure and report customer attitudes and
enough customer data but they do not know how perceptions.
to use it effectively; so it is important to leverage • Monitor changes in customer attitudes or
the right analytical tools (Obrien, 2014). perceptions in order to proactively identify
and respond potential problems, and
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• Link customer attitudes and perceptions to and unstructured data that come from variety of
customer behavior to determine drivers of sources in order to find out useful information
behavior. for decision making. Analysis of big data allows
enterprises to discover what customers really
Enterprises gather information about their want, increase their sales and efficiency, close
customers from traditional (e.g. point of sale and more deals, and improve operations and customer
call centers) and also digital (e.g. online customer service experience. As can be seen from Box 1,
services) channels in order to understand what big data technologies allow companies to decrease
customers want and predict what customers can customer churn. Big data has been changing the
do in the future. The data come from these chan- way companies manage their relationship with
nels can be unstructured and also multi-structured. customers and influencing the customer experi-
Big data is the reality of today’s businesses and ence. Big data is seen as one of the major trends
structured and unstructured data flow in organi- in delivering great customer experience. Big data
zation on a daily basis. If enterprises manage the and CRM analytics enable enterprises to find cor-
data well, it can provide powerful insights about relations, which allow them to identify customer
the customers. Therefore, enterprises are trying to patterns and based on the knowledge enterprises
find out insights from their data. Since customer can improve customer engagement by tailoring
insight is the new kind of power, enterprises have the experience for them (Fonolo, 2013).
to leverage the power of big data in their business As enterprises realize that customer experience
and extract big knowledge from big data. Since can be enhanced by predicting behavior of custom-
the big data is defined as high volume (amount ers, popularity of predictive analytics such as CRM
of data), high velocity (speed of data in and out) and big data analytics has been increasing. The
and high variety (data kinds and sources) of infor- ability to predict is an essential element for cre-
mation, it requires new forms of data processing ating compelling customer experiences, because
(Beyer and Laney, 2012). anticipating customer needs and behaviors allows
Big data analytics helps enterprises to collect, a company to proactively engage customers with
organize and analyze large amount of structured customized interactions that are both relevant and
Box 1. T-Mobile USA integrates big data technologies to decrease customer churn
T-Mobile USA integrates big data technologies and this causes decrease in customer churn. Telecom organizations collect massive
amounts of data about their customers and if they have millions of customers, this generates serious big data. However, many of the
telecom companies are unable to manage and use all this big data. T-Mobile USA, which has approximately 33 million customers,
collects massive amounts of data from various channels and puts all data for its use. In order to fully use all of its data, T-Mobile USA
combines subscriber and network data together among multiple databases. It uses several tools to store all the data and analyze it. It
confronts with the customer churn by using a tribal customer model. This model is based on the fact that there are people who have
high influence on others due to their large social network and if one of these customers switches to another telecom provider, it causes
a domino effect and leads others in his or her network to switch. T-Mobile USA calculates the customer life time value for each of these
customers by using multiple databases and this allows T-Mobile USA to determine to most valuable customers. To expect the customer
churn of a customer, T-Mobile USA uses billing, drop call and sentiment analysis. T-Mobile USA combines these different analyses
into an integrated singlenview for customer care. Then it provides this integrated single-view for customer system to agents. This system
enables agents to see key indicators about the customers including the customer lifetime value during the interaction. By using this
system agents can offer customer-specific offers. This management of big data and customized customer-centric approach causes a drop
in monthly customer churn. While the number of lost customers almost 100.000 in the first quarter of 2011, with the big data analysis the
company brings it down to 50.000 lost customers in the second quarter of 2011. With the help of its big data strategy, T-Mobile USA cuts
down its churn rates by 50% in just one quarter.
Source: Big Data Startups (2013). T-Mobile USA cuts downs churn rate by 50% with big data. Retrieved November 23, 2013, from http://
www.bigdata-startups.com/BigData-startup/t-mobile-usa-cuts-downs-churn-rate-with-big-data/
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timely. Customers don’t simply want companies to Engaging Customers

collect information about themselves. They also through Social Media
expect that insight to be used to add value to the
relationship (SAS and Peppers & Rogers Group, Social media is giving birth to a new world of
2009). With the help of predictive analytics en- customer interactions and services. Social media
terprises enable to recommend the right offer to enables customers to share their comments and
customers and connect a customer through right experiences about a brand and communicate it with
channel. In the following years, organizations will large audiences. Since, customers are increasingly
continue to invest in predictive analytics tools active on social channels, enterprises will continue
to predict “next-best actions” during the service to increase their social presence. Social media
process in order to offer customized service based has to be treated as another customer interaction
on the customer’s unique needs and past purchase channel, and integrated into the existing business
history (Leggett, 2014). Whether the interaction is processes and service levels.
occurring on the Web, through a text chat, or on Enterprises have been increasingly aligning
the telephone, past purchase history and descrip- social media and customer service and turning
tive knowledge of the individual customer have Facebook and Twitter into primary customer
to be used together with predictive propensities. contact channels; because social channels provide
Otherwise, the customers feel that the company an effective way of communicating to vast group
doesn’t know who they are, what products they of customers, while enabling the opportunity
already have, or why they buy and in return this for a more personalized interaction at the same
leads to poor experience (SAS and Peppers & time. Social media channels are considered as an
Rogers Group, 2009). essential part of an enterprise’s service strategy.
Using big data enables enterprises to deeply Social media monitoring enables enterprise to
understand their customers and serve them better. identify new revenue opportunities, understand
This increases the profitability of companies. Text how customers are connecting with a brand, and
analytics will be another trend and essential tool how to quickly respond to product or service
to deliver great customer service and experience. problems (Bluewolf, 2012).
Voice of the customer programs allow companies Aberdeen Group (October 2012) research paper
to gather information about customers and data highlights key trends in the use of social media as
about the customers comes from multiple-channels one of the customer service channel and indicates
(e.g. call centers, customer surveys, point of sale, practices of best-in-class enterprises in integrat-
online live chat, virtual agents, social media). En- ing social channels into their customer service
terprises need to create insight from these various channels. The findings of a recent survey, which
data resources, interpret what customers are saying is conducted by Aberdeen to 169 organizations,
and communicate it to the rest of the company show that only 41% of companies indicated that
especially across touchpoints. Enterprises that their customer service teams were using social
have large volumes of data have to consider to add tools for external communication and customer
value to the delivered service with this data. It’s management. According to the Gartner (2011)
also important to have a text analytics or a content research more than 80% of the top 100 compa-
management system in place to help organize and nies in the Fortune 500 are present on Facebook;
make sense of all this information. Along with big however, less than 20% are actively engaging with
data and customer experience management, social customers. Actively engaging enterprises do more
media has been on the top of trends to watch for that marketing, they actively listen, engage, and
a few years now. respond to customer questions. Facebook com-
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pany page (73%), company blog (59%), YouTube • Deliver multichannel proactive service by
(57%), Twitter for search and monitoring (51%), providing agents with the tools to engage
LinkedIn Company page (47%), LinkedIn Groups with relevant knowledge and guidance,
(43%), Twitter for customer service handle (41%), • Monitor and measure social media key
company branded communities (37%), company performance indicators (KPIs) to improve
branded forum (34%), third party message boards quality and performance, and
(31%), and expert Q&A sites (19%) are the social • Bring social media to business processes
tools that companies prefer to use while deliver- and leverage social channels for the deliv-
ing customer service support (Aberdeen Group, ery of customer care.
October 2012).
Since, engaging customers via social media Improving customer satisfaction, understand-
is considered as a key opportunity to improve ing customer sentiment, meeting with customers
customer service, it is important to form an effec- in all channels that customers prefer, expediting
tive social media customer engagement strategy customer response, and reducing support costs are
that can enable fast, relevant and appropriate among the main motivations that lead enterprises
responses to customer inquiries, complaints and to deliver customer support and services through
other interactions in the social networks. Enter- social media channel (Aberdeen Group, October
prises that want to integrate social media within 2012). Figure 8 shows the role of social customer
the contact center and leverage social media as support programs.
an interaction channel in order to contribute the When social media channels are used effec-
brand value and deliver superior customer service tively, enterprises can turn customers and their
experience, have to (Altitude, 2012): broader network of connections and followers into
powerful advocates for their enterprise and brand.
• Monitor the social media channels, iden- It is important to keep in mind that customers who
tify and act on the relevant conversations engage with companies over social media spend
and interactions, 20% to 40% more money compared to the other
• Unify service across channels by establish- customers of the company (ClickSoftware, 2013).
ing a unified, streamlined process for han- Therefore, in today’s business world, setting a
dling interactions in the social media chan- new vision and metrics around social service is an
nel together with interactions from other
channels, Figure 8. Role of social customer support programs
• Unify customer history and include all tra-
ditional and social interactions,
• Provide entire set of customer information
and interaction history to agents in order
to enable agents to deliver consistent ex-
periences and allow seamless transitions
among different interaction channels,
• Unify knowledge and applications by seam-
lessly tying social interactions through the
agent applications and empowering agents
with knowledge management tools,
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important step in transforming customer service. discuss and build a reference able knowledgebase
Customer service metrics must evolve to measure around the brand, product or service (Aberdeen
social metrics such as customer sentiment, conver- Group, October 2012).
sation volume, likes, retweets, and net promoter
score (Bluewolf, 2012). Management of Experiences
As can be seen from the Accor and Lenova across Multiple Channels
cases (see Box 2), listening, analyzing, responding
and engaging are the requirements for managing Accessibility is also another essential component
social customer support programs successfully. of customer experience. Delivering outstanding
Integration of social media into customer support customer service experience can be possible by
program requires investments in listening to cus- providing the customer services through multi-
tomers, prospects, and forums regarding product channel and coordinating the effectiveness and
and service issues. Listening conversations enables efficiency of customer service experience among
enterprise to analyze and monitor customers’ feel- these multi-channel. Enterprises have to keep
ings and trends in the social platforms. With the customer service consistent over all channels.
analysis of solicited or unsolicited feedback from Investing in customer experience and customer
social channels, enterprise can use this feedback service have to be among the budget priorities
to improve its customer management process, of enterprises. In order to maintain consistent
products and services, and develop new offerings customer experience and customer services across
based on the customer needs. Listening customer multi-channel, enterprises need to invest much
sentiments and analyzing them allow enterprises more in comprehensive customer experience
to respond and participate direct dialogue with rather than single channel experience programs
their customers. Enterprises also engage with their (Bernoff, 2011).
customers, prospects, and individuals who have Aberdeen Group surveyed 487 customer con-
similar interests by building communities. Social tact center executives to find out critical factors
media communities enable customers to connect involved in customer care programs. Findings
with one another and also with the company to of the research indicate that phone (98%), email
Box 2. Delivering customer service through social media: success of Accor and Lenovo
Accor, which has more than 4,000 hotels in 90 countries, integrates social media into its customer support program to deliver customer
service on the digital platform. It faces over 5,000 comments each month on social travel sites and in order to manage its customer
support program, Accor tries to listen, learn and engage with what customers are saying about its brand and 12,000 competitors’ hotels.
Then it responds the customer problems, requests, and suggestions based on the social media data. By analyzing the customers’ comment
and reviews, it wants to identify the problem and fix it as quickly as possible. Providing customer service through social media not only
improves the Accor’s overall online reputation by 55%, Accor also increases its sales.
Lenovo case can be also given as a successful example for the implementation of customer service through social media. When Lenovo
acquires the IBM PC computing division, Lenovo sees that customers are talking about its products on 3rd party forums. Lenovo does not
want to miss these important conversations. It takes the ownership and leads the customer social media interactions by using a peer-to-
peer support community in social media and Lenovo listens to customer experiences and establishes ownership of any problem. Lenovo
aligns marketing, sales, service and other related departments to accelerate changes and improvements to the customer experience. This
alignment leads to a 20% decrease in laptop service call volumes, increase in customer service agent productivity, and shorten product
problem-resolution cycle and also causes a reduction in customer service support costs and an increase in sales. In addition peer to peer
support community in social media generates new product ideas and innovations.
Source: Glassman, N. (2011). Case study: Monitor globally, act socially. Retrieved March 24, 2013, from http://socialtimes.com/
casestudy-accor-synthesio_b36283
Petouhoff, N. (2010). How Lenovo implemented customer service social media best practices. Retrieved June 12, 2013, from http://blogs.
forrester.com/business_process/2010/01/how-lenovo-implemented-customer-service-social-media-best-practices.html
110

(96%), web (90%), IVR (76%), mail (76%) and and call-center). Poor multi-channel experience
social media (55%) are among the channels that is considered as a major annoyance. If companies
are widely used by enterprises to deliver customer provide different or inaccurate information through
service. More than half of the surveyed contact call-center, retail outlets and website, 74% of
centers use the above mentioned six channels to customers become annoyed. 90% of customers
interact with their customers. The research find- expect to receive consistent information over
ings show that enterprises that offer customer multiple customer contact channels. It’s actually
service through multi-channel achieve more im- not enough to be accessible through multi-channel.
provement in customer satisfaction compared Enterprises have to keep communication consis-
to enterprises that use single channel. Although tent across multi-channel and provide accurate
Aberdeen Group’s research findings validate the information that is based on unified knowledge
impact of using multi-channel customer service base. Enterprises have to ensure that customers
on business performance, they argue that this receive the same experience, regardless of which
does not mean that simply adding extra channels channel they choose. The consistent knowledge
to existing customer service channels improve the across channels of an enterprise is going to be key
performance of the enterprise. Surveyed customer to the success of an enterprise’s customer service.
contact centers that are ranked as best in class The success of providing multi- channel customer
get 83% first contact resolution rate (customer service is based on building central, constantly
request is properly addressed at the first time updated and deep knowledge base that can be
without need to recall customer contact center), used by agents (Synthetix, 2012).
19.8% average year over year improvement in In today’s markets, 65% of enterprises use at
customer satisfaction, and 4.7% average year over least six touchpoints to interact with customers.
year decrease in the average organizational cost Managing customer interactions across these
incurred per each customer interaction. However, channels in a synchronous way is critical and
surveyed customer contact centers that are ranked omni-channel customer experience management
as laggards only get 29% first contact resolution helps enterprises to establish seamless experience
rate and 1.2% average improvement in customer to the same customer regardless of the number
satisfaction. More interestingly, although laggards and type of the channels that they use to interact
are using multi-channel contact centers, they get with the enterprise by retaining the context of
0.2% average year over year increase in average each previous interactions. Aberdeen Group’s
cost per customer contact. It is clear that to get (October 2013) research indicates that the abil-
improvements in business performance through ity to deliver a seamless and consistent customer
using multi-channel contact center requires enter- service experience across multiple channels (e.g.
prises to adopt best in class practices (Aberdeen, phone, email, web and social media), and devices
November 2012). It is also important to keep in (e.g. in store, laptop and mobile phone), which
mind that a 1% of improvement in first call response is referred as omni-channel, will be a top trend
means $ 276,000 savings in annual operational that impact customer experience management
for the average call center SQM benchmarks programs in the near future. A customer may
(Bluewolf, 2012). start an interaction on a mobile website and then
The findings of Synthetix (2012) survey on continue interaction through call center. At this
online customer services demonstrate that 65% point, enterprises have to focus on delivering
of respondents have received inconsistent in- a seamless interaction with the same customer
formation when contacting companies through without losing the context of an interaction from
multiple channels (e.g., website, retail outlets one touch-point to another. The findings of the
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Figure 9. Multi-channel customer support
Aberdeen Group’s research show that enterprises Since the customers has been becoming
that deploy omni-channel customer experience increasingly intolerant of poor experiences, ac-
management strategy achieve 91% greater year cording to the SAS Institute Inc. and Peppers &
over year increase in customer retention rates com- Rogers Group (2009) the biggest area for improve-
pared to enterprises that fail to adopt omni-channel ment is working with front-line staff to deliver
customer experience management strategy. With an experience that is consistent and on-going. It
the help of employing omni-channel customer is important to ensure that employees have the
experience management strategy, enterprises knowledge, skills, tools and technology required
also increase customer profitability and customer to manage customer interactions consistently and
life time value. Omni channel strategies help seamlessly across channels. Enterprises have to
enterprises to get critical insights to customize also provide right and consistent customer infor-
product and service offerings to meet the needs mation to employees in order to allow them to
and preferences of each customer which in return deliver seamless interactions.
increases customer profitability. Aberdeen Group Enterprises have to effectively utilize each
research indicates that top performing companies, channel to deliver customer delight and increase
which implement best practices of omni-channel their business performance. Requirements for
customer experience management, achieve 89% effective management of multi-channels are
customer retention rate, 9.5% average year over illustrated in Figure 10. In order to increase
year improvement in annual company revenue, performance of the multi-channels and deliver
8.5% average year over year improvement in first outstanding customer service experience over all
contact resolution rates and 7.5% average year channels, enterprises have to focus on (Aberdeen,
over year decrease in average cost per customer November 2012):
contact (Aberdeen, October 2013).
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• Training and supporting agents with the CUSTOMER SERVICE IN

tools that are needed to respond to custom- THE DIGITAL ERA
er inquiries effectively through multiple
channels, Enterprises can differentiate themselves from their
• Ensuring that customer contact center competitors by offering outstanding customer
activities are compatible with industry service and experience. Improving the customer
regulations, experience creates customer loyalty and leads to
• Providing real time agent guidance to bet- increase in customer retention and acquisition
ter serve customers across multi-channels, rates. Meeting or exceeding customer expectations
• Consolidating multi-channel customer at touchpoint, which is also known as moments
data with internal data to establish a cross of truth, is critical for positive customer experi-
channel 360 degree customer insight and ence. Touchpoint performance either strengthen
empower agents with this customer insight or weaken the relationship between the company
in order to personalize each inter action, and its customers. Therefore, performance of
• Adopting customer feedback management touchpoint should be maximized to provide the
tools, analyzing the overall cost/benefit of optimal value and experience to customers.
each channel, Top 10 customer experience trends for 2013
• Optimizing the business performance as- white paper indicate that enterprises have to
sociated with each channel, and consider voice of the customer while improv-
• Integrating enabling technologies. ing moments of truth. In order to improve the
Figure 10. Effective multi-channel management requirements

Source: Adapted from Aberdeen Group (November 2012). Multi-channel contact center: Delight customers where they live.
Retrieved from http://www.oracle.com/us/products/applications/aberdeen-mltichnnl-contact-ctr-1902157.pdf
113

performance of moments of truth, enterprises asked questions (FAQs), e-mail, instant messag-
have to define metrics and track performance ing or online chat with a live person, online forum
for moments of truth based on these metrics. or community, screen sharing, virtual agent, and
Identifying and prioritizing the problems and the social media are among the online customer ser-
factors that delight customers enable enterprises vice channels. Forrester (2012) report indicates
to deliver outstanding customer experience and that averagely 37% of Generation Z (consumers
improve the performance of the moments of truth. ages 18 to 22) as well as Generations X and Y
For instance, more than half of the people that (consumers ages 23 to 45) prefer to use online
are surveyed spend 10-20 minutes per week on customer service rather than speak with a live
hold when call customer contact center and this person on the telephone. Online customer service
means average person spends almost 43 days of adoption has been growing dramatically. Forrester
their entire lifetime on hold. Actually, customers (2012) report indicates that 19% of online US
waste a lot of time when calling customer service, consumers had used online live chat for customer
when it is considered that 86% of customers are service in 2009; however that number has nearly
put on hold every time they contact a business. It doubled and 37% of consumers had used online
is important to eliminate hold time to improve the chat to get customer service in 2011. There has
customer experience. Call back technology may been also a striking increase in the use of social
help companies to decrease the phone queue and communities to get customer service. In 2009,
customers’ cost per call and improve customer only 7% of US online consumers had used online
experience with the touchpoint. 75% of customers communities for customer service; in 2011, that
think call-back option is highly appealing (Fonolo, number has increased nearly fourfold to 27%.
2013). Moreover, customer service agents at touch- More interestingly, while in 2009 only 1% of
point require user friendly technology solutions US online consumers had contacted a company
that enable them to focus on solving the customer’s through Twitter; two years later, 19% of consum-
issues quickly and delivering differentiated ser- ers had used this social media platform for getting
vices to customers. So it is essential to simplify customer support (Forrester, 2012).
the agent workspace by removing extraneous data In the age of the customer in order to maintain
elements from agent screens, automate tasks to customers’ satisfaction and loyalty, enterprises
increase agent productivity, and make relevant have to deliver pain free customer service. For-
information to help personalize the interaction rester’s top trends for customer service in 2014
(Leggett, 2014). Customer service agents need report that customers want consistent service
the right data, at the right point in the service experiences across multiple channels and they
process to provide the right answers to customer expect to be able to start an interaction in one
questions. Enterprises need to consider the quality channel and complete it in another. Enterprises
and usefulness of the supporting customer data have to work to understand the channel preference
and data governance practices. of their customer base, and guide customers to the
Technology-based service delivery systems right channel based on their on the complexity and
are becoming an integral part of customer service time-sensitivity of their inquiry (Leggett, 2014).
and have critical impact on customer experience. Figure 11 indicates some of the online customer
Consumers are more likely to use online customer service channels.
service channels. According to the Synthetix’s Voice (e.g., calling call center) is still the
report, 70% of consumers think online customer primary communications channel; however, it is
service will dominate over traditional call-centers quickly followed by self-service channels, chat and
within a decade (Synthetix, 2012). Frequently e-mail. In fact, customer service channel prefer-
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Figure 11. Online customer service channels
ence depends on the complexity of inquiry. As the section or FAQs are unsatisfied with this channel
complexity of the inquiry increases, customers (Forrester, 2012). In fact, majority of customers
strongly prefer to get live assistance over phone. contact a call center after they look for answers
On the other hand, for simple inquires, web and to their questions through self-service (Fonolo,
email are strongly preferred (Fonolo, 2013). Thus, 2013). This is a major drawback for organizations.
offering a self-service knowledge base is one of Self-service knowledge base has to comprehen-
the growing customer experience trend that com- sively cover issues that are most frequently en-
panies must consider. Customers find self-services countered by contact representatives. Customers
a convenient way to get customer services, but a have to easily access the online self-services and
self-service implementation can fail if it is not the information have to be tailored according
done right. According to Harris Interactive (2007) to their needs in order to divert them from the
more than half of those online want the ability phone queue. Enterprises can easily measure the
to chat live via the Web with a customer service customers’ level of satisfaction with the online
representative. 36% of those online find it most services. Enterprises can integrate user ratings and
gratifying when email messages are answered comment fields to their websites and this allows
quickly when contacting an organization.46% visitors to provide real-time feedback about their
of those online find it most gratifying to quickly services and as well as they can rate their overall
and easily find the information they need online. satisfaction with the online customer services.
Although, FAQ sections are the most commonly With the advances in technology, web services
accessed online customer service channel (60% have been becoming alive. Since the online inter-
of consumers accessed FAQ section in 2011), action provides impersonal knowledge, to deliver
nearly half of the consumers who use online help a great experience on online channels, enterprises
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have to deliver a personalized and create a more tual agent technology to enterprise’s traditional
human-like online interaction such as virtual assis- customer service channels enable enterprise to
tant to increase customer loyalty and reduce costs. resolve customer questions and problems in low
Enterprises have to integrate new channels (e.g., cost self-service channels. This lowers the cost
proactive live chat, virtual agent, remote support of customer service and contact center which
software) into their traditional helpdesk (see Figure are considered as expensive customer service
12). Traditional helpdesks have to be supported channels. Algorithm behind the virtual agent
with virtual helpdesks, which provide intelligent, also helps enterprises to understand customers
automated and live agent support. Integration of better. Virtual agent technology acts as a 24×7
virtual helpdesk to traditional helpdesk leads to online agent and provides real-time voice of the
reduce in email and call volume, which in return customer insights. Virtual Agent technologies are
increases the performance and lowers the cost of powerful online customer self-service compared
traditional helpdesk. to FAQ tools, which provide limited information
Virtual agent technology platform is considered and create poor customer experience. During
as next generation self-service software that helps the information gathering process of customers,
customers to get service on online platforms and virtual agents may also increase the likelihood of
virtual agent uses the artificial intelligence to conversion to sales and generate new revenue by
answer the sales and support queries of custom- guiding customers and providing them real time
ers. By solving a variety of customer experience relevant and customized offers.
and customer service issues, virtual agent tech- Virtual agent not only answer customer ques-
nology allows enterprises to deliver outstanding tions online but also drive conversion. Virtual
customer experience and increases the customer agent technology can intelligently recognize the
satisfaction with the service. As can be seen from intent of a customer’s question and it delivers
Copa Airlines case (see Box 3), adding the vir- relevant, real time and customized offers to the
Figure 12. Multichannel customer services: adding new channels to traditional helpdesk
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Box 3. Online customer self-service through virtual agent technology: Copa Airlines Case
A successful case for the implementation of digital online service and virtual agent can be given from the airline industry. Digital
customer service is also critical for airline industry. Delivering the best possible online experience is top priority of the Copa Airlines,
which has 290 daily scheduled flights to 64 destinations in 29 countries in North, Central, and South America, and the Caribbean.
According to the Intelliresponse Airline Industry Online Self-Service Case Study, airline customers may need to ask questions about
booking flights, baggage rules and restrictions, or flight status when booking a trip. Often customers ask these questions with just before
a flight, while on-the-go or inside an airport and want immediate response to their questions. They have no time to call and wait in call
queue, or send an email and wait for a response. Customers are also highly intolerant of traditional help tools like site search or FAQ
pages and find these tools cumbersome to navigate, answers are hard to find, and information is often wrong or missing.
As indicated in the case, airline customers want an easy way to go online and get instant and accurate answers to critical questions,
without ever having to phone a contact center. Poor online customer experience annoys the customers in that crucial moments when they
need an immediate and easy resolution to a question. Customers, who are disappointed with the poor online customer service, escalate to
more expensive channels (75%), defect to competitors (17%) and abandon purchase transaction (17%). It is important to cope with this
challenge and keep customers happy. Simply adding more customer service is not considered satisfactory to meet needs and expectations
of today’s time-pressed travelers.
Since, Copa Air realizes important role of the online customer experience for staying competitive in the airline industry, Copa airlines
adopts digital self-service and consolidate the web as the number one source of knowledge for its customers in order to provide its
customers with instant and accurate answers while they are online. Copa airlines uses an online virtual agent, who is a friendly digital
persona, named Ana. Ana serves as Copa airline’s automated concierge and handles customer questions. With the help of virtual agent,
customers get a single, accurate and approved answer to their questions regardless of how the question is asked rather than getting pages
of search results. Intent recognition ability of virtual agent also enables the company to provide links of relevant information that the
customer is likely to be interested in next step. Virtual agent helps Copa airlines deliver an exceptional digital self-service experience in
multiple languages and 4 out of 10 interactions with virtual agent require no phone or chat support. Copa airlines experienced a decline
from 65% to 50% in call and chat volumes since implementing Ask Ana and an increase from 35% to 50% in online queries within 18
months.
Source: Intelliresponse (2013c). Online self-service at Copa Airlines. Airline industry case study. Retrieved January 18, 2014, from http://
info.intelliresponse.com/WhitePapers_CopaCaseStudy-W.html
customer based on the their queries. When the the inquiry cannot be solved by live agent, at the
offer delivered is highly relevant to the customer’s third phase of line, enterprises may offer instant
interest, the customer is far more likely to click on IT remote support to their clients and customers
the offer. Virtual agents can improve the online can take support through screen sharing. Visual
experience for prospective as well as existing agents ask questions to understand better the
customers and virtual agent technology can be intent of customers and this creates a two-way
implemented across web-based channels, mobile conversation and the feel of an online chat with
channels, social media platforms, and also on a real agent. There are also virtual agents that
contact center agent desktops. speak to the customer and speaking virtual agents
Gartner Research predicts that by 2015, 50% provide a more engaging and enjoyable experi-
of online customer self-service will be through a ence. The speaking feature of the agents allow
virtual assistant. The Gartner research indicates visually impaired customers to access online
that deploying virtual assistant leads to service self-services easily. Virtual agent technologies
cost savings, downsizing of customer service also enable customer service representatives to
centers and increasing customer loyalty by simply access relevant and accurate answers from a great
providing enjoyable customer experience with a database of content as quickly as possible. Since
robotic presence on a website. (Stamford, 2012). virtual agent and live online chat technologies
First line support can be given by the virtual provide instant, relevant, and accurate responses
agents and when the sales and support requests to customers’ inquiries; this increases satisfaction
cannot be answered automatically by the virtual with customer services. Hence, enterprises as well
agent, virtual agent passes the chat over to a live as call centers may integrate these technologies
agent in the second line of the support process. If to serve customers efficiently. Enterprises have
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to allow their customers to reach online customer channels; therefore marketers are expected to shift
services through mobile devices; thus virtual agent from “we have mobile” to “mobile helps us dif-
technologies have to be supported by mobile chan- ferentiate ourselves from competitors” thinking.
nels. Online customer services have to be easy to It is important to differentiate on how well mobile
view and easy to navigate through mobile devices. services work rather than what mobile services
Mobile communication is rapidly becoming you offer (Husson & Ask, 2013).
the first choice for customers. Customers are Enterprises have been increasingly integrating
becoming more mobile and mobile devices such mobile into their product offerings and service
as smartphones and tablets enable customers to experiences and shaping their company’s mobile
do more things wherever they go. According to strategy by creating and redesigning the smart-
the Nielsen cross platform report monthly usage phone experience. Temkin Group (2013a) advices
of mobile applications and mobile web through enterprises to stop considering digital channels
smartphones are approximately 30 hours and as an alternative to retail channels, and instead,
3 hours and 45 minutes respectively (Nielsen, embrace experiences across them. Leggett (2014)
2014). Majority of smartphone users keep their indicates that enterprises have to move away from
devices within arm’s reach 24/7 days a week, and duplicating their web presence for their mobile of-
78% of customers report that they use customer fering, and they have to focus on user experiences
service mobile applications and 72% of custom- that allow tasks to be efficiently accomplished and
ers are willing to replace traditional channels add value to customers in the mobile environment
with mobile apps if the same customer service (Leggett, 2014).
features are available (Fonolo, 2013). Therefore, As can be seen from the Sephora case (see Box
it is an imperative for an enterprise to offer mo- 4), enterprises have to align their mobile strate-
bile customer services as a support channel to its gies, technology investments and user experiences
customers and allow its customers easily connect across marketing, customer service, ecommerce
to customer services directly from within their and IT. Integration of mobile channels will help
mobile applications. The quality and design of enterprises to develop deeper consumer engage-
user experiences is a key element for satisfaction ment, real-time interactions based on customers’
with the service that is delivered through mobile location in the real world, and contextual pricing
Box 4. Sephora serves customers through mobile channels
Sephora, the international cosmetics and beauty retailer, can be given as the ideal model for customer centric company that achieves
tremendous success with mobile implementations in 2012. Sephora increases its mobile orders up 167 percent. With around 1,750 retail
stores in 30 countries, Sephora makes useful technology a central part of its brand. Customers perceive the brand as a company that
offers unbiased service from experts, an interactive shopping environment and innovation. Sephora does not just have a mobile presence.
Sephora embrace the digital platforms in order to differentiate itself from its competitors. Sephora’s success depends on its ability to
embrace its customers, understand their unique wants and needs, and create digital customer centric experiences that make customers’
lives easier. While its competitors focus on selling, Sephora focuses on serving. As a result Sephora gains the rewards of extremely
loyal customers. By offering digital experiences that actually make customers lives easier, Sephora has almost 5 million Facebook
fans, 900,000 Twitter followers, and 600,000 Apple Passbook registrations; more interestingly mobile devices make up one-third of all
brand’s internet traffic. Sephora’s mobile application has more than 2 million downloads and this application provides in-store feature
experiences, such as bar code scanning, reviews, and personal purchase histories. Implementation of mobile application increases the
purchase of mobile apps users compared to non-users. Those 600,000 registered Apple Passbook users spend two times more annually
and purchase twice as frequently as the average Sephora customers.
Source: Hinshaw, M. (2013). A digital customer experience case study: Sephora’s supremacy. Retrieved January 14, 2014, from http://
www.cmo.com/articles/2013/5/28/a_digital_customer_e.html
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(Forrester, 2013). To deliver differentiated and that integrate communities into customer support
engaging mobile experiences, enterprises have will realize cost reductions ranging from 10 percent
to integrate elements of context that are time, to 50 percent (Stamford, 2012).
customer knowledge (past customer behavior), and Customers expect immediate and consistent
place (physical context) to create new products customer service across channels (ClickSoftware,
and services. Companies that can serve based on 2011). In order to meet customer expectations,
customers’ situations, preferences, and attitudes enterprises expect to increase their spending on
in real time on mobile devices may overtake the customer experience technologies by 18% in
competition and they can charge their services at the next two years to improve the cross-channel
a premium price (Husson & Ask, 2013). Thus, experience, online customer support experience,
knowledge has to be accessible through any chan- and online customer purchase experience (Oracle,
nel that the customer chooses and it needs to be 2013). In the next two years, businesses plan to
contextual to what the customer is doing. A mobile invest in technologies that integrate customer
application that’s finely tuned for moments of need view across channels in order to improve the
such as personalized, relevant, and location-aware cross-channel experience. To improve the online
demonstrates true customer obsession and mobile customer support experience, businesses plan to
devices that supply information instantly delight invest in knowledge management, online self-
customers (Burns, 2013). service, mobile application and click-to-chat op-
In the following years, organizations are in- tion online technologies. Businesses also plan to
creasingly going to shift customer support to com- invest in technologies (e.g., e-commerce, mobile
munities and employ communities as a platform for applications, and web experience management)
customer support. Enterprises, which successfully that will improve the online customer purchase
integrate communities into customer support and experience (Oracle, 2013). Online self-service
moderate customer support communities, experi- technologies allow (Intelliresponse, 2013b):
ence moderate to great success in call deflection
and increased first-contact resolution cost savings. • Cost savings through reduction in number
Gartner report predicts that by 2014, enterprises of calls and emails to the contact center,
Figure 13. Requirements for delivering differentiated mobile service experience
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• Revenue generation through making more customers have to escalate from a self-service
customized and relevant cross-selling and channel to other channels seamlessly. Enterprises
upselling offers, also need to integrate a feedback mechanism into
• Harnessing the power of online service to their online self-service channels so that custom-
gain true customer insight through real- ers can rate the enterprise’s customer service
time voice-of-the customer analytics, and performance Maintaining these five requirements
• Enhancing customer loyalty by providing a of online self-service ensure that the delivered
delightful customer experience online. online service experience is effective in meeting
the customer needs, easy to use and enjoyable.
Intelliresponse (2013a) proposes a recipe for Online services that are easy to use, enjoyable
world-class customer experience and argues that and effective create excellent experience.
meeting customer needs, making the customer
experience easy and enjoyable are considered as
the recipe of outstanding experience. According KEY BUSINESS TRENDS ABOUT
to the report path to customer excellence begins FUTURE OF CUSTOMER SERVICE
and ends with being good at meeting customer
needs. To foster excellent online customer service, Forrester report entitled “navigate the future of
enterprises need to check their online services customer service” tries to explain the future of
interms of (Intelliresponse, 2013a): customer service and outlines the key business
trends that will flourish and strengthen over the
• Accessibility and availability following years (Leggett, 2012a). Although major-
• Findability ity of customer service decision makers consider
• Relevancy creating satisfying customer experience as one
• Escalation of their top strategic priorities, in reality few
• Feedback companies are focusing on optimizing the service
experience and dedicating budget to customer ex-
Company’s online self-service has to be ac- perience initiatives. In order to deliver outstanding
cessible, available, and easy to use. Easiness of customer service experience, enterprises need to
finding information that customers are looking focus on improving the (1) agent facing capabili-
for is critical for creating excellent customer ties, (2) making customer centric improvements
service experience. Online search tool must not in delivering service, and (3) adopting enabling
generate many possible answers because multiple solutions (see Figure 14).
answers lead to doubts and lack of confidence in In order to deliver consistent, seamless, value
the customer’s mind. Customers want to find the added, and differentiated customer service experi-
one right answer, they do not want to find many ence across multi-channel, Forrester report argues
of possible answers. Enterprises have to provide that in the following years enterprises will focus
contextually-relevant content because contextu- more on empowering their agents by (Leggett,
ally relevant content creates high satisfaction and 2012a):
converts the inquiry to purchase decision. The five
checkpoints above give the enterprise an under- • Providing them needed information,
standing of what is required to achieve excellence knowledge, and data,
in customer service. Escalation is also important • Allowing access to customer history re-
for creating outstanding customer service experi- cords over all communication channels,
ence. During the online self-service experience
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Figure 14. Business trends for improving customer service experience

Source: Adopted from Leggett, K. (2012a). Navigate the future of customer service. Forrester Report. Retrieved from http://
www.oracle.com/us/corporate/analystreports/forrester-future-customer-service-1603792.pdf
• Simplifying the agent workspace and mak- times, ensure company policy compliance
ing it more usable to personalize interac- and control costs; and
tions with customers, • Improving the quality and usefulness of the
• Investing in knowledge management, supporting customer data.
• Integrating search-based applications
that combine knowledge and information In the following years, enterprises increas-
sources and allowing agents to access con- ingly continue to improve customer centricity by
solidated and correlated information in (Leggett, 2012a):
unified dashboards,
• Investing in predictive analytics in order • Providing customer service through broad
to enable agents to predict next best action range of communication channels and
of customers during the service resolution standardizing the resolution process and
process in an attempt to make targeted and customer service experience across these
tailored service offers based on the cus- communication channels,
tomer’s unique needs and past purchase • Increasing customer service agility,
history, • Improving mobile customer service
• Integrating business process management experience,
and guiding agents through the service res- • Putting end-to-end feedback processes in
olution process in an effort to standardize place across all communication channels,
service delivery, minimize agent training
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• Making easy to get customer feedback and ences. Since, satisfied, loyal and knowledgeable
integrating that information for continuous employees deliver a better customer experience
improvement; and and close more deals, employee skills and cor-
• Adopting proactive outbound communi- porate culture are important in creating customer
cations technologies to help personalize centric enterprise. Outstanding customer service
service, makes customers as well as companies happy.
Therefore providing better benefits, giving more
Forrester report, which indicates the future of decision-making authority, and offering clearer
customer service, concludes that enterprises need career tracks will increase employee satisfaction
to evolve business processes and technology to and loyalty and in return this will lead to customer
serve customers better. For improving the customer satisfaction and loyalty.
service experience, enterprises continue to invest In the age of customer, customers expect
in technology solutions that offer enterprises dif- companies to be faster, provide better and cheaper
ferentiation and measurable business value, evalu- offerings with an outstanding customer service. It
ate their software-as-a- service (SaaS) strategy, is important to note that most successful businesses
consider outsourcing their operations in an attempt have one thing in common that is outstanding
to reduce the cost of providing customer support, customer service and experience. Customer expe-
and adopt service-oriented architecture (SOA) rience is even more important during an economic
which reduces information technology complexity downturn. Enterprises are no longer competitive
through its ability to provide an agile framework through their products and prices. Enterprises
that can adapt to rapid changes (Leggett, 2012a). need to spend more on customer experience and
customer service to build close relationships with
their customers because customer’s experience is
CONCLUSION becoming the new differentiator. Companies can
overtake the competition by the service experience
Internal marketing plays an important role in that they offer. Companies that provide welcoming
delivering outstanding customer service experi- and warm customer experiences have the oppor-
ence. Establishment of a customer-oriented culture tunity to stand apart from the crowd. Besides the
within the organization is a critical determinant of great customer service and experience, companies
relationship marketing success. First of all, com- can build long term relationships with customers
panies that want to establish long-term profitable and gain advantage through their loyalty.
relationship with their customers have to maintain Customers are likely to be less forgiving of a
employee satisfaction and loyalty by developing poor experience and in the case of poor experience
successful relationship with their employees. they share their dissatisfaction and most of them
Therefore, companies have to focus on creating an switch to a competitor. Improving customer service
internal culture and orientation, which assist and experience is important and ongoing process for
support the organization in the implementation of enterprises because unhappy customers will not
relationship marketing practices. Companies that buy again from a company that disappointed them.
are looking to achieve employee satisfaction and It is important to surprise your customer by going
loyalty need to invest in improving the quality of beyond what is expected but when a dissatisfaction
internal service and employees. Investing more in arises, it is significant to recover the dissatisfaction
training, empowerment, technology and tools help immediately. Enterprises have to avoid turning a
employees deliver great customer service experi- dissatisfied customer into an angry one. Inability to
122

recover the dissatisfaction creates negative word of and use customer data for analytical decision
mouth about the brand and this leads to customer making to get profitable growth. Meeting cus-
churn. Creating customer keeping culture, getting tomer expectations has been becoming difficult
360 degree customer insight, using big data and in today’s market conditions. However, based on
predictive analysis, engaging customers through the customer insight and using the big data and
social media channels and managing experience predictive analysis, enterprises can offer tailored
across service channels help companies to deliver product and services that meet the customer needs
outstanding customer experience. and preferences. Technology makes it possible for
It is not enough to think about customers. En- enterprises to serve their customers effectively.
terprises have to put themselves in their customers’ Today’s customer data management enables en-
shoes and have to think as if they are customers. terprises to manage customer knowledge and align
The culture and processes of the organization their decision making around customers. With the
have to support employees in delivering customer new data analytic technologies such as big data
experience. Disappointing experiences arise when and predictive analysis, marketers can develop
a company fails to adopt the customer’s perspec- and manage meaningful customer interactions and
tive; thus it is important to place the customers grow profitable long term customer relationships.
at the heart of company. People in the organiza- Analytical insight enables companies to better
tion have to work together in a customer centric understand and proactively respond to customer’s
way to increase the value of the customer service unmet needs. Big data and predictive analytics will
experience. Willingness of employees to serve be increasingly used to recommend the right offer
is essential for delivering great customer service to customers, personalize cross-sell and up-sell
experience. To work with right employees is the offers as well as communication and customer
starting point of delivering great service. Employee service. As enterprises want to understand how
hiring, training and incentive policies that sup- customers behave and based on the data they want
port the implementation of relational marketing to predict future behavior of them, in the follow-
practices, creating customer centric mission and ing years there will be a significant increase in
vision, integrating the information technologies the need for analytics. Thus, technology plays a
to deliver customized services, and listening the critical role in achieving excellence in customer
voice of customers contribute the creation of service experience.
customer keeping culture. Engaging with customers through social me-
Companies need to listen their customers to dia channels help companies to build 360 degree
meet and even exceed their expectations, and customer insight. By listening conversations that
encourage their customers to share their idea take place in social media, companies can learn
and opinions with them to make the product and the needs and preferences of their customers,
services better. Companies that want to deliver identify the problems and respond to conversa-
better service to their customers also need to tions before problems escalate. Moreover engaging
develop a 360 degree of customer view. With with customers via social media channels leads
the advancements in information communication to establishing close relationship between the
technologies, customers contact with enterprises company and its customers and company can
through multiple touch points such as the web, call activate its brand advocates in order to generate
centers, sales forces, and stores. These customer positive word of mouth about the brand. Achiev-
touch points are producing enormous volumes of ing excellence in customer service experience is
customer data. Enterprises increasingly incorpo- based on the following magical formula, that is:
rate new technologies to manage and store data
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• Listen tomer experience requires continuity, consistency

• Learn and correctness of interactions.
• Care As enterprises have been increasingly provid-
• Serve ing customer self-service through web, social
networks and mobile devices, integration of
Technological advancements such as mobile customer self-service reduces the voice and email
phones and applications lead to change in customer traffic, improves the performance of the call center,
behavior and their purchase decisions. Customers reduces the complaints and increases the speed
want the flexibility and choice of channels through of responses. Moreover, with the decrease in the
which they can interact with the company. Since number of incoming calls, employees of call center
there is variety in preferences, companies should may focus more on revenue generating outbound
be prepared to engage with customers and deliver calls. Customer self-service has to be built on a
service across all possible channel phone, email, knowledge base that enables companies to serve
web, chat and point of purchase. In the digital era, customers consistently and cost efficiently across
consumers are also willing to seek support across all channels. Briefly, virtual helpdesk technologies
a variety of online channels. Customers are going facilitate engagement with customers, accessible
online for information more than ever by using a to customers 24x7 days a week across a broad
variety of devices and channels. Contact centers array of interaction channels, answer the inqui-
have been transforming to adapt rapidly chang- ries and questions, increase the sales conversion
ing customer behavior. Therefore, enterprises rate by customizing real time and relevant offers
must improve online self-service through mak- based on the customers’ intent of interaction; and
ing technology investments in order to provide provide real time customer insight and feedback
personalized and relevant online support. to the enterprise.
Self-service channels are experiencing signifi- In the next years businesses are expected to
cant growth. Customers prefer to serve themselves focus more on improving customer service expe-
through the Web, and increasingly on a mobile rience. Enabling customers to interact with the
device. Therefore, it is imperative to provide online company through multi-channel ways, integrating
customer services and transactions in the mobile online self-service, virtual helpdesks and social
format and ensure easy transition between mobile media into customer service channels, providing
and other support channels because many custom- customer support and service through mobile
ers begin interaction or transaction on a mobile channels, and creating omni-channel customer
device and later shift to call centers to complete experience are considered as business trends to
the interaction. Thus, the transition has to be improve the customer experience. Companies will
easy and seamless across support channels. Since put more emphasis on enriching customer insight
customers has been increasingly using variety of with the content that are generated from social
channels especially mobile channels to seek infor- listening, forums, virtual helpdesks and analytics
mation, multi-channel customer service strategy in order to personalize offers and communication.
is required to maintain integrated and unified Improving data quality and data managements
experience, consistent high levels of satisfaction will be among the hot issues of the businesses
and engagement across all channels. Regardless in the future.
of the channel preference, the correctness and the An enterprise’s ability to respond to custom-
completeness of the information must be consistent ers inquires instantly, across whichever channel
across channels. A successful multichannel cus- customers chose, at whatever time they chose, will
have a major impact on a customer’s experience.
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Rogers, M., & Gilleland, J. (2009). Customer expe-
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Empowerment increases employees’ motivation
Zaibak, O. (2013) 101 inspirational customer and creativity. Empowerment, as an internal mar-
service quotes. CSM. Retrieved September 4, ket relationship management strategy, contributes
2013, from http://www.customerservicemanager. to the creation of relationship marketing culture
com/101-inspirational-customer-service-quotes. within the organization.
htm Internal Marketing: The main objective of
internal marketing is to hire, train and motivate
able employees who want to serve customers
well; because selection, training and motivation
KEY TERMS AND DEFINITIONS
of employees can make a worthwhile difference
in delivering better service experience. Internal
Big Data Analytics: Big data analytics helps
marketing activities include the creation of a
enterprises to collect, organize and analyze large
customer oriented internal environment in which
amount of structured and unstructured data that
all functions of the organization proactively com-
come from variety of sources in order to find out
municate, understand and inform each other to
useful information for decision making. Analysis
serve customers effectively.
of big data allows enterprises to discover what
Online Customer Service Channels: Fre-
customers really want, increase their sales and
quently asked questions (FAQs), e-mail, instant
efficiency, close more deals, and improve opera-
messaging or online chat with a live person, online
tions and customer service experience.
forum or community, screen sharing, virtual agent,
Big Data: Enterprises gather information about
and social media are among the online customer
their customers from traditional and digital chan-
service channels.
nels in order to understand what customers want
Service Profit Chain: Service profit chain
and predict what customers can do in the future.
model describes the linkage among employee
Big data is the reality of today’s businesses. Struc-
satisfaction, customer satisfaction, customer re-
tured and unstructured data flow in organization
tention, sales and profitability. According to the
129

service profit chain model, to keep profitability online platforms and virtual agent uses the artifi-
of the company, it is important to increase inter- cial intelligence to answer the sales and support
nal service quality and employee satisfaction. In queries of customers. Virtual agents ask questions
return this will foster value of external service to understand better the intent of customers and
which leads to increase in customer satisfaction this creates a two-way conversation and the feel
and retention. Highly satisfied customers means of an online chat with a real agent. Virtual agent
growth and profitability for the companies. Thus, technology acts as a 24×7 online agent and pro-
quality of external relationships is dependent on vides real-time voice of the customer insights.
the quality of internal relationships. Virtual Helpdesk: Virtual helpdesk com-
Social Customer Support Programs: Social poses of new online customer self-services such
customer support programs can be defined as as proactive live chat, virtual agent, and remote
integration of social media into customer support support software. Virtual helpdesk technologies
program. Listening, analyzing, responding and facilitate engagement with customers, accessible
engaging are the requirements for managing social to customers 24x7 days a week across a broad
customer support programs successfully. Listen- array of interaction channels, answer the inqui-
ing conversations enables enterprise to analyze ries and questions, increase the sales conversion
and monitor customers’ feelings and trends in the rate by customizing real time and relevant offers
social platforms. based on the customers’ intent of interaction; and
Virtual Agent: Virtual agent technology plat- provide real time customer insight and feedback
form is considered as next generation self-service to the enterprise.
software that helps customers to get service on
130
131
Chapter 6
A Framework for CRM:
Understanding CRM Concepts
and Ecosystem
ABSTRACT
This chapter aims to develop a framework for CRM in order to understand CRM concepts and ecosystem
better. To achieve this aim, this chapter starts with giving definitions of CRM from different perspectives.
Reviewing the definitions of CRM reveals the essential pillars of CRM implementation. A well-developed
CRM implementation framework can help companies see the big picture and develop successful CRM
implementations. This chapter explains the vision and strategy; customer value proposition and customer
experience; organizational culture and customer centric processes; and enabling technologies and
information management as the fundamental components of a successful CRM initiative. After mention-
ing the benefits of CRM implementations, this chapter continues with analysing the architecture of the
CRM ecosystem. Key functionalities and the role of analytical, operational, and collaborative CRM in
managing relationships are also clarified. This chapter ends up with discussing the functionalities of
CRM technologies in understanding customers, customer targeting, customer acquisition and retention,
and customer service and support.
INTRODUCTION customers and building relationships to create

value. The ultimate aim of relationship marketing
In today’s markets, Customer Relationship is to maintain customer retention and advocacy.
Management (CRM) has becoming the main Retaining customers provides a more sustainable
strategy for companies. Due to the changes in competitive advantage than acquiring new cus-
market conditions companies have been moving tomers. As businesses are realizing that it costs
from transactional marketing, which focuses on less to retain customers compared to compete for
products and transactions, towards relational new ones (Rosenberg & Czepiel, 1984), they have
marketing in order to increase their sales as well been increasingly using relationship marketing
as profits. Relational marketing is considered activities in attempt to encourage customer com-
as a new paradigm of marketing that focuses on mitment and retention.
DOI: 10.4018/978-1-4666-8231-3.ch006

A Framework for CRM
Relationship marketing is an umbrella term relationship management is more focussed on

that involves all the activities that are directed building relationships with profitable customers.
towards establishing, developing, and maintain- Since relationship marketing focuses on com-
ing successful relational exchanges to deepen the mitment, empathy and trust, it is considered as
customer advocacy (Webster, 1992). Relationship relatively strategic, emotional and behavioral in
marketing, which is a customer-centric business nature; on the other hand customer relationship
concept, must be supported by establishing rela- management is considered as more tactical and
tionships with all stakeholders, namely: customers, managerial in nature because it focuses on building
employees, suppliers, retailers, distributors, and and maintaining profitable customer relationships
shareholders (Kandampully, 1997). In return, these (Sin, Alan, & Yim, 2005). The objective of this
coordinated activities are helpful in ensuring the chapter is to analyse various aspects of CRM,
customer satisfaction, which has a direct link on provide a conceptual foundation and framework
the profitability of the organization. Relationship for understanding the domain of CRM, and un-
marketing also increases efficiency and effective- derstand the CRM application ecosystem.
ness by reducing the marketing costs, facilitating The CRM approach has been receiving in-
targeting of high profit customers, enhancing creased attention as a marketing concept and
customer loyalty, reducing price sensitivity and publications that are related with CRM have been
facilitating database development (O’Malley & increasing substantially from the period after the
Tynan, 2000). Since the relationship marketing end of the 1990s to 2004 (Ngai, 2005; Paulissen,
enables the company to create superior value for Milis, Brengman, Fjermestad, & Romano, 2007;
its customers and increase customer satisfaction, Wahlberg, Strandberg, & Sandberg, 2009). Al-
companies have been increasingly focusing on though there are considerable attempts to define
building long-term relationships with their internal CRM, the review of CRM literature reveals that
and external stakeholders in order to gain market there is no unified definition of CRM (Rababah,
success and competitive advantage. Mohd, & Ibrahim, 2011). The term of CRM has
been defined by different perspectives in differ-
ent ways. Zablah, Bellenger, & Johnston (2004)
DEFINING CRM FROM review the literature about CRM and identify
DIFFERENT PERSPECTIVES 45 distinct CRM definitions. Detailed analysis
of these definitions reveal that CRM has been
Customer relationship management and relation- defined and conceptualized in terms of one of
ship marketing are not distinguished from each the following perspectives Zablah et al. (2004):
other in the marketing literature (Parvatiyar &
Sheth, 2000). Although in many studies the con- • Process,
cept of relationship marketing and customer re- • Strategy,
lationship management are used interchangeably, • Philosophy,
customer relationship management is a subset of • Capability,
relationship marketing (Ngai, 2005). Relationship • Technological tool.
marketing not only includes standard buyer and
seller relationships but also includes building Payne and Frow (2005) review the CRM
relationships with the entire range of stakehold- definitions in order to analyse the definitional
ers that help firms deliver superior value to their aspects of CRM and authors suggest that CRM
customers (Payne, 2000). However, customer can be defined by three alternative perspectives:
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• Narrowly and tactically as an implemen- perceptions of the organisation and its products”
tation of a specific technology solution (Peelen, 2005). The process perspective of CRM
project, focuses on customers and developing long term
• Wide-range of customer oriented informa- relationship with them. This definition does not
tion technologies, and underline the role of technology and it does not
• Broadly and strategically as a holistic cus- consider information technologies as a must to
tomer centric approach to managing selec- perform relational activities. According to the
tive customer relationships to create value. process perspective, relationships between the
buyer-seller develop over time and process per-
Since, the lack of a unified, clear and con- spective defines CRM as process that seeks to
sistent definition of CRM is considered as one build durable, profitable, and mutually beneficial
of the main reasons for the failure of the CRM customer relationships. Briefly CRM is a process
implementations and adoptions, Rababah et al. that aims to build and maintain long term profitable
(2011) review the CRM definitions in order to relationships by managing customer interactions
propose a unified definition of CRM that may (Zablah et al., 2004).
guide companies to implement CRM successfully. Philosophical perspective of CRM aims to
Authors review the CRM literature in information create customer loyalty by proactively seeking
systems, management, and marketing. At the end to build and maintain long lasting relationships
of literature review, they get 23 definitions of with customers. CRM as a business philosophy
CRM and in this study the definitions of CRM focuses on achieving customer centricity for the
are given from three different perspectives that entire company and it emphasizes that interactions
are (Rababah et al., 2011): with the customers have to be considered within
the context of ongoing relationship. Philosophical
• Business philosophy, view suggests that maintaining long term relation-
• Business strategy, ship can be possible by organizing the company
• Technology. around customers and being continuously respon-
sive to customers’ changing needs and able to
As a result of content analysis, Rababah et al. deliver customer value based on the customers’
(2011) categorize these 23 definitions based on evolving needs (Zablah et al., 2004).
the three perspectives. The findings of the analysis Parvatiyar and Sheth (2001) define the CRM
reveal that approximately half of the definitions “as a comprehensive strategy and process of
(48%) state the CRM as a strategy of doing busi- acquiring, retaining, and partnering with selec-
ness, 22% of these definitions define the CRM tive customers to create superior value for the
from technology perspective and 17% of them company and the customer. It involves the inte-
define the CRM as a business philosophy. While, gration of marketing, sales, customer service, and
two of definitions indicate that CRM is a technol- the supply-chain functions of the organization to
ogy enabled strategy, only one definition defines achieve greater efficiencies and effectiveness in
the CRM by the help of three perspectives. The delivering customer value”. As it is indicated in this
findings support the fact that there is a tendency definition, strategic view of CRM aims to improve
of defining CRM as a strategy. marketing productivity and to enhance mutual
Process perspective defines the CRM “as a value for the parties involved in the relationship.
process that addresses all aspects of identifying The strategic view of CRM underlines the fact
customers, creating customer knowledge, build- that companies have limited resources and while
ing customer relationships, and shaping their building and maintaining relationships, these re-
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sources should be allocated based on customers’ technologies support CRM by enabling to gather
lifetime value to the company. Kumar and Reinartz greater customer insight, increase customer access,
(2012) define the CRM “as a strategic process build more effective interactions, and integrate
of selecting the customers that a firm can most throughout all customer channels and back of-
profitably serve and of shaping the interactions fice enterprise functions (Gartner Inc., 2004).
between a company and these customers. The CRM technology systems enable the company
goal is to optimize the current and future value of to profile customers; understand customer needs
the customers for the company”. Authors define and preferences; build long-term relationships
the CRM from a business strategy perspective by delivering superior value and service to its
and they suggest that assessing and prioritizing customers; target, acquire and retain profitable
customer relationships based on the customers’ customers; and integrate back and front office to
lifetime profitability increase the profitability of create a unified customer database.
the company. Strategic CRM perspective does Although, technological tools such as use of
not focus on how relationships are developed and data mining technologies enable the company to
maintained, but focus more on how building the serve its customers better, CRM is not a simply
right type of relationships that lead to increase technological tool or software that help companies
corporate profitability (Zablah et al., 2004). in building customer relationships. CRM is much
On the other hand, in 1990s technology per- more than technology. Considering the CRM
spective often considers the CRM as a technology- limited with technology causes failure in CRM
based customer solution and CRM is defined implementations. In other words, integration of
as “Enterprise-wide software applications that CRM tools to the organization’s process does not
allow companies to manage every aspect of their guarantee success of CRM programs. As Payne
relationship with a customer”(FOLDOC, 1999). and Frow (2005) argue that CRM is not simply
This definition equates CRM with technology an IT solution that is used to acquire and grow a
and considers the CRM as a software application, customer base. They propose that CRM should be
which automates the marketing, selling and service positioned in a broader and strategic context. A
functions of businesses, allows companies in build- strategic and holistic approach is needed to create
ing long-term customer relationships. Enterprise- superior customer value and manage customer
wide software application helps company acquire relationships effectively.
customer information from sales, marketing, and Buttle (2009) defines the CRM as “the core
customer service and store customer information business strategy that integrates internal processes
in a centralized database. Data mining function and functions, and external networks, to create and
of the software application enables company to deliver value to targeted customers at a profit. It
understand the customer and offer tailored prod- is grounded on high quality customer-related data
ucts and service, which in return create customer and enabled by information technology”. Buttle’s
satisfaction and customer loyalty. In another defini- definition comprises both strategy and technol-
tion, technology perspective defines the CRM “as ogy perspective. CRM is considered as business
the automation of horizontally integrated business strategy that uses IT in order to create and deliver
processes involving front office customer contact value to selected customers at a profit. Moreover, it
points (marketing, sales, service and support) underlines the significant role of business networks
via multiple, interconnected delivery channels” such as collaboration with suppliers in creating
(Peelen, 2005). This narrow focused definition customer value.
of CRM also emphasizes the role of information Rababah et al. (2011) argue that definition
technologies in serving customers better. CRM the CRM must composed of philosophy, strategy,
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A Framework for CRM
and technology perspectives and they suggest in large amounts and create economies of
that “CRM is the building of a customer-oriented scale and lower the fixed costs).
culture by which a strategy is created for acquir- • Benchmark customers (customers serve as
ing, enhancing the profitability of, and retaining benchmarks for other customers, although
customers, that is enabled by an IT application; for they might not generate much revenue,
achieving mutual benefits for both the organization other customers follow them so they gen-
and the customers”. This definition underlines the erate references and help companies access
essential pillars for successful implementation of many customers and markets).
CRM (see Figure 1). According to this definition, • Inspiring customers (customers who in-
a company needs to build customer centric organi- spire change and improvement in the sup-
zation, develop a CRM strategy that imposes the plier’s business, they are the source of new
commitment of being customer centric and realize product ideas and product improvements),
the CRM strategy by using enabling technologies • Door openers (customers who provide cre-
Reviewing the CRM definitions from dif- dentials and allow the supplier to gain ac-
ferent perspective reveals the essential aspects cess to a new market).
of CRM. First of all, the common denominator
of these definitions and the overall purpose of Briefly customers, who have high economic
CRM is to improve marketing productivity. CRM return, future business potential, learning value,
and relationship marketing perspectives suggest reference value and strategic value, are considered
that marketing productivity can be achieved by as strategically significant customers. Therefore
establishing and maintaining cooperative and the ultimate aim of CRM is to identify and focus
collaborative long lasting relationship between
the company and its customers, internal markets
Figure 1. Essential pillars of CRM implementation
and business markets. In addition, as strategic Source: Adapted from Rababah, K., Mohd, H., & Ibrahim,
CRM perspective indicates customer selectivity H. (2011). A unified definition of CRM towards the suc-
also plays significant role in building profitable cessful adoption and implementation. Academic Research
International, 1(1), 220-228.
relationships because as it is known that not all
customers are equally profitable (Storbacka,
2000). Building long lasting profitable customer
relationships can be achieved when the company
builds relationships with the “right” customers
who have potential to provide a desired level of
return (Zablah et al., 2004).Building relationships
with customers, who are strategically less signifi-
cant for the company, could result in marketing
inefficiencies and loss off time and financial
resources. Buttle (2009) identifies the attributes
of strategically significant customers as follows:
• High lifetime value customers (customers

that have potential to use the product/ser-
vice in the long term).
• High volume customers (customers that
might not generate much profit, but buy
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A Framework for CRM
on strategically significant customers and es- Considering the CRM limited with database
tablishing long-term relationships with them by marketing is also among the misunderstandings
providing them customized value propositions about what CRM is. Customer data is collected
and relationship management strategies. through many different channels and the gathered
data is stored in data warehouses on computers.
Companies use these customer databases for
WHAT CRM IS NOT marketing purposes such as segmenting markets,
targeting, making campaigns, and communicat-
There are some misunderstandings about what ing. Although database marketing activities can
CRM is. Perceiving the CRM exclusively as be seen as part of CRM, companies cannot do
database marketing, marketing process, informa- database marking without CRM, but they can
tion technology/software application, and loyalty do CRM without database marketing. Database
programs are among the common misunderstand- marketing is part of technology enabled market-
ings about the nature of CRM (Buttle, 2009; ing activities and it can perform the functions of
Payne & Frow, 2005). Most of the time CRM is analytical CRM, however it cannot perform the
considered as just software or system; however functions of operational and collaborative CRM.
CRM is much more than a software. CRM is a Thus, the scope of database marketing is narrow
philosophy that focuses on building long-term than CRM and database marketing is the essential
customer relationships and CRM is a strategy foundation of a CRM program. Furthermore, as-
that aims to build relationships with selective suming the CRM as merely marketing process is a
profitable customers. CRM software technologies misstep because CRM covers not only marketing
enable the company to get customer insight and functions but also includes sales and customer
develop successful CRM strategies. The informa- service functions. CRM is not limited with market-
tion technology facilitates the implementation ing activities such as lead management, customer
of CRM strategies. However, many companies retention or campaign management. CRM can be
believe that implementing CRM technologies used for many other activities such as management
makes them a customer-centric organization. They of communication channels, delivering outstand-
ignore the importance of organizational culture, ing and consistent customer service, complaint
people and processes in the implementation of management. CRM does not also mean loyalty
CRM strategies. Successful implementation of programs. CRM is first and foremost a business
CRM strategies requires qualified internal mar- strategy that has to be supported by business
ket and customer oriented processes. Integrating processes and enables technologies in order to
information technologies does not compensate for achieve the organization’s customer-centric goals.
poor processes and unqualified employees. On the Companies implement CRM with the purpose
other hand, qualified employees need information of increasing marketing productivity by focusing
technology tools to serve customers well and pro- on acquiring the targeted customers whom they can
cesses are required to be supported by information serve in a profitable way, retaining the strategically
technologies. Therefore, CRM does not equal to significant customers, and delivering outstanding
technology or software applications. CRM is a customer experience and value to the selected
business strategy and philosophy that should be customers. CRM as a business strategy allows
supported by qualified people, customer oriented the company to maximize profitability, revenue
processes, and enabling technologies. Companies and customer satisfaction by organizing around
need information technologies to r understand and customer segments, encouraging the practices that
meet the requirements of customers better. satisfy its customers, and implementing customer
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A Framework for CRM
centric processes (Alvarez, 2013).Implementation the “how”, while vision states the “what” and
of CRM requires development of customer centric “why”. CRM strategy guides company to turn its
vision and strategy. customers into assets. Hence, CRM strategy has to
include objectives and determine how resources
are going be used to interact with customers in
CRM IMPLEMENTATION order to turn the customer base into an asset by
FRAMEWORK delivering customer value propositions (Gartner
Inc., 2004). While developing a CRM strategy the
A CRM implementation framework is needed to company requires to (Thompson, 2007):
develop CRM vision and strategies. This frame-
work can be served as a basis for building CRM • Assess the company’s current position
and evaluating the company’s CRM capabilities in the market and its relations with its
for improving the CRM implementations. Gart- customers,
ner develops a CRM framework, which is called • Understand its current customers,
eight building blocks of CRM, to help companies • Identify target segments by segmenting the
see the big picture and develop successful CRM customer base,
implementations (Radcliffe, 2001). The eight • Set customer objectives for each acquisi-
building blocks of CRM argue that vision, strat- tion, development and retention stages,
egy, valued customer experience, organizational • Define metrics for checking the implemen-
collaboration, processes, information, technology tation of the strategy and performance of
and metrics are the fundamental components of achieving the objectives such as satisfac-
a successful CRM initiative. Figure 2 illustrates tion, loyalty, and cost to serve,
the fundamental elements of successful CRM • Outline the strategy to customize products,
implementations. pricing, communication and channels to
CRM vision is essential for creating a success- create customer value proposition,
ful CRM program. Successful CRM implementa- • Develop strategy to manage segments,
tions require a clear CRM vision that reflects the customer service, channels and contacts to
value proposition of the company, the nature of deliver customer value and customer expe-
the customer experience and target customers with rience, and
which the company wants to build relationships. • Identify the required capabilities, skills,
To develop a clear and actionable CRM vision, people, data and infrastructure.
a company needs to ensure that its leadership is
committed to fostering a customer-centric focus Designing an excellent customer experience
and creating corporate culture that supports the plays critical role in the implementation of CRM.
company’s customer-centric objectives. The vi- It is significant to ensure that the company’s
sion should motivate employees to work together, offerings and interactions deliver ongoing and
generate customer loyalty, and gain greater wallet consistent value to customers. Understanding
share and market share (Alvarez, 2013). the key dimensions of the customer experience
CRM strategy is essential for successful and meeting the customer expectations result in
CRM implementations. The objectives of a CRM more satisfied and loyal customers and higher
strategy are to target, acquire, develop and retain sales; whereas poor customer experience causes
valuable customers to achieve corporate goals customer loss (Gillespie, 2013). Company has to
(Radcliffe, 2001). Creating a strategy is differ- look from the eyes of customers and set expecta-
ent from developing a vision. Strategy addresses tion on the basis of what customers want. It is
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A Framework for CRM
Figure 2. Fundamental elements of successful CRM implementations

Source: Adapted from Gartner Inc. (2004). Reaping business rewards from CRM: From charting the vision to measuring the
benefits. Gartner Press.
important to deliver what the customers expect management in internal processes, organizational
and this can be possible by ensuring multichannel structures, employees’ skills, competencies and
feedback systems and listening voice of customers. behaviours, incentives and compensations, and
Feedback is critical in designing and improving the leadership (Thompson, 2007).
customer experience. Company has to listen and Functionally fragmented processes lead to poor
take feedback from its customers and employees experiences and cause failure in delivering the
to design, personalize and improve the customer customer value. Successful customer process re-
experience (Gartner Inc., 2004). engineering is necessary for meeting the custom-
Successful CRM implementation requires ers’ expectations, delivering great customer value
organizational culture that is compatible with and experience, and providing competitive differ-
CRM vision and strategy. Organizational col- entiation (Radcliffe, 2001).The aim of customer
laboration is needed for CRM implementations. process re-engineering is to improve relationships
Whole organization and employees have to be- with customers. CRM programs require effective
come more focused on the needs and preferences management of customer life cycle processes as
of customers. A company which fails provide well as analytical and planning processes that build
organizational collaboration faces high risks of knowledge of the customer. Customer process
CRM project failure. It is essential to align the re-engineering efforts of a company has to start
organizational structure with customer focus, with mapping the touch points and processes in
build customer-centric understanding within the attempt to identify the processes that cause most
enterprise, create an environment of collaboration, dissatisfaction from the perspective of customers.
maintain the employee satisfaction, and identify A company has to focus on re-engineering the
the area of change management and update them weak points of the processes to make them more
(Sussin, 2013).Aligning the organization based on customer centric and deliver greater customer
the philosophy of CRM requires ongoing change value. Not all processes are considered as equally
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A Framework for CRM
important for the customers. Thus, company can cause costs about storing and managing duplicated
quantify and prioritize the processes based on data. Company that has fragmented and inadequate
their contributions to customer value and their CRM information cannot (Gartner Inc., 2004):
impact on the company’s strategic CRM objec-
tives. Company can take feedback from customers • Handle customer interactions efficiently,
about their priorities and based on the feedback effectively and accurately,
it can make necessary changes in the front and • Estimate the customers’ current and poten-
back office to improve the processes (Gartner Inc., tial value,
2004).Customer process re-engineering, which • Predict the likely future behavior and re-
is one of the key foundations of implementing a quirements of customers,
CRM strategy, has to focus on creating processes • Accurately segment and profile customers
that meet customers’ expectations, support the for offering customized products, and
customer value proposition, provide competitive • Measure ROI and CRM strategy success.
differentiation and contribute to delivering out-
standing customer experience (Thompson, 2001). Companies that can source, manage and lever-
Customer information is considered as the age the customer information are more likely to
lifeblood of CRM. Customer information is the achieve their CRM goals and objectives and gain
key to build profitable relationships with custom- a competitive advantage. To improve the CRM
ers. Since the customer information is the basis information system, companies have to focus on
of customer insight and effective customer inter- (Radcliffe, et al., 2001):
action, customer information has to be sourced,
managed and deployed strategically (Radcliffe, • Maintaining and improving data quality,
Collins, & Kirkby, 2001). Customer information • Integrating data that come from all across
and insight must be attainable all across touch channels,
points to support consistent customer interactions. • Creating an integrated, multichannel, cus-
Creating accurate, complete, consistent and timely tomer-facing view for customer interaction,
customer information and insight is the foundation • Determining what information is needed to
of CRM and enables company to enhance customer get customer insight,
interactions and deliver consistent customer ex- • Creating analytical customer view by ob-
periences. Success of CRM strategies depends on taining the data that are extracted from the
the ability of a company to ensure high quality, different data sources, transforming into a
accurate, and complete customer data; create a consistent and usable format, and integrat-
single view of the customer for operational and ing it with other data,
analytical purposes; identify the customer infor- • Storing customer data for analytic
mation and insight needs for the different customer purposes,
life cycle stages; and leverage customer informa- • Analyzing customer data and creating in-
tion and insight during the customer interactions sight, and
(Davies, 2013). Fail to provide the information • Applying customer insight to customer in-
in the right place, in the right format, and at the teractions and optimize customer relation-
right time and lack of customer data quality are ships (such as using customer insight for
among the top causes of CRM failure (Nelson & pre-planned outbound communications,
Kirkby, 2001). Fragmented databases and systems event-driven outbound communications,
may hurt the CRM information capabilities of a and guiding incoming interactions in real
company. Poor CRM information capabilities can time.
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A Framework for CRM
Customer information and insight must be ac- rate, retention rate and customer lifetime value),
cessible from all touch points to support consistent operational & process (e.g., complaint levels and
customer interactions and drive more profitable response levels), and infrastructure inputs (e.g.,
customer relationships. call answering times and data accuracy levels)
Although CRM is more than technology, role metrics are considered as the CRM performance
of CRM technologies cannot be ignored. CRM management metrics (Kirkby, Thompson, & Buy-
technologies enable CRM business strategies. The tendijk, 2001). However, marketing measures such
aim of CRM applications is to deliver integrated as market share and total volume of sales may not
functionality to support seamless customer centric be suitable for evaluating the CRM performance.
processes throughout the company and its partners. A balanced scorecard, which involves the perfor-
CRM technology bases of a company have to be mance evaluation metrics related with the objec-
integrated across channels and business units. tives of the CRM program, can be more suitable
Companies that want to achieve objectives of to evaluate CRM performance. Measurement of
CRM strategies, have to integrate their fragmented relationship satisfaction is considered as another
operational and analytical capabilities, and need global measure used to control CRM performance.
to create a set of enterprise integration standards Measuring the relationship satisfaction help the
to ensure conformity. They have to also consider company see to what extent its relational partners
the integration of CRM applications with other are satisfied and estimate the customers’ inten-
companies’ applications such as ERP, supply tion of continuing or terminating the relationship
chain management and other internal applications. (Parvatiyar & Sheth, 2001).
(Gartner Inc., 2004). On the other hand, Payne and Frow (2005)
Performance of CRM programs and strategies provide a process-based conceptual framework
has to be evaluated systematically to see whether for strategic CRM and identify key elements
they meet expectations. Performance evaluation within each process. As can be seen from Fig-
enables companies to match the CRM objectives ure 3, authors identify five key cross-functional
and performance measures by taking corrective CRM processes: strategy development process,
actions or modifying CRM objectives (Parvatiyar value creation process, multichannel integration
& Sheth, 2001). Defining and checking CRM process, information management process, and
metrics are required for successful CRM. To performance assessment process.
build profitable relationships with customers, The proposed CRM process-based framework
companies need to set measurable CRM metrics provides deeper insight for achieving success
and monitor the metrics in order to evaluate their with CRM strategy and implementation (Payne
performance. Without performance management, & Frow, 2005). In the strategy development pro-
a CRM strategy cannot be successful. CRM met- cess, company develops its business and customer
rics assess the level of success as well as provide strategy which affects the success of its CRM
feedback mechanism for the change management, strategy. Company takes into consideration its
modifying the CRM strategy and implementation, business and customer strategy while developing
and improving customer experience (Thompson, and implementing its CRM activities. Company
2007). Identifying the performance management can develop its business strategy based on its vi-
metrics seen as challenging. CRM performance sion and industrial and competitive environmental
management metrics can be used to measure analysis. As a part of customer strategy process,
the company’s performance and success with company identifies its target segments by analysing
CRM. Corporate (e.g., market share, revenue the existing and potential customers’ preferences
and profit), customer strategic (e.g., acquisition and characteristics. After the strategy develop-
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A Framework for CRM
Figure 3. Process-based conceptual framework for strategic CRM

Source: Adapted from Payne, A., & Frow, P. (2005). A strategic framework for customer relationship management. Journal of
Marketing, 69(4), 167-176.
ment process, company determines the value for long term customer relationships. Lastly, as a part
its customers and with this value company has to of the performance assessment process, company
maximize the lifetime value of desirable customer has to ensure whether the company’s strategic
segments and achieve competitive advantage. aims in terms of CRM are being fulfilled or not
Since the company can interact with its custom- (Payne & Frow, 2005).
ers through growing number of various channels, Briefly, a company that wants to implement
the multichannel integration process becomes CRM has to consider the fundamental elements of
as one of the most important issues in CRM. CRM (see Figure 4). The ultimate aim of CRM is
The multichannel integration process includes to deliver superior customer value and experience.
determining the right combination of channels to It needs to start with developing CRM vision and
interact with customers and ensuring outstanding strategy. In order to achieve the CRM objectives,
customer experiences across channels. Company’s the company has to create an organizational
ability to manage multichannel integration and culture which is compatible with its CRM vision
create excellent customer experience is depen- and strategy. Organizational collaboration and
dent on its ability to create a single unified view customer centric processes play a critical role
of the customer and deliver it across channels. in value creation for customers and delivering
Therefore, during the information management customer experience. The company also needs
process, company has to focus on gathering and enabling technologies and information manage-
intelligently using customer information from ment systems in order to provide competitive,
all channels and integrate it with other relevant consistent, customized and outstanding customer
information to generate customer insight, build value proposition and experiences.
a consistently superior customer experience and
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A Framework for CRM
Figure 4. CRM implementation framework
There are some pitfalls that cause failure of are adoption, acquisition, implementation, usage
CRM implementations. Implementing CRM and maintenance, evolution and retirement phases
before creating customer strategy, installing in the CRM life cycle (Paulissen et al., 2007). In
CRM technology before creating a customer the adoption decision phase, company considers
focused organization, assuming that more CRM why and how to implement CRM system as well as
technology is better, and stalking customers are the consequences of its implementation. Company
considered as the perils that cause CRM failure defines the system’s requirements and analyse the
(Rigby, Reichheld, & Schefter, 2002). For the contribution of CRM adoption to their business.
success of CRM implementations, a company During the acquisition phase the company chooses
needs to create customer strategy and identify a CRM system that fits its requirements which are
its target customers with whom it wants to build defined in the previous phase. While comparing
relationships. A company, which wants to build and evaluating the CRM systems, company con-
relationships with profitable customers, has to sider the system’s functionality, usability, price,
restructure its organization and processes before training and maintenance services. Implementa-
rolling out CRM in order to deliver excellent tion phase deals with the implementation of the
customer experience and meet customers’ needs. CRM-system. In the use and maintenance phase,
Building relationships with wrong customers or company assesses the implemented CRM system
attempting to build relationships with the right based on its functionality, usability and adequacy.
customers in the wrong way may irritate custom- If the system requires corrections and improve-
ers and cause failure of CRM implementations ments, the implemented CRM system must be
(Rigby et al., 2002). maintained. The company needs to pay attention
CRM is quickly becoming a necessity for busi- to the realization of the expected benefits and
nesses who want to remain competitive. Organi- minimization of possible negative effects. In the
zational implementation of CRM systems evolve evolution phase, if it is required additional func-
through five different phases, (see Figure 5) which tions are integrated into the CRM system to get
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A Framework for CRM
additional benefits. In the last phase of CRM life customized and effective customer care
cycle, which is called retirement phase, the CRM and services and this helps the company
system no longer meet the company’s needs and retain its customers.
cannot be adaptable to new technologies. In this • Delighted and better served customer be-
phase, company has to consider to switch to new comes more loyal to the company and this
version of CRM system (Paulissen et al., 2007). generates perpetual source of revenue and
profit from the loyal customers.
• With the CRM technologies and custom-
BENEFITS OF IMPLEMENTING CRM er knowledge, company can identify the
opportunities for cross-sell, up-sell, and
Maintaining customer retention and loyalty is deep-sell. This will lead to effective cam-
the main objective of implementation of CRM paign management.
programs because in today’s competitive environ- • Satisfied customers make repeat purchas-
ment a company’s competitive advantage derives es and the company is more able to make
from its ability to sustain long-term relationships cross-sell, deep-sell and up-sell to the sat-
with customers (Kandampully, 1997). CRM is a isfied customers.
customer-centred business strategy that is helpful • Satisfied and loyal customers are also im-
in creating an organizational structure in which portant sources of positive referral cre-
the customer is at the center of everything; in ation. Customers, who receive excellent
turn, this provides long-term strategic benefits service are likely to share their positive
(Palmer, 2001). Since loyal customers are the customer experience and provide free ad-
most important assets of the company, in recent vertising by talking about the company’s
years companies have been increasingly focusing products and services. Positive word of
on creating value for their customers. They have mouth is considered as more reliable and
been implementing CRM in attempt to develop
long-term relationships with their customers.
CRM is a company-wide initiative and CRM’s Figure 5. CRM life cycle classification framework
return on investment is usually overestimated in
the short run and underestimated in the long run.
If a company meets the essential fundamentals
of CRM implementation, it will enjoy serious
benefits of implementing CRM. The benefits of
implementation of CRM can be outlined as fol-
lowing (Rai, 2012):
• CRM helps the company in understand-

ing its customers’ needs and preferences;
therefore company is able to serve its cus-
tomers better as well as deliver outstanding
customer value proposition and experience.
• Customer retention is one of the signifi-
cant benefits of implementation of CRM.
Understanding the customers’ needs and
preferences enables the company provide
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A Framework for CRM
believable than the company’s commer- the company. Ensuring customer loyalty provides
cial communication tools (e.g. advertising) significant benefits to the organization in terms
and brings more customers with no extra of profitability.
expenses. Since the objective of CRM is the acquisi-
• Through positive word of mouth, referrals tion and retention of profitable customers and
and cross-sell and up-sell opportunities, partnering with them (Sheth & Parvatiyar, 2001),
customer acquisition becomes easier and acquiring and retaining profitable customers can
the company decreases its customer acqui- be possible by delivering the right value proposi-
sition costs. tions to customers, developing customer centric
• Customers, who are satisfied with the com- processes, and motivating employees (Rigby et al.,
pany and customer experience, are more 2002). As can be seen in Figure 7, CRM technolo-
willing to pay a little more premium price gies and systems enable the company to achieve
for the company’s products and services the aims of CRM. The company needs to identify
in order to avoid the risk of trying a new its valuable customers and assess their lifetime
company. value and share of their wallet for its products.
CRM technologies enable the company to analyze
As it is indicated in the Figure 6, the benefits the customer revenue and cost data and segment
of CRM implementations to the company can be customers based on their profitability in order to
categorized under three aspects: customer profit- identify most valuable customers. As a result of the
ability, acquisition and retention. The success of segmentation, the company builds and broadens
the company depends on how successfully the its relationships with profitable customers, ignores
company implements CRM and its ability to keep the unattractive customer segments and manages
its customers. A great effort, time and money is costs to serve low margin segments worthwhile.
spent on customer acquisition. Since attracting Hence, company can target direct marketing efforts
new customer costs are high, focusing on customer efficiently with the help of CRM technologies.
acquisition without concentrating on retaining the Besides, CRM technologies and systems enable
new customers is a waste of time and money to the company to analyze the product and service
Figure 6. CRM benefits to the company
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A Framework for CRM
buying and usage behavior of customers; so that tomer service and experience (Brink & Berndt,
company understands current and future needs of 2008). Outstanding customer service and experi-
customers better and in return delivers the right ence can be achieved through training employees
value propositions to its customers. Company can and supporting the employees with technologies
build and maintain relationships with profitable and processes that make them more effective
customers by finding the best way to deliver its during the service delivery. Front line employees
products and services. CRM systems also allow require to have information about the customers’
the company to provide information to the front and their contact history. Employees have to be
line to serve customers better, manage supply able to understand the customers’ issues, predict
chain more efficiently, and process the transac- anticipated customer behavior, and give right re-
tions faster (Rigby et al., 2002). sponses. Therefore, during the service encounter,
Excellent customer service and experience is employees have to be supported by CRM tech-
integral part of CRM. Successful implementation nologies. Through CRM technologies employees
of CRM is possible by delivering excellent cus- can access the relevant customer information and
Figure 7. Role of CRM technologies in achieving CRM aims

Source: Adapted from Rigby, D. K., Reichheld, F. F., & Schefter, P. (2002). Avoid the four perils of CRM. Harvard Business
Review, 80(2), 101-109.
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A Framework for CRM
based on the customer information they may be depend on the quality of the data. Lack of data
able to identify prospects, give customized offers quality may generate costs, waste and customer
and services, deepen customer loyalty, reactivate irritation. On the other hand, well-established
customer purchases, avoid customer mistakes, high quality data provides increase in customer
and deliver satisfying responses and solutions conversion rates, cross-selling and up-selling
(Brink & Berndt, 2008). Since CRM systems opportunities, and retention rates. The data have
enable employees to access single customer view to be complete, up to date, in the correct form
across channels; employees can serve customers and content. The content of the data requires to
better and deliver superior customer experience. be valid as well as correct. The data should not
CRM technologies provide the necessary tools to involve duplications. In order to get the long-term
employees in order to foster customer relation- benefits of CRM, company needs a technological
ships. Moreover, CRM programmes facilitate infrastructure that captures, stores and processes
the tracking of customer retention and defection customer data in order to use this information to
rates, and satisfaction level. By tracking the de- deepen the customer relationships. A CRM tech-
fection rate and satisfaction levels, company can nology solution requires to support all customer
take preventive measures for customer defections interaction channels and easily connect with the
(Rigby et al., 2002). front and back office enterprise applications
and the applications of company’s suppliers and
partners. CRM systems integrate the customer
ARCHITECTURE OF information and business intelligence across all
CRM ECOSYSTEM customer interaction channels and business
functions (Brink & Berndt, 2008). Architecture
The adoption of CRM systems has been increasing of CRM involves processes and systems (Geib,
by recent developments in information technology. Reichold, Kolbe, & Brenner, 2005).
By implementing of CRM systems, companies CRM technologies can be practiced at the
can retain and attract potentially valuable cus- functional level, customer- facing front end level,
tomers (Sohn & Lee, 2006). Profitability of the and organizational (strategic) level (Kumar &
customer to the company is determined by tak- Reinartz, 2012). CRM from functional perspec-
ing into consideration the income and expenses tive refers to the sets of processes that perform
associated with the customer over time (Gordon, marketing and sales functions such as sales force
1998). The tracking of customer profitability automation or marketing campaign management.
can be more accurate through the use of CRM CRM that is practiced on a functional basis as-
technologies. Although CRM business strategy sociates with technology orientation. CRM at
needs to be seen as more than just technology, the customer facing level focuses on customer
CRM technologies are regarded as the facilita- experience. The aim of this CRM view is to build
tor of the CRM strategy and can be used in the a single view of the customer across all the touch-
development of CRM strategy. points and distribute the customer knowledge to
Building successful relationships with custom- all customer facing functions in order to deliver
ers requires information about the customer. Qual- excellent customer experience. CRM at the cus-
ity of the data is an important issue in developing tomer facing level emphasizes the significance
effective CRM strategies. The company needs of coordinating information across touch-points
usable, well-built and rich customer data. Well- to build successful relationships. The strategic
built data have to be complete, current, correct and level of CRM views CRM as a process that aims
unique (Peelen, 2005). Success of CRM strategies to achieve competitive advantage by delivering
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A Framework for CRM
value and satisfaction to the customer. Therefore support that consolidate front, back and mobile
knowledge about customers and their preferences office. All interactions with the customer are re-
has implications for the entire company (Kumar corded in order to gather data about the customer
& Reinartz, 2012). and understand what customers really value. On
CRM architecture at the process level incorpo- the other hand, analytical CRM analyses the data
rates business processes and focuses on the three that are gathered through operational CRM with
categories of CRM processes (Geib et al., 2005): the purpose of getting a picture of the customer
and examining the behavior patterns of customers
• CRM delivery processes which have di- to develop marketing strategies and campaigns.
rect customer contact and cover the part Analytical CRM includes the capturing, storage,
of customer processes such as campaign extraction, processing, interpretation and reporting
management, sales management, service of customer data stored in data warehouses (Xu &
management, and complaint management. Walton, 2005). Dyche (2002) makes a distinction
• CRM support processes have also direct between analytical CRM and operational CRM. In
customer contact; however they are not this distinction operational CRM is defined as front
part of customer processes but they fulfil office CRM that involves customer touch-points;
supporting functions within the CRM con- whereas, analytical CRM is defined as back office
text such as market research and loyalty or strategic CRM that involves understanding the
management. customer activities that take place in front office.
• CRM analysis processes merge and ana- Collaborative CRM uses multiple new and tradi-
lyze customer knowledge that has been tional communication technologies to facilitate the
obtained from other CRM processes. The interaction between the customer and company.
results of analysis are used in the CRM Collaborative CRM helps company deliver better
delivery and support processes in order services and products on time by integrating and
to increase the effectiveness of processes collaborating with all the members of the value
related with lead management, customer network such as suppliers (Xu & Walton, 2005).
profiling and segmentation, feedback and Peppers and Rogers (2011) explain the role of
knowledge management. analytical and operational CRM in building and
managing profitable relationships with customers
In the literature many studies examine the through IDIC model. According to the IDIC model,
technological developments, the nature of CRM companies need to (Peppers & Rogers, 2011):
systems, and their implementation in relationship
building, CRM context and strategy (Gartner • (I) identify its customers individually be-
Inc., 2004; Geib et al., 2005; Ling & Yen, 2001; cause relationships are established with an
Rababah, 2013; Sohn & Lee, 2006; Viljoen, individual,
Bennett, Berndt, & Van Zyl, 2005). Analytical, • (D) differentiate customers from each oth-
operational and collaborative technologies are er in order to deliver them customized and
considered as the main components of the CRM satisfying services and products which are
system architecture (Gebert, Geib, Kolbe, & based on their preferences and needs,
Riempp, 2002; Wahlberg et al., 2009) and it is • (I) interact with customers; since the rela-
named as the CRM ecosystem (Sohn & Lee, 2006). tionship depends on interaction between
Operational CRM includes customer-facing the two parties, the company requires to
applications such as sales force automation, find more efficient channels to interact with
marketing automation and customer service and its customers and during the communica-
147

A Framework for CRM
tion the company should tell something As it is illustrated in Figure 8, during building and
relevant to customers’ needs and values, managing profitable relationships, analytical CRM
and focuses to develop better customer insight, while
• (C) customize offers and services as well operational CRM focuses on how the company
as customize the customer’s treatment be- deliver a specific customer experience (Peppers
cause customers are different from each & Rogers, 2011).
other. Wahlberg et al. (2009) review the articles which
include the “Customer Relationship Management”
The first two steps of IDIC model, which are term either in the title or as a key word or in the
identifying customers and differentiating them, abstract in attempt to identify trends and find out
can be possible by analyzing the company’s cus- how CRM research has developed over the years.
tomer database and tracking the transactions of As a result of search in three major electronic data-
individual customer with the purpose of better bases they get 468 articles and they categorize the
understanding what their customers value and what articles based on the CRM types that are Strategic
their needs are. Customers do not participate in CRM, Analytical CRM, Operational CRM, and
the analysis process and even they are not aware Collaborative CRM. Strategic (185) and Analytic
of the information that the company is collecting CRM (180) are among the most studied type of
about them. Since for the interaction and custom- CRM in the literature. However Collaborative (35)
ization, company needs a receipt of interaction and and Operational CRM (19) do not appear much in
customization behavior, the last two steps of the literature. CRM paradigm, process and resource
IDIC model requires customers’ personal partici- integration across the organization, organizational
pation. Therefore, the first two steps of the IDIC coordination, implementation failures, success
model are considered as analytical CRM and the factors, management commitment, organization
last two steps are considered as operational CRM. culture, information systems and architecture,
Figure 8. Role of analytical and operational CRM in managing relationships

Source: Adapted from Peppers, D., & Rogers, M. (2011). Managing customer relationships: A strategic framework (2nd ed.).
New Jersey: Wiley.
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A Framework for CRM
measurement and profitability, and multichan- OLAP is a sophisticated technology, which uses
nel management are the topics that are discussed multidimensional structures for the data analysis
in Strategic CRM. Analytical CRM, which is as and it helps company discover the business data
popular as Strategic CRM, includes the topic of such as profitability of the customers for each
data mining, customer knowledge management, customer age group, product sales volumes for
customer behaviour and profile, customer seg- specific regions during the past years, and break-
mentation, predictive modelling, customer churn, down of profitability by product category for the
and customer analysis. There are few studies on regions or customer segments.
Collaborative CRM and these studies are dealt In the later stages, business analytics begin
with internet and web channels, self-service and to move from a system that generates descriptive
mobile channels. Operational CRM is the least reports to an algorithm that makes decisions for
studied type of CRM and it covers topics of the the company. Companies begin to employ business
customer service, contact centers, sales force sup- analytic technologies such as data mining and real
port and CRM software (Wahlberg et al., 2009). time applications that enable companies make
In the next sub-sections, specific types of CRM predictive analysis. Data are the heart of business
systems and technological tools that can be used analytics. Business analytical tools are becoming
in relationship building will be explained briefly. more important and new business analytic tools
and processes permit companies to quickly and
Analytical CRM easily collect all types of data, and to store, man-
age, analyse and integrate all data in order to make
CRM technologies have been evolving over the better, more informed decisions about the future.
time. The four levels of analysis in today’s CRM Companies gather all this information and with
systems, in increasing order of complexity, are the sophisticated algorithms they use predictive
standard reporting, online analytical processing modelling for decision making (Rachlis, 2013).
(OLAP), data mining and real time applica- Predictive insight can be used to (Viljoen et al.,
tions. At the beginning CRM technologies help 2005):
companies in standard reporting. Reporting is
an essential element of an effective CRM sys- • Predict what customers want and try to
tem and help companies get simple descriptive foresee their future behavior,
statistical reports about sales volume, customer • Identify the most profitable customers to
churn rate, buying frequency of customers, and so deliver them customized services,
on. Reporting can be standardized (predefined), • Guide front-line decisions and interactions,
or query-based (ad hoc). As the requirement • Determine which customers have potential
for analysis grows, the standard transactional for cross-sell, deep-sell and up-sell offers,
reporting becomes inadequate to deliver the best • Maximize customer lifetime value through
results; for this reason, online analytical process- customized up-sell, deep-sell and cross-
ing (OLAP) becomes an essential part of CRM sell in order to increase profitability and
(Buttle, 2009). As the time passes, technological retention,
advancements, such as OLAP technologies, allow • Predict customer churns,
companies to organize huge amounts of business • Identify which customers are at the risk of
data, facilitate business intelligence queries and leaving,
reporting, permit sophisticated analysis and get • Target the best customers for specific mar-
quick access to multi-dimensional data that are keting campaigns to increase sales and
generated from vast amounts of detailed data. ROI, and
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A Framework for CRM
• Determine the best channels to reach the purposes (Buttle, 2009). CRM analytics involves
customers. three categories of data analysis (Herschel, 2001):
Achieving competitive advantage, generating • Historic data analysis is descriptive and

new revenue opportunities, delivering superior deals with analyzing the success of busi-
customer service and increasing profitability and ness operations performance and past cus-
operational efficiencies are among the benefits of tomer behavior in order to see trends and
predictive analytics (Cosentino, 2012). Technol- patterns.
ogy advances in the business intelligence systems • Customer centric data analysis is predic-
allow companies to get insight about What hap- tive and focuses on obtaining a deeper
pened? Why did happen? What will happen? understanding of the customer’s potential
respectively over the time. The company is now relationship with the company in order to
able to predict the future through deep analysis of identify the customer’s propensity to churn
existing data, historical trends and hidden relation- or repurchase and their lifetime value.
ships within organizational data. The adoption of • Market data analysis focuses on analyzing
predictive analytics addresses a variety of busi- the customer segments and their buying
ness needs in the area of forecasting, marketing, patterns in the marketplace.
customer service, and product offers (Cosentino,
2012). Predictive CRM techniques enable the Customer data that is essential for the Ana-
company to derive new customer insights from lytical CRM can be obtained from enterprise
existing data and increases the effectiveness of repositories such as customer touch-points,
the CRM strategy for the company. marketing, sales and service automations, and
Understanding customers enables the company loyalty programs. ERP and transaction systems
to serve its customers better and keep them loyal such as customer purchase and payment history
forever. This is the main objective of CRM and also serve as data sources for the customer data
CRM processes allow the company to attain this warehouse and analytical systems. These data
ultimate aim. As can be seen in Figure 9, Analyti- sources generates behavioural, attitudinal, and
cal CRM builds on operational and collaborative demographical customer data for the data ware-
CRM, and analyzes customer data with the help house of the company. Behavioral data about the
of analytical tools to obtain customer insight. current customers of the company can be ob-
Analytical CRM systems capture, store, integrate, tained through historic and customer centric data
process, evaluate, distribute, use and report cus- analysis such as analysing the customer purchase
tomer data in order to understand each customer history. While attitudinal customer behavior can
and his behavior, and create superior customer be acquired through making market research or
value (Geib et al., 2005). Therefore, analytical customer satisfaction surveys. Analytical CRM
CRM supports the CRM analysis processes such includes technology intensive tools and applica-
as customer profiling and segmentation. Analytical tions that allow transformation of behavioural,
CRM concerns customer data analysis to improve attitudinal, and demographical “customer data”
business decisions. It includes data warehouse into meaningful “customer knowledge” which is
systems, reporting, analysis and data mining used to build profitable relationships with custom-
(Aurelie & Laïd, 2008). ers. Fully faceted CRM analytics is required for
Analytical CRM focuses on the intelligent min- getting customer insight that enables the company
ing of customer-related data for strategic or tactical to better understand the needs and preferences of
its customers.
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A Framework for CRM
Figure 9. Obtaining customer insight
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A Framework for CRM
Customer data analysis through analytical tools analytical CRM, the company might be able to
and applications permits the company to deeply predict buy and detect opportune times to make
analyse the customer data and reveal the hidden offers and this prevents irrelevant communica-
patterns in customer behaviour. As a result of tions, increases the marketing effectiveness, and
customer data analysis, the company is able to: decreases the costs (Buttle, 2009).
• Profile and segment its customers, Operational CRM

• Better understand its customers,
• Identify the profitability of its customers While operational CRM creates knowledge about
and their lifetime value (LTV), customers, analytical CRM creates knowledge for
• Predict the probability of customer churn, customers (Ranjan & Bhatnagar, 2011).Opera-
• Make market basket analysis, tional CRM provides customer information about
• Predict customer buying behavior, customers’ demographics, preferences and needs.
• Identify the target customers of a market- On the other hand, analytical CRM analyses the
ing campaign and predict their probability customer information that is provided by opera-
of responding to an offer, tional CRM and creates knowledge for customers.
• Offer cross-sell and up-sell propositions Based on the operational CRM, analytical CRM
based on the customer knowledge, gets customer insight and uses this customer in-
• Identify the next best offers and actions for sight for the benefits of the customers in order to
each customer, deliver them better value and service.
• Increase effectiveness of a marketing Operational CRM automates and improves
campaign and lower campaign costs in customer-facing and customer supporting business
return this leads to marketing campaign processes such as selling, marketing and service
optimization, across customer touch points and channels, and
• Assess performance and the results of mar- generally it requires the support of analytical
keting campaigns, and CRM (Iriana & Buttle, 2007).Operational CRM
• Make real time marketing. improves the efficiency of the company’s cus-
tomers operations, CRM delivery and support
Analytical CRM is becoming an essential processes such as customer complaint manage-
component of CRM implementations and ana- ment, customer interaction, customer service and
lytical information about customers increases the campaign management (Geib et al., 2005). It also
effectiveness of both operational and collaborative allows the company to take care of its customers.
CRM. CRM analytics enable company to plan Operational CRM deals with collecting data,
relationships at the strategic level and optimize processing transactions, and controlling workflow
them at the individual level (Radcliffe et al., at the sales, marketing, and services functions
2001). Analytical CRM enables the leverage of (Rababah et al. 2011).
customer insight within the daily operations of Delivering outstanding customer service and
the company, increases the customer satisfaction experience is critical in maintaining customer
and loyalty, and decreases the customer churn satisfaction and loyalty. With the support of CRM
probability. When analytical CRM functions technologies, companies may understand the needs
properly, customers receive timely and relevant of their customers and serve their customers bet-
communications and offers. With the help of ter. Operational CRM contributes to delivering
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A Framework for CRM
outstanding customer service and experience. the main areas where service automation is used.
Operational CRM technologies allow the com- A comprehensive service automation provides a
pany to recognize individual customers and their 360 degree customer information to facilitate de-
needs, fulfil orders accurately and on time, make livering consistent and excellent customer service
relevant communication and offers, and serve its by service agents at each touch point. Moreover,
customers in a responsive and reliable manner. service automation allows the company to gather
Operational CRM provides the ICT based support customer information from each customer interac-
for the employees to perform front office activities tion and the gathered customer information from
better and serve customers efficiently. the service automation is stored in databases in
Marketing automation, sales force automation, order to be used for contacting with customers
customer service automation, and management at the right time at the right place with the right
reporting are among the key functionality areas content. Customer service automation performs
of operational CRM (see Figure 10). Sales force some functions related with complaint manage-
automation uses technology in the management of ment, inbound and outbound call management,
selling activities with the purpose of optimizing queuing and routing, customer self-service and
sales productivity and improving the speed and service level management. Self-service automa-
quality of information flow between the sales force tion decreases the service cost by supporting ser-
and management. Similarly, marketing automa- vice agents, increases service agents ‘efficiencies,
tion technologies permit the company to manage improves service quality, delivers better customer
its marketing programs. Marketing automation experience, resolves customer issues faster, and
is a category of operational CRM technology increases customer satisfaction.
that allows companies to automate and measure Ultimate purpose of sales and marketing
marketing tasks and workflows in attempt to automation is to generate more revenue for the
maintain operational efficiency and revenue company. Sales force automation is the adaptation
growth. Whereas, service automation allows the of information technologies to support the sales
company to automate its service operations in order function. Sales force automation system collects,
to increase customer satisfaction by increasing stores, analyses and distributes transactional and
the speed of the inquiry and feedback processes profiling data about customers as well as market,
across multiple communication channels (Iriana competitor, product, price and other information to
& Buttle, 2007). salespeople and managers (Buttle, Ang, & Iriana,
As can be seen in Table 1, Buttle (2009) 2006). Tilyard (2014) underlines the distinction
categorizes major software applications within between the sales force and marketing automation
marketing, sales and service automation. Market- and indicates that sales force automation focuses
ing, salesforce, and customer service automation on improving the efficiency of the sales team and
are becoming indispensable operational CRM it enables sales team to be more customer focused
applications for companies. and deliver a better customer experience. Sales
Service automation enables service agents force automation concentrates on lead conversion
to deliver customer service at the touch points and customer engagement; whereas marketing
where customers are looking for help and allows automation focuses on finding leads and qualify-
the company to handle and coordinate its service ing them. Marketing automation distributes the
related activities across all channels through the promotional content to large numbers of targeted
use of technology. Contact centers, call centers, customer in an efficient manner in order to find
help desks, field service, and web self-service are potential customers (Tilyard, 2014).
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A Framework for CRM
Figure 10. Key functionalities of operational CRM
Table 1. Marketing, sales force and service automation software applications
Marketing Automation Sales Force Automation Service Automation

Campaign Management Account Management Activity Management
Customer Segmentation Contact Management Agent Management
Enterprise Marketing Management Incentive Management Case Assignment
Event Based Marketing Lead Management Case Management
Lead Generation Opportunity Management Contract Management
Loyalty Management Order Management Customer Self Service
Market Segmentation Pipeline Management Email Response Management
Market Analytics Product Encyclopaedias Escalation
Marketing Optimization Proposal Generation Inbound Communication Management
Marketing Performance Management Sales Forecasting Queuing And Routing
Partner Marketing Territory Management Outbound Communication Management
Product Life Cycle Management Service Analytics
Search Engine Optimization Service Level Management
Trigger Marketing Web Collaboration
Source: Adapted from Buttle, F. (2009). Customer relationship management: Concepts and technologies (2nd ed.). New York, NY:
Butterworth-Heinemann Elsevier.
Marketing automation tools are used for lead information technologies into marketing processes
generation, segmentation, lead nurturing and enhances marketing efficiency, increases the mar-
lead scoring, relationship marketing, cross-sell keting effectiveness and productivity, improves
and up-sell, customer retention, and marketing the responsiveness of marketing campaigns by
return on investment measurement. Integration of providing more targeted, customized and real time
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A Framework for CRM
offers, generates valuable customer, market and • Enables managing customer relationships
campaign insight, and enables delivering superior more efficiently,
customer experience (Buttle, 2009). Marketing • Improves customer relations by enhancing
automation is also expected to generate more customer support,
pipeline, more productive sales representatives, • Provides superior customer account
and higher revenue (Marketo, 2012).According management,
to the Gleansight: Marketing Automation report, • Improves the communication with
increasing revenue (79%), generating high quality customers,
leads (76%), divesting of fragmented marketing • Allows better sales management,
technologies (53%), increasing marketing and • Leads to more efficient sales force,
sales performance (51%), automating nurture • Increases sales force’s performance, sell-
marketing (45%), increasing the quantity of leads ing skills and knowledge,
(44%), and lowering marketing costs (36%) are • Fosters sales force productivity by en-
among the compelling reasons to implement abling shorter sales cycles, more closing
marketing automation respectively (Gleanster, opportunities and higher win rates,
2013 Q3). • Enables greater operational flexibility,
Marketing automation provides an environ- • Improves the access to information,
ment for the creation, management and automation • Reduces cost of sale,
of marketing processes. Marketing information • Increases sales revenue, market share
technologies enable the creation of central mar- growth, and profitability,
keting database, which includes all marketing • Provides accurate sales reporting, and
data about prospect and customer interactions • Allows contact management and sales-cy-
and behaviors and with the help of this database cle tracking.
company can target the right message and offer
to each customer. Therefore, company can man- Briefly, operational CRM software applica-
age its customer interactions better. Marketing tions can help dramatically improve the efficiency
automation also functions as an analytics engine. of the company’s sales funnel. Automation ap-
It tests, measures, and optimizes marketing ROI plications build relationships by nurturing the
and impact on revenue. This leads company to leads. In the company database there are leads
understand what works, what does not, and where who are not ready to buy immediately, but have
it can make improvements. the potential to buy in the near future. The com-
Improving efficiencies and customer contact, pany needs to nurture these leads in order to build
increasing sales, reducing costs, and improving relationships. With the help of the automation ap-
accuracy are among the main motivations for plications, company can identify these leads and
implementation of sales force automation (Erff- nurture these leads by lead nurturing campaigns
meyer & Johnson, 2001). Implementation of sales to build relationships over time. Analysis of the
information technology applications impacts the database also enables the automation systems to
performance of the salespeople as well as the detect opportunities. Identifying the opportunities
company (Engle & Barnes, 2000). Organizational and lead nurturing campaigns facilitate building
implementation of sales information technology long term relationships with customers and gen-
applications (Buttle et al., 2006; Erffmeyer & erate more revenue from the company’s existing
Johnson, 2001; Engle & Barnes, 2000; Ingram, database automatically.
LaForge, & Leigh, 2002; Wright & Donaldson,
2002; Donaldson &Wright, 2004):
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A Framework for CRM
Collaborative CRM to manage customer data, communication, and

contacts efficiently.
Operational CRM systems support the gathering
customer data and the management of customer
contacts; whereas collaborative CRM systems CUSTOMER MANAGEMENT
support the integration and synchronization of TECHNOLOGIES
different communication channels within the
scope of multi-channel management in order to It is important to keep in mind that CRM is not a
serve customers in a consistent and systematic category of applications or technologies. As it is
way (Gebert et al., 2002; Geib et al., 2005). Col- defined by Gartner Inc. (2004), CRM is a busi-
laborative CRM facilitates the role of operational ness strategy that aims to maximize profitability
CRM (Gebert et al., 2002). The development of and revenue by maintaining customer satisfaction.
ICT provides new channels for communicating CRM business strategy can create customer satis-
with the customers. Today, in the multi-channel faction by organizing around customer segments,
reality, companies require a single 360 degree implementing customer-centric processes, and
customer view in order to build and retain long encouraging behavior that satisfies customers
term relationships with customers by utilizing within the organization. Although CRM is not a
the knowledge of interactions with customers. category of technology, CRM technologies facili-
Collaborative CRM allows the company to share tate the implementation of CRM strategies. CRM
the customer information that is gathered from technologies support CRM strategies by enabling
interactions with customers in order to provide greater customer insight, increased customer ac-
better customer understanding. Collaborative cess, effective interactions, and integration of all
CRM is also responsible for distributing the cus- customer touch-points and back-office functions
tomer information that is collected from differ- (Gartner Inc., 2004).
ent departments (e.g. sales, marketing, customer CRM is a technology-enabled strategy for the
service, and technical support services) across all management of the customer interface and rela-
touch points to serve customers better. It brings tionships. CRM systems provide the technological
processes and data together so that company can infrastructure to implement CRM strategies and
serve and retain its customers more efficiently they are used to support and optimize customer
Collaborative CRM has broadly two aspects: related business processes. There are various CRM
interaction management and channel management technologies which allow companies to develop,
(Khalafinezhad & Long, 2013). The purpose of maintain and maximize the relationships that they
collaborative CRM is to enhance the interactions have with customers. Each of customer manage-
between the company and customers in order to in- ment technology deals with one or more aspects
crease customer retention. Designing the customer of CRM. CRM technologies serve to integrate and
oriented interaction channel process, which meets provide access to all customer information and
the customer needs and improves the interaction contact channels on the basis of a central database.
process for collecting customer information, can Main motivations for companies to implement
increase the extent of communication between the customer management technologies are to retain
company and customers. Integration of technology current customers and improve customer loyalty
tools and applications into processes is essential (72%), improve the customer experience (62%),
for improving the channel management. Col- attract new customers (45%), reduce the cost of
laborative CRM applications enable employees marketing, selling and serving customer (38%),
sell more to existing customers (37%), improve
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A Framework for CRM
the profitability of customers (32%), and offer new customers and targeting, customer acquisition and
products/services (15%) (Band, 2010). retention, and customer service and support will
Xu, Yen, Lin, & Chou (2002) classify the be discussed below.
CRM software applications based on the four
characteristics of CRM systems; i.e., sales force Understanding of Customers
automation, customer service and support, field
service and marketing automation. Torggler The main purpose of CRM is to build and maintain
(2008) provides a theoretical overview about the profitable relationships with customers and cus-
structure of CRM applications and classifies the tomer satisfaction management plays a critical role
functionality of CRM applications based on the in building, maintaining and strengthening long
collaborative, operational and analytical CRM term profitable relationships with customers and
systems and their use in business. Buttle (2009) creating customer loyalty. Customer satisfaction
categorizes the CRM software applications based can be maintained through delivering right offers
on whether they perform marketing, selling or ser- that address the customer needs and preferences
vice functionality (see Table 1). Geib et al. (2005) and offering high quality customer service, experi-
identify three distinct types of CRM applications ence and intimacy. Customer satisfaction manage-
based on the strategy, process (delivery, support, ment becomes a critical issue during campaign,
and analysis processes), and system (operational, sales, service and complaint management. CRM
analytical, and collaborative CRM) levels: CRM software applications facilitate the management
as customer satisfaction management, customer of customer relationships and customer satisfac-
contact management, and customer profitability tion management. They are just tools that are used
management. On the other hand, Band (2009) to support implementation of CRM strategies.
classifies the CRM applications based on the Company uses these systems to track customer
business processes that support; i.e., customer behavior and efficiently manage the marketing
understanding, targeting, acquisition, retention, campaigns by using customer insight. These CRM
and collaboration. systems, known as operational CRM systems, sup-
Forrester report indicates that in order to op- port front-line processes in sales, marketing, and
timize the end-to-end customer-facing business customer service, and automate communications
processes, companies require to integrate applica- and interactions with the customers (Tsiptsis &
tions that extend beyond traditional CRM. This Chorianopoulos, 2009). While operational CRM
means that in addition to marketing, sales, and systems record and store customer contact history
service functionalities, companies need to extend and customer information; collaborative CRM
CRM technology ecosystem by incorporating systems ensure the consistent customer relation-
related applications to support customer-facing ship with across all customer touch points. Since,
cross-functional processes. Companies are now customer retention can be maintained through
using extended CRM application ecosystem, customer satisfaction, successful customer sat-
which includes customer management technolo- isfaction management requires being customer
gies to support the key business processes for centric and understanding of customers’ needs,
customer understanding, targeting, acquisition, preferences and behaviours. Therefore, under-
retention, and collaboration (Band, 2009; Band standing of customers based on customer insight
& Petouhof, 2010). is the heart of customer satisfaction management.
Now, some of the major customer manage- Analytical CRM allows the company to gain the
ment applications of the CRM ecosystem that customer insight through data analysis. Analysing
are used for understanding customers, profiling the customer data enables the company to address
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A Framework for CRM
CRM objectives and provide the right message of new data every day, companies have more data
and right offer to the right customer efficiently about their customers than ever before. Customer
and effectively. Hence this leads to better customer data begins to come from variety of new channels
satisfaction management. such as digital channels and social media networks.
Customer understanding CRM software ap- Thus, it is not easy to store and connect this big
plications help the company collect feedback from data to key business applications and convert the
customers, analysing and reporting on customer data into useful business information. Customer
information, and maintaining up-to-date and ac- data management software application, which is
curate data about customers and their interactions also known as customer knowledge management,
with a company (Band, 2009). CRM applications, can help the company centralize the big data to
which are used to understand customers, involve provide a 360-degree view of customer in real-time
the use of data mining models and analysing from all customer touch points. Customer data
data patterns in order to extract knowledge for management software integrates and consolidates
optimizing the customer relationships, assess the the data that come from the company’s CRM,
value of the customers, understand, and predict ERP, marketing, voice of customer, social media,
their behavior (Tsiptsis & Chorianopoulos, 2009). website, and customer touch points. It allows the
Enterprise feedback management, customer con- company gather, store, analyse and use the big
tact management, and customer data management data in order to create a multidimensional view
software applications can be used to understand of customers. For instance, as can be seen from
customers (Band, 2009) and effectively manage Box 1, marketing cloud application also helps the
customer satisfaction. Within the scope of com- company in understanding its customers.
plaint management, company can understand Prepared and enriched customer data through
the needs of its customers. Complaint manage- customer data management becomes ready to be
ment can be considered as one of the feedback used for further analysis such as business intel-
mechanisms and it is essential for the customer ligence, statistical modelling, advance analytics,
satisfaction management. Feedback management data discovery, and advance visualization. Cus-
is responsible for the merging voice of customer tomer data that come from feedback management
and analysis of knowledge from customers, which and/or customer data management can be used
is collected during the CRM delivery processes not only in the context of customer satisfaction
(e.g., campaign management, sales management, management but also used in customer contact
service management, and complaint management) management and customer profitability. Customer
especially in the complaint management process data management enables the company to:
(Geib et al., 2005). Learning the problems that
led to complaints allow the company to improve • Support departments with a single and
its products, services and processes. Customer complete customer view of all interaction,
complaints have to be handled properly and timely • Deliver fast, accurate, and outstanding cus-
to maintain customer satisfaction and prevent tomer service by using a single customer
customer churn. view,
Company requires customer data in all most • Improve customer satisfaction and reten-
all area of business especially in designing and tion by delivering a consistent customer
developing product, managing advertising and service and experience,
marketing strategies, making sales, providing cus- • Find out hidden but valuable relationships
tomized offers and delivering customer service and in data, as well as real-time information
experience. Since businesses generate big amount
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A Framework for CRM
that may influence of quality, efficiency sales management, service management, and
and effectiveness of service delivery, complaint management are among the relevant
• Better understand customers and get valu- processes of customer contact management. Dur-
able customer insights, ing the customer contact management customer
• Identify cross-selling, deep-selling and up- data are collected and also utilized. Operational
selling opportunities, CRM systems support the collection of customer
• Focus cross-marketing activities on valu- data and the management of customer contacts.
able customers, Customer contact management and customer data
• Generate revenue and reduce market- management systems enable better understanding
ing costs with more accurate, targeted of customers and efficient management of cus-
communications, tomer data, communication, and contacts.
• Boost marketing campaign effectiveness
through using customer insight and cus- Customer Targeting
tomer profiling, and
• Deliver timely, relevant and personalized Since the main objective of CRM is to build
offers and communications to customers. profitable relationships with customers, customer
profitability management becomes a critical issue
Customer Contact Management, which uses in the management of customer relationships. The
integrated information and communication tech- purpose of customer profitability management
nologies, aims to provide customers with a con- is to develop long term and sustainable relation-
sistent interface across all touch points. Customer ships with profitable customers by exploiting the
contact management software applications record potential of the profitable customers (Geib et al.,
and view all customer interactions across differ- 2005). In customer profitability management, a
ent communication channels and departments. company has to identify and nurture profitable
This provides history of customer data, issues, customer relationships. In order to build right
and interactions. Thus, whoever is speaking to a relationship with right customers and make right
customer from the touch points can see the history offers to them, company needs to identify its target
of customer interactions. Successful customer markets as well as its target customers. Customer
contact management can be possible by gathering segmentation and profiling analysis are necessary
provision of customer data throughout all customer to achieve building profitable relationships. Cus-
touch points (Geib et al., 2005). Customer con- tomer segmentation and profiling, which are based
tact management software applications establish on customer database, help the company in target-
connection between the company and customers ing. Customer targeting applications prioritize the
across all interactions. Campaign management, most appropriate target markets for the company’s
Box 1. Ford Motor company implements marketing cloud application to understand customers
Ford Motor Company utilizes marketing cloud application in order to better understand customers and gather customer insight. Ford
Motor Company is changing the way it communicates with consumers. Ford aims to integrate and bring together all of its customer data
with the purpose of building closer connections with current and prospective customers. “We don’t just want to talk at people. We want to
have a customer-centric attitude of people serving people. We want to go further, and be extraordinary” says Scott Monty, Global Head of
Social Media. The company uses marketing cloud to listen on social networks, gather insights, and participate in conversations about its
brand. Marketing Cloud also helps Ford make sure its marketing teams and agencies stay aligned across country lines, effectively manage
social media advertising, conversations, and content on its Facebook pages, and create unified 360-degree customer view.
Source: Salesforce.com (n.d.). Customer success stories. Retrieved September 16, 2013, from http://www.salesforce.com/customers/
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A Framework for CRM
offerings and marketing campaigns. Analytical Relevant customer knowledge is gathered across
CRM tools enable the company to identify its all customer touch points. Segmenting and analysis
target customers through data mining, customer of the customer segments allow the company to
knowledge management, customer profiling and profile its customers. Segmentation is the process
segmentation, customer analysis, and enterprise of grouping customers into clusters by dividing
marketing management. the customer base into internally homogeneous
Delivering the right message to the right groups based on their demographic characteristics,
customer, assessing the value of the customers, behavioural, and psychographic attributes. Com-
understanding and predicting their behavior can pany generates customer profiles, identifies sales
be possible by data mining tools. Data mining opportunities, and plans the long-term develop-
tools such as marketing analytics can be used to ment of each individual customer relationship by
explore, describe and explain customer issues and using data mining and OLAP systems. With the
provide customer insight. Marketing analytics customer profiling analysis of customers can be
are also used to predict what might happen. With classified with regard to their value for the com-
the marketing analytics company can segment its pany, loyalty, and products and communication
customers, profile the common characteristics of channels preferences (Geib et al., 2005). With
customer segments, predict the respond of custom- the customer scoring, company can identify the
ers to specific marketing campaigns, evaluate the individual cross, deep and up-selling opportunities
lifetime value of customers, identify the potential and the results of customer profiling are utilized
risk of customer churn, select the best channel to in the campaign and sales management processes.
reach the customer segment, predict the likelihood Moreover data mining tools allow the company
of a customer to purchase or respond the market- to make a distinction between the profitable and
ing offer, and so on (Buttle, 2009). Data mining unprofitable customers. Customer analysis help
tools help the company in getting, developing and the company identify its unprofitable relationships.
retaining customers throughout the customer life As a result of the customer analysis, company can
cycle. Within the CRM framework, the data mining convert the unprofitable customers into profitable
tools enable company to profile customers, better customers or terminate the relationship with them.
address the specific preferences and priorities of Campaign management, sales management,
target customers, predict the next based activ- service management, complaint management,
ity and develop targeted marketing campaigns. and loyalty management processes use the re-
It can also enable to offer customized products sults of customer profiling to address customers
and services, which in return support customer in a more personalized way. Customer acquisi-
development through cross, deep, and up-selling. tion, development, and retention, which are the
Data mining can lead to personalized interactions CRM objectives, can be maintained based on
with customers and this leads to increase satisfac- the analysis of customer data and obtained cus-
tion and foster profitable customer relationships. tomer insight. Analysis of customer knowledge,
Briefly, data mining models can be used in customer profiling and segmenting, and target-
segmenting and profiling customers, developing ing are essential for successful execution of the
direct and targeted marketing campaigns, predict campaign management. Campaign management
next based activity based on basket and sequence software allows the company to use customer-
analysis, and customized customer relationships related data in order to develop, execute and
(Tsiptsis & Chorianopoulos, 2009). evaluate targeted communications and offers.
Customer profitability management starts with Customer targeting for campaigning purposes is
establishing company-wide customer database. possible at the level of the individual customer,
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A Framework for CRM
enabling unique communications to be designed. constraints. Marketing optimization applications

Targeted campaign management requires gather- ensure achieving the marketing campaign objec-
ing comprehensive customer information from tive and profitability while delivering the right
different communication channels. Based on the offer to right customers through right channels
gathered customer knowledge, company analyses (Buttle, 2009).
customer base and segments of its customers in Marketing’s role has been expanding over time
order to select the right customers for developing and it also begins to contribute to the business
the marketing campaigns. After selecting target processes of buying, selling and servicing. As it
customers, company can execute the marketing is indicated in IBM’s Thought Leadership White
campaign by selecting the right communication Paper, data explosion, social media, growth of
channel, right time and right offer according to channel and device choices, and shifting consumer
the needs of selected target customers. Company demographics are among the top challenges that
needs to measure the effectiveness of marketing make marketing much more complicated today.
campaigns. Evaluation of campaign performance Marketers need to respond to all these challenges
and results guide the company to improve the ef- by integrating all their marketing efforts across
fectiveness of its future campaigns. Data mining all channels, touch points and media into one
plays a significant role in campaign management cohesive and coordinated marketing program
especially in identifying the right customers to with enterprise marketing management (EMM)
be contacted. Data mining tools can be used in (IBM, 2012). EMM is a comprehensive market-
(Tsiptsis & Chorianopoulos, 2009): ing software application that creates value for the
company by optimizing business strategies with
• Customer acquisition campaigns in attempt marketing automation. EMM organizes, auto-
to identify and target potentially valuable mates and manages every stage of the company’s
prospect customers, marketing process in order to bring efficiency to
• Customer development campaigns with marketing operations. Starting point of EMM is
the purpose of predicting the purchasing to develop a deep understanding of target cus-
potential of existing customer and identi- tomers (Sutton & Klein, 2006). As it is indicated
fying cross, deep and up-selling opportuni- in Saepio’s Enterprise Marketing Management
ties within the existing customers, and Strategy Guide, EMM gets insights from customer
• Retention campaigns in order to prevent interactions and by using its artificial intelligence,
profitable customers from terminating it automatically generates and delivers the right
their relationship with the organization. message to the right person using the right com-
munication channel at the right time in order to
Campaign management software applications create the expected and right outcome. At the
have some limitations to achieve profit maximiza- same time EMM lowers costs and improves return
tion; while distributing the campaign expenditure on marketing investment (Saepio, 2010). EMM
among many different communication channels supports five critical marketing processes across
and customers. However, marketing optimization all channels (see Figure 11).
software with its optimization algorithm allows EMM enables the company to (IBM, 2012):
the company to maximize profitability; while
considering the constraints of marketing cam- • Collect data about profile of customers that
paign strategy, such as budget, customer contact enrich what the company already knows
policy, channels availability, customer segments ’ about its customers and prospects,
propensities to buy different products, and channel
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A Framework for CRM
Figure 11. Supporting role of EMM in marketing

personalized, relevant communications and offers
processes
Source: IBM Corporation (2012). Enterprise marketing
at appropriate times.
management (EMM). IBM Thought Leadership White Pa-
per. Retrieved April 16, 2013, from http://www.olsps.com/ Customer Acquisition and Retention
analytic/pdf/UNICA/emm1.pdf
Customer acquisition applications, which are

used to support the lead management, selling
and ordering activities of the company, can also
be used in customer retention stage in order to
develop profitable long lasting relationships with
customers and benefit more from customer lifetime
value. Since the objective of sales management
is to deliver an offer and close a deal based on
the needs, preferences and buying behaviour of
the existing and prospect customers, customer
insight and data management is also essential at
the customer acquisition and retention stage. Cus-
tomer data management can support customized
and optimized customer relationship management
throughout all the phases of the customer life
cycle as well as at the customer acquisition and
• Analyze all of its customer and prospect
retention stage.
data in order to find new and actionable in-
Sales force teams need up to date information
sights that can increase the effectiveness of
about customers, market and company’s products
all their marketing efforts,
in order to be more effective and efficient during
• Decide on the next best marketing actions
the selling process. Sales automation includes
to take with each customer and prospect
the technologies and applications that enable the
and increase the relevance of all its mar-
company to collect, integrate and analyse the
keting actions by automating the process,
customer data in order to support its sales activi-
• Deliver engaging messages and capture re-
ties. Sales Force Automation (SFA) is one of the
actions in order to influence and shape the
sales automation solutions that involves utilising
future messages and ensure interactivity,
information technology to automatically track all
and
the stages of the company’s selling activities and
• Manage marketing processes, track perfor-
processes. SFA, which is a part of a company’s
mance and measure results to guide future
CRM system, automatically records all the stages
marketing decisions.
in a sales process and it is used to support sales
staff and sales management in the achievement of
EMM identifies the most appropriate target
their work-related objectives. The selling process
markets and communicates offers to them. EMM
starts with the lead generation, lead qualifica-
includes functionality of campaign management,
tion, and need identification of customers. By
lead generation and management, and analytics.
considering the needs of customers, company
EMM functionality enables the company to engage
develops specifications, generates and presents
in real-time marketing and respond immediately
its proposal, and handles objections during the
to an identified opportunity. Customers receive
selling process. Selling process ends with closing
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A Framework for CRM
sale. Sales force automation technologies are used over the internet, or on the phone. Customers
to improve and standardize these selling activities expect fast and reliable order processes regard-
(Buttle, 2009). SFA increases the opportunity to less of where or how they buy from. Thus, it is
close more deals. SFA automates the opportunity crucial to deliver a seamless and highly interac-
management, account management, employee tive shopping and customer service experience.
performance management, order processing, order Order management application helps the company
tracking, inventory controlling and monitoring. serve its customer better through centralized order
SFA software facilitates the sales employee access orchestration. Company can provide accurate and
to customer information as well as back office current information related with the customers’
information during the selling, post-sale follow- order queries. Order management application em-
up and support which in return enable the sales powers customers through self-service order status
employees to deliver outstanding customer service tracking functionality over the Internet. Customers
and experience and also give sales employees can easily monitor and check the status of their
opportunity to make cross and up sell. order. Order management software streamlines all
SFA software with sales opportunity manage- of the order processes across channels. Order or-
ment application identifies, communicates and chestration across channels provides the company
analyses prospects who have potential to buy a centralized platform for processing, controlling
until the completion of a sale. It tracks the sales and routing orders that are placed through differ-
cycle of an opportunity from being a prospect to ent channels, warehouses or fulfilment routes. It
closing the deal and it ensures that all opportuni- allows the company to easily collaborate with
ties are handled consistently throughout the sales its suppliers and optimize the complex order
cycle. Opportunity management module collects, fulfilment processes. Hence, order orchestration
stores and provides information about the sales across channels helps the company sell across all
stage, probability of closure, expected revenue, channels and reduce stock overheads. Centralized
and cost of sales of the opportunities. Hence, order management provides end-to-end visibility
company can track the progress in the sales of inventory and orders throughout the order‘s life
cycle of opportunities. SFA also includes contact cycle, control over the order status and compli-
management system which tracks and records all ance, stock level availability information across
contact between the company and customer such the entire company, flexible fulfilment options
as purpose of the contact or whether any follow up such as buy online pick up in store. Integration
that may be needed. This increases the efficiency of order management applications into the order
and effectiveness of the sales efforts. process shortens delivery times and improves
SFA with order management tool can turn inventory management.
sales quotes into order easily. Order management SFA includes electronic product catalogue,
software provides up to date order information product configuration, and visualization modules
in one place that is accessible throughout the which facilitate the selling process. As can be
company for the sales employees, business depart- seen from Box 2, L’Oreal builds portals which
ments, and customers. By using a single platform includes electronic product catalogue to provide
that includes all relevant sales transactions, sales product info, demo tips, and training materials for
employees have access to accurate and complete the distributor representatives and beauticians in
information. It reduces order processing time and order to helps representatives and beauticians work
cost. Customers can interact with the company by together. Electronic product catalogue provides
using multiple channels. Customers may interact product images and detailed information about
with the company at the point of sale in the store, product specifications. Product configuration ap-
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A Framework for CRM
plication of SFA is used for designing and pricing comprehensive information about customers and
customized products, services or solutions during prospects allows the company to engage with
the selling. Product configurators help the sales prospects effectively and delight existing custom-
employee customize products and services to the ers; so this increases the revenue of the company.
needs and preferences of customers by designing Company can proactively reach prospects and
the products and presenting product combination seek to exceed its current customers’ expectations
possibilities and product alternatives in the context through utilizing account management applica-
of sale. Moreover, product visualization software tion rather than waiting for customers to call the
enables producing realistic images of customized company. With the help of account management
products in the form of simulated photograph or applications, sales staff track their accounts and
three dimensional model before they are produced their purchase history to see whether there is an
(Buttle, 2009). opportunity to be closed, an order to be fulfilled
Account management is among the sales force or query to be responded. Activity management
automation applications and enables the company application allows the sales employees to organize
to keep unified 360-degree account view. It pro- their pending activities related with an account,
vides a comprehensive information about contacts, contact or opportunity, follow all completed ac-
contact history and interactions, past transactions, tivities, and check progress in pending activities.
leads, cross and up sell opportunities, customer Lead management focuses on the qualifica-
requests and queries. With the help of the account tion and prioritization of prospective customer
management, company centralizes the customer contacts. The main objective of lead management
information across sales, marketing and service is to provide sales staff a qualified and prioritized
with the purpose of improving efficiency and seek- list of valuable prospective customers in order to
ing and creating opportunities in selling processes. deal with them effectively within the sales man-
Centralizing all customer information across the agement process. Customer scoring is also an
company enables customer facing employees to essential element of selling process and the aim
make quick, informed decisions on issues such of customer scoring to prepare a list of current
as target marketing strategies, cross-selling and customers who may be interested in a specific
up-selling opportunities and effective resolution product or service. Customer scoring focuses
of customer service issues. Account management on achieving the advantage of the cross-selling
effectively manages customer relationships from potentials of current customers.
prospect, to close, to customer using in-depth Sales pipeline management is considered as
customer profiles. Maintaining updated, and essential for the sales management and pipeline
Box 2. L’Oreal integrates social media to coordinate sales efforts of beautician
L’Oreal, which is the world’s largest cosmetics and beauty company, integrates social media channels to keep its operations coordinated
and engaged with customers. L’Oreal includes many brands such as Lancôme, Maybelline, and Redken and owning many brands creates
some communication challenges. The company aims to consolidate its sales efforts and back-end systems to help the Professional
Products Division share data and coordinate brands and achieve operational efficiencies across the board. L’Oreal builds portals which
includes electronic product catalogue to provide product info, demo tips, and training materials for the distributor representatives and
beauticians. L’Oreal integrates an employee social network that helps representatives and beauticians work together and share everything
from hair coloring techniques to tips on reducing frizz or keeping hair shiny. Therefore, employee social network portal enables the
company management to communicate with employees so everyone in the organization stays aligned.
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A Framework for CRM
management automation which allows the com- contacts are captured, prospects are maximized,
pany to effectively manage its sales steps during and converted into customers by providing the
the sales process. Sales pipeline includes the stages correct information at the right time in the sell-
between converting a prospect into a paying cus- ing process.
tomers. Sales funnel starts with the identification Campaign management generates valuable
of opportunities and at this stage business leads opportunities in other words leads, which are
are gathered manually or automatically. Company qualified by lead management and used by sales
follows up the leads that are moved to qualified management. While campaign management
lead stage and the management of sales pipeline addresses the need articulation phase of the cus-
continues with initial contact of the sales employee tomer process, sales management covers the need
with a prospect and passes through the different articulation, evaluation, and buying phases of the
stages (e.g., initial contact, qualification, meeting, customer process (Geib et al., 2005). Automated
and proposal) until the closure stage. Closure stage campaign management tools facilitate customer
ends with winning or losing the deal. A deal which acquisition and can be utilized for lead manage-
won moves to won stage and lost moves to a lost ment. Campaign management application designs
stage. Sales pipeline management automation the campaign development process and automates
visualizes the entire sales funnel of the company the processes of campaign planning, implementing
and the process of moving potential customers and measuring. It designs automated rules based
from contact to prospect to customer. Visualiza- marketing campaigns. Campaign management
tion of the sales funnel enables the company to automation visualizes the campaign workflow,
see number of leads that it has, stage of the each identifies the segments, selects target custom-
lead, and what the company needs to do for each ers, develops personalized campaigns, nurtures
lead to close the deal. targeted customers and defines trigger resulting
Many times prospects are lost in the sales actions. Campaign development process starts
process due to weaknesses in the sales funnel with workflow design. The order of tasks that have
and inefficient sales funnel management. Sales to be performed in the campaign management is
pipeline management application allows the indicated in the workflow. Delivering the most
company to access sales reports and insights that relevant campaign offer to the right customer,
will improve the sales management and let the at the right time and through the right channel
company win more deals. For instance, company requires understanding of customers. Thus, cus-
can identify at which stage it loses most of its deals tomers are segmented based on the campaign
by analysing the sales funnel reports. Analysis of specific criteria and customer segments that will
sales funnel reports help company improve its sales receive the campaign offer are selected based
processes. With the utilization of the sales pipeline on the campaign objective. Campaign manage-
management application, company can make more ment automation enables nurturing the selected
effective follow ups and win more deals; because customers with customized messages through
sales pipeline management application enables the using integrated multi-channels. Campaigns can
company to store and organize all lead information be executed in many channels, independently,
(e.g., prospect’s contact information and details consecutively or simultaneously by email, web,
of deal) in one place. Sales pipeline management direct email, RSS feed, SMS, trigger outbound
automation helps the company effectively man- calls. Measuring the response and reporting the
age its sales team by controlling leads, tasks, and results of the campaign are also among the func-
performance for each sales employee. Therefore, tions of campaign marketing automation. Cam-
pipeline management automation ensures that paign marketing automation allows the company
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A Framework for CRM
to evaluate the campaign results on the basis of product), and so on. Trigger marketing helps the
target customers. Campaign results are interpreted company sell goods when the customer is ready.
statistically in order to see whether the campaign According to the Gleanster (2010) Lead Nurtur-
objectives are achieved. Statistical insight about ing Survey, 72% of top performer companies use
the campaign results also help the company to drip marketing campaigns in order to improve
understand what works and what does not, and the sales cycle with automated communications
it can design its future campaigns based on the in the pre-configures time intervals and 34% of
statistical campaign insight. them implement multi-channel trigger marketing
Nurturing the leads during the customer ac- techniques for lead nurturing. The result of the
quisition can be possible by using drip marketing survey also reveals that lead nurturing through drip
and trigger marketing tactics. Drip marketing marketing and trigger marketing contributes to the
and trigger marketing activities can be executed sales pipeline and company’s revenue (Gleanster,
through campaign management automation. Drip 2010). Trigger based messages can improve cus-
campaigns are delivered based on pre-determined tomer retention and engagement.
time intervals while trigger marketing campaigns As can be seen from McAfee case (see Box 3),
are initiated based on customer behavior. Trigger lead scoring and nurturing provides the sales team
marketing is the practice of responding to an event value added insight and analytics that are essential
and the triggers are yielded as a result of customer in prioritizing leads, converting opportunities into
behaviour or contextual conditions. Lead nurturing sales and turning prospects into customers.
involves a series of triggers that deliver prede- Changes in buying behaviors of customers
termined messages based on customer behaviors force companies to change how they market and
(e.g., signing up, calling customer service, vising sell, and adopt the technology into their marketing
website, clicking the prior email and abandoning and selling processes. Today some of the software
a shopping cart). Trigger messages can be used vendors provide integrated automation in which
in various forms as they can be utilized for auto- marketing and sales automation tools are unified
mated welcome campaigns (sending automated in order to synchronize the sales and marketing
welcome email or SMS to all new customers), automation tools to maximize lead generation,
cross-sell campaigns, reminder to repurchase a streamline the lead conversion processes and
product, abandoned cart-campaign (designing a effectively manage current customer relation-
strategy to activate customers who place a product ships. In fact, by integrating both sales force and
in the shopping cart but do not to purchase the marketing automation, company can increase
Box 3. McAfee utilizes lead scoring and nurturing programs
McAfee, which is the world’s largest security technology company, harvests the benefits of lead scoring and lead nurturing programs.
McAfee realises that marketing and sales departments have to work together in order to maintain revenue growth and improve the
marketing effectiveness and sales pipeline. Although marketing team of McAfee generates many leads for the sales team, sales team find
the quality of the leads poor. McAfee marketing decides to utilize lead scoring and nurturing to give prospects right information at the
right time in the buying process. With the utilization of lead scoring and automated lead nurturing program, McAfee reduces leads by
35% while improving the overall quality of leads. Moreover, lead to opportunity conversation rate increases four times. Besides a better
relationship between the sales and marketing team is established. The implementation of automated lead nurturing and lead scoring
program provides the sales team value added insight and analytics that are essential in prioritizing leads, converting opportunities into
sales and turning prospects into customers.
Source: Oracle (2011). McAfee reaps the benefits of Eloqua lead scoring & lead nurturing programs. Customer success story. Retrieved
September 17, 2013, from http://www.eloqua.com/content/dam/eloqua/Downloads/su-ccess-stories/O-Eloqua%20Success%20Story_
McAfee.pdf
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A Framework for CRM
the effectiveness of both sales and marketing number of customers who move from one stage
performance which leads to increase in revenue to the next and duration of this movement. It
and overall profits (Tilyard, 2014). provides more accurate revenue forecasts. RPM
Revenue performance management (RPM) is allows deep integration with CRM data and pro-
one of the integrated automations that transforms vides more customer insight into marketing and
the traditional marketing and sales force automa- sales activities. It captures customer profile data
tion. RPM is a technology-enabled strategy to about leads and contacts as well as it captures in-
increase total revenue productivity and it focuses teraction history. This is utilized to develop more
on integrating marketing and sales functions all in comprehensive marketing and sales actions. The
a single technology platform. RPM can be defined RPM system gathers data from both marketing
as the process of tracking and optimizing all mar- and sales and creates unified view of marketing
keting and sales contacts through the customer life and sales pipeline. Since RPM creates a shared
cycle. The main purpose of RPM is to better track, database, process view and reporting between
measure and optimize the relationship between sales and marketing, RPM systems better align
sales and marketing, and the revenue. It attempts with sales. Company can track the activities of
to create a collaboration between marketing and customers and prospects and discover the buy-
sales departments’ skills, establish a set of meth- ing patterns of them by RPM systems. Thus,
odologies and best practices to support processes, RPM enables the company to adjust its strategies
and integrate marketing and sales tools through based on changes in consumer behaviour. RPM
technology (Ldesanctis, 2013). Operational CRM enhances reporting and analytics to measure the
and its offspring sales automation, marketing impact of marketing and sales activities. Briefly,
automation and service automation are mainly RPM databases compared to traditional market-
about automation. Instead of just automating, ing automations enable the company to optimize
RPM business strategy is attached to the purpose contacts across the entire customer relationships
of driving revenue (Thompson, 2011). (Gleanster, 2013 Q3).
RPM provides unified view of the entire rev- Since maintaining customer loyalty is the ulti-
enue cycle from initial lead generation through mate aim of CRM, the main focus of the company
customer growth and retention (Gleanster, 2013 is to create customer loyalty and prevent customer
Q3). RPM systems break the buying process into churn at the customer retention stage. Although
stages and track customers’ movement through companies have been increasingly implement-
these stages. Breaking the buying process into ing customer loyalty and incentive programs,
stages allows the company to identify qualified most of the companies fail to increase the value
target prospects, calculate the cost of moving that they get from their loyal customers. Loyalty
customers from one stage to the next stage and management application increases the efficiency
invest in most effective marketing programs. This of loyalty programs. Utilizing loyalty management
optimizes the marketing spend across channels, module motivates loyalty with incentives and
lowers the marketing costs and increases the rewards, increases the profitability by identifying
revenue of the company. Company can estimate and retaining most valuable customers, creates
the future revenue by projecting the movement of targeted loyalty promotions with relevant and
prospects and current customers throughout the personalized rewards, recognizes and rewards
stages with the help of RPM systems. Projections, customers based on their value in real time at
which rely on historical data, give idea about the every touch point. Loyalty management software
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A Framework for CRM
enables the company to convert its customers into Customer Service and Support
loyal customers by delivering consistent, relevant
and valuable experiences. Loyalty management Customer service and support technologies include
applications manage every aspect of running a applications that allow the company to deliver
loyalty program. Loyalty program management outstanding customer service and experience from
application manages points accruals, redemptions, anywhere, anytime and on any device. Customer
and expiration process; incorporates partners in service automation software includes applications
loyalty programs; designs reward rule manage- such as agent assisted customer service, self-
ment; models loyalty program rules, conditions service, field service, multi-channel service, and
and offers to maximize loyalty program strategy; social customer service modules. Since customer
manages memberships across all loyalty levels; service and support software provide service
and delivers real time loyalty account updates. employees instant access to real-time, 360-degree
As can be seen from X5 Retail Group and customer profiles as well as social media content
Enterprise Rent-A-Car cases (see Box 4), loyal and sentiment, use of customer service and support
customers are important for the success of busi- software enables the company to solve customer
ness. Therefore it is important to reward the issues faster, deliver consistent customer service
customers for their loyalty by rewarding them and support across all interaction channels, identify
with loyalty points, member discounts and gifts. cross and upsell opportunities by relying on the
Loyalty management application customizes the customer insight, improve collaboration across the
customers’ experiences and customers feel them- company to solve sophisticated customer service
selves special. Loyalty management program also cases, and increase productivity and data quality.
enables the company to build strong customer As it is mentioned in KLM Royal Dutch Air-
relationships by keeping and tracking records of lines case (see Box 5), customer service applica-
customers, their contact details, preferences and tions enable the company to effectively manage
history of purchases. Effective loyalty manage- its multi-channels. Multi-channel management,
ment generates more sales by retaining repeating which is a cross-functional activity, synchronizes
loyal customers. the CRM delivery and support processes and in
Box 4. Loyalty management program: Success of X5 Retail Group and Enterprise Rent-A-Car case
Comarch’s clients X5 Retail Group and Enterprise Rent-A-Car implement loyalty management application and achieve considerable
success by increasing their sales and revenue. X5 Retail Group, which is a leading Russian food retailer, has more than 4544 company
operated stores and has the leading market position in both Moscow and St. Petersburg and a significant presence in the European part
of Russia. X5 Retail Group implements loyalty management application with the purpose of creating programs to reward the most loyal
supermarket and hypermarket customers for their purchases. Implementation of loyalty management applications enables the X5 Retail
group to increase the average basket value of a program member 45% higher than non-members’ basket value and generate more than
26% of revenue from loyalty transactions.
Another example of successful implementation of loyalty management program can be given from the car rental company. Enterprise
Rent-A-Car is an international car rental company and has more than 7,000 rental offices in the United States, Canada, the UK, Ireland,
Germany, France and Spain. Enterprise Rent-A-Car decides to re-launch its Enterprise Plus loyalty program in 2011, which allows
members to earn points for qualifying rentals in the U.S., Canada and Puerto Rico. Points can be redeemed anytime and the collected
points do not expire as long as program members make a qualifying rental at least once every two years. Program members can reach
three tiers that are Silver, Gold or Platinum and each status level offers a unique set of benefits such as bonus points and vehicle upgrades.
With the utilization of loyalty management program, Enterprise Rent-A-Car increases its enrolment 26%, active members 22.5%, rentals
24%, and revenue 25%.
Source: Comarch (n.d.). Comarch Loyalty Management for Enterprise Rent-a-Car. Retrieved September 18, 2013, from http://www.
comarch.com/trade-and-services/our-solutions/comarch-crmmarketing/success-stories/comarch-loyalty-management-for-enterprise-rent-a-
car/
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A Framework for CRM
Box 5. KLM Royal Dutch Airlines delivers customer service through social media channels
KLM Royal Dutch Airlines puts the social media in the center of KLM’s customer service efforts and uses social platforms in order to
respond more quickly to customer enquiries and protect the KLM brand image. KLM reorganizes marketing and service functions to
support social media and launches a social media hub to handle all incoming requests. KLM aims to make travel easier for its customers
by engaging them through social media platforms. With the integration of social media tools into customer service and support, KLM
efficiently collects and tracks all social conversations and monitors the brand sentiment on the Web. KLM identifies customers’
experience during the service interaction and detects problems by listening customers on the social media. In the case of any problem,
presence of KLM in social media allows the brand to respond more quickly to customers’ problems and cut resolution time to one day
with an initial response time within an hour of a social media post.
return increases the customer satisfaction. Cus- way they want to get them. In addition, customer
tomer service applications deliver unified experi- service applications quickly escalate cases to
ence whether on a desktop or on a mobile device. experts to close cases faster. Customer service
This category also includes technologies such solutions with the utilization of real-time and
as customer community platforms and customer 360-degree customer information allow the com-
forums that support working collaboratively with pany to quickly respond to customer queries on
customers and enabling customers to interact with any communication channel and resolve issues on
and support each other (Band, 2009). Customer the first attempt. This increases customer satisfac-
community platforms provide the tools for self- tion, ensure positive customer experience at every
service troubleshooting and allow customers to touch points and reduces service costs. Customer
help themselves and each other wherever they service automation leverages back-office data from
are and whatever device they are on. Customer other enterprise systems to serve its customers
service software also delivers service to custom- better. The gathered customer insight improves
ers through the social media channels. Social the performance of the customer service center
customer service application helps the company of the company.
listen and understand customers through social Based on the extensive literature review and
media like Facebook and Twitter. Company can CRM applications of the significant vendors, it
engage and respond intelligently to social media can be concluded that CRM ecosystem is com-
conversations by escalating conversations based prised of solutions that are utilized for four major
on topic, priority, and other business rules. Track- area: understanding of customers, profiling and
ing the social media sources allows the company targeting of customers, customer acquisition and
to leverage social media conversation data for retention, and customer service and support. For-
developing actionable customer insight. rester surveyed 286 CRM professionals in order
Service automation provides service employ- to examine and discover the adoption patterns
ees tools that allow them to deliver outstanding for various customer management technologies.
customer service. As it is mentioned in the Ask. In that research, CRM professionals indicate
com case (see Box 6), by implementing cus- the significance level of customer management
tomer self-service applications, company aims technologies for the business operations. CRM
to improve the performance of its customer professionals consider the selling, ordering, and
service. Through utilization of customer service servicing solutions as the winning technologies
applications, customer service employees quickly and these solutions deliver the most certain busi-
search the knowledge base for relevant answers ness value. The findings of the research indicate
or customers do it themselves easily. Either way, that contact center, order management, customer
customers get the answers they need exactly the service and support, sales force automation, cus-
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A Framework for CRM
Box 6. Ask.com implements customer self-service solution
Ask.com, which is ranked as a top ten U.S. Internet site, has more than 100 million monthly global visitors. Ask.com looks for a way to
effectively provide convenient self-service answers that are complemented with responsive and personalized customer care. Although,
Ask.com regularly handles hundreds of questions in a day, answers of these questions cannot be easily accessible throughout the site’s
current knowledge base. The company wants to make answers of these questions easily accessible for the users and it also wants to
answer user questions directly in a timely and personalized manner if the answer is not already available in the site’s current knowledge
base. Ask.com implements its new knowledge base customer service solution which enables the company to deliver real-time, well-
organized self-service solution and makes answers easier to find. Since many users can easily find answers to their questions from Ask.
com’s most common questions without having to request assistance, Ask.com focuses much more on inquiries that are unique, complex,
or need a personal response. Implementation of customer self-service solution prevents the company from responding repetitive questions
so that Ask.com saves time. The number of questions that are submitted through Ask.com’s online help desk has been reduced by 60%
through integration of customer self-service application. Besides, queries are resolved in an average of 1.5 hours compared to 8 hours.
Source: Parature (n.d.). Customer success story: Ask.com. Retrieved September 18, 2013, from http://www.parature.com/case-studies/
AskDotCom_CaseStudy.pdf
tomer business intelligence, and customer data channels and distribute customer intelligence to
management are considered as the most criti- all customer facing channels in order to reduce
cal customer management technologies (Band, cost of interaction, improve customer experience,
Moore, C., & Magarie, 2009). and increase customer retention. The scope of
second generation CRM technologies has covered
Shift towards Integrated marketing, sales and service functions and been
CRM Systems used for campaign management. Third generation
of CRM technologies has focused on integrating
The growth of information technologies and customer facing front end systems with back end
internet has led to increase the implementation systems as well as with the systems used by sup-
of CRM in many industries. CRM has grown pliers and partners. Strategic CRM technologies
from a tactical marketing tool to a strategic have been based on the ERP integration, customer
management tool in marketing decisions. CRM analytics and web integration. At this phase, com-
has undergone an evolution since the mid-1990s. panies has realized that adopting strategic CRM
Kumar and Reinartz (2012) explain the histori- help them in cost reduction as well as revenue
cal evolution of CRM on a timeline. Timeline growth. Fourth generation of CRM technologies
of the CRM evolution covers four generations has begun to emerge at the first decade of 21st
of CRM technologies. First generation of CRM century. As the agility and flexibility of CRM
technologies called functional CRM and has been technologies increases and cost of these technolo-
developed based on the sales force automation and gies decreases, small and medium enterprises have
customer service support applications. Scope of been increasingly adopting the fourth generation
first generation of CRM was limited with sales and CRM technologies. Emergence of social media,
services functions. Although early SFA/CSS ap- self-service, and web based service technologies
plications were fragmented and poorly integrated, has been empowering the customers at the fourth
these applications were used to improve service phase (Kumar & Reinartz, 2012).
operations and increase sales efficiency. Second Successful implementation of CRM strategies,
generation of CRM technologies was expected building profitable relationships with selected cus-
to address the business needs of the company’s tomers, delivering outstanding customer service
customer facing front end. They have focused on and experience, improving sales and profitabil-
integrating different independent subsystems to ity require use of CRM technologies, extending
create a single view customer across all contact CRM technology ecosystem and integration of
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A Framework for CRM
CRM systems. Gartner Inc. (2004) indicates that applications is necessary while redesigning busi-
obtaining, distributing and analysing customer ness processes. Companies also need to consider
information, and getting customer insight are integrating their CRM applications with their
essential for developing successful CRM strate- partners’ CRM applications. Building collabora-
gies. Customer data integration enables the CRM tive relationships in business to business (B2B)
implementations and improves the data quality. markets such as with suppliers is important for
Achieving a single, accurate and complete view creating high value for consumers. Moreover,
of the customer across multiple channel provides companies that sell to consumers through channel
the company the ability to instantly recognize its partners such as distributors and retailers have
customers and access their relevant information to maintain business-to-business-to-consumer
dynamically from all touch-points. Customer data (B2B2C) relationships in order to understand
integration can be possible by integration of CRM and satisfy the needs of consumers. Therefore,
systems with business processes. However, most of it is essential to establish business processes and
the companies fail to support an integrated CRM applications that support partner collaboration to
strategy since their CRM systems are fragmented deliver excellent customer service and experience.
and build up different systems and customer Collaboration with partners increases value for
databases over time. Companies need to have customers and this leads to customer satisfaction
an integrated CRM system to achieve a unified (Gartner Inc., 2004).
customer view throughout the organization. In A well designed, unified and integrated CRM
order to analyse customers, company requires to system enables a company to perform the follow-
build customer data warehouses where it can store ing actions to achieve strategic benefits (Kumar
customer data to support analytical CRM applica- & Reinartz, 2012; Geib et al. 2005):
tions. Companies also need to deliver this customer
information to operational CRM applications for • Continuously acquire, share and update
building effective customer interactions. Develop- customer knowledge,
ing successful CRM strategies and customer in- • Integrate and unify customer information,
teractions necessitate the integration of analytical • Provide a single location for holding cus-
and operational systems with analytical customer tomer information,
insights such as predictive customer models and • Deliver unified customer information
real-time analytics (Gartner Inc., 2004). across all touch points,
Improving consistency in customer inter- • Access a common view of customer from
action management and customer experience different business functions,
across touch-points, and enhancing customer- • Provide a better framework for customer
facing processes for sales and marketing require service processes,
integration of customer data within and across • Organize activities around customers and
channels and accessing the relevant data timely. their priorities,
Since, the purpose of CRM applications is to • Provide personalization and manage cus-
maintain seamless and customer centric processes tomer cases effectively,
throughout the organization, companies require to • Integrate marketing, sales, and service
assess their fragmented operational and analytic activities,
capabilities and consider transforming them into • Improve sales processes and leads are bet-
more integrated CRM architecture. Integration of ter managed,
the functional areas of CRM (i.e., marketing, sales • Generate new sales opportunities,
and service) with legacy systems and front-office
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A Framework for CRM
• Generate and manage successful market- opportunities for relationship development such
ing campaigns, as cross, deep and up-selling. CRM technologies
• Measure the effectiveness of marketing, enable the company to evaluate the effectiveness
sales and service effectiveness, of strategies that is critical for developing future
• Reactivate inactive customers, strategies. Briefly, CRM technologies allow the
• Allow faster and more accurate follow-up, company to make the following analysis:
• Manage all business processes, and
• Instantly react to changing market • Segmentation and selections
environments. • Acquisition analysis and selections
• Customer analysis and selections
CRM as a business strategy utilizes information ◦◦ Retention analysis
technologies with the purpose of creating value ◦◦ Relationship development analysis
for both company and customers and building and (cross, deep and up-selling analysis)
maintaining profitable customer relationships. • Analysis to determine the effectiveness of
Developing successful CRM strategies requires the CRM strategies.
customer knowledge and CRM technology plays
an important role in creating customer knowledge. Figure 12 illustrates the requirements of devel-
As can be seen from Box 7, the CRM strategy oping successful CRM strategies. Developing suc-
can yield the desired results with the proper use cessful CRM strategies requires relationship data
of information technology in the CRM processes. and information technologies such as relational
CRM technologies facilitate the gathering, databases, data warehousing, and data mining
consolidating and delivering the relationship data. tools. Information technologies are essential for
Data mining tools and statistical analysis allow the CRM systems, because CRM technologies pro-
company to segment and select customers based vide and share the related customer information
on the specific factors. With the help of the cus- across all interface units for the effective CRM
tomer profile analysis, company can identify the implementations. To achieve the CRM objec-
Box 7. Abu Dhabi Commercial Bank implements integrated CRM solution
The client of Infosys, which is the third largest bank in United Arab Emirates, aims to become the region’s number one bank in terms of
customer service. However, since Abu Dhabi Commercial Bank does not have a 360 degree view of the customer, it cannot understand
the real value of each customer and it is unable to deliver differentiated targeted services. Customer service requests cannot be completed
on time due to the sub-optimal tracking systems and escalation procedures and this leads to loss of clients and revenue. Therefore, Abu
Dhabi Commercial Bank decides to implement an integrated CRM solution in order to streamline its operations, enhance efficiency,
integrate customer touch points, channels and applications to deliver consistent cross-channel customer experience, develop targeted
and effective marketing campaigns, and analyse customer portfolios to generate more revenue through cross-sell and upsell activities. It
begins to utilize integrated CRM architecture to ensure the objectives that are mentioned above. CRM solution of the bank is modularized
and each module deals with specific functionalities such as customer management, service request management, email management,
computer telephony integration, campaign management, lead management, and relationship management. However, these modules
are integrated as a whole. With the utilization of integrated CRM solution, Abu Dhabi Commercial Bank delivers consistent customer
experience across channels and this leads to increase in customer satisfaction levels. Since the customer data are stored in a single
application, the bank is able to serve customers faster and service requests are processed on a uniform platform. Moreover, campaign
management module of the CRM system allows the bank to segment its customers and target right customers at the right time with the
right offer. Targeted marketing efforts of the bank increase customer satisfaction as well as revenue. Furthermore with the integrated
CRM solution, Abu Dhabi Commercial Bank improves its opportunity management. Briefly, integrated CRM applications enable the
bank to understand its customers better and serve them better and this leads to improve the profitability of each customers. Utilization of
integrated CRM solution helps the Abu Dhabi Commercial Bank increase customer satisfaction as well as ROI.
Source: Infosys (2010). Infosys’ Oracle Siebel CRM solution helps Abu Dhabi commercial bank (ADCB) increase ROI, customer
satisfaction: Case Study. Retrieved April 19, 2013, from http://www.infosys.com/Oracle/case-studies/Documents/siebel-crm.pdf
172

A Framework for CRM
Figure 12. Requirements for developing successful CRM strategies
tives, it is important to develop an integrated of an organization to being customer centric.

CRM platform that collects relevant relational CRM provides the building blocks necessary
data from each customer interface and uses the for customer acquisition and retention. Lack of
obtained knowledge in developing CRM strate- CRM strategy and undefined CRM objectives
gies to achieve the CRM objectives e.g., customer may cause failure of CRM. CRM is not a just
acquisition, maintaining customer profitability, software. CRM focuses on building relationships
and customer loyalty. and it includes people, process, and technology.
CRM is the process of selecting the customers
a firm can most profitably serve and shaping
CONCLUSION the interactions between a company and these
individual customers. Assessing customer value
Building and maintaining close, cooperative is critical to CRM.
and long term relationship with customers is es- In today’s conditions, customers’ behaviors,
sential in the current era of intense competition. needs and expectations are changing rapidly
Acquisition and retention of profitable customers, and they embrace technologies to improve their
maximization of revenues as a result of maintain- lives. As customers have been increasingly using
ing customer retention, decrease in costs due to technologies to improve their lives, it’s important
attracting new customers through customer refer- for businesses to benefit from technologies while
rals from loyal customers without making any they are developing marketing strategies. Using
spending, and improvements in profits and ROI CRM technologies allows the company to un-
by generating strategies based on customer data derstand its customers better and to improve the
are among the benefits of CRM implementations. likelihood of building meaningful and profitable
CRM is a philosophy that reflects the commitment relationships with them. With the CRM strategy
173

A Framework for CRM
implementation, the company aims to build and processes such as selling, marketing and customer
retain relationships with profitable customers. service. Operational CRM technologies transform
CRM systems provide many benefits for the com- the marketing and sales process, impact the per-
pany such as improving customer satisfaction and formance of the company and provide benefits
increasing the company’s efficiency, profitability especially for the marketing and sales departments
and revenues. CRM system, which comprises three of the company. Marketing automation technology
fundamental aspects: operational CRM, analytical reshapes the role of the marketing department.
CRM and collaborative CRM, facilitates build- Marketing automation uses technology in the
ing relationship with profitable customers and marketing processes. The purpose of automation
attaining CRM goals. Operational, analytical and of the marketing processes is to target and attract
collaborative are important constitutes of CRM customers effectively. On the other hand, sales
and needed to create a successful CRM. Data automation enables the company to engage with
created through operational CRM are analyzed customers and acquire them. Service automation
by the analytical CRM for the purpose of getting allows the company to manage, handle and co-
customer insight and collaborative CRM enables ordinate its service operation across all channels
consistent collaboration between customers and in order to retain them by delivering superior
business organizations. On the system level, customer service. Operational CRM technologies
operational, collaborative and analytical CRM increase the marketing performance, sales effec-
systems support the CRM processes. tiveness and revenue growth. Collaborative CRM
CRM analytics is becoming important over manages all interactions between the company
the last few years. Customer data is an invaluable and its customers across channels. Collaborative
asset of the company and analytical CRM enables CRM applies technology across touch points to
the company to reap the customer data in order serve customers in a consistent and systematic way.
to improve marketing efficiency. The customer CRM software applications allow the company
insight can be formed from the systematic col- to create, collect, update and view the customer’s
lecting and storing of customer data. Companies information as well as record and access all cus-
have been noticing that simply automating and tomer interactions across different communication
restructuring the customer-facing operations in channels and departments. CRM systems provide
sales, marketing and service are not sufficient for the technological infrastructure to implement
the successful implementation of CRM. Analytical CRM strategies and they are used to support and
CRM deals with capturing, storing, integrating, optimize customer related business processes.
processing, interpreting, distributing, using and Developing successful CRM strategies can be
reporting customer data to build relationship with maintained through synchronizing and integrat-
profitable customers. Analytic CRM provides a ing various databases that contain customer data.
deeper customer insight related with the key CRM Within the CRM framework, sophisticated sys-
metrics such as customer value and satisfaction; tems such as data mining tools enable company
so that it enables the company to build profit- to segment and profile its customers, analysing
able relationships with its customers. Analytical the customers’ buying behavior through market
CRM systems involves standard reporting, online basket and sequence analysis, predict the next
analytical processing (OLAP), data mining and best activity strategy, develop targeted and direct
real-time applications. marketing campaigns, and deliver customized
Operational CRM focuses on the automation, products and services.
improvement and enhancement of customer-facing
174

A Framework for CRM
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and right outcome. EMM includes functionality
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of campaign management, lead generation and
the customer information that is provided by opera-
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management, and analytics. EMM functionality with collecting data, processing transactions, and
enables the company to engage in real-time mar- controlling workflow at the sales, marketing, and
keting and respond immediately to an identified services functions.
opportunity. Revenue Performance Management (RPM):
IDIC Model: Peppers and Rogers (2011) ex- RPM is a technology-enabled strategy to increase
plain the role of analytical and operational CRM total revenue productivity and it focuses on inte-
in building and managing profitable relationships grating marketing and sales functions all in a single
with customers through IDIC model. According technology platform. RPM can be defined as the
to the IDIC model, companies need to identify process of tracking and optimizing all marketing
their customers, differentiate them, interact with and sales contacts through the customer life cycle.
them, and customize their offers and services in The main purpose of RPM is to better track, mea-
order to build and manage profitable relationships sure and optimize the relationship between sales
with their customers. Therefore, the first two steps and marketing, and the revenue.
of the IDIC model are considered as analytical Sales Pipeline Management: Sales pipeline
CRM and the last two steps are considered as management automation allows the company to
operational CRM. effectively manage its sales steps during the sales
Operational CRM: Operational CRM auto- process. Sales pipeline management automation
mates and improves customer-facing and customer visualizes the entire sales funnel of the company
supporting business processes such as selling, mar- and the process of moving potential customers
keting and service across customer touch points from contact to prospect to customer. Sales pipeline
and channels. All interactions with the customer management application enables the company
are recorded in order to gather data about the to store and organize all lead information in one
customer and understand what customers really place. Visualization of the sales funnel enables the
value. Operational CRM creates knowledge about company to see number of leads that it has, stage
customers. Operational CRM provides customer of the each lead, and what the company needs to
information about customers’ demographics, do for each lead to close the deal.
preferences and needs. Operational CRM deals
181
182
Chapter 7
Management as a Customer-
Centric Business Strategy
ABSTRACT
CRM is fundamentally essential for the future of the company. CRM technologies enable the company
to understand customer behavior better, predict their future behavior, deliver customized customer
experience, and establish long-term customer relationships. However, considering that CRM is only
limited with technology would be a big mistake for the company. Companies cannot deliver outstanding
customer value, service, and experiences only through investing in CRM technologies. Strategic integra-
tion of CRM philosophy into company culture and operating processes are required to deliver superior
customer service and experience. In the absence of CRM strategy, companies fail to harvest the benefits
of CRM. The main purpose of this chapter is to discuss the characteristics as well as the strategic objec-
tive of CRM strategy. This chapter explains the customer life cycle management and proposes a holistic
framework for customer life cycle management. This chapter ends with discussing the strategies to turn
customers into assets and create devoted customers.
INTRODUCTION also evaluate the performance of the company by

looking at how well companies handle their needs.
In today’s market conditions, customers demand Bluewolf infographic reveals the fact that 85% of
better service and expect more from companies. the company’s business could be lost due to the
Companies require to understand the needs, poor customer service. 59% of customers indicate
preferences, and buying behavior of customers; that they may switch to another brand in order to get
in order to plan and execute interactions that cre- better service and 40% of customers say that they
ate best possible experience for their customers. will leave the company after the second mistake;
Responding needs of customers fast is important, however 73% of customers are willing to spend
but customers do not only expect fast respond, they more with the company if the company delivers
DOI: 10.4018/978-1-4666-8231-3.ch007

Customer Relationship Management as a Customer-Centric Business Strategy
good customer service (Bluewolf, n.d.). Hence, tions above the industry average have more loyal
greater focus on delivering satisfying customer customers than the customer experience laggard
services and customer experience is essential for companies that have customer experience ambi-
maintaining customer loyalty. tions below the industry average. Customers, who
As SAS Institute Inc. and Peppers & Rogers have more positive customer experience with the
Group (2009) indicate that the landscape of mar- company, are willing to purchase more from the
keting is being reshaped. In this new landscape company and likely to recommend the company.
power shifts to customers and companies lose their Although companies are still in early stages of
control. Customers become belligerent and they their customer experience journey, statistics
are increasingly intolerant of poor experiences. In indicate that the number of the companies that
the case of dissatisfaction they share their dissat- have reached the satisfactory customer experience
isfaction with other people on the social networks. level has been gradually increasing from 16%
When a company fails to adopt the customer’s in 2011 to 37% in 2013 (Temkin Group, 2013).
perspective, it may damage to its business. How- Companies that want to deliver excellent customer
ever, companies that provide customer intimacy experience need to realign their technologies and
and outstanding customer experiences, have the organizational culture around the customer. Com-
opportunity to stand apart from the crowd and panies that fail to organize around the customer
achieve competitive advantage. Since the unique endanger their companies’ market share as well
product differentiation can be quickly copied as financial survival.
by competitors and it is easy to compare prices CRM is fundamentally essential for the future
through shopping bot to find best price, customer of the company. Advancements in information
experience becomes the new differentiator. Cus- technology allow companies to organize around
tomer experience report findings indicate that ma- the customer and build better relationships with
jority of U.S. consumers consider good customer customers. CRM technology solutions enable
service (52%) as an extremely important compared the company to track customer behavior, better
to good prices (38%) in engendering loyalty to the understand customer behavior, predict their future
company and four out of five respondents do not behavior, identify the profitability of custom-
consider to purchase again from a company that ers, quickly respond customer requests, deliver
delivers a bad experience. Therefore, it is not the customized customer offerings and experience,
product or price that creates the differentiation, and establish and sustain long-term customer
intimate customer relationships between the cus- relationships. Many companies have been increas-
tomer and company creates the differentiation and ingly allocating their resources to develop CRM
competitive advantage (SAS Institute and Peppers strategies and making significant investments
& Rogers Group, 2009). Companies that want to in CRM technologies and processes. Today, the
be successful should invest in building stronger adoption of CRM and sophisticated technologies
customer relationships and adopt the customer’s has become more widespread in B2C markets as
point-of-view to their processes. Building the well as in B2B markets. However, considering
intimate customer relationships is more important the CRM only limited with the technology would
than transaction. Companies recognize that supe- be a fatal mistake for the company. Most of the
rior customer experiences have become critical companies invest in CRM technologies without
for ensuring competitive advantage. developing a CRM strategy. Companies cannot
According to the Temkin’s State of Customer deliver outstanding customer value, service and
Experience report, customer experience leader experiences only through investing in CRM tech-
companies that have customer experience ambi- nologies. Strategic integration of CRM philosophy
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into company’s culture and operating processes implementing CRM technology, companies need
and customer centric alignment of the organization to create CRM strategy. Companies should align
are required to deliver superior customer service their organizational resources according to their
and experience. In the absence of CRM strategy, CRM strategies. It is important to rely on CRM
integration and alignment, companies fail to strategy instead of vague aspirations. CRM as a
harvest the benefits of CRM and get satisfactory business strategy has to be supported by business
return on CRM investments. The lack of unified, processes and enabling technologies in order to
clear and consistent CRM strategy is considered achieve the organization’s customer-centric goals.
as one of the main reasons for the failure of the
CRM implementations and adoptions.
Companies can only be satisfied with the CRM AS A COMPETITIVE STRATEGY
performance of their CRM investment, if they
consider the CRM as a business strategy that Companies can achieve competitive advantage
integrates the company’s internal processes through creating superior customer value, de-
and external networks by utilizing information livering what customers value, providing more
technologies in order to create and deliver value value than competitors, and raising customer
to selected customers at a profit (Buttle, 2009). expectations about the level of value. Since dif-
Thus, successful CRM implementations must be ferent customers expect and buy different values,
composed of philosophy, strategy, and technol- companies need to deliver customer value based
ogy perspective. CRM as a philosophy focuses on their target customers. Value strategy of the
on building long-term customer relationships; company has to be designed by considering what
whereas, CRM as a strategy aims to build re- target customers value most. Customers may value
lationships with selective profitable customers. low cost, innovative and best products, or best
On the other hand, the information technology personalized solution. Therefore, it is important
facilitates the implementation of CRM strategies to understand what target customers value most.
by enabling the company to get customer insight To succeed in the marketplace and become market
and utilizing the customer insight in developing leadership, Treacy and Wiersema (1993) identify
successful CRM strategies. Therefore, delivering three value disciplines which can be utilized in
the right information to the right person at the creating customer value to achieve competitive
right time is the expected function of successful advantage: operational excellence, product leader-
CRM solutions. CRM solutions help the company ship, and customer intimacy (see Figure 1).
understand the needs and preferences of customers Companies that want to achieve competitive
by providing customer insight to decision makers advantage have to choose one of the three value
and leveraging that insight at the point of customer disciplines and achieve market leadership in that
contact in real time when it is needed. discipline while meeting the standards in the other
Building customer oriented organizational value disciplines. Company has to achieve excel-
culture, developing a CRM strategy that guides lence at only one discipline because, a company
and enforces the commitment of being customer cannot be the best in all value dimension. Attempt-
centric and realizing the CRM strategy by using ing to be perfect on more than one value discipline
enabling technologies are the essential pillars for leads the company not being perfect at anything,
successful implementation of CRM (Rababah, trap in the middle without a clear differentiator, and
Mohd, & Ibrahim, 2011). Therefore, imple- prone to failure (Treacy & Wiersema, 1997). To
menting CRM technologies does not make the achieve competitive advantage, company requires
company customer-centric organization. Before to choose a value discipline based on considering
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Figure 1. Achieving competitive advantage through value disciplines

Source: Treacy, M., & Wiersema, F. (1997). The discipline of market leaders: Choose your customers, narrow your focus,
dominate your market. New York, NY: Basic Books.
its capabilities and culture as well as its competi- Operational excellence as a competitive strat-
tors’ strengths and weaknesses. Focusing on the egy attempts to deliver a combination of price,
value that the company wants to deliver to its quality and ease of purchase. Company that fol-
customers and aligning the company’s culture, lows operational excellence as its value strategy
business processes and management systems in aims to become competitive in terms of price and
order to serve desired value are essential to be convenience. The value proposition of operational
competitive and successful. Thus, it is important excellence strategy is the best price. Operational
for the company to design its value proposition excellence approach does not concentrate on
by identifying the value that target customers delivering the best possible product or having
consider most important. the intimate relationship with its customers.
If the target customers value consistent ef- Therefore company, which focuses on delivering
ficiency and low cost more than anything, a value through operational excellence strategy,
company can choose operational excellence as its does not spend a great deal of time on one to
value strategy. Product leadership value strategy one relationship with customers. Company that
is ideal for the target customer who values inno- pursues operational excellence concentrates on
vative, newest and best products above all else. making its operations lean and efficient in order
Whereas, company can choose customer intimacy to deliver standard and reliable products at the
value strategy if its customers value personalized best price. Since it tries to achieve cost leadership,
solutions, customized products, and intimate re- it delivers one size fits all products and services,
lationships more than anything. Characteristics and this approach ignores differences in customer
of the three value disciplines will be explained needs. Company automates and standardizes its
below based on the Treacy and Wiersema’s (1993; business processes and production in order to
1997) studies. streamline operations, reduce costs and achieve
efficiency. Therefore, it focuses on efficiency to
185

improve the organization’s operations. High level ment, creating differentiated customer experience
of productivity and efficiency is rewarded. Pur- and making customers feel unique to achieve a
suing operational excellence as a value strategy customer loyalty advantage. Company that fol-
requires standard operating procedures and strong lows customer intimacy strategy wins through
central authority. Achieving organizational effi- understanding customers, delivering what they
ciencies and benefits are among the priorities of need in a customized way, establishing close,
the operational excellence strategy rather than the intimate and long lasting relationships with its
customer needs and this is the main disadvantage customers and providing high touch customer
of operational excellence strategy. service. Although customization increases the
Product leadership value strategy, which aims costs, customer intimacy strategy considers
product leadership, emphasizes product devel- customer’s lifetime value to the company rather
opment and innovation, and optimizes research than the value of single transactions. Moreover,
and development to gain competitive advantage. company can charge high prices for the customized
Company that follows product leadership as a offerings and high touch customer services. Since
competitive strategy wins by delivering new, in- management decisions are made on total lifetime
novative, and best products. Product leadership customer value, company measures and compares
value strategy requires creativity and the ability to the cost of providing service and maintaining
commercialize ideas quickly. Business processes customer loyalty with the customer’s lifetime
support the nurturing ideas, translating them into value. Pursuing customer intimacy competitive
products and marketing these products. Product strategy requires flexibility and empowerment of
leadership approach encourages idea generation customer contact employees in order to address
at all levels of organization and makes high in- and resolve customer issues. Keeping and satisfy-
vestment in research and development. Time to ing customers are rewarded. Companies that are
market and speed is important because innovative best in customer intimacy value creation are able
ideas have to be commercialized quickly before to combine customer knowledge with operational
competitors do. Company takes the risk of fail- flexibility and respond quickly to the needs of
ure because decisions are made quickly without customers. So that they can maintain customer
analysing the situation. Since product leadership loyalty. Customer intimacy strategy is based on
strategy provides tangible advantage that can be customer insight and aims to build relationships
legally protected and not easily be duplicated, it with the desired customer base through consider-
offers the ability to charge premium prices and ing the lifetime value of a customer.
high margins in short time frame before fast fol- Peelen (2005) examines the nature of the
lowers can replicate the new offering. Management three value disciplines and classifies each value
system rewards employees’ innovative capacity discipline strategy based on whether it is offensive
and new product system, avoids bureaucracy. and defensive strategy. Offensive strategy focuses
However, continuous innovation and ambition on acquisition of new customers through either
for offering newest and best products generally enlarging the market or increasing the market
suppress learning from customers and disregards share. Since, in the case of operational excellence
customer needs. as well as the product leadership value discipline,
Customer intimacy as a competitive strategy company attempts to expand its customer base and
concentrates on understanding of customer needs, aims to gain new customers, they are considered
developing customized products, services and as offensive strategies. Company that pursues
unique solutions, delivering outstanding customer offensive strategy tries to switch customers to its
service through customer relationship manage- brand and measures its success by market share
186

relative to competition. On the other hand, defen- implementing CRM system is to increase produc-
sive strategy focuses on maintaining and defending tivity and convenience for customers, this means
current customers and position by either increas- that the company aims for achieving operational
ing customer satisfaction or building switching excellence (Peelen, 2005).
barriers. Therefore, customer intimacy strategy, Implementing CRM allows the company to
which focuses on customer retention, is a defensive achieve competitive advantage through the way it
strategy. Company that follows defensive strategy integrates and adopts CRM. Companies that can
focuses on maintaining customer commitment turn their information assets from a tactical project
and measures its success by customer retention into a strategic advantage will benefit from CRM.
rate (Peelen, 2005). SAS Institute Inc. and Peppers & Rogers Group
As the competition increases in the market (2009) argues that competitive advantage, which
place, establishing deep customer intimacy will be arises from excellent customer experience and
one of the most powerful competitive strategies. delivering outstanding customer service, requires
Sustainable customer intimacy strategy requires: a focus upon insight, interaction and improve-
ment. Outstanding customer experience is not
• Putting customer at the heart of the busi- limited with improving customer service quality
ness and be responsive to customer needs, or enhancing customer satisfaction. Delivering
• Establishing multiple feedback mecha- great customer experience can be possible by
nisms to capture customer experiences and designing an experience for each customer based
needs, upon knowledge of individual customers, using the
• Delivering high touch customer service by customer insights during the interactions across
empowering front line employees, channels, and measuring outcomes to guide ongo-
• Providing outstanding, seamless and dif- ing improvements (SAS Institute Inc. and Peppers
ferentiated customer experience, & Rogers Group, 2009).
• Making customer feel special, SAS Institute Inc. (2008) indicates that in
• Developing marketing strategy based on today’s competitive markets, companies need to
customer insight, and evolve to a customer-centric business model that
• Aligning organizational culture consider- is focused on the three I’s of marketing:
ing the customer base of the company.
• Insight
CRM strategy, which is a customer centric • Interaction
business strategy, fits best with customer intimacy • Improvement
value discipline; because both CRM strategy and
customer intimacy value discipline aim to develop Customer-centric business model, which is
long lasting profitable relationships with custom- based on the three I’s, is expected to align the
ers. As it is in the defensive strategy, company that organization and the delivery of its products and
implements CRM strategies wants to sell more by services around the customers in order to identify
creating customer satisfaction and loyalty. Com- the opportunities for profitable long-term growth
panies, which implement CRM systems in order and get a growing durable profitable customer
to understand customers, communicate with them, base. Designing interactions that are built upon
and develop long lasting profitable relationship customer insight allow companies to improve
with customers, follow a customer intimacy value customer experience management. In order to
strategy that is considered as a defensive strategy. deepen customer insights and make smarter deci-
At the same time, if the objective of a company in sions, companies need to manage the quality of
187

customer data, predict customer behavior, and pro- concentrate on deepening its relationships with
file and segment customers accurately. Company customers. The main objective of implementing
needs to have the ability to manage and optimize customer centric CRM strategy is to increase sales
segment strategies and engage high potential and profitability by increasing customer retention
customers to design its customer interactions. and creating customer loyalty. CRM strategy tries
Today’s CRM technologies enable companies to achieve its ultimate objective through focusing
to manage customer knowledge and align their on creating better product and services, delivering
decision making around customers. In customer outstanding customer experience, and building
centric business model, it is also essential to op- deeper intimate customer relationships in order
timize marketing investments and continuously to maintain customer satisfaction.
improve marketing performance by measuring Customer satisfaction is considered as one of
and reporting. Reporting and measurement enable the most important factor for customer loyalty
enterprises to improve marketing ROI and learn because a satisfied customer is supposed to stay
from the past and improve on it. Briefly, with loyal to the company for a long period of time and
the help of the CRM, customer-centric business to buy more and more often than other customers
model aligns the organization, and the delivery (Heskett & Schlesinger, 1994). A highly satisfied
of its products and services around the customers customer is expected to stay loyal longer, increase
by developing analytical insight, connecting that their purchase quantities over time, buy as the
insight to customer interactions and integrating company introduces new products or upgrades
learning to continuously improve results (SAS existing products, talk favorably about the brand,
Institute Inc., 2008). show less sensitivity to price, pay less attention
to competing brands, and generate new product
The Strategic Objective and service ideas to the company (Kotler, 2000).
of CRM Strategy Satisfied customers are more willing to pay
premium prices for outstanding customer experi-
CRM, which is a customer centric business strat- ence and refer new customers to the company at
egy, is considered as the winning strategy of today’s no cost (Buchanan & Gillies, 2000). Therefore,
competitive marketplace. CRM is an integrated satisfied customers when become loyal account
approach to achieve its objectives of identifying,
attracting, and retaining the profitable customers.
Figure 2. Stages of CRM cycle
As shown in Figure 2, the CRM cycle consists of
stages that conform to these objectives and CRM
cycle starts with identifying the potential custom-
ers (Rai, 2012). The company targets customer
segment(s) which it can serve in a profitable
way and focuses on obtaining information from
its target customers in order to understand their
needs, preferences, and expectations. Based on the
information, company creates its value proposi-
tion to its target customers. The company tries
to attract qualified prospects and offers them its
value proposition. Some of the prospects response
the offer of the company and become customer.
With the close of sale, the company begins to
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for a valuable amount of company profits. Since surveys with its 174 clients in order to find out
companies spend considerable time and resources primary objectives of its customers’ current
to acquire new customers, it is less expensive to CRM plans and initiatives. Majority of Gartner
serve satisfied existing customers than serving clients declare that they have several CRM ob-
new customers. Furthermore, cost of retaining jectives and each respondent of this survey cites
customers are not high compared to acquisition averagely six CRM objectives for implementing
costs of new customers because there is no need CRM plans and initiatives. The most cited CRM
to spend time for searching existing customers and objectives are respectively: increasing customer
there is less need to conduct awareness building satisfaction, sales revenue, customer loyalty, and
activities for existing customers (Maister, 2000). customer retention, enhancing cross and upsell
Therefore, customer retention is crucial for the opportunities, and acquiring new customers
business success because acquiring new customer (Gartner Inc., 2004). Maintaining and enhanc-
costs five times more than the costs of retaining ing intimate relationships with customers help
existing customers, the customer profit rate tends the company achieve its ultimate objective of
to increase over the life of the retained customer, customer retention. To be successful in achieving
a five percent reduction in the customer defec- this aim, the company also requires to establish
tion can increase profits by 25%-85% depending close relationships with its internal and supplier
on the industry and as the retention rate goes up, markets that help firm deliver superior value to
overall profitability of the firm also increases its customers and enhance customer satisfaction.
(Kotler, 2000). It is evident that it is more profit- Since CRM is a strategy not a tactic, companies
able to retain customers rather than acquiring new require to consider CRM as the ongoing process
customers. To reap the benefit of customer reten- of managing collaboration between the company
tion, a company requires to effectively manage its and selected customers for mutual value creation
relationships with customers and establish close and sharing (Gordon, 2001). For the successful
satisfying relationships with them. implementation of CRM strategy, a company
With the high competition companies have requires to (Gordon, 2001):
been increasingly implementing CRM strategies
in order to turn prospects to customers and make • Decide which customers to focus on and
them loyal to the company by increasing their which ones to ignore by identifying the
satisfaction (see Figure 3). Gartner Inc. (2004) best customers for serving profitably,
Figure 3. Objective of implementing CRM
189

• Measure customer profitability and focus company has approximately 7% chance of doing
on customer profitability to improve it, business with someone with whom the company
• Prioritize its customers based on their val- has never done business, the company has 25%
ue and ensure that each receives appropri- chance of doing business with someone with whom
ate value, the company has had a relationship but has stopped;
• Focus on customers instead of products or however the company has 50% chance of doing
services and provide what customers want business with an existing customer (Heuvel, 2009).
rather than what the company makes, Moreover, as far as it is known that 5% decrease
• Be responsive to individual needs and col- in customer defections can increase profits up to
laborate with its partners to ensure that the 25%-85%. Therefore, it is a meaningful strategy to
customer receives the value he wants, focus on keeping existing customers and creating
• Identify capabilities that the company customer loyalty in order to reap the benefits of
should have while designing its CRM strat- decreasing the customer churn.
egy, and focus on improving these strategic In customer centric business strategy the
capabilities such as process, technology, starting point is the customer and the strategy
people and knowledge, should be aimed at realizing superior customer
• Win through customer centric innovation value through establishing customer intimacy.
by collaborating with customers and in- In customer centric CRM strategy, company
volving them into the company’s processes develops relationships with selected customers.
to create customer value, Customer value is designed, offered and realized
• Unlearn the principles of mass and relearn in close cooperation with customers as well as
customization to delight customers, and other partners such as internal markets, suppliers
• Compete for gaining access to the best and intermediaries in order to realize long-term
customers, providing saving time advan- profits through customer, partner and employee
tage for customers, wining and recruiting satisfaction (Hoekstra, Leeflang, & Wittink,
right employees to serve customers bet- 1999). Listening voice of customers and asking
ter, collaborating with right and best part- for feedback help the company gather customer
ner to deliver superior customer value, insight which in return can be used to offer superior
gaining more useful customer knowledge customer value and improve customer interactions.
and insight to deliver the what customer The objective of being customer centric can
wants, and creating the best new strategic be achieved by CRM technologies that enable
capabilities. the company to obtain a 360 degree view of
the customer at every stage of the customer life
Developing Customer cycle so that company can develop more effective
Centricity with CRM interactions with customers. Improving the effec-
tiveness of interactions with customers, company
CRM is important for building customer loyalty may increase its sales, profitability and intimacy
and encouraging customer retention. Companies of its relationship with customers. In customer
are moving from “one size fits all” customer mass centric CRM strategy, the focus needs to be on
marketing approach to a “customer centric” busi- managing customers, not products or production.
ness approach, which aims to increase customer CRM strategy should balance allocation of invest-
loyalty by focusing on the individual customer’s ment expenditures between keeping current and
needs and preferences. It is more profitable to focus attracting new customers based on customers’
on existing customers. According to Drucker a expected lifetime values.
190

Companies, which aim to deliver customer easily, extract customer insight, and utilize it for
value by establishing customer intimacy, need better decision making.
CRM in order to (Peppers & Rogers, 2011): CRM technologies help the company focus on
the following CRM objectives:
• Identify each customer individually,
• Differentiate the customers based on their • Improving customer satisfaction and cus-
value to the company, tomer loyalty,
• Interact with customers effectively, and • Shortening sales cycles to convert pros-
• Customize products and services. pects into customers,
• Increasing revenue from existing custom-
Companies require to identify each customer er by improving the success in cross and
individually to establish customer intimacy. Basic up-selling,
contact information is no longer sufficient to serve • Creating effective marketing strategies
customers and establish close relationships with through segmenting and prioritizing the
them. Companies need to gather more informa- customer, and
tion about the customers’ needs, preferences, and • Promoting a higher level of interaction be-
buying behavior in order to identify customers tween employees and customers to create
individually. Each interaction with the customer customer satisfaction.
creates an opportunity to learn more about the
customer. CRM systems help the company gather Facilitators of Developing
customer information across customer touch points Relationship with Customers
and deliver the needed information across the
company to serve customers better. Differentia- A customers’ tendency to engage in a relationship
tion is also essential for delivering value through with a company is influenced by several factors.
customer intimacy. Since, the value of each cus- The customer’s desire to enter into a relation-
tomer varies for the company, companies need ship with the company increases when there is a
to prioritize their marketing and service efforts greater heterogeneity among alternatives, a higher
around most valuable customers. Companies switching cost, large number of alternatives, a
need customer knowledge to profile and segment higher perceived risk, and complex alternatives
customers accurately. CRM technologies enable that need expertise in making a decision. The
companies to manage customer knowledge, align likelihood of customers’ engaging in a relation-
their decision making around customers, and ship with the company increases as the product
modify marketing and service efforts based on category heterogeneity increases. When there
customer knowledge, needs and value. Knowl- is a large number of alternatives in the product
edge about customers and their value allows the category, complex alternatives that need expertise
company to interact with its customers efficiently in making a buying decision, and significant dif-
and effectively and customize its interactions ferences among the alternatives, customers show a
with customers; so that company can deliver its tendency to establish long-term ongoing relation-
value through establishing customer intimacy and ships (Bhattacharya & Bolton, 2000). The need for
achieve competitive advantage. CRM technologies information, knowledge and expertise in making
help the company recognize, address and serve a buying decision among alternatives, desire to
customers on the basis of customer insight that is choice reduction to decrease the complexity of
gathered during the interactions with customers. the buying process and simplify the process of
CRM technologies capture customer knowledge choosing, and the uncertainty, perceived risk and
191

importance of the decision making outcomes lead perceived risk and foster the relational behavior of
the customer to engage in relational behavior with the customers (Bolton & Drew, 1995). Warranties
the company (Sheth & Parvatiyar, 1995; Doney & increase the trust in the company and improve
Cannon, 1997). Furthermore, customers are more the customers’ perception about the importance
likely to establish and maintain long term ongoing of the relationship.
relationships with the company when there are Companies can also use pricing and promo-
costs as a result of switching from one company tion tools to facilitate the relationship building
to another. Customers are expected to maintain process with customers. Usage rewards and cus-
long-term ongoing relationships when searching, tomized promotions are some of the pricing and
forming a new relationship and switching costs promotion practices that are used to promote the
are greater (Bhattacharya & Bolton, 2000). relationship building process and the commitment
Companies require to use product related at- of customers to the relationship. Companies may
tributes, pricing and promotion practices, distri- give usage rewards to the customers based on
bution and communication strategies in order to their usage status, frequency or quantity in order
facilitate the relationship building process with to create an incentive for customers to stay in
customers. Product extras, perceived quality, relationship with them and aim to influence the
and warranties are some of the product related purchase behavior of the customer in an attempt
facilitating factors that are used to influence the to increase customer loyalty. Rewards that directly
customers’ decision to engage in a relationship. support the product’s value proposition such as
Providing the core product with extra benefits such price promotions are more powerful in creating
as superior customer service or product features loyalty than indirect rewards. Moreover, rewards
increases the customer satisfaction as well as that are given immediately such as price discounts
the customer’s commitment to the relationship. are better than rewards that are delayed such as
Companies that want to keep their customers frequent shopper points (Bhattacharya & Bolton,
through customer satisfaction require to offer 2000). Companies may undertake promotional
more than the basic product. Value added product activities in attempt to stimulate purchase of
extras that are provided with the core product customers and to communicate the value of the
support the sales and increase the relationship product to customers. Customized and personal-
engagement of customers (Rosenberg & Czepiel, ized promotions increase the customers’ percep-
2000). Perceived quality also plays a critical role tion of the value of the relationship.
in the customers’ decision to maintain a particular It is essential to make the products available to
relationship. Offering high quality products can the customers at the right time and at the right place.
strengthen the relationship between the company Distributional efforts can also be used to facilitate
and the customer, and increase the commitment the relationship building processes. Flexibility and
of the customer to the company. Product quality, sales force connections are the two significant
consistency and reliability increase customer distributional factor that enable the establishment
satisfaction and also influence the relational of a relationship with the customers. Flexibility in
behavior of customers such as repeat purchasing product delivery and distribution can be used to
and purchasing other products from the company make customization, increase customer satisfac-
(Bhattacharya & Bolton, 2000). Warranty may be tion, and strengthen relationships with customers.
used as an effective marketing tool to influence the Improvements in information technology enable
buying decision of customers and their intention the company to make customization and person-
to continue the relationship with the company. alization. With the help of databases, companies
Warranties, guaranties and return policies reduce can keep information about the preferences of their
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customers and companies can provide customized customers program enables the company incor-
products and services to the customers based on porating the needs of customers into the design
their preferences even without being asked (Hart, of customer experiences. Voice of the customer
1996) and flexibility in product delivery increases program involves capturing and listening what
customers’ commitment to the relationship. Sales customers are saying and companies may listen
employees play a crucial role in delivering cus- their customers through email messages, com-
tomer service and creating customer satisfaction. plaints, online chats, forums, social media sites,
To be successful in establishing close relation- surveys, and call centers. Gathering customer
ships with the customers and maintain customer insights through listening customers help the
retention, effective human resource management company improve customer experience and bet-
is needed. Hiring, training and supporting sales ter serve the customer needs. Utilizing the voice
employees are important to ensure customer satis- of the customers enables the company to gain
faction, deliver outstanding customer service and competitive advantage. With the widespread use
develop personal trust between the company and of social networks, listening to customers becomes
customer. Sales employees have to be willing to more critical because customers can easily share
serve customers and trained to solve the problems their negative experiences with the brand through
of customers. Willingness of sales employees social networks and these negative online product
helps the company build long-term relationships or brand reviews can destroy a business (Kaplan,
with its customers (Rosenberg & Czepiel, 2000). 2014).
Communication is another facilitator for the Forrester believes that companies require to
relationship building process. Communication is improve how they listen to customers. It is im-
the lifeblood of the relationship and it fosters trust portant for companies to respond to and act on
between the company and customer. Establishing customer feedback in order to effectively develop
communication channels is essential for a com- CRM strategies, manage their relationships with
pany to enhance its relationship with customers. customers and serve customers. However, most
In addition to communicating with customers, of companies fail to use the gathered customer
it is also essential to establish intra-company feedback in their decision making. A study by
communication in order to serve customers bet- Customer Champions, a U.K. consulting firm,
ter (Parvatiyar & Sheth, 2001). Listening is an reveals the facts that 95% of companies gather
important aspect of the relationship between customer feedback, 50% of them inform their
company and customer. Listening creates two way employees about the findings of the customer
interaction and customers feel that they are taken feedback, 30% of them make decisions using this
care of and in turn this leads to the creation of a customer insight, and 10% of them act on these
long-term relationship (Bhattacharya & Bolton, decisions and improve its processes (Gartner,
2000). Listening the voice of customers is required 2004). Thus, companies require a systematic
to deliver outstanding customer service and ex- feedback program, which handles the process for
perience based on the needs and preferences of how and when the company responds to feedback,
customers. Two-way, personal and customized and how it integrates customer feedbacks into
communication strategies rather than impersonal its business strategy. Rather than just collecting
modes of communication, are more effective in feedback, companies need a holistic program that
facilitating the relationship building process (Mohr generates and utilizes customer insights. Forrester
& Nevin, 1990). report on “Crafting Your Voice of the Customer
Companies require to focus on gathering and Program” explains the requirements that make
using customer insights. Listening the voice of up voice of the customer programs as: listening,
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interpreting, reacting, monitoring, culture and relationship-tracking survey and survey customers
alignment, and governance and organization. at regular intervals to gather customer insight and
Companies need to listen and collect feedback discover how customers feel about the company.
from across all channels such as surveys, emails, Interaction monitoring is also cornerstone of the
calls, and comments. Companies also need to voice of the customer programs. In the context
listen to the voice of the frontline employees, of the interaction monitoring, companies can
who have deep insight into customers’ needs and survey customers after key interactions to learn
experiences, to get customer insight. Just getting how satisfied they are with both the results and
customer data is not sufficient. Gathered customer the processes. Interaction monitoring is used to
feedback has to be interpreted and analysed in or- spot problematic trends, provide detailed feedback
der to understand and get insights about customer to frontline employees, and trigger an immediate
needs, attitudes, and behaviors. Interpretation of response to negative feedbacks from customers.
the customer data provides actionable insights Continuous listening can be possible through
and reveals unstructured data. Companies have sampling frontline customer interactions on a
to respond to and react on the customer insight regular basis in order to listen to call center con-
and infuse customer insights into their experi- versations, reading emails, chat logs, and blogs,
ence design and decision-making processes in and visiting stores. Continuous listening allows
order to improve the customer experience and get the company to identify early signs of problem
value from their voice of the customer programs. and understand the emotional side of customers’
Companies should also use customer insights to issues. With the periodic immersion, companies’
train and inform employees and respond custom- executives periodically spend significant time in-
ers at individual and aggregate levels. Voice of teracting with customers and frontline employees
the customer programs also requires to monitor to identify obstacles encountered by customers
internal progress and external results of their ef- as well as employees. In the context of project
forts over time. To be successful in voice of the infusion, companies systematically include insight
customer programs, organizational culture and about target customers’ needs within project.
alignment are also essential. Companies have to They keep projects focused on the needs of spe-
participate into voice of the customer program cific customer segments and align investments
across the organization from upper management to improve customer experience (Temkin, 2010).
to the frontlines. Moreover, governance and or- Leading companies have been increasingly invest-
ganization of processes are critical to effectively ing in building a customer interaction hub that
operationalize the voice of the customer program enables the business to learn and meet customer
(Temkin, 2010). Companies cannot get return on expectations across all communication channels in
investment from only listening and interpreting the order to achieve competitive advantage (see Box
customer feedback, companies can get business 1). The customer interaction hub is an integrated
results from responding to and acting on customer customer interaction framework that provides a
feedback, and improving the customer experience real-time, complete view of the customer across
(Kaplan, 2014). channels to all relevant customer-facing employees
Forrester report identifies the five levels of a (Gartner Inc. 2004).
voice of the customer program as: relationship Customer insight that is gathered through the
tracking, interaction monitoring, continuous lis- voice of the customer program can be used to
tening, project infusion, and periodic immersion. determine the customers’ satisfaction with the
Companies need to track the progress of customer company’s products, services, and experiences and
relationships over time. Many companies rely on maintain customer retention through improving the
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Box 1. Voice of the customer program: Barclaycard ring’s success
Barclaycard US, which is the winner of the 2012 Forrester Research Voice of the Customer Awards, won the award for its voice of the
customer program. Barclaycard Ring, which was launched in April 2012, is the world’s first community designed credit card. Barclaycard
has built a community of Ring cardholders and enables its card members collaborate to build a better credit card experience by using
the social tools at barclaycardring.com. Ring card members can discuss every financial topic under the Ring’s social hub and the
main purpose of the community is to help Barclaycard improve its products and policies. Its arms-length relationship with customers
enables the Barclaycard Ring to learn what customers really want. Barclaycard brings Ring card members together and empowers them
to influence its business decisions through this social hub. Barclaycard closely manages its Ring community processes to ensure that
customer ideas and feedback are being thoroughly evaluated and put to work in Barclaycard’s business. Barclaycard has combined Ring
with other voice of the customer initiatives (e.g., listening to randomly selected real customer calls) to decrease customer complaints by
50%, and increase customer retention by 25%, resulting in an annualized benefit of over $10 million.
Source: Lithium (2012). Ring: Barclaycard turns card members into company stakeholders and drives up customer retention. Retrieved
June 9, 2013, from http://community.lithium.com/t5/Lithium-s-View-blog/Ring-Barclaycard-Turns-Cardmembers-into-Company-
Stakeholders-and/ba-p/59070
customer experience by meeting customer needs implementation of CRM will be discussed below
and preferences. Therefore, companies should both from the company and customer perspective.
listen to the voice of customers, act on customer Implementation of CRM strategy allows the
feedback, and integrate customer feedback into company to focus on profitable customers, avoid
their business strategies in order to effectively unnecessary expenditures and reduce the waste-
manage their relationships with customers and ful marketing practices associated with mass
better serve customers; so that this can facilitate marketing practices. CRM technologies make the
the likelihood of customers’ engagement in a rela- marketing activities more effective and efficient
tionship with the company. Voice of the customer by improving lead generation and qualification
programs help companies deliver an outstanding processes, lowering the costs of customer acquisi-
customer experience that leads to satisfaction, tion, enabling more efficient account management,
trust, and customer loyalty. decreasing waste in marketing campaigns, reduc-
ing the customer service costs, and making front-
Benefits of Implementing office processes more efficient (Buttle, 2009).
Customer Centric CRM Strategy Companies try to implement CRM strategy in an
attempt to effectively manage their relationships
CRM as a business strategy aims to maximize with customers. Effective management of rela-
profitability, revenue and customer satisfaction tionships with customers enables the company to
by organizing the company and processes around deliver outstanding products and services through
customer segments, fostering behavior that sat- better understanding of customers and their needs
isfies customers, and implementing customer (Cannon & Perreault, 1999). CRM technologies
centric processes (Gartner Inc., 2004). The aim of support CRM strategies by enabling to gather
implementing a CRM strategy is to provide higher customer insight. CRM technologies allow the
value to customers. CRM becomes an essential company to become more knowledgeable about
strategy in today’s dynamic markets in which the customers’ needs and also allow the company
customer needs are changing very rapidly. Rapid to identify their most important customers. In this
changes in almost all types of business increase way, companies can offer the right product and
the importance of strengthening the relationship service to their customers at the right time. Better
with customers. A relationship develops between understanding of customer needs enables the com-
a customer and a company when there are ben- pany to meet and exceed customer expectations
efits to both parties. Benefits that result from an and in return this will delight customers, increase
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customer satisfaction and engender customer com- of information processing, lower search costs and
mitment. With the help of CRM, companies stay reduce the perceived risks associated with future
very close to their customers and respond quickly purchase choices (Kandampully & Duddy, 1999;
to their changing needs; in this way, companies Bhattacharya & Bolton, 2000). Maintaining long
gain competitive advantage. term relationships with the company increases
Implementation of CRM helps the company the customer’s confidence in the company and
generate additional revenues and reduce costs by reduces the anxiety of the customer. Customer feels
converting more leads from prospect to customer, comfortable in the relationship because customer
creating high levels of customer satisfaction and knows what to expect from the company.
retention, making more cross-selling and up- Customization is one of the most important
selling to loyal customers, gaining more customer benefits of CRM for the customer. All customers
referrals, achieving higher levels of word of mouth, do not need to be served the same way. With the
and generating more sales from marketing cam- help of the CRM technologies, customers can get
paigns (Buttle, 2009). When a company manages customized products and services based on their
its relationships with its customers successfully, preferences. CRM enables the customer to receive
it lowers its customer defection rate (Reichheld & outstanding customer service and experience. In
Sasser, 1990). Lowering defection rate by adopting some long-term customer-company relationship,
CRM strategies allows companies to benefit from company can deliver personal and intimate rela-
the lifetime value of the customer and generate tionships which improves the customer’s quality
more revenue for more years from loyal customers. of life by providing social support benefits. En-
Profit of a company climbs when the company gaging in long term relationship offers financial
retains its customers. The customer profitability benefits to customers. Loyalty programs provide
rate over the life of a retained customer tends to financial benefits to the customer within the
increase annually by up to 20% (Reichheld, 2001). context of CRM. Loyalty programs such as fre-
Moreover, a 2% increase in customer retention has quency marketing programs and club membership
the same effect on profits as cutting costs by 10% programs reward customers who buy frequently
(Murphy & Murphy, 2002). Customer retention and in substantial amounts by providing discounts,
provides cost reduction to the company which is special offers, customization, privileges, and so
another benefit of CRM because the cost of keep- on. Since customers feel comfortable in the re-
ing existing customers are lower than the costs lationship, know that they are taken care by the
of acquiring new ones (Berry, 1995). Satisfied company, receive special treatment, they stick to
customers tell their satisfaction to their friends the relationship and become loyal to the company.
and this leads to increase in referrals. With the
customer referrals, companies can attract new
customers at no cost. CUSTOMER LIFE CYCLE
Customers can also reap the benefits of engag- MANAGEMENT
ing in a long term relationship with the company.
Customers remain loyal to a company when they Life of human beings evolves over time and they
receive greater value compared to competing com- are born, grow, mature and die. Products also go
panies. Long term relationship with the company through a similar life cycle from launch to with-
provides some relational benefits to customers. drawal. It is important to keep in mind that not
Engaging in a long term relationship with the all products reach the final stage. Some continue
company allows the customer to achieve greater to grow and others born and die. The relationship
efficiency in their decision making, reduce the task between the customer and company also evolves
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over the time. Similar to the human or product life take place between the parties and trust begins
cycle, customer relationships pass through similar to develop. Over the time the relationship moves
stages over the time. The customer life cycle has to the commitment phase which is characterized
stages and each has its own characteristics that by increased adaptation and mutually understood
mean different things for business. A company roles and goals. Purchasing processes that have
has to manage its relationships with the customer become automated are the sign of commitment.
based on the customer’s position at the customer However, not all relationships reach the com-
life cycle and understand the requirements of mitment phase. Many are terminated before that
each phase at the customer life cycle in order to stage. As the requirements of the customer change
develop more effective interactions and increase or competitors provide attractive offers, customer
the intimacy of the relationship with the customer. may reconsider the relationship. Customers may
Dwyer, Schurr, & Oh (1987) has identified five exit relationships for many reasons, such as service
phases through which customer–supplier relation- failures or poor product performance. On the other
ships can evolve: hand, suppliers may choose to exit relationships
because of their failure to contribute to sales
• Awareness volume or profit goals.
• Exploration As it is indicated by Peelen (2005) the re-
• Expansion lationship life cycle between the customer and
• Commitment company develops and dissolves by progressing
• Dissolution through path-dependent stages. The relation-
ship life cycle composes exploration, growth,
At the awareness stage each party comes to saturation and decline stages. As the trust and
the attention of the other as a possible exchange satisfaction are growing over time, customers
partner and parties move to the exploration are increasingly willing to commit to a long-term
stage. Exploration is the period of investigation relationship with the company. Commitment to
and testing and in this stage the parties explore the relationship also increases as the company
each other’s capabilities and performance. The consistently provides attractive offers over the life
relationship between the customer and supplier cycle of the relationship. Thus, the commitment
starts with the trial purchasing and if the trial to the relationship typically increases during the
purchases do not meet the customer’s expectations exploration and growth stages, peaks and remains
and performance of the supplier is unsuccessful relatively flat during the saturation stage, and
then the relationship can be terminated with few weakens during the decline stage. Purchases of
costs at the beginning of the customer life cycle. the customer follow the similar pattern with the
Companies, which want to successfully move from commitment. Purchases of the customer gradually
exploration stage to the expansion stage, require increase through exploration and growth phase
to provide attractive offers to the customer and of the relationship life cycle, and hit the highest
develop and communicate the right expectation levels in the saturation phase. However, as the
level that is compatible with their capabilities and commitment to the relationship decreases, the
performance. As the parties are satisfied with the purchases of the customer also decrease at the
relationship and each other’s performance, the decline phase.
relationship moves to the expansion phase. Ex- Company needs to understand requirements
pansion is the phase in which the interdependence of each phase to effectively develop long term
between the customer and suppliers increases. relationships with customers. In the exploration
During the expansion stage, more transactions phase, company requires to discover and under-
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stand the needs, preferences and expectations effectiveness and efficiency in marketing activi-
of the customer in order to provide attractive ties, CRM philosophy is not only interested in the
offers to the customer. Company also needs to number leads or sales. CRM strategy deals with the
inform customers about the company’s products, entire customer cycle from identifying leads and
services, processes and policies; therefore inter- acquisition to retaining and developing custom-
active communication plays a significant role ers. CRM as a customer centric business strategy
at the exploration phase. Since customer makes focuses on improving the company’s capabilities
trial purchases to evaluate the performance of the to convert these leads into loyal customers. Within
company, transactions are low at the exploration the CRM context, company has to effectively man-
phase. Company should continuously measure the age the customer life cycle in order to improve
satisfaction to see whether the delivered products the conversion process. Company needs to keep
and services satisfy the customers’ expectations. control over processes related with gaining leads
If the company meets the expectations of the and retaining customers. Control can be achieved
customer, the relationship moves to the growth by measuring the conversion rates. At the customer
phase. In the growth phase of the relationship cycle, acquisition stage, company can measure how many
company has to provide outstanding customer leads are converted into qualified opportunities and
service and experience in order to maintain the then to new customers (see Figure 4); and at the
relationship with the customer. The main purpose retention stage, company can measure how many
of the company in the growth stage is to gather new customers are converted into loyal custom-
more value from the customer through identify- ers and then company can measure the gathered
ing cross, up and deep selling opportunities and value from loyal customers through cross, deep
reap the lifetime value of the customer. Company and up selling.
requires to exceed the expectations of the customer Structure of CRM strategy is based on customer
by offering appealing and customized offers and acquisition, retaining the acquired customers, and
services. At the growth stage transactions begin to developing more value from loyal customers.
grow and during the saturation phase transactions For successful execution of CRM, companies
reach the peak and become stable. In the satura- require to implement their CRM strategy accord-
tion phase the main challenge of the company ing to customers’ position at the purchase life
is to keep the relationship alive. At the decline cycle. Company needs to implement different
stage, customer begins to consider to terminate the CRM strategies in each phase of the purchase
relationship and evaluate alternatives because of life cycle. Since customers can be at any point of
the poor customer experience. Transactions begin this purchase cycle, company has to implement
to decline. Thus, company should focus on win customized and individual CRM tools in attempt
back the customers who are worth to be retained to influence the decision of its customers. Lead
by learning the reasons that may cause these management and retention marketing are the two
customers to consider stopping the relationship, major CRM strategies that a company may use
so that company can take necessary precautions in different phases of purchase life cycle (Nasir,
to prevent customer churn. 2002). As can be seen in Figure 5, lead manage-
The relationship with the customer requires to ment strategies can be used at the beginning of
be considered and managed in terms of the cus- the purchase cycle in order to turn a prospect into
tomer life cycle, from targeting and acquisition to customer. On the other hand retention marketing
development and retention in order to develop and can be used at the later stage of the purchase cycle
maintain long term relationship with customers. to turn customers into loyal customers. Thus, ac-
Although companies implement CRM to achieve
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Figure 4. Customer conversion at the acquisition stage
cording to the phases of purchase, the company are among the fundamental customer life cycle
adopts different CRM strategies. management activities:
Although the above framework of customer
life cycle management does not provide an all- • Identifying and attracting customers
embracing formula for successful CRM imple- through lead management strategies,
mentation but hopefully will help to explain the • Keeping customers through retention mar-
fundamental meaning, strategies and key aspects keting strategies,
of CRM implementation. It attempts to highlight • Growing the customer’s value to the com-
some key strategies such as lead management, pany through customer development strat-
retention marketing, and win back strategies egies (e.g., encouraging customer refer-
which need to be addressed to successful CRM rals, identifying cross, up, and deep-selling
implementation. For implementing customer opportunities),
centric business strategies and establishing long • Delivering superior customer service to
term relationships with customers, company re- ensure customer satisfaction,
quires to perform fundamental CRM activities. • Understanding the needs and preferences
CRM activities can be classified based on the of customers through database analysis,
customer life cycle management processes as • Making customized and tactical offers,
customer acquisition, customer development and • Analysing customer database to identify
customer retention (see Figure 6). These three cross, up and deep-selling opportunities,
main categories of CRM activities deal with how • Developing customer loyalty programs to
companies identify and acquire new customers, reward customer commitment,
grow their value to the business and retain them
for the long term (Buttle, 2009). The followings
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Figure 5. A holistic framework for customer life cycle management

Source: Adapted from Nasir, S. (2002). Relationship marketing as a new concept: A case study of an automobile company.
Master’s thesis, Işık University, Istanbul.
• Establishing ongoing and interactive rela-

tions with customers to take feedback from
Figure 6. CRM activities the customers,
• Managing relationships in internal markets
to serve customers better and efficiently
which in turn ensures customer satisfaction
and company’s profitability,
• Managing relationship in business / suppli-
er markets to deliver high-quality products
consistently, and
• Making defection analysis to win back cus-
tomers and improve processes, products,
and services.
All business processes need to be supported

with customer insight to effectively manage
interaction at each phase of the customer life
cycle; therefore processes of the company have
to focus on building and maintaining customer
insight throughout the company to optimize the
customer relationships (Thompson, 2001). CRM
strategies of a company can be successful only if
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it understands its customers completely. In order to development of intimacy between the customer
to understand customers completely, gathering a and company. Everyone in the company have to
360 degree view of the customer is essential. 360 work together in a structured and customer centric
degree customer view creates an integrated view way to create customer value. Successful manage-
of the customer across the company. ment of customer life cycle management requires
Fragmented customer data make it difficult to creating a customer-keeping vision, listening the
achieve a 360 degree customer view. Lack of 360 voice of the customers, investing in customer
degree customer view and fragmented customer relationships, and communicating with customers
data cause problems in coordinating consistent consistently to form cooperative relationships. It
interactions with customers across channels and is important to keep in mind that there is only one
prevent the company from performing customer boss in the company that is the customer. As Sam
analytics effectively. Companies are unable to Walton, founder of Wal-Mart, indicates that the
leverage all customer data and miss opportunities customer can fire everybody in the company from
because of fragmented data. 360 degree customer the chairman on down simply by spending his
view as well as the data quality influence the suc- money somewhere else. Therefore, it is essential
cess of CRM strategies. All kinds of information for the company to retain its customers through
related to leads, prospects and customers need establishing intimate relationships. Building the
to be centralized and seamlessly integrated in long term relationships is more important than
order to understand the customers. For success- doing transactions.
ful CRM implementations, companies need to CRM strategies emphasize developing and
focus more on: enhancing relationships with customers in or-
der to keep them. Effective customer life cycle
• Increasing the data quality, management enables the company to maximize
• Achieving complete, correct, current, real customer lifetime value. CRM strategies focus on
time and rich data, and retaining and growing the business with the cur-
• Integrating the customer data to achieve a rent customers. Nurturing the relationships and
360 degree customer view. delivering ongoing value help the company achieve
the high revenue growth and profits. Developing
Integrating, enhancing, managing, analyzing, and enhancing relationships with customers can
and disseminating customer information through- be seen as a process that starts with nurture stage
out the company allow the company to recognize (see Figure 7). At the nurture stage, company
its customers, provide them consistent service, identifies its potential customers, communicates
deliver outstanding customer experience and make with them, and implements lead management
customized interactions across all touch points strategies with the purpose of converting prospects
of the company. Since customers are the greatest into customer. After the initial purchase, prospects
asset of the company, a 360 degree customer view move the stage of customers at the customer life
enables the company to understand and serve better cycle management. Second stage focuses on the
its customers; which in turn increases customer process of building more profitable, long-term
satisfaction, lowers customer churn, and increases relationships by encouraging repeat purchases of
the profitability. Therefore, every employee that customers and the aim of grow stage is to maximize
serves customer at the touch points should help the customer value. Third stage of CRM process
the company towards better understanding of the is to retain customers. At the third stage of the
customer. Better understanding of customers leads customer life cycle management, the company
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aims to keep its profitable customer relationships Suspects are at the base of the loyalty ladder
through customer retention strategies and focuses and they might possibly require the company’s
on identifying and winning-back inactive and product or service. Company requires to identify
quit customers. its suspects and direct all of its marketing efforts
The ultimate purpose of the company is to to qualified suspects. Attracting customer is costly;
focus on customer attraction and retention, and so that it is not meaningful to direct marketing
enhancement of the customer relationship. It efforts to suspects that they do not need or they
takes a great deal of time, effort and resources to cannot afford to buy what the company offers. A
convert prospects into customers, loyal custom- qualified suspect should have a need or desire for
ers, and finally brand advocates. Christopher, the company’s offer and can be able to buy the
Payne, and Ballantyne (1991, 2002) use a model company’s products or services. Analysis of the
that has been known as a value ladder to help current customer profile enables the company to
companies understand where their customers are discover the common characteristics of its current
positioned in terms of their tenure with the com- customers, which can be used to identify qualified
pany. Customer loyalty ladder concept provides suspects. Prospects are at the second stage of the
a sequential set of goals for growing the lifetime loyalty ladder. When a suspect is converted in a
value of customers. Using the customer loyalty prospect, prospect has the idea about the company,
ladder, company can examine its relationships knows what the company sells and shows an in-
with its customers. According to the customers’ terest in the company’s product or service. Some
position at the ladder, company has to develop suspects may not need the company’s products or
strategies to move customers from one step to the services immediately, but they may indicate their
next, until they ultimately reach the top step of interest to the company’s offer. These suspects
the ladder. Although the customer loyalty ladder become prospects and the company can contact
steps conceptualized differently in the literature, with them in the future. Prospects become the
the basic customer loyalty ladder composes of five company’s customers when they buy from the
steps that are: Suspect, Prospect, Customer, Cli- company. Prospects may make the initial pur-
ent and Advocate (Christopher et al., 1991). The chase when they believe that their need will be
ladder of customer loyalty illustrates the different satisfied by the product or service that the com-
loyalty relationships that customers have with the pany offers. To successfully convert prospects to
company. The main focus of the company is to customers, company needs to know more about
move customers to the highest step on the ladder. their customers and this can be achieved through
Figure 7. CRM life cycle stages

Source: Adapted from Vtrenz (2004a) Effective relationship marketing part one: Nurture. Retrieved June12, 2013 from http://
www.ianbrooks.com/useful-ideas/articles_whitepapers/Effective_Relationship_Marketing_I.pdf
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building relationships with prospects. It is im- company and advocates. Thus the ultimate goal
portant to update prospects about the company’s of CRM is to create a group of advocators, who
offers, products and services. At the fourth stage are always willing to be with the company and
of loyalty ladder, company focuses on converting not only make positive word of mouth, but also
customers into clients. Clients are the customers act as spokespersons.
who make purchase regularly from the company. Similar to the loyalty ladder, pyramid of cus-
To convert customers to clients company requires tomer loyalty is used to examine the relationship
to build stronger relationships with its customers between the company and customers. The cus-
so that company can identify customer develop- tomer loyalty pyramid suggests that the number of
ment opportunities (e.g., cross-sell and up sell advocate is less than the number of initial prospects
opportunities) and provide outstanding customer and the company should focus on converting target
service and experience. Clients are resistant to prospects into not only advocates but also partners
switching competitors and have a strong positive through creating and maintaining relationship with
attitude towards the company and its products and the customers. As it is illustrated in the below
services. Advocates are at the top of the loyalty image of the Pyramid of Customer Loyalty (see
ladder. Advocates value the high level of customer Figure 8), it takes a great deal of time, effort and
service that the company provides. Advocates resources to go from target prospect to customer,
not only buy regularly from the company, but to client, to brand advocate and finally trusted
also they make positive word of mouth about the partner (Leary, 2013). As a customer climbs the
company to their friends and they are willingly pyramid of customer loyalty, he may naturally
refer new prospects to the company. There is a become a supporter who will passively provide
strong personal and emotional bond between the positive word of mouth for the company if it is
Figure 8. Customer loyalty pyramid

Source: Leary, B. (2013). Where modern marketing meets the pyramid of customer loyalty. Retrieved December 14, 2013, from
http://socialmediatoday.com/brentleary/1807666/where-modern-marketing-meets-pyramid-customer-loyalty
203

asked or an evangelist who proactively advocates set its objectives related to customer acquisition,
the company’s product or service that leads the development and retention, and define metrics
company to gain referrals (Vtrenz, 2004b). for monitoring the execution and evolution of
It is important to note that not every customer the strategy (Gartner Inc., 2004). Companies can
progresses uniformly along the path from target turn customers into assets by creating customer
prospect to client, advocate or partner. Most of satisfaction. Therefore, to achieve the benefits of
prospects can never move to customer or client CRM the goal is creating happier and devoted
phase of the customer life cycle. Some of the customers. Every interaction with the customer
customers stay longer at the client phase and has to be considered as an opportunity to create
others may have a shorter life at the client stage customer satisfaction.
(Buttle, 2009). Therefore, companies need to Acquiring many new customers is not suffi-
analyze where customers are on the customer cient for the survival of the business. Since new
life cycle pathway and develop appropriate CRM customers are not devoted, companies need to
strategies in order to move customers to the top create devoted customers who have great experi-
of the customer loyalty pyramid and keep them ence with the company. Delivering great customer
there for a long time. Companies spend a lot of service and experience lead customers to fall in
time and effort at the bottom of the pyramid to love with the company. Devoted customers spend
identify target prospects and prospects and this most of their money to the company’s products
stage is known as customer finding. Customer and services, stick to the company, become
catching stage of the pyramid focuses on convert- ambassadors of it and talk favorably about it to
ing prospects into customer as well as into client. many people in order to encourage them to come
The ultimate aim of the company is to move clients and buy from the company. Turning customers
to the supporter, advocate and partner stages of into assets and creating devoted customers have
the pyramid and keep customers at the top of the to be considered as a process (Chrispin, 2012).
customer loyalty pyramid. Delighting the customer is the first step in creating
devoted customers. Therefore, companies should
Turning Customers into Assets provide attractive products and services in order to
delight their customers. Delighting the customer
CRM strategy of the company should focus on might be enough to attract customers; however it
customer development in order to grow the value is not sufficient to make customers to purchase
that it gets from customers. CRM strategy guides repeatedly. To turn customers into devoted ones,
the company in turning customers into assets and company needs to consistently deliver outstanding
it is possible by understanding of current custom- experience. Establishing intimate relationships
ers. Company can reap the benefits of CRM when with the customers is also important in creating
it gets and analyzes customer insight, and apply devoted customers. If the company establishes
the gathered customer information to improve the intimate relationships with its customers, custom-
quality of interaction with customers and deliver ers will keep on buying from the company. It is
relevant value-added services and outstanding essential to keep on creating devoted customers
customer experience. CRM technologies allow and this has to be considered as a process that
the company to understand customer needs and the company requires to create devoted custom-
preference. To optimize the benefits of CRM, ers throughout its business lifetime (Chrispin,
company needs to define its target customers well 2012). When customers are engaged with the
by segmenting its customer base and identifying company, the company becomes default buying
its target customers. The company also requires to choice of devoted customers. Devoted customers
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also become advocates for the company. With Encouraging customers to spend more through
social media, devoted customers can endorse the cross, up and deep-sell promotions can serve as
company to tens of thousands of people instantly an essential tool for customer retention process
and generate customer referrals at no cost. and help the company harvest the lifetime value
Welcome campaigns, cross/up/deep sell proof its customers. Company needs to offer related
motions, and relational campaigns are among the products to increase the probability of the sales.
marketing tactics, which can be used to get more Customizing cross, up and deep-sell promotions
value from the customers. Moreover, companies, that are based on customer insight is crucial
which want to create devoted customers and turn for converting the promotional offer into sales.
customers into assets, require to consistently Another crucial factor to boost the success of
measure customers’ satisfaction with their services the promotional offer is to limit the time frame.
and products in order to improve their products, Company should limit the time that a promotion
services, and processes. After the initial purchase, is available to push the customers to buy more
it is important to keep new customers and establish and quickly. Furthermore, it is also important to
long term relationships with them to gather the limit the options. Providing many product options
benefits of loyal customers. In order to prevent with the promotion may cause confusion for the
new customer defection, company requires to customer during the purchase process and impede
consistently interact with the new customer. The the purchase of the promotion (Hoell, 2014). To
welcome campaign is a significant marketing tactic improve the company’s opportunities for cross, up
that can be used to turn the new customer into as- and deep-sell promotions, company requires to stay
set. It may be more effective to offer the welcome focused. It is important not to overload custom-
campaign during the initial purchase. Therefore, ers with unrelated promotional offers. Relational
the welcome campaign can be considered as the campaign can be used as a communication tool
starting phase of a customer retention process that that enables the company to demonstrate that the
starts at the earlier stages of customer life cycle company appreciates the relationships with its
with the first sale and continues throughout the en- customers. Company can reward its customers for
tire customer life cycle. Welcome campaigns make doing business with itself. However, it is important
sense when the new customers are contacted with to provide reward based relational campaign by
a relevant message. The customers are more likely considering the value of the customer to the com-
to make a repurchase, when the company designs pany. Company may offer bigger rewards to high
relevant and customized welcome campaigns. value customers compared to low value customers
Customized welcome campaign is a sign of that (Vtrenz, 2004b). Newsletters can be also used for
the company is able to understand its customer’s engaging customers, building loyalty and driving
needs at an individual level. Delivered after or sales. Content of the newsletter should be relevant
during the initial purchase, welcome campaigns to the customer who is going to read it. Company
can serve as a means of thanking customers for should send the newsletter when it has something
their purchase and companies can use welcome to say otherwise it will be waste of time for the
campaign to make new customers feel like honored customers and waste of money for the company.
customers. Welcome campaigns can be in the To achieve the ultimate aim of turning the
form of encouraging adoption, providing contact customers into assets, companies may follow
information for customer service, delivering train- the seven core CRM strategies that are indicated
ing, asking for warranty registration, providing below (Buttle, 2009):
reorder instructions, or even serving up cross-sell
or up-sell information (Vtrenz, 2004b).
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• Company protect its relationships with acquisition strategies in order to start a re-
significant customers through building lationship with the customer. Developing
exit barriers as well as customer retention effective customer acquisition strategies is
strategies. necessary to move the customer top of the
• In the case of when the customer is current- customer loyalty ladder.
ly unprofitable or less profitable, company
may prefer to re-engineer its relationships Creating Devoted Customers
with customers. While serving unprofit-
able or less profitable customers, company As the modern marketing ecosystem is changing
may implement cost-reduction programs. very rapidly and becoming more competitive,
Unprofitable customers or customers companies focus more on moving customers upper
who are costly to serve can be directed stages of the customer loyalty pyramid in order
to lower cost channels. Re-engineering a to gain competitive advantage by harvesting the
relationship requires a clear understand- benefits of having devoted customer base. Com-
ing of the activities that create costs in the panies require to harness the power of customer
relationship. advocacy to sustain the growth. Walter (2013)
• Company can enhance the relationship mentions the customer-brand relationship model
with customers by moving customers from and 5 Ls of customer’s emotional journey in
bottom to upper stages of customer loyalty creating advocacy (see Figure 9). The purpose of
ladder. The aim is to increase the compa- the company is to take its prospective customers
ny’s share of customer spend and identify from “Lack of awareness” to the top of the pyra-
up-selling and cross-selling opportunities. mid “Loyalty”. To establish brand advocacy, the
• Company may harvest the relationship company requires to focus on moving its current
when the company’s share of wallet be- customers from “Like” to “Love” to “Loyalty”.
comes stable and the customer has reached The fastest and the most effective way to get the
maximum value. In this case company top of the pyramid is through building a strong
does not want to invest in customer devel- network of advocates. Instead of telling the brand’s
opment and it optimizes cash flow from the its own message and trying to attract new custom-
customer. ers, company can let its current customers tell
• Company may prefer to end the relation- their stories and share their brand love. Creating
ship when the customer shows no sign of an advocacy program allows the company to start
making a significant contribution. building meaningful relationships with its devoted
• Customers may switch to the competitor customers, and empower organic word of mouth
company and if these customers are not both online and offline (Walter, 2013).
strategically important, company can let Brand advocacy is beyond like, love, or loyalty.
them go. However, when the customer is Advocates are highly satisfied customers who
strategically significant, company needs to proactively recommend brands, companies, or
develop win back strategies to regain the products without being paid. Brand advocates are
lost customer. Company requires to under- considered as trusted sources, they are highly in-
stand the reasons of customer churn in or- fluential and they have massive reach. Companies
der to develop effective win back strategies. require to have marketing competencies to create
• When the company identifies a prospect devoted customer base in order to gain competi-
who has potential strategic significance for tive advantage. As indicated in BtoB Research
the future, the company needs to develop Insights Report (2013) especially small-to-midsize
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Figure 9. Customer brand relationship model

Source: Walter, E. (2013). 8 essentials of creating a sustainable advocacy program. Forbes. Retrieved December 18, 2013, from
http://www.forbes.com/sites/ekaterinawalter/2013/09/17/8-essentials-of-creating-a-sustainable-advocacy-program/
businesses need to have five essential marketing Company should deliver right content with the
competencies in order to be successful in their right channel at the right time to the targeted
marketing strategies: customers in order to improve the conversion
rate. To convert more prospects into customers
• Targeting and create devoted customers, company needs to
• Engagement do analytics. Understanding customers allows the
• Conversion company to develop effective strategies to convert
• Analytics prospects into devoted customers. Company can
• Marketing Technology leverage the big data to understand the customer
better. Moreover, marketing technologies (e.g.,
Targeting is essential for developing success- marketing automation, integrate CRM, social
ful CRM strategies that help the company move monitoring and business intelligence) also help
customers towards top of the pyramid. Company the company gather customer related data as well
requires to know profile of the customers who as allow the company to better serve its customers.
have potential to buy the company’s products and Findings of the BtoB Research Insights Report
services. Effective engagement with customers (2013) indicate that budget constraints, problems
affects the conversion ability of the company. in data collection and analysis, lack of sales data
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support and poor integration of data with sales adoption of smartphone worldwide, smartphones
are considered among the major obstacles in are becoming indispensable to our daily lives and
transition to be modern marketer. Besides, these also transforming everyday shopping behavior.
obstacles prevent the company from creating To be competitive and build customer advocacy,
devoted customers. Thus, companies want to companies need to benefit from social media for
gain modern marketing competencies in order to customer interaction and customer retention. As
increase their sales, shift their limited budgets to indicated by Sklar (2013), companies no longer
more profitable activities, differentiate their brand push the company and brand messaging; however
from the competition, gain a competitive advantage customers are now spreading the company and its
by lowering costs and, address and solve many brand messaging. In this new interactive economy,
of the sales-marketing integration challenges. companies need to focus on building deep intimacy
Companies can create devoted customers through with customers rather than acquiring new database
gaining five essential marketing competencies. contacts. Building intimate relationships with
Creating attractive experiences all across the customers can be possible by actively listening,
customer life cycle is essential for having devoted engaging and responding to customers. Fail to
customers. In creating attractive experiences, it is listen, engage and respond customers across social
important to understand contemporary customers networks and traditional selling channels causes
whose needs and preferences are changing rap- loss of opportunities. Missing or mishandling op-
idly. Companies require to stay connected with portunities lead to revenue loss for the company.
the customers and satisfy their expectations in To avoid missing or mishandling opportunities,
order to make them a devoted customer for a long companies should become customer-focused,
time. To keep the relationship building process business processes and systems needed to be flex-
moving efficiently, companies need to take right ible and organized around the customer, customer
actions at the right time with the right prospect data should be available from all touch points, and
and customers. Companies can do this by having used for building relationships with customers
customer insight and improving their technol- and serving them. Since customers are becoming
ogy adoption and usage strategies, as well as the mobile and social, and they are always connected
development of engaging content, and efficient more than ever before, social media can be seen
conversion techniques in conjunction with sales as a primary channel for customer engagement.
(Leary, 2013). Social media channels have to be used as a way
Social media is one of the important medium to interact and build intimate relationships with
to understand customers as well as to engage with customers. To maximize customer engagement,
them. According to Nielsen’s (2011) monthly company needs to establish personal engagement
survey of 25,000 mobile consumers, 44 percent and nurture its prospects as individuals rather
of U.S. mobile subscribers now own a smartphone than anonymous transactions. As indicated by
device and these advanced devices are changing Michiels (2009) every customer experience is
the way consumers interact with their phones. an opportunity to influence customer acquisi-
The number of smartphone subscribers using the tion, customer retention, loyalty, and advocacy.
mobile internet has grown 45 percent since 2010. Since the interactions as a whole that take place
This means that mobile consumers are social, between the customer and company influence the
always connected, and rely on their phones more long-term success of the company, companies
than ever before. As consumers spend more of should invest in customer experience manage-
their lives online, the digital and physical worlds ment. Companies have been increasingly investing
are increasingly coming together. With increasing in customer experience management in order to
208

improve customer retention, customer satisfaction • Drive referral leads, clicks, and sales by
and, increase cross and up-selling opportunities sharing offers and content of the brand
(Michiels, 2009). Customers share their negative with social networks,
experiences on social media channels. Fail to • Build buzz for new products and services,
respond customers’ issues can cause revenue loss and help the company launch new products,
for the company; thus companies have to follow • Give the company profitable ideas and pro-
customer problems on social channels and take duce feedback, and
action to solve the problem of the customers. Since • Attend and also encourage others to attend
customers have more alternatives than ever before, brand’s events and activities.
they can easily switch to another brand in the case
of poor customer service and experience. On the Word of mouth, which is consumer to consumer
other hand, engaged customers, who are highly communication with no economic incentive, is
satisfied with the company’s services, willing to the primary determinant of 20 to 50 percent of
spend more and becoming brand advocates on all purchasing decisions. Increase in social media
social channels. When customers are engaged, usage has amplified and accelerated word of mouth
the brand becomes their default buying choice reach. It is no longer one to one communication.
and they become advocates for the company. With the social media revolution, it becomes one
With social media, they can endorse the company to many communication. Consumers post product
to many people instantly. Listening the voice of reviews and their experiences with brands through
customers and establishing personal engagement social networks. By this way, consumers can either
with the customers across social channels, and praise or punish brands. As the significance of
building brand advocates are essential in order online communities increases, companies have
to survive in this competitive and interactive been increasingly recognizing the growing im-
economy (Sklar, 2013). portance of creating brand advocacy. McKinsey
Creating a sustainable advocacy program help research shows that consumer to consumer word
the company in several ways. Advocates can drive of mouth generates more than twice the sales of
awareness for the brand and its products, try to paid advertising in categories as diverse as skincare
change negative perceptions about the brand, and mobile phones (Bughin, Doogan, & Vetvik,
educate and inform customers and prospects, 2010). Word of mouth is most trusted form of
provide customer support, provide feedback and advertising, it is organic and durable. People com-
insight, and influence others to buy. Advocates pletely or somewhat trust word of mouth (90%)
can (Fuggetta, 2012): compared to paid advertising (25%). In addition,
word of mouth (90%) has more impact on sales
• Post favorable reviews about the compa- than paid advertising (30%) (Zuberance, 2011).
ny’s products and services, It generates meaningful returns. According to the
• Boost online ratings, word of mouth and brand advocates statistics of
• Give the company referral leads and help Zuberance, brand advocates are at least 5 times
the company sell its products and services, more valuable than average customers because
• Serve as a virtual salesforce, they spend 2 times more than average customers
• Answer prospects’ questions, overcoming and recommend or share 2 to 4 times more than
their objections and reducing shopping an average customer. Identical offer from brand
cart abandonment rates, generates striking differences in conversion rates
• Defend the brand’s reputation from between loyal customers and advocate customers.
detractors, Advocates (57%) are more likely to buy the offer
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compared to loyal customers (8%). Since the con- them exclusive access and special privileges, give
tent of advocate media is created by the advocates, brand loyalist a platform to listen their voice, and
advocate media is considered as 3 times more respond their comments and feedback.
trusted and influential than paid media. It is also Walter (2013) mentions about essentials of
highly targeted and relevant (Zuberance, 2011). creating a sustainable advocacy program. Creating
Advocate customers trigger conversations a sustainable network of advocates is among the
around the brand that lead to customer recom- essentials of advocacy program. Although, creat-
mendations. Recommendations generate new ing a sustainable network of advocates takes more
customers, increase sales and profits, and lower effort to build; it can provide long-term commit-
customer acquisition costs of the company. Ash ment. Since, advocacy programs empower loyal
and Murphy (2009) indicate that companies have customers as well as the company’s employees
to activate their advocates by understanding the to talk on the brand’s behalf as ambassadors,
role that the brand plays in customers’ life, iden- company requires to define who will be invited
tifying the actions that the brand needs to take to into its advocate network. If the company does not
increase advocates, and creating momentum to invite the right people into its advocate network,
encourage people to talk about the brand. Analysis it cannot achieve the desired results. Company
of the company’s buyer base allows the company can start invitation for its current communities
to determine what brand actions are driving ad- and their most engaged participants who might
vocates and critics (see Figure 10). be right for the brand. Company must also focus
Social media can be used as facilitator for on developing organic love rather than paid love.
building momentum and the forum for stirring Created brands advocates have to be willing to
advocates. Social media should not be considered engage with the brand and spread the positive
as an advertising platform, it has to be seen as word of mouth consistently and with no monetary
value delivery platform. Social media allows the reward. While engaging with its loyal communi-
company to market with customers instead of at ties, company needs to build a platform that al-
them. It is not easy to control social media for lows the members of the network to engage with
the company and companies cannot ignore the the company, as well as with each other. At this
significance of social media. As the voices of platform, company can allow network members
customers have been amplifying with the social to create and share their own content. Creating
media, companies can benefit from their brand an open feedback loop is essential element of
advocates. Although it is not easy to control the advocacy program in (see Box 2).
content of advocate media, company can allow Company needs to provide channels to take
its happy customers to speak on behalf of it in feedback from customers and use these feeds in
order to harvest the benefits of brand advocacy. delivering better product and service development.
To cope with the difficulties of social media as In order to build successful advocacy program,
well as to use social media as a forum for stirring company can offer exclusivities to its advocates
advocates, company needs to be authentic, per- and reward them for their advocacy. Exclusivity
sonal, transparent, inclusive, honest, interesting, will make the advocacy program more appeal-
and conversational at social networks. Besides, it ing. Exclusivity can be in the form of being the
must deliver value through social networks (Ash first one to get information about the brand’s
& Murphy, 2009). new products or getting limited access to brand’s
Companies that want to convert their brand events or activities. Brands can also amplify the
loyalist into advocate need to identify and stimulate messages and endorsements that are created by
their advocates, find their brand loyalist and give their advocators to other people. While establish-
210

Figure 10. The company’s buyer base

Source: Ash & Murphy (2009). Brand advocacy and social media. GMA Conference. Retrieved September 17, 2013, from http://
www.slideshare.net/brandonmurphy/brand-advocacy-and-social-media-2009-gma-conference
Box 2. Advocacy program of Starbucks
Starbucks, which is the world’s premier roaster and retailer of specialty coffee, can be considered as successful in creating brand
advocacy program. Starbucks established its first online community that is called MyStarbucksIdea.com in 2008 in order to give a
platform for its customers to share their ideas, suggestion and even their frustration. MyStarbucksIdea.com is an advocate-driven
idea tank where Starbucks drinkers submit their ideas for new products and coffee concoctions. It has been functioning as a hub for
all Starbucks customers. Moreover, Starbucks has also presence on social networks and it has more than 37.07 million of fans on
Facebook and 6.37 million Twitter followers, as of 2014. Starbucks has many advocates and Melody Overton is one of them. She has
been known as “Starbucks Melody” and she is a passionate Starbucks advocate. She also writes a blog about Starbucks, which is called
“StarbucksMelody.com”. At this blog she shares her authentic enthusiasm for Starbucks with other people. She also connects with
Starbucks and other Starbucks’s lovers through MyStarbucksidea.com. As the part of its brand advocacy program, Starbucks finds its
brand loyalists and give them exclusive access and special privileges. For instance, Starbucks invited Melody Overton to attend the
official unveiling of Starbucks’s updated logo. She was one of the only three consumers Starbucks invited to the event that was held at the
company’s headquarters in Seattle.
Source: Fuggetta, R. (2011). Extreme brand advocate story: “Starbucks Melody” goes la la for lattes # Energize. Retrieved September 6,
2013, from http://blog.zuberance.com/blog/extreme-brand-advocate-story-starbucks-melody-goes-la-la-for-lattes-energize/
211

ing advocacy network platform, company requires follow product leadership consistently strive to
to measure and track the effectiveness and the produce innovative, new and best products. In
impact of it. Who shares the content?, Who creates customer intimate strategy, company aims to
original content?, Who are the most influential build customer loyalty for the long term through
members?, What content is being shared most?, being responsive and providing best solution to
What’s being said when the content is shared?, its customers.
and What is the program’s overall impact on Developing and maintaining long term and
purchase intent? are among some basic metrics intimate relationship with the profitable custom-
that have to be measured and tracked (Walter, ers provides valuable benefits to the company.
2013). Company has to build a tribe of followers As the relationship between the customer and
and online communities in order build intimate company grows, a customer who is satisfied
relationships with them and use them to drive with the company’s products and services, tends
referrals. Creating brand advocacy is significant to commit the relationship and buy more over
to gain and retain customers. time. It is also known that the cost of keeping the
existing customers is less expensive than the cost
of acquiring new customers. As the customer and
CONCLUSION company know each other, the cost of serving exist-
ing customers decreases gradually over the time.
CRM as a business strategy has to be supported Moreover, satisfied and loyal customers can help
by business processes and enabling technologies the company decrease its cost of acquiring new
in order to achieve the organization’s customer- customers by spurring positive word of mouth. If
centric goals. Successful implementation of CRM the existing customers are satisfied with the com-
requires development of customer centric vision pany, they tend to tell their satisfying experiences
and strategy. CRM is all about vision, strategy, to their friends, which in return generate customer
and implementation. referrals at no cost. Therefore, developing and
Companies are moving from a one-size-fits-all maintaining intimate relationship with profitable
customer mass marketing strategies to customer customers leads to increase the commitment to
intimacy strategies that promote customer loyalty the relationship, foster sales, lower costs, and
by focusing on the individual customer’s needs and encourage positive word of mouth and referrals.
preferences. CRM as a business strategy allows CRM technologies enable the company to
the company to maximize profitability, revenue develop, enhance and maintain long term relation-
and customer satisfaction by organizing around ships with its customers. First of all, with the help
customer segments, encouraging the practices that of the CRM technologies, company can easily
satisfy its customers, and implementing customer identify the profitable customers with whom it is
centric processes. A company that wants to reap going to establish relationship. CRM technologies
the benefits of customer retention needs to focus allow the company to segment and prioritize the
first on developing a vision and customer strategy customer base in order to effectively allocate its
related to long-term business goals. resources. Getting customer insight and better
Companies may deliver superior customer understanding of customers are also among the
value by focusing on one of three value disciplines: benefits of CRM technologies. Company can
operational excellence, product leadership, or deliver right offer to the right customer segment
customer intimacy. Operational excellence value with the right message content at the right time
creation strategy aims to provide reliable products through the use of CRM technologies. Customer
and services at competitive price. Companies that insight and understanding customers foster cus-
212

tomer loyalty, improve success in cross, up and process enables the company to acquire right
deep-selling promotions, and promote effective customers, nurture them, grow customer value and
interaction between the company and customer. retain customers. Customer life cycle management
CRM technologies play a critical role in achiev- composes of several stages: acquire, grow and re-
ing the strategic purpose of a company that is tain. Nurturing at the stage of customer acquisition
developing and maintaining intimate relationships is significant. In the acquisition stage, the goal of
with profitable customers. For instance, analyti- the company is to convert prospects into customer
cal CRM analyzes the customer data to identify by making sale while keeping acquisition costs
which customers are profitable or strategically low. Therefore, in the acquisition stage nurturing
important to target, acquire and retain. Besides, right customers and providing the right offers to
analytical CRM provides the necessary customer the right prospects at the right time are essential.
data for both operational and collaborative CRM. After acquiring a customer, the next stage of the
Customer data and insight enable the company to life cycle is customer development, which aims
interact with the customers effectively, deliver to grow the customer value. To achieve growth in
outstanding customer service and experience, customer value, company has to ensure providing
identify and track sales opportunities, and develop the expected value to its customers, meeting the
effective marketing campaigns. customers’ expectations and keeping its promises
Maintaining and enhancing intimate relation- that are given at the acquisition stage. Providing
ships with customers help the company achieve ongoing support and proactive engagement is
its ultimate objective of customer retention. To be important during customer development stage. At
successful in achieving this objective, companies the same time, company should also actively seek
utilize CRM strategies in order to turn prospects revenue growth opportunities through up, cross
to customers and make them loyal to the company and deep sell. In the retention stage of the life cycle,
by increasing their satisfaction. company needs to continuously monitor customer
Since devoted customers stick with the com- satisfaction to identify any downward trends that
pany, spend more, make word of mouth and may cause churn and then proactively prevent
generate customer referrals, the ultimate aim of it. Effective management of customer life cycle
CRM strategies is to create devoted customers. can be possible by knowing and understanding
Delighted customers by consistently delivering a customers. It is essential to listen to the voice of
great experience are essential for creating devoted the customer and use customer and staff feedback
customers. Thus, companies have been increas- to design, develop and personalize the customer
ingly implementing CRM strategies in order to experience. Company can deliver personalized
identify and reach its target prospects and custom- customer interactions by leveraging the predictive
ers effectively; identify and meet the needs and analytics. It is critical to develop a process one to
demands of their customers; provide consistent one engagement.
and superior service to them in order to satisfy and
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KEY TERMS AND DEFINITIONS are highly satisfied customers who proactively
recommend brands, companies, or products with-
Advocacy Program: Creating an advocacy out being paid. They are considered as trusted
program allows the company to start building sources. With social media, devoted customers
meaningful relationships with its devoted custom- can endorse the company to tens of thousands of
ers, and empower organic word of mouth both people instantly and generate customer referrals
online and offline. Advocacy programs empower at no cost.
loyal customers as well as the company’s employ- Operational Excellence Value Strategy:
ees to talk on the brand’s behalf as ambassadors. Operational excellence as a competitive strategy
Members of the advocacy program can drive attempts to deliver a combination of price, qual-
awareness for the brand, try to change negative ity and ease of purchase. Company that pursues
perceptions about the brand, educate and inform operational excellence concentrates on making its
customers and prospects, provide customer sup- operations lean and efficient in order to deliver
port, provide feedback and insight, and influence standard and reliable products at the best price.
others to buy. Achieving organizational efficiencies and benefits
Customer Intimacy Value Strategy: Custom- are among the priorities of the operational excel-
er intimacy as a competitive strategy concentrates lence strategy rather than the customer needs.
on understanding of customer needs, developing Product Leadership Value Strategy: Prod-
customized products and services, delivering uct leadership strategy aims product leadership,
outstanding customer service through customer emphasizes product development and innovation,
relationship management, creating differentiated and optimizes research and development to gain
customer experience and making customers feel competitive advantage. Company that follows
unique to achieve a customer loyalty advantage. product leadership as a competitive strategy wins
Customer intimacy strategy is based on customer by delivering new, innovative, and best products.
insight and aims to build relationships with the Business processes support the nurturing ideas,
desired customer base through considering the translating them into products and marketing these
lifetime value of a customer. products. However, continuous innovation and
Customer Loyalty Ladder: The ladder of ambition for offering newest and best products
customer loyalty illustrates the different loyalty generally suppress learning from customers and
relationships that customers have with the com- disregards customer needs.
pany. Customer loyalty ladder composes of five Qualified Prospect: A qualified prospect have
steps that are: Suspect, Prospect, Customer, Client a need or desire for the company’s offer and can
and Advocate. The main focus of the company is to be able to buy the company’s products or services.
move customers to the highest step on the ladder. Analysis of the current customer profile enables
Devoted Customer: Devoted customers also the company to discover the common character-
become advocates for the company. Devoted istics of its current customers, which can be used
customers spend most of their money to the com- to identify qualified prospects.
pany’s products and services, stick to the company, Relationship Life Cycle: The relationship
become ambassadors of it and talk favorably about between the customer and company evolves over
it to many people in order to encourage them to the time. The relationship life cycle composes of
come and buy from the company. Delivering great exploration, growth, saturation and decline stages.
customer service and experience lead customers to Each stage has its own characteristics that mean
fall in love with the company. Devoted customers
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different things for business. A company has to can listen their customers through email mes-
manage its relationships with the customer based sages, complaints, online chats, forums, social
on the customer’s position at the customer life cycle media sites, surveys, and call centers. Gathering
and understand the requirements of each phase at customer insights through listening customers help
the customer life cycle in order to develop more the company improve customer experience and
effective interactions and increase the intimacy better serve the customer needs. It is important
of the relationship with the customer. for companies to respond to and act on customer
Voice of the Customer Program: Voice of feedback in order to effectively develop CRM
the customer program involves capturing and strategies, manage their relationships with cus-
listening what customers are saying. Companies tomers and serve customers.
218
219
Chapter 8
Customer Acquisition
Management Strategies
ABSTRACT
Achieving customer retention and loyalty is vital for the success of the company; however, acquiring new
customers has to be considered equally significant to the customer retention process. Since the company’s
ability to grow its customer base determines the long-term success of the company, companies need to
consider customer acquisition as an ongoing process. Customer acquisition management process involves
identifying, attracting, and retaining potentially profitable customers. This chapter starts with examining
the phases of the lead management process. Understanding customers is seen as important for effective
lead management. After explaining the lead generation and lead nurturing within the context of lead
management, this chapter ends up with underlining the importance of lead management automation for
customer acquisition.
INTRODUCTION be considered as an ongoing process and equally

significant as customer retention process. A suc-
The ultimate purpose of CRM strategy is to cessful business strategy needs to focus on both
maintain customer retention and loyalty in order growing the customer base by acquiring new
to survive in an ever-changing landscape. Com- customers and providing excellent customers
panies’ executives prioritize customer acquisition, experience to them in order to generate more
expanding wallet share of existing customers and revenue from keeping customers loyal. Since
customer loyalty as their top customer business the company’s ability to grow its customer base
objectives through 2015 (LaValle, 2013). How- determines the long term success of the company,
ever, in the absence of a well-developed, focused companies must actively seek new customers
and successful customer acquisition management, (Merrill Lynch, 2013).
companies cannot achieve their ultimate purpose Customer acquisition management is the set
of customer retention and development (Ang & of methodologies, systems, and practices to man-
Buttle, 2006). Loyal customers are the lifeblood age prospects and inquiries, which are generated
of companies and acquiring new customers has to by a variety of marketing techniques such as
DOI: 10.4018/978-1-4666-8231-3.ch008

Customer Acquisition Management Strategies
marketing campaigns or event triggers, in order Customer insight that is provided by CRM
to help companies generate new potential busi- technologies also enables the company to deliver
nesses. Customer acquisition is the process of outstanding services. Delivering outstanding cus-
identifying, attracting and retaining potentially tomer service and experience allows the company
profitable customers. While managing customer to retain customers as well as acquire new cus-
acquisition, companies require to consider which tomers. Customers, who are satisfied with the
potential customers to target, how to communicate company’s exceptional services, are often willing
with them and what to offer them (Buttle, 2004). to recommend the company’s services to their
Identifying an ideal customer portfolio, exceed- friends. Delivering excellent customer experience
ing customer expectations, becoming a trusted generates customer retention and referrals. Since
partner, establishing consistent communication satisfied loyal customers are excellent referral
with customers to find out unmet needs, opportu- source, leveraging loyal customer relationships
nities, and deliver customized offers, addressing is a cost-effective customer acquisition strategy
customer satisfaction issues, and implementing for reaching out to new prospects. Therefore,
CRM technologies can be considered as essential companies can transform retention into a pow-
tools for acquiring new customers. According to erful acquisition tool by delivering outstanding
the Bank of America Merrill Lynch white paper, customer experience (Merrill Lynch, 2013).
the analysis of the current customer base provides Worrell (2012) indicates seven critical stages
guidance for developing a customer acquisition in securing new customer acquisition:
strategy. It is important to attract right customers
to the company to ensure long-term profitability • Know
and harvest the benefits of relationships with loyal • Like
customers. With the analysis of existing customer • Trust
base, company can predict expected annual profit- • Try
ability and lifetime value of its customers, rank • Buy
customers based on their profitability, identify • Repeat
customers who are critical for the company’s • Refer
success and estimate the customer acquisition
costs and time. The analysis of current customer Customer acquisition management process
base reveals the company’s ideal customer pro- starts with creating awareness about the company’s
file; so that company can spend its efforts to products and services. In order to turn a prospect
acquire customers who are within the scope of into customer, prospect must know about the
this ideal customer profile. While identifying the company. Creating awareness can be achieved
ideal customer profile, company can consider its by variety of ways such as advertising, public
customers’ revenue generation capacity, growth relations, trade shows, direct mail, newsletters,
potential, and potential to bring customer referrals social media, cold-calling, word of mouth, and
(Merrill Lynch, 2013). The process of converting other marketing activities. Since customers seek
potential buyers into customers can be handled relationships that are pleasant and want to do
by using CRM technologies. Implementation of business with companies that they like, companies
CRM technologies allows the company to access should focus on establishing pleasant and enter-
360-degree view of the customer that will help the taining interactions with prospects. For instance,
company identify and target prospective customers companies can develop entertaining interactions
and generate customer insight that can be used to with prospects through social networks or deliver
create effective marketing campaigns. pleasant experience by inviting prospects an event
220

or a party. Trust is another essential factor in new customers. Most importantly, acquiring new
securing new customer acquisition. In convert- customers is not sufficient for the company’s suc-
ing prospects into customers, companies need to cess. Through retention management strategies,
establish trust. Prospects have to be sure that the company has to move customers to the top of the
company will keep its promises and they will get customer loyalty pyramid. Company should also
a fair deal. Thus, companies require to keep their encourage new customers to refer the company
promises, do what they say, respond questions of to their friends and other people. Word of mouth
prospects quickly and professionally, and fairly communication can be promoted through build-
deal with them. Companies can enhance trust by ing online communities and giving incentives for
making presentations at webinars or trade shows, customers to write reviews. In conclusion, it is also
sharing expert opinion through white papers, and essential to convert these newly acquired custom-
answering questions of prospects at face to face ers into devoted customers who refer business
meetings. All of these trust building activities to the company (see Figure 1). To generate high
make the company to be seen as an expert in the quality leads and convert them into customers,
industry and prospects and customer begin to trust company requires to have high quality customer
the company more over a period of time. Try is data and lists, find unique ways to attract prospec-
also significant for attracting new customers. Sales tive customers, focus on generating leads across
promotions and special offers and trial can encour- multiple channels, create awareness through public
age prospects to try the product or service of the relations and buzz, communicate with relevant
company before they become regular customers. If content, and consistently nurture leads.
they are satisfied with the product or service that
they try, this will accelerate the process of convert-
ing prospects into customers. At the next stage of PHASES OF LEAD
customer acquisition management, prospects buy MANAGEMENT PROCESS
the product or service. Company needs to fulfil its
promises, be responsive and professional in the Lead management is one of the relationship mar-
delivery of the product or service, and establish keting practices that is crucial for the company
constant communication with the new customer to convert prospects into customers. Lead man-
in order to maintain customer retention. agement deals with the overall process in which
At the next stages of customer acquisition potential buyers are identified, educated, engaged
management, it is important to convert new cus- with, qualified, and passed to sales. Prospect be-
tomers into repeat purchaser through identifying comes a customer after a complex process of lead
cross, up and deep selling opportunities. To ensure management. In ownership phase of the purchase
long term relationship with the new customer, cycle, customer begins to use the product and
company should deliver more value to the new services that are provided by the company. At
customer. Making customer surveys, listening this stage of the purchase cycle, company tries
the voice of these new customers and taking to keep its customers and make them loyal to the
feedback from them allow the company to iden- brand by applying retention marketing practices.
tify potential problems, improve its products and Customer retention management practices focus
services, deliver excellent customer experience, on moving customers to the top of the customer
and exceed expectations of them. Rewarding new loyalty pyramid and aim to create devoted custom-
customers for their repeat purchase through loyalty ers. Lead management is an important process that
programs is essential for maintaining long term takes place before a prospect becomes a customer
relationships and encouraging repeat purchase of and enters the CRM system (see Figure 2).
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Figure 1. Conversion of new customers into devoted customers
Figure 2. Customer acquisition management funnel
222

Lead management is the antecedent of sales buying cycle in order to move customers towards
management and CRM. Its primary focus is to purchase stage. Potential buyers, who are at the
manage relationships with prospects. Lead man- beginning of the buying cycle, are not likely to
agement software deals with the acquisition of make purchase immediately at the first contact
customers, while CRM addresses the ongoing cus- with the company. Therefore, company needs
tomer experience (Saylor, 2004). Having an orga- to keep in touch with them in order to turn them
nized and effective lead management process and into buyers in the future. Lead nurturing is con-
improving the lead generation efforts contribute to sidered as an effective way to stay in touch with
more sales. To create and implement a successful potential buyers, who are not ready to buy but
and efficient lead management process, company consider to buy in the future. With the help of
needs to start with identifying and understanding lead nurturing communication, company tries to
its leads and continue with generating, scoring, penetrate consideration as well as shopping list of
and nurturing its leads. At the last step, marketing the potential buyers. At the later stages, company
department of the company passes the generated can provide lead nurturing campaigns to trigger
qualified leads to sales department (Sahota, 2011). the customer’s buying.
Company should develop different interactions The lead management process includes a
and provide different offerings depending on the number of phases such as lead generation, lead
customer’s position at the buying cycle. Under- qualification, lead nurturing, lead allocation, lead
standing the customer’s position at the buying harvesting and lead tracking. Company needs to
cycle allows the company to develop effective manage these phases effectively and efficiently in
marketing strategies. Buying cycle composes of order to convert more prospects into customers.
three main stages: awareness, consideration, and In lead generation, company proactively focuses
purchase (Skok, 2012). Customers’ position at on creating, nurturing, and discovering interest
the buying cycle can vary and some of them may among prospective customers and engage with
be early at the awareness stage; while others may prospective customers in order to convert them
be at the consideration stage or end of the buying into customers. During the lead generation, com-
cycle. Awareness stage starts with the arising need pany determines the sales readiness of prospects
of the customer and customer becomes aware of and identifies qualified prospects who have intent
the brand or product in order to fulfil the need. and ability to make a purchase decision within a
At the consideration stage, customer begins to reasonable timeframe. If prospects are ready to
evaluate alternatives to fulfil his need and later buy in the buying process, company communicates
makes purchase among alternatives. Depending with them and provides highly relevant informa-
on where customers are at the buying cycle, cus- tion to them in order to build product and brand
tomers’ expectations of how the company should awareness, preference, and penetrate to shopping
treat are different. If the customer is at the early list of prospective customers. Lead allocation
stage in the cycle, he wants to be get educated. If processes ensure that leads are routed to the right
he is at the later stage in the cycle, he may want salesperson. With the lead harvesting, company
highly responsive help to complete the purchase. designs promotions and incentives to encourage
Thus, company requires to approach customers by prospective customers to make purchase. Lead
considering their position at the buying cycle in tracking traces the conversion process of prospects
order to convert more leads into customers. Us- into customers.
ing a wrong sales approach can cause customer Lead management is a very complex process
loss. As indicated in Figure 3, company needs to and crucial for the company to turn its prospects
develop different strategies at each stage of the into customers. Companies that want to increase
223

Figure 3. Sales approach based on the customer’s position at the buying cycle
the conversion rates and lead management suc- define and segment their prospects. Data mining
cess, require to focus on profiling & targeting, and data base management are the tools that help
lead scoring, content, and nurturing early stage companies to identify their target customer seg-
buyers (Forrester, 2009). It is essential to gather ment and reach their potential customers. With
customer insight. Thus, company needs to focus the help of the mosaic-profiling, companies can
on customer profiling, which allows the company make segmentation and divide potential customer
to understand its best customers, what motivates segment into sub segments. They can profile their
them to buy and how they buy from the company. potential customers according to their geographic,
Company requires to select scoring criteria and demographic, behavioral, and/or psychographic
assign values to each score criteria in order to characteristics. As a result of mosaic profiling a
determine the lead quality. Content of the commu- prospect list emerges. After dividing potential
nication is also significant for the lead management customer segment into sub segments, companies
success; because different prospective customers begin to lead prospects by making them different
need different type of information based on their tactical offers according to the characteristics and
position at the decision making. Relevant content needs of these sub segments. Companies need to
accelerates customer engagement. Consistently follow trends and according to the trends they
nurturing earl stage buyers also helps the company should change or make additions to their offerings.
increase the lead management success. After the identification of the target prospect
Figure 4 illustrates the lead management segment, company focuses on penetrating the
process of a company. First of all, lead manage- shopping list of target segment by creating aware-
ment process of a company should start with ness. Mass communication, mass advertising,
identification of the potential customers. Through and event trigger are among the important com-
insight researches and surveys, companies can munication tools for creating awareness. At this
224

Figure 4. Lead management process

Source: Nasir, S. (2002). Relationship marketing as a new concept: A case study of an automobile company. Master’s thesis,
Işık University, Istanbul.
stage company injects the brand into the minds of buying decision? what are the factors that affect
customers and tries to explain its brand. When the their buying decision?, how do they shop?), and
company as a brand penetrates the shopping list lead source (e.g., How do the company’s best
of the prospects it begins to communicate with leads typically find the company?) of its ideal
the prospects in order to enter their consideration prospective customers (Sahota, 2011).
list. Salespersons play key role in turning pros- To effectively develop lead management
pects into customers. Persuasion of the prospects strategies, company should start with creating
depends the ability of the salespeople. At this customer database based on the customer activ-
point importance of managing relationships in ity. Company can develop CRM strategies as well
internal markets becomes important. Therefore, as lead management strategies by analysing the
companies need to give importance to the selec- customer database. Analysis of customer database
tion and training of employees. allows the company to select its target customers,
Identifying and understanding leads are cru- identify the tools for targeting the customers, and
cial for the effective lead management process. decide how to build relationships with the targeted
First of all, company needs to determine who the customers (Winer, 2001). Company should also
company’s potential buyers are. Thus, marketing maintain a centralized and seamlessly integrated
department of the company should identify its view of the people whom they sell to, plan care-
buyer types and their personas, which help the fully and target series of communications based
company portray ideal prospective customers for on customers’ preferences thoughtfully, and learn
its products and services. Company should identify continuously and enrich customer profiles. They
demographics (e.g., Where do they live?, What have to avoid listening to the wrong customers
are their needs?), behavior (e.g., how do they give who are not in target market of the company
225

and incorrectly identifying customer priorities. in order to customize its communication messages
Understanding the customers and identifying the as well as its offers. Furthermore, companies need
target market is important in lead management. to consistently check their current performance
Companies that want to successfully grow their in meeting customer needs and wants. To delight
leads and turn prospects into loyal customers need customers, employees need to get the right infor-
to understand their customers. Companies should mation at the right time. Assessing the business
know about what motivates their customers?, performance in delivering the intended customer
what matters to them?, and what do they value?. experience can help the company improve its
It is also essential for the company to identify the products and services (Robinson & Brown, 2012).
effective marketing channels to communicate its Companies have to understand their customers
offerings and select the right channels to reach its as long as they try to become their lovemark. The
leads, prospects and loyal customers and make an concept of lovemark is put forward by Roberts
offer that they cannot refuse. Establishing control (2005) and indicates that lovemark is a brand that
over sales cycle conversion processes is essential creates loyalty beyond reason. Lovemarks estab-
in order to successfully convert more prospects lish an emotional bond with customers through the
into customers. Company requires to control and use of mystery, sensuality and intimacy in order
measure the length of its average sales cycle and to gain the heart share as well as the mindshare
the conversion ratios. Companies also need to of their customers. Roberts (2005) defines the
understand what determines the conversion and concept of products, fad, brand and lovemark
which marketing channels are most effective in based on the respect and love axis. Customers feel
converting leads in to customers? Therefore lead neither love nor respect towards mere products.
management process has to start with understand- Although, fads attract the love of customers for
ing customers. a short period of time, customers do not respect
them and without respect this love is just like
Understanding Customers a flash in the pan. Brands attract the respect of
customers but they lack the emotional sense that
Getting your customers’ attention is much easier attracts customers to love them. On the other
if you can leverage information that you know hand, lovemarks create loyalty beyond reason
about them. This provides a more rich and per- by ensuring high level of both love and respect
sonal interaction. Consumers have been changing. (Roberts, 2005). Companies have to focus on be-
Their lifestyles, buying power, and habits have ing a lovemark of their customers and lovemark
been continuously changing. It is important to can be created through understanding customers.
understand customers and how customers give Companies require to utilize customer insights
their buying decision. Companies can achieve to deliver experiences that their target customers
customer-centricity through understanding their desire in order to create competitive differentia-
customers. Tools that provide a 360-degree view tion. Utilization of the customer insight enables
of customer profile information, preferences and the company to successfully implement CRM
behaviors help the company achieve customer- strategies. According to the Merkle (2013) report,
centricity. Harnessing the power of customer customer insight (33%) is among the top-three
insight enables the company to distinguish itself value generators. Getting the customers’ attention
from the competition. Utilization of technologies is much easier if the company can leverage infor-
allows the company to drive predictive modeling mation about the customers because customer in-
and next-best-action decision making; so that com- sight provides more rich and personal interaction.
pany can anticipate the customer’s needs or actions
226

Companies require to build their strategies initiative is necessary for evaluating marketing
by determining current trends and the needs of campaign effectiveness and improving success
customers. With the help of customer insight and of next marketing campaigns) (Winer, 2001).
analysing trends, company can form its relation- Customer database should be updated consistently
ship marketing strategies and also make tactic over time.
offers to its customers. Success of CRM imple- Augmenting leads with the relevant, insightful
mentations depends on the company’s ability of customer and marketing information that is avail-
using customer information to identify, engage, able in-house and from external sources helps the
sell to, serve and retain customers. Companies company complete prospecting processes quickly
require to manage a comprehensive view of their and efficiently as well as improve lead conversion
prospects and customers. Therefore, companies rates and pursue compelling deal opportunity.
have to focus on understanding, identifying and Along with lead qualification and prioritizing,
managing customers based upon their value. This providing leads with sales, channel, and cus-
allows the company to allocate its resources to tomer context (e.g., details on customer profiles,
optimize long-term customer value, customize and product interests and lead origins) enable the
personalize customer interactions, and respond to company to produce ideal leads, which in return
changes in customer, competitor or marketplace helps the company increase lead conversion and
conditions faster than their competitors (Merkle, sales. Thus, quality of information in terms of its
2013). breadth and detail is important for the success of
Detailed customer information is the most im- conversion rate. Company requires to assess the
portant factor in developing acquisition strategy. value of information that is used to augment the
While developing customer acquisition strategy, lead, and remove information that is not useful. To
company requires to have information about improve the lead conversion rate, company needs
customers’ demographics, behavior or usage and to augment (Desisto & Collins, 2007):
lifetime value. Customer demographic and usage
information can be gathered during the interac- • Contact details (e.g., name, title, address,
tion of the customer with the company. Customer phone number, and e-mail address of the
behavior of usage information includes customer’s lead),
purchase history information. CRM analytics and • Customer information (e.g., customer’s
data mining help companies get customer profiles, segment information, customer’s current
which allow company to target right group of and potential value information),
customers and choose channels and techniques • Relationship history (e.g., a complete view
that are effective in reaching target customers of interaction history of the lead),
(Vindicia, 2012). • Product information (e.g., a list of prod-
Creating a customer database is a necessary ucts in which the prospective customer
for all CRM activities. Customer database should indicates interest or already uses from the
contain information about transactions (purchase company),
history), customer contacts (customer or company • Marketing information (e.g., information
initiated interaction information that is gathered about interests of the prospect that is ex-
from all touch points), descriptive information pressed through various marketing interac-
(descriptive information about customers is es- tions such as past marketing campaigns or
sential for profiling and segmenting customers), potential to churn or propensity scores for
and response to marketing stimuli (information various products and services),
about how the customer responds to a marketing
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• Content (e.g., providing context informa- • Offer products and services that are cus-
tion based on lead type, customer, custom- tomized to each segment’s needs and
er segment, sales or channel), and preferences,
• Service records (e.g., information about • Provide customized rewards and incentives
customer’s issues such as customer based on the each segment’s value,
complaints). • Select the right advertising, communica-
tion, sales, service channel to reach the tar-
Customer databases analysis allows the com- get segment(s),
pany to profile customer segments. Profiling • Determine the brand image and the key
improves lead scoring and customer targeting. To product benefits to be communicated based
do customer profiling effectively, company needs on the specific characteristics of each
to research customer issues instead of product segment,
features and focus on what customers do instead • Provide differentiated services considering
of what they say (Forrester, 2009). A variety of each segment’s importance,
multivariate statistical methods can be used to • Allocate resources according to the expect-
segment customers. Market segmentation is the ed return from each segment,
process that companies use to divide large hetero- • Prioritize the customer retention marketing
geneous markets into small homogenous markets initiatives considering the each segment’s
whose needs, buying behavior and preferences importance and value, and
show similarity. Segmentation enables the com- • Target most profitable prospects.
pany to reach target customers more efficiently
and effectively with products and services that Development and analysis of the customer
match their unique needs. To be successful in database are essential to identify which custom-
segmenting markets, market segments must be ers to target. Segments can be chosen as target
measurable, accessible, substantial, differentiable, market depending upon factors. For instance,
and actionable (Kotler & Armstrong, 2013). Seg- customer-based profitability or customer lifetime
mentation identifies the different customer profiles value can be used to determine on which cus-
and facilitates the development of differentiated tomers to focus. Company requires to evaluate
marketing strategies to serve customers better. A and understand each customer’s “lifetime value”
successful segmentation differentiates the seg- (LTV) in determining profitable customers and
ments by identifying unique characteristics and considering the each segment’s importance and
needs of each segment. Identification and analysis value. Customer lifetime value is a measure of a
of unique characteristics of customer segments en- customer’s, or customer segment’s profit genera-
able the company to manage and target customers tion capacity for a company and can be estimated
more effectively, offer customized products and at the level of individual customer or customer
targeted campaigns, and design effective market- segment (Buttle, 2009). Lifetime value includes
ing actions for the revealed segments. Segmenta- customer’s present value and potential value.
tion in marketing allow the company to (Tsiptsis While evaluating lifetime value of a customer,
& Chorianopoulos, 2009): company analyses customer database in terms of
current and future profitability of the customer
• Understand customers better in order to or customer segment to the company. Based on
find out new marketing opportunities, the customer or customer segment profitability,
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company can decide which customers or customer While selecting customer segments in order
segments to target. To calculate lifetime customer to target, company needs to consider (Kotler &
value, company requires to make assumptions Armstrong, 2013):
about future purchasing, product and marketing
costs, as well as how long the customer can be • Segment size and growth,
expected to remain with the company. Lifetime • Segment structural attractiveness (e.g. in-
customer value calculation also includes addi- tense of competition), and
tional profits that a company can gain from the • Company objectives and resources.
customer through increasing cross, up, and deep-
selling opportunities as well as decreasing the Lead Generation
customer acquisition costs (Winer, 2001). Thus,
the company takes into account the customer’s Lead generation is the process of creating sales
expected lifetime and potential value from new opportunities that may come from various sources
purchases in order to estimate the future value of and activities such as advertisements, social me-
the customer. To put it together, companies that dia, marketing campaigns, events, and customer
want to estimate the lifetime value of a customer referrals with the hope of converting them into
or a customer segment for a period of time need a sale for a company. In lead generation, it is
to know (Buttle, 2009): important to figure out contact points where
the company can make initial communication
• The probability that the customer will buy with the potential buyers. The key to generating
products and services from the company, lead is to share content offers through channels
• The gross margins on those purchases, such as internet, email marketing, social media,
• The cost of serving that customer, whitepapers, and so on. An important part of lead
• The cost of acquiring customer, generation is creating forms and landing pages to
• The rate of discount that may be applied to collect lead information. Company can decide on
future net margins, and what information is the most critical to collect
• Word of mouth influence of that custom- and ask the needed information with the help of
ers (satisfied customers influence others the forms (Hanington, 2013). Company can place
to buy; therefore customer referrals de- premium content offers such as whitepapers and
crease the customer acquisition costs of the webinars and company can ask potential buyers
company). to fill a form in order to access these whitepapers
and webinars. By this way company can generate
Profitability analysis of customers allow the leads and gather critical prospective customer
company to choose customers who are profitable information, which can be used during the lead
or expected to be profitable in the future. Customer management process. Company can also share
profitability analysis help the company target cus- content through social media or email marketing
tomers who will provide the most long-term profits by adding a tracking system, which enables the
and avoid customers who are too costly to serve. company to analyse leads’ behavior and interac-
Therefore, understanding customer profitability is tion with the shared content. With the purpose
important in selecting which customers to target. of generating lead, company can use marketing
analytics that allows the company to determine
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how people are coming to the company’s website more information at online platforms. As custom-
or blog, what they are clicking, what type of con- ers trust advice from online sites, user-generated
tent they are looking for, and what their interests, commentary, and expert strangers more than sup-
needs, and wants are?. Capturing answers of these plier sponsored mass media communication, lead
questions help the company understand its leads generation becomes more challenging. Therefore,
and this information can be used during the lead company requires to use emerging sales 2.0 tools,
nurturing in order to convert more potential buyers which may let them track prospect online activ-
into customers (Sahota, 2011). ity and mine social networks for lead generation
Finding and qualifying the sales lead is the most (Forrester, 2009).
important step in lead management. The quality As illustrated in Figure 5, free trials, campaigns
of a lead is usually determined by the readiness and promotions, affiliate networks, display ad-
and probability of the prospective customer to vertising, email marketing, social media, search
take the next action towards a purchase. Once the advertising, and customer referrals are among
company identifies its ideal customer profile, it the most used customer acquisition channels by
becomes easier to determine effective acquisition online merchants (Vindicia, 2012). Campaigns and
channels to reach its ideal prospective customers. promotions in the form of free trials, discounts,
A company can use a wide variety of customer community events, additional content, and bundles
acquisition channels from broadcast and print can be used as customer acquisition tools. The most
advertisements to search engine marketing, social effective campaigns and promotions are the ones
media, and email marketing. To achieve success- that offer prospective customers the most value
ful conversion rates, company needs to consider in return for their time, effort and money. Since
characteristics of its ideal customer profile while free trial allows the prospective customers to try
it selects acquisition channels. Mass marketing the product with having no financial burden, free
communication tools such as television, radio, trials can be used to attract prospective customers.
outdoor or print advertising can be used for gen- To have access to free trial, prospective customer
erating awareness, reaching potential customers gives its contact information such as email or phone
and communicating with targeted customers. number, which can be used by the company for
However, with advancements in information lead nurturing purposes. Companies can attempt
communication technologies and widespread to reach new customers with activities. Hosting
use of social networks, companies can use more community events not only enhance relation-
targeted and one to one marketing communication ships with current customers, but can attract new
approaches rather than conventional approaches customers. Creating additional content makes the
for communicating with selected customers. Since company a valuable partner in the customers’
targeted, personalized, and one to one marketing decision making process. Offering unique goods
communication enables the company to build or additional benefits enable the company to at-
intimate relationships with customers, in today’s tract new customers. Bundles is another form of
conditions, it is more effective to communicate customer acquisition promotion that offers access
with customers through targeted and one to one to multiple products for a lower and combined fee
approaches rather than talking to customers with (Vindicia, 2012).
conventional mass marketing approaches (Winer, Affiliate networks which are partners that drive
2001). traffic to the company’s website can be also used
Customers have been increasing coming to- to as customer acquisition channel. Company may
gether at online platforms to share their product or use display advertisements that are displayed at
service reviews. They can easily access richer and various complementary websites in order to drive
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Figure 5. Lead generation channels
acquisition. Size, placement, overall site traffic on certain keywords and natural search results are
and the creative content of the display advertise- used as customer acquisition channels. Company
ments are the factors that increase acquisition. can increase the effectiveness of natural search
Email marketing can be implemented to attract in acquisition through high quality, constantly
prospective customer. Company sends emails to updated content and working on search engine
in house generated or purchased lists to encour- optimization. On the other hand, the effectiveness
age receivers to sign up. Message content and list of paid search in acquisition can be maintained
quality influence the success of conversion rates. through working to optimize keyword choice and
However, success of email marketing is low in messaging. In the case of a problem in key word
acquiring prospective customers (Vindicia, 2012). optimization, search advertising becomes a costly
Social networks and micro-blogging services channel with low conversion rates. Company
can be also used for attracting prospective cus- can encourage customer referrals by rewarding
tomers. Social media is a critical tool for busi- its customers and it can be used as acquisition
nesses because it allows companies build direct channel that delivers high quality traffic for the
relationship with their customers. The interactive lowest overall cost (Vindicia, 2012).
nature of Facebook and Twitter gives businesses Skok (2012) argues that different lead sources
the opportunity to attract new customers. For produce potential buyers who are at different
instance, social media contests can be used to stage of the buying cycle. For instance, potential
attract prospective customers. These acquisition buyers who are at the later stages of the buying
channels are highly targeted and the conversation cycle are most likely to use Google and review
in these social channels are mostly initiated by the sites to search for brands and products. Leads
prospective customer. Social media acquisition has that come from these sources are highly valued
higher conversion and lower costs. Search advertis- because purchase intention of them is very high
ing in the form of paid search sponsorship based and they are almost ready to buy. They are at the
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consideration or purchase stages of the buying potential interest in the company’s product and
cycle. On the other hand, potential buyers, who service. Lead scoring information is important
come from social referrals, Twitter, Facebook ads, and useful to the efficiency of passing qualified
banner ads, and so on, are at the beginning of the leads to sales department. When a lead gets higher
buying customer buying cycle and they usually score, the chance of converting this lead to sale is
just become aware of the product (Skok, 2012). more likely. If the lead gets lower score, this means
In lead generation, B to B companies mostly that this lead is unqualified or cold lead, and it
rely on white papers, social media, email, search can send for lead nurturing. The salesforce of the
optimization, webinars, and inside sales channels company can prioritize their contact with potential
to make the content more engaging (see Box 1). buyers based on their lead scores. Companies need
Social media such as Twitter posts and blogs, to work on to figure out factors that are important
and email are considered as among the channels for their business and develop lead scoring process
that they demand management engine (Forrester, based on these factors (Sahota, 2011).
2009). A comprehensive poll is conducted with
the 40,000 B2B marketers on LinkedIn in order Lead Nurturing
to learn marketers’ focus for 2014. Companies
indicate that their biggest marketing spend will Lead nurturing can be used as lead management
be on demand generation in 2014. The findings strategy to convert prospects into customers.
of the poll reveals that tele-prospecting (39%), Without lead qualification and lead nurturing
email (26%), web (12%), social media (12%), programs, it is not easy to convert prospective
and events (12%) are considered as primary lead customers into customers. Lead nurturing is the
generation tools respectively. process of engaging with qualified prospective
Scoring leads is essential for qualifying leads customers, regardless of their purchase timing,
and effective lead management process. Lead with the aim of earning their business when they
scoring determines the prospective customer’s are ready to buy (Forrester, 2009). Most of the
Box 1. Social selling: Success of First Business Financial Services and PayPal
First Business Financial Services began operation in 1990 and listed on the NASDAQ. First Business Financial Services focuses
exclusively on the specific needs of businesses, key executives, and high net worth individuals seeking a higher level of financial
service and expertise. Since living in the age of social media, leveraging professional networks like LinkedIn to generate sales leads
are becoming increasingly important, First Business decides to leverage social selling in order to get new, high-quality lead sources
to increase pipeline and shorten a lengthy sales cycle. The company begins to use LinkedIn Sales Navigator, which is the prospecting
tool that is powered by social selling. Utilizing social selling enables companies to find and connect with potential sales leads, who are
already on those social platforms, engaging with others and content. With access to over 300 million members on the world’s largest
professional network, LinkedIn creates sales lead generation success by enabling sales professionals to easily find the right prospects.
Utilization of this lead generation solution allows First Business Financial Services to access targeted accounts, shorten the sales process
and increase the likelihood of getting in the door. When leveraging teammates’ connections to set up a meeting, the average success rate
is at least 80% higher than without LinkedIn Sales Navigator.
PayPal Australia also achieves 3000% ROI with LinkedIn Sales Navigator. PayPal digital wallet enables consumers to purchase with
security, flexibility and convenience. 5.5 million Australian consumers uses PayPal when shopping online. The company tries to make
PayPal to be a payment option for consumers. The company looks for a solution in order to provide its sales team with more accurate
leads and reduce the sales cycle. Previously, PayPal purchased rich data, which was stale and not accurate, from several sources. PayPal
also spent a lots of time and money to clean the data. However, with the use of LinkedIn Sales Navigator, PayPal makes it easy for the
sales team to find the right contacts. By this way, it reduces sales cycles by 25% and generates more opportunities.
Source: LinkedIn (2013). Sales navigator shortens sales cycle & opens doors to new leads. Retrieved January 8, 2014, from http://
business.linkedin.com/content/dam/business/sales-solutions/global/en_US/site/pdf/cs/linkedin-first-business-bank-case-study-en-us.pdf
LinkedIn (2014). PayPal Australia achieves 3000% ROI with LinkedIn sales navigator. Retrieved June 12, 2014, from http://business.
linkedin.com/content/dam/business/sales-solutions/global/en_US/site/pdf/cs/paypal-case-study-en-us.pdf
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time, potential buyers are not ready to buy with As it can be seen from the categories of pros-
the first interaction and they need to be nurtured pects, there are some leads that present real op-
over time. If the company fails to follow up leads portunities for converting to sales but they aren’t
in a timely manner, they can become cold very ready to buy and it requires a longer process for
quickly. Most of the time, companies are short term converting them to sales. These opportunities have
revenue oriented and only focus on leads, which to be nurtured until they become ready to buy. The
are most likely to close in the short run. Focusing aim of lead nurturing is to build relationships with
on merely mature leads causes the company miss potential customers even if they are not ready to
leads who can be converted to sales; but in the short buy a product or service.
time, they are not ready to make purchase and the Based on the information that is gathered from
company requires a longer time to convert them the lead identification and profiling, lead genera-
to sales. Therefore it is important to nurture leads tion and lead scoring stages, company can deter-
over time until they become mature in order not to mine the lead’s level of interest to the company’s
lose these opportunities. To successfully manage product and services as well as the lead’s degree
lead nurturing, company engages with potential of readiness in the sales cycle. Some of leads are
buyers early in the sales cycle and automates the more qualified and close to the end of the sales
engagement based on the potential buyers’ inter- funnel; so that they may be easily converted to
est. Potential buyers get the information from the sales through simply offering them free trial or
company until they are ready to make a buying promotions. However, some of leads are not quite
decision. When they become mature leads, they ready to be sent to sales and they are more close to
are forwarded to sales (Gleanster, 2010). Compa- top of the sales funnel. These unqualified or cold
nies require to develop nurture communications leads can be taken into a suitable lead nurturing
and campaigns in order to move potential buyers campaign. Company requires to educate leads,
end to the sales funnel until they become ready who are in the research or awareness phase and
to purchase from the company. Prospects within considering whether the company’s products or
the company’s target market fall into one of the services will meet their needs. Company can
above four categories (Hollander, 2012): move these leads at the end of the sales funnel
by convincing these leads that the company’s
• Ready Buyers: They are at the very products and services will meet their needs, and
top pyramid of prospects and meet all offer them more relevant content and promotional
BANT criteria (Budget, Authority, Need, offers. Therefore, company should design relevant
Timeframe). They are ready to buy in a and specific content based on the potential buyer’s
short timeframe. position at the sales funnel. While delivering the
• Buying Soon: Just below the ready to buy content to potential buyers, company should build
prospects and they also meet all BANT cri- personal and relevant email and social media
teria but are on a little bit longer timeframe communications. Moreover, company requires to
to purchase from the company offer targeted content and continue communicat-
• Buying Sometime: They are prospects ing from first contact until the lead is ready to be
who will be buying someday, just not in the passed to sales (Sahota, 2011).
immediate future. Detailed information about potential buyers al-
• Never Buying: They are at the bottom of lows the company to easily qualify leads and close
the pyramid of prospects who will never the sales. Thus, company should gather and record
buy what the company offers for various detailed and relevant information from potential
different reasons. buyers at each interaction. For instance, company
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needs to know why the product is important for It fixes the company’s name and message in the
the potential buyer. By knowing this information, potential customer’s mind. Drip marketing can also
company can design its lead nurturing communi- inform prospects about the company’s products.
cation and campaigns. Company can map the customer buying cycle
Lead has to be routed to sales department in a stages and identify potential buyers’ information
timely fashion, passed to right person, and most need for each stage. According to the potential
importantly lead has to be ready to engage with a buyer’s position at the buying cycle, company
salesperson. To achieve better sales effectiveness, can design its communication content in order
the company needs more well-defined directions to provide the needed information and nurture
and definitions of when a lead should be forwarded leads over time to convert them into sales. Drip
to sales. When the lead is ready and qualified, it marketing as a communication series can be used
can be forwarded to the sales. Company should be to establish trust for the company in the eyes of
sure that the lead is qualified and needs no further prospect customers. It should not be used for
nurturing. Lead scoring allows the company to selling purpose. Company can deliver automated
give decision of whether the lead is qualified to and relevant information such as educational
be passed to sales. While marketing department materials or industry specific best practices about
is sending the qualified lead to sales, it has to its brand with the purpose of establishing trust.
provide information about the lead’s activity and When prospect customers begin to actively engage
background that is gathered at the lead generation in drip marketing emails, they become mature
and nurturing stages. To ensure that qualified and best leads are passed to sales or added to
leads are followed up by the sales force, company a trigger marketing campaign in order to move
requires to provide incentives to the salesforce. them towards purchase stage of the buying cycle
Lead management process can be more effective (Gleanster, 2011).
and generate better business results if the company Relevant content accelerates customer engage-
tracks and measure the performance of entire sales ment. To develop effective communication with
cycle (Sahota, 2011). the prospective customers, company must provide
There are two main tactics for nurturing leads: relevant information instead of huge volumes of
drip campaigns and trigger marketing campaigns. information. In order not to waste prospective
The phrase drip marketing comes from the com- customers’ time, content of communication has to
mon phrase used in agriculture and gardening be relevant. Company requires to understand what
called drip irrigation. This is the process of water- information prospective customers want. Using
ing plants or crops using small amounts of water a conversational style and personal direct tone
over long periods of time (Lake, 2014). Successful in content creation enable the company to easily
drip marketing involves a carefully planned and capture prospective customer’s attention. Making
thoughtfully targeted series of communications the content lively, provocative, and interesting
that will get the company’s message across to make the communication more effective (For-
customers and keep the company’s name in their rester, 2009). Moreover, it is important to note that
minds. Drip marketing helps potential customers company should respond quickly when a potential
become the company’s actual customers. Drip buyer contacts with the company for the purpose
marketing is ideal for high-value products with a of requesting information. Responding quickly to
long sell cycle, especially which are purchased at prospects’ inquiries increases probability of the
infrequent intervals. Building awareness is one of sales closing rates.
the most important advantages of drip marketing.
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Trigger event can be used as lead nurturing provides additional information on one product.
campaign in order to cause a potential buyer to Then it can develop a series of trigger campaigns
feel a clear need of the product or service and for each landing page link. When the prospect
create a sense of urgency in their buying process. clicks and completes the landing page, the trig-
Trigger event has to be designed by considering ger campaign automatically routes new prospects
characteristics of target prospects who are really to the most relevant triggered communications
ready to buy. For creating effective trigger event, (Gleanster, 2011).
company needs to determine triggers that typically Since triggered emails secure higher open
get potential buyers and customers into buying rates and engagement, triggered messaging has
mode (Skok, 2012). Drip marketing campaigns, been rising. Utilization of triggered messaging
which are automated email communication series, was up 73% compared to previous year in 2012.
are delivered based on pre-determined time inter- Triggered emails also yield 70.5% higher open
vals. However trigger marketing campaigns are rates and 101.8% higher click rates compared to
initiated based on prospect behavior; for instance, business as usual (BAU) messages in the fourth
a click-through on an email, a webpage visit, or quarter of 2012 (O’Malley, 2013). According to the
filling a form on a landing page (Gleanster, 2011). MarketingSherpa (2013) survey results, the most
Automated and triggered email campaigns can commonly used triggered emails are respectively
be used to reach out and keep in touch with potential welcome (50%), thank you (48%), transactional
buyers as well as customers throughout the buying (e.g., order confirmations and bills) (40%), activa-
cycle. Trigger marketing helps the company sell tion (26%), post purchase (e.g., thank you coupon,
when the time is right and prospect is ready to pur- product review request, and customer survey)
chase. Triggered emails increase the performance (25%), cross and up-sell promotions (e.g., prod-
and conversion rates of email marketing; because uct recommendation) (25%), date triggered (e.g.,
triggered email is automatically sent in response birthday and renewals) (24%), event countdown
to action taken by a prospect or customer. Cus- (18%), triggered based on website behavior (e.g.,
tomer lifecycle triggers, welcome messages, post website visits) (18%), win back & reengagement
purchase triggers, thank you emails, transactional (15%), and shopping cart abandonment (9%).
behavioral triggers, order confirmations, expira- Company can send welcome messages when
tion triggers, birthday wishes, online behavioral the potential buyer visits the company’s website
triggers, and follow ups to abandoned shopping and fills the form which is on the company’s
carts / reminders are among the examples of trig- website. Website visiting and filling the form
gered emails (Spyglass Intelligence LLC, 2012; indicate the purchase intention of the prospect
Newslever, 2013). Gleanster (2011) indicates that customer as well as his interest in the company’s
using the combination of email campaigns and products and services. Through filling the form,
landing pages is the best way to utilize trigger mark- prospect customer gives his contact informa-
ing campaigns. Companies can also use trigger tion for further communication. To convert this
campaigns for prospect customer segmentation. opportunity into sales, it is essential to stay in
If the company is not sure about what products touch with the potential buyer and nurture him
that it should offer to new prospect customers, it over time in order to penetrate the shopping and
can send an email campaign with a few different consideration list of the prospect buyer. Thus, the
offerings from its product portfolio and link each company can send the potential buyer, who visits
offer in the email to a unique landing page which the company’s website and indicates his interest,
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welcome message that may include information a product in shopping cart. So that company can
about the company’s social media portals where send a triggered email to them after abandoning
the prospect customer can find rich information the shopping cart and this email can contain the
about the company or special offer. After the po- link of the abandoned shopping cart.
tential buyer is welcomed and express his interest, To increase the effectiveness of triggered
company can start to send follow up emails based emails, it is important to personalize triggered
on the specific interest of the prospect. So that emails. Research which is conducted by Mar-
potential buyer can get the necessary information ketingCharts (2013) indicates that personalized
to make a purchase decision. Company can also triggered emails deliver stronger open and click
send trigger emails to motivate potential buyer to rates than their non-personalized ones. Personal-
move purchase stage of the buying cycle. Wake ized triggered emails have an average open rate
up is one of the other trigger communication pur- of 29.2%, about 25% higher than the rate for non-
poses. After the initial website visit of prospect personalized triggered emails. Personalized trig-
customers, some of them may become inactive. gered emails’ unique click rates also outperform
The company can send them trigger emails in compared to non-personalized triggered emails
order to wake and push them towards company. (6.7% vs. 4.4%). The findings of the study reveal
Trigger email can be also sent after purchase in the fact that personalization provides a significant
order to follow up and evaluate the satisfaction of rise in transaction rates and revenue per email. For
the newly acquired customers. Company needs to personalized triggered mailings transaction rates
continue communication after the sale in order to are 2.5 times higher; while revenue per email is
establish ongoing relationship with new custom- 63% higher than non-personalized triggered emails
ers and make them loyal. Ongoing surveys or (MarketingCharts, 2013).
asking whether they need any help can be used Controlling the email frequency of triggered
as trigger communication with the purpose of based campaigns is important in order to not to
establishing long term customer relationships as annoy customers with too many emails. Company
well as these communications help the company needs to establish rules and set limits on the number
improve its products and services. In the context of the emails that are going to be sent to a customer.
of post purchase trigger emails, company can also While sending trigger email, company should not
send thank you coupon in order to trigger cross violate the can-spam act as well as should not
and up-sell opportunities. It is important to keep send emails to people who have already opted out
in mind that up-sell or cross-sell triggered email of the database. For the success of trigger email,
that is sent as a post purchase trigger has to involve company should provide a value or an attractive
relevant offers based on the receiver’s wants and offer to the customer. Company needs to include
needs. Asking for product review request or refer a premium content, discount, coupon, or some
a friend messages can be used to trigger new ac- other special opportunity to the trigger email in
quired customer to become an advocate customer order to increase the sales conversion rate. Com-
(Spyglass Intelligence LLC, 2012). Abandoned pany can try to deliver different offers and assess
cart campaign can be designed as trigger email the results of the campaigns to see what works
strategy in order to activate customers who place and what does not. Through testing and learning,
a product in the shopping cart at the website but company can develop and improve trigger based
leave the website without purchasing the product. campaigns that can help the company generate
The company knows the contact information of revenue. Lastly, company has to avoid sending the
these prospects because they log in in order to place trigger email that is irrelevant, broadly targeted,
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and impersonal. Success of trigger campaigns pany tries to approach a target market to acquire
depends on the company’s ability to profile its new customers, customers in the market look at
customer segments and send trigger email based the company’s product with suspicion. They do not
on the wants and needs of each customer segment. know the company, and its products and services;
so they may have questions in their minds. The
company requires to engage with suspects and
LEAD MANAGEMENT AUTOMATION through lead nurturing communications company
tries to provide answers to those questions and
Companies have been increasingly automating focuses on converting suspects into prospects
their lead management process with the purpose (see Figure 6). After being convinced, then sus-
of generating revenue streams from new custom- pects become prospects. At this stage, company
ers, increasing the sales conversion rate, targeting needs to qualify prospects through lead scoring
profitable customers, and identifying cross and before sending them to sales. Finally, a qualified
up-sell opportunities from new customers. Ang prospect becomes a customer when he makes the
and Buttle (2006) conduct a research with the purchase. Lead management automation helps the
732 Australian companies in order to identify company automate the lead management process
and explore attributes that enable companies to and transforms the data into actionable insights;
outperform at customer acquisition. They look at so that company can predict what customers want
the presence of a range of customer acquisition and discover the most effective ways to improve
management practices, objectives and tactics. customer acquisition. For achieving sales effec-
The findings of the research indicate that stat- tiveness, company need to provide its employees
ing revenue streams from new customers (84%), tools that capture information about each and
numbers of new customers to be acquired (65%), every interaction with prospects and customers.
specific named customers to be acquired (57%), Effective lead management automation inte-
and margins to be earned from new customers grates and aligns marketing and sales to improve
(53%) are among the most common customer sales conversion ratios; while increasing the qual-
acquisition objectives (Ang & Buttle, 2006). ity and quantity of qualified prospects who are
CRM technologies can provide tools that assist delivered to sales department. Lead management
companies in customer acquisition. Once a com- solutions help the company improve customer
Figure 6. Automation of lead management process
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acquisition through segmentation and clustering information, and other related information. Risk
techniques, reduce costs by targeting prospects assessment helps the company acquire profitable
that are most likely to respond the company’s customers while minimizing risk.
marketing efforts, and allocate budget to the Lead management automation allows the
best performing programs. Lead management company to track and measure lead management
software also allows the company to customize efforts of the company. With the help of the lead
its interactions (Buttle, 2009). Companies have management automation, company can see how
been increasingly implementing lead management many prospects are converted to opportunities
automation to effectively and consistently qualify or closed deals. Measuring the lead management
leads, prioritize the best leads to pursue, develop performance gives the company great insight into
systematic measurable approaches to score the what it is doing well, while also helping to identify
leads, make marketing more proficient, automatic points of improvement (Hanington, 2013). Sales
and efficient, create a consistent flow of leads management tools of lead management automa-
pumping through the pipeline, nurture prospective tion software automate reports on new leads, lead
customers, keep prospective customers from fall- sources, conversion rates, and opportunity move-
ing through the cracks of the pipeline, and improve ment. It also monitors sales team and individual
data quality, reporting, marketing efficiency and sales representatives’ activities. Through sales
targeting (Forrester, 2009). and automation tools, lead management process,
Lead management automation reduces cus- which is composed of selecting qualified leads,
tomer acquisition costs by better targeting pro- making the sales pitch, closing the sale, and retain-
spective customers. It segments and identifies ing the new customer for repurchases, becomes
prospective customers, who meet the company’s standardized.
business objective, through using market research
and surveys, psychographic profiles, and analytics
tools. Since segmenting and profiling prospective CONCLUSION
customers allow the company to deliver the best
offer and develop more targeted and relevant com- Since customer acquisition is the first stage
munication, company can improve its acquisition of the customer buying cycle and essential for
ability and reduce its acquisition costs with the maintaining customer retention, companies need
implementation of lead management automation. to effectively manage their customer acquisition
Lead management automation also helps the com- process. While managing customer acquisition
pany automate the lead nurturing process. With process, companies require to consider which
these technologies, company can send direct and potential customers to target, how to engage with
most relevant nurturing messages to prospective them and what to offer them. Lead management is
customers based on their position at the buying one of the relationship marketing practices that is
cycle and segment profile. Targeted and relevant crucial for the company to convert prospects into
nurturing messages increase the probability of customers. During the lead management process,
reading the message (Skok, 2012). Moreover, company identifies its potential buyers, educates
lead management software also provides risk them, and engages with them, and when the leads
modelling tools that help the company evaluate are considered qualified, leads are passed from
prospect profitability as well as evaluate and score marketing to sales. The lead management pro-
the prospect’s creditworthiness and risk through cess of a company includes a number of phases
screening business reports, public records, credit such as lead generation, lead nurturing, and lead
238

qualification. Company needs to manage these referrals with the hope of converting them into a
phases effectively and efficiently in order to sale for a company. Once the company identifies
convert more prospects into customers, and then its ideal customer profile, it becomes easier to
into loyal customers. determine effective acquisition channels to reach
It is essential for companies to find and engage its ideal prospective customers. A company can
with potential buyers at the earlier stages of the use a wide variety of customer acquisition chan-
customer buying cycle and build relationship nels from broadcast and print advertisements to
with them over time in order penetrate into their search engine marketing, social media, and email
shopping and consideration list and move them marketing. To achieve successful conversion rates,
forward in the buying cycle towards purchasing company needs to consider characteristics of its
stage. Lead management process starts with un- ideal customer profile while it selects acquisition
derstanding the buyers’ profile. Existing custom- channels. Finding and qualifying the sales lead is
ers are the starting point in identifying potential the most important step in lead management. The
buyers. Company needs to know and understand quality of a lead is usually determined by the readi-
its existing customer base, and define key attri- ness and probability of the prospective customer
butes of them. Once the company figures out its to make a purchase. Company needs to track the
buyers’ profile, it will be easy to set and weigh source of the lead and focus on understanding
criteria that can be used to score and grade leads what actually causes these leads to be aware of
in order to evaluate the lead’s appropriateness the company and its products. Tracking the source
overall company’s customer profile. Profile of the of lead allows the company to determine what
best customers can be used to define and acquire works and what does not work in lead generation.
new prospects better. Since some potential buyers do not ready
Getting your customers’ attention is much to purchase at the buying cycle, they need to
easier if the company can leverage information be nurtured until they become qualified to pass
that the company knows about them. This helps sales. To effectively manage lead nurturing pro-
the company provide rich and personal interac- cess, companies need to identify what triggers
tion. Company can develop its CRM strategies potential buyers to make a purchase and based on
by analyzing its customer database. Analysis of this insight they can develop their lead nurturing
customer database allows the company to select content. Lead nurturing is intended to raise the
its target customers, identify the tools for targeting company’s profile in the prospects’ eyes, thus
the customers, and decide how to build relation- making it more likely that the prospect will con-
ships with the targeted customers. In the age of sider the company’s product or service when it is
the customer, the ability to leverage customer time to buy. Lead nurturing focuses on educating
insight better helps the company implement CRM qualified sales leads who are not ready to buy
strategies successfully and gain competitive ad- yet. Lead nurturing is the process of providing
vantage. Company requires to consider customer highly relevant educational content that helps
profitability, customer lifetime value, customer’s build brand and product preference long before
possible growth in purchasing, and customer’s prospects are ready to buy. The key to successful
potential or strategic importance in determining lead nurturing is to deliver content that’s valuable
which customers to be selected as target market. enough to keep the company’s audience engaged.
Lead generation is the process of creating sales If the companies do it right, lead nurturing can
opportunities that may come from various sources help them build a strong brand preference in the
and activities such as advertisements, social me- company’s prospects long before they’re actively
dia, marketing campaigns, events, and customer engaged in a buying process.
239

There are two main tactics for nurturing leads: enable the company to identify prospective cus-
drip campaigns and trigger marketing Successful tomers, who are profitable and within the scope
drip marketing involves a carefully planned and of company’s target market and have potential to
thoughtfully targeted series of communications buy. Therefore, company develops more targeted
that will get the company’s message across to and relevant offers. Highly targeted marketing
customers and keep the company’s name in their lists help company achieve better response rates
minds. Drip marketing helps potential customers on offers to new customers. Briefly, lead man-
become the company’s actual customers. Drip agement automation improves the company’s
marketing as a communication series can be used ability to acquire new customers. With the lead
to establish trust for the company in the eyes of management automation, companies gain control
prospect customers. Since relevant content accel- over lead management processes and marketing
erates customer engagement, to develop effective programs, get better customer insight, and increase
communication with the prospective customers, efficiency in marketing activities.
company must provide relevant information
instead of huge volumes of information. Trigger
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paigns, events, and customer referrals with the management automation also helps the company
hope of converting them into a sale for a company. automate the lead nurturing process. With these
.During the lead generation, company determines technologies, company can send direct and most
the sales readiness of prospects and identifies relevant nurturing messages to prospective cus-
qualified prospects who have intent and ability tomers based on their position at the buying cycle
to make a purchase decision within a reasonable and segment profile.
timeframe. Lead Scoring: Lead scoring determines the
Lead Management: Lead management is prospective customer’s potential interest in the
one of the relationship marketing practices that company’s product and service. Lead scoring in-
is crucial for the company to convert prospects formation is important and useful to the efficiency
into customers. Lead management is an important of passing qualified leads to sales department.
process that takes place before a prospect becomes When a lead gets higher score, the chance of
a customer and its primary focus is to manage converting this lead to sale is more likely. If the
relationships with prospects. Lead management lead gets lower score, this means that this lead is
software deals with the acquisition of customers. unqualified or cold lead, and it can send for lead
Lead management deals with the overall process nurturing.
in which potential buyers are identified, educated, Trigger Email: Trigger marketing campaigns
engaged with, qualified, and passed to sales. The are initiated based on prospect behavior; for in-
lead management process includes a number of stance, when prospect customers begin to actively
phases such as lead generation, lead qualification, engage in drip marketing emails, company can
lead nurturing, lead allocation, lead harvesting send trigger emails in order to motivate and move
and lead tracking. them towards purchase stage of the buying cycle.
Lead Nurturing: Lead nurturing can be used Company needs to include a premium content, dis-
as lead management strategy to convert prospects count, coupon, or some other special opportunity
into customers. Lead nurturing is the process of to the trigger email in order to increase the sales
engaging with qualified prospective customers, conversion rate. Automated and triggered email
regardless of their purchase timing, with the aim campaigns can be used to reach out and keep in
of earning their business when they are ready to touch with potential buyers as well as customers
buy. With the help of lead nurturing communica- throughout the buying cycle. Trigger marketing
tion, company tries to penetrate consideration as helps the company sell when the time is right and
well as shopping list of the potential buyers. Lead prospect is ready to purchase.
243
244
Chapter 9
Customer Retention Strategies
and Customer Loyalty
ABSTRACT
Since loyal customers are the most important assets of a company, companies have been giving attention
to developing customer retention and loyalty programs. The fundamental purpose of customer retention
efforts is to ensure maintaining relationships with value-adding customers by reducing their defection
rate. Creating customer loyalty is essential for the survival of the company in highly competitive markets.
Thus, this chapter starts with indicating the significance of customer retention marketing strategies for
the company by revealing the economics of retention marketing programs. Requirements for developing
effective customer retention strategies are explained. Finally, after discussing types of commitment, this
chapter ends by explaining loyalty programs and win-back strategies.
INTRODUCTION Retention marketing strategies provide many

benefits to the company because loyal custom-
Relationship marketing becomes an essential ers increase their spending at an increasing rate,
strategic tool for companies in today’s dynamic purchase at a full margin rather than at discount
market in which customer needs and preferences prices, and create operating efficiencies (Reich-
are changing rapidly. These rapid changes that held & Sasser, 1990). Moreover, acquiring new
take place in almost all business types, increase customers such as new account setup, credit
the importance of relationships, and highlight searches, advertising and promotional expenses
the need to enter into networks of relationships. is costly compared to retaining a customer. The
Thus, companies have been increasingly focusing relationship startup costs that are incurred when
on developing long term profitable relationships a customer is acquired are quite high and it may
in business, internal and consumer markets in take several years to gain profit from the rela-
order to enhance the value that they deliver to tionship to recover those acquisition costs. The
their customers. account becomes more profitable and relationship
DOI: 10.4018/978-1-4666-8231-3.ch009

Customer Retention Strategies and Customer Loyalty
maintenance costs may eventually decrease as the As those statistics demonstrate, companies that
relationship between the company and customer are going to effectively develop and manage cus-
deepens over the time. Besides, customers who tomer retention strategies can achieve a competi-
are satisfied with the company are more willing tive advantage, healthier profits and an admirable
to pay higher prices because they get their sense reputation. There is strong evidence that customer
of value from more than price and in an estab- retention yields commercial benefits; because of
lished relationship they are also likely to be less that reason companies try to enhance customer
responsive to price appeals offered by competitors lifetime value. Customers want to maximize
(Buttle, 2009). their benefits when they enter into a relationship.
The below statistics also reveal and support Thus, when the customers believe the profitability
the economics of retention marketing programs: of the relationship, they establish and maintain
ongoing relationships with a company. Custom-
• Customer profitability tends to increase ers are more likely to enter into a relationship
over the life of a retained customer be- when the future value of the relational behavior
cause they buy more as their trust increase is high. The future value of the relationship will
(Murphy & Murphy, 2002). be high, if the relational behavior provides high
• 80% of the company’s future profits come perceived benefits due to customization, superior
from just 20% of its existing customers service, outstanding customer experience, product
(Murphy & Murphy, 2002). bundling and so on, and/or lower costs due to the
• A 5% decrease in customer defection rates reduced mental processing, search costs, and risks
can increase profits by 25% to 125 depend- associated with the purchasing (Bhattacharya &
ing on the industry (Murphy & Murphy, Bolton, 2000). Receiving outstanding customer
2002). experience increases the perceived value of the
• A 2% increase in customer retention has relationship for the customer. It is important to
the same effect as decreasing costs by 10% note that companies that prioritize delivering
(Murphy & Murphy, 2002). excellent customer experience can generate 60%
• Repeat customers spend on average 33% higher profits than their competitors. Moreover,
more than new customers (Retail Active, strict adherence to delivering customer experience
2008). results in up to 25% more customer retention and
• Referrals among repeat customers are revenue than sales or marketing initiatives (Mur-
107% greater than non-customers (Retail phy & Murphy, 2002).
Active, 2008). Future value of the relationship as well as
• 86% of consumers will pay up to 25% the customers’ trust in the organization affect
more for a better customer experience the customers’ decision to maintain or withdraw
(RightNow, 2011). from a relationship (Blois, 1996). Better Business
• According to the Marketing Metrics, the Bureau (BBB)/Gallup Trust in Business Index
probability of selling to an existing cus- 2007 survey finds that nearly one in five (18%)
tomer is 60–70%; while the probabil- adult American consumers says his trust in busi-
ity of selling to a new prospect is 5–20% nesses that he regularly deals with has decreased
(Charlton, 2012). in the past 12 months. The findings of the survey
• According to the White House Office of indicate that 93% of American adult consumers
Consumer Affairs, it costs six to seven rate company’s reputation for honesty and fairness
times more to acquire a new customer than as extremely or very important to them; while
retain an existing one (Hisaka, 2013). 91% of respondents find company’s reputation for
245

being both dependable and reliable is extremely no equal. Cult brands become integral to their
or very important in order to trust in a company customers’ live by linking their products and ser-
(BBB, 2008). In the light of the findings, it can be vices to higher level needs of Maslow’s hierarchy.
argued that companies that want to establish trust, Cult brands enjoy intense loyalty because they
need to be honest, fair, dependable, and reliable. work hard to connect with their customers at the
Customers switch from the company for many very highest level of Maslow’s Hierarchy. So it is
reasons such as high, unfair and deceptive pricing, important to create devoted customers. Devoted
inconvenience (e.g., wait for service), core service customer sticks with the brand, spends more, and
failure (e.g., service mistakes, billing error), ser- makes positive word of mouth.
vice encounter failure (e.g., impolite, uncaring, Managing customer relationships provides a
unresponsive staff behaviors), response to service source of competitive advantage to the firms. A
failure (e.g., negative, no, reluctant), competition relationship develops between a customer and or-
(e.g., availability of better alternatives), ethical ganization when there are benefits to both parties.
problems (e.g., unsafe, cheating) and involun- Building a long-term relationship is appropriate
tary switching (moving) (Rai, 2012). Customer only in circumstances where both the customer
switching has negative effects on market share and the seller are convinced of the profitability of
and profitability (Rust & Zahorik, 1993). Cus- the relationship (Blois, 1996). Developing strong
tomer switching means loss of customers’ future bonds with customers are typically characterized
revenue stream. According to the Get Satisfaction as customer retention programs (Bhattacharya &
Infographics, globally, the average value of a lost Bolton, 2000).
customer is $243 and $83 billion is the cost of
poor customer service in the US (Azita, 2010).
Knowing what drives customer loyalty is CUSTOMER RETENTION
important for the company’s financial health STRATEGIES
because repeat purchases and new customer re-
ferrals generate continuous revenue streams for Since loyal customers are the most important assets
the company. Creating cult brands contributes the of the company, in recent years, companies have
customer loyalty. Establishing strong excellent been increasingly recognizing the importance of
relationship with customers, makes cult brands loyal customers and they have been giving atten-
special. Therefore companies need to focus on tion to develop customer retention and loyalty
creating cult brands. Cult Brands are a special programs. The fundamental purpose of customer
class of magnetic brands that command super-high retention efforts is to ensure to maintain relation-
customer loyalty and almost evangelical customers ships with value-adding customers. A customer
or followers devoted themselves to the company. retention strategy aims to retain valuable customers
Cult brands create customers who love them so by reducing their defection rate; while a customer
much that they won’t do business with anyone else. development strategy aims to increase the value
Cult brand can be any product, service or brand of those retained customers to the company by
that creates high level of loyalty. Cult brands are making cross-selling and up-selling to them, and
vehicles that serve brand lovers’ human needs. Cult encouraging them for making word of mouth
brands fulfill the need for belonging by creating communication and customer referrals. Customer
strong customer communities. Cult brands do not acquisition strategy of the company focuses on
just offer great products and services, they provide attracting profitable prospective customers. Just
social interaction, esteem, and self-actualization. as in the customer acquisition, customer retention
They make customers believe that the brand has and development strategy of the company also
246

focuses on retaining particular customers. Focus Repeat purchases and new customers from refer-
is necessary because not all customers are worth rals generate continuous revenue stream for the
retaining and not all customers have potential for company. Thus knowing what drives customer
development. Therefore, it may not be beneficial loyalty is important for the company’s financial
to maintain relationships with all customers; es- sustainability. If the company wants customers
pecially with the customers who are too costly to who bring the company more business and advo-
serve. Companies require to focus their customer cate for the company, the company needs to dem-
retention efforts on those who have profit potential onstrate that it knows and cares its customers and
or are strategically significant. The strategic im- rewards customers for their commitment (Rogers
portance of a customer can be determined by the & Gilleland, 2009). Service quality, relationship
value and/or volume of the customer’s purchases, quality, and overall service satisfaction are among
the prestige of the customer, and potential of the the factors that improve customers’ intentions to
customer in providing access to new markets/ stay with a firm (Bose & Bansal, 2001). A com-
customers, and the customer’s impact on other pany can maintain customer retention and loyalty
relationships (Fiocca, 1982). Companies have through customer satisfaction, superior service,
to focus on the most profitable customers; but loyalty programs, defection analysis, complaint
they should also focus on attracting and retaining handling, mass customization, customer targeting
customers who will act as advocates for the com- and database marketing.
pany’s growth and encourage others to buy from Companies implement retention marketing
the company. By assessing customer profitability practices in attempt to increase customers’ com-
and customer advocacy, company can tailor its mitment to the company. As the commitment
retention strategies and invest in specific customer of the customers’ increases, customers become
segments (Allen, Reichheld, & Hamilton, 2005). more loyal. If the customers are satisfied with
Understanding customer needs and prefer- the product and the services that are provided
ences, meeting and even exceeding customer by the firm, they will become loyal customers.
expectations, and delivering the high customer Therefore, companies try to achieve customer
value lead to customer satisfaction. Customers, satisfaction by exceeding the customers’ expec-
who are satisfied, are more likely to become loyal tation and delivering superior customer service.
and demonstrate behavioral and/or attitudinal loy- The key to generating high customer satisfaction
alty. Companies that have a loyal customer base is to deliver high customer value. Companies must
enjoy with high business performance, and achieve aim for high satisfaction (performance of the firm
increase in revenue growth, share of customer, and must exceed the expectations of the customer)
customer commitment. Satisfied customers keep because high satisfaction creates an emotional
doing business with the company, and over time bond with the firm and in turn, this will lead to
customers’ trust begins to grow. As customers’ customer retention.
trust grows over time, customers’ commitment Bringing together the customer service quotes
as well as spending increases; because customers of worldwide known CEOs can inspire and guide
prefer to do business with companies with whom companies in delivering outstanding customer
they have a proven and satisfactory relationships. service (Brookes, 2013). Merely satisfying cus-
They do not want to take risks. Moreover, loyal tomers is not satisfactory to achieve customers’
customers are more likely to make positive word loyalty. They have to experience exceptional
of mouth about the company and try to encourage service that will be worthy of their repeat busi-
other customers to do business with the company. ness and referral. Since profit in business comes
Loyal customers become referrers (Buttle, 2009). from repeat customers who are delighted with
247

the company’s products and services, and bring to understand their customers’ degree of loyalty
their friends with them. Therefore, the purpose better. Companies can measure customer loyalty
of a business is to create a customer who creates by considering customers’ repurchase intention
customers. Great service helps companies drive in the future, primary behavior (e.g. recency,
the customer acquisition, retention, and efficiency. frequency, and amount are measures of actual
This makes the leading companies successful. behavior and indicates the change in behavior
If you make customers unhappy in the physi- over time), and secondary behavior (e.g., the
cal world, they might each tell 6 friends. If you potential of making customer referrals) (Jones &
make customers unhappy on the Internet, they Sasser, 1995). Companies that want to measure
can each tell 6,000 friends. Since bad customer customer satisfaction need to track the following
service causes customer lost and negative word metrics (Beard, 2013):
of mouth, good customer service costs less than
bad customer service. The customer experience • Customer Expectations versus
is the next competitive battleground; because of Perception: It is important to measure
this reason, companies need to understand what whether the company’s product or service
customers appreciate and deliver what they need. meets the expectations of customers.
This is possible by engagement. The more the • Likelihood to Recommend to Friends:
company engages with its customers the clearer To track the customer loyalty, company
things become and the easier it is to determine needs to know the customers’ likelihood of
what the company should do. recommending the company. This can be a
To secure customer loyalty, it is also important critical metric to evaluate the advocacy of
to measure customer satisfaction. It is expected that the customer.
meeting or exceeding the customers’ expectations • Customer Experience versus Ideal
leads to customer satisfaction and as a satisfied Experience: Company can ask its custom-
customer, they would continue to do business with ers to compare its product or service with
the company. However, it is indicated by Jones and the customer’s ideal product or service ex-
Sasser (1995) that there is a tremendous difference pectations in order to understand whether
between merely satisfied customers and totally the company’s product and service meets
satisfied customers. For instance Xerox Company the real needs and wants of its customers.
realizes that its merely satisfied customers are six • Overall Satisfaction: Another metric
times less likely to buy again from Xerox than its to track is overall satisfaction with the
totally satisfied customers (Jones & Sasser, 1995). company,
Therefore, it is important to focus on creating • Affective and Cognitive Satisfaction:
delighted and devoted customers for ensuring Company requires to measure affective sat-
customer loyalty. Companies should include sys- isfaction by asking customers to evaluate
tematic customer satisfaction measurements into (like or dislike) the service level agreement
their customer retention management programs. benefits. On the other hand, cognitive sat-
Companies can use a variety of measurement isfaction needs to be measured by asking
methods to measure the customer satisfaction such customers’ judgments about the usefulness
as customer satisfaction surveys, feedback forms, of the service.
and customer service feedback. Customer satisfac- • Repeat Purchase Intention: Customer
tion should not be used as only one metric to track satisfaction has also impact on the custom-
customer loyalty. Companies should consider and ers’ repurchase intention. Asking custom-
measure a range of customer satisfaction metrics ers’ intention to repurchase, renew their
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contacts, or purchase more products from channels their companies are using. Figure 1 il-
the company in the future help the compa- lustrates the mostly used feedback channels that
ny understand whether customers are sat- are utilized in taking feedback from customers.
isfied with the company and whether they Company needs to adopt a multi-channel approach
will continue doing business. while establishing feedback channels.
In today’s marketing environment, the way
Since satisfaction is not sufficient to create companies serve their customers is an important
customer retention, exceeding the customers’ source of competitive advantage. Companies use
expectations is an important criteria for keeping customer service to develop long-term relation-
customers loyal, companies need to learn about ships. Customer service is crucial because it can
customers’ expectations and needs by establishing be used to differentiate a firm’s products, keep
continuous communication with them. Customer customers loyal and in turn increase sales and
information is important to retain customers. profits. Moreover, delivering superior customer
Thus, taking feedback is a crucial mechanism service provides an opportunity for a firm to gain a
to learn about the customers’ expectations and sustainable advantage in the market place (Sharma
needs. Establishing ongoing and interactive & Lambert, 2000). Service is the backbone of
communication system helps the company learn any business. The quality and consistency of the
about the needs, expectations and complaints of service are critically crucial for customer reten-
the customers. Based on the gathered customer tion (Shostack, 2000). According to the Aberdeen
feedback, company may improve its products, Report, improving customer retention (42%), im-
services, and processes. Brand Republic and Snap proving customer satisfaction (33%), and increas-
Surveys (2014) ask marketers which feedback ing cross-selling and up-selling (32%) are among
Figure 1. Customer feedback channels

Source: Brand Republic & Snap Surveys (2014). 7 most common mistakes in customer feedback. Retrieved July 20, 2014, from
http://www.snapsurveys.com/blog/download-free-report-7-common-mistakes-customer-feedback/
249

the top three drivers for companies to invest in ize its customer service and experience, and be
customer experience management (ClickSoftware, proactive and responsive in responding.
2011). A company that wants to increase customer Company needs to support its marketing,
retention must provide superior experience and sales and customer service employees with rich
service to its customers. Reliability, responsive- customer insight in order to provide personal-
ness, competence, access, courtesy, communica- ized engagement with its customers and deliver
tion, credibility, security, understanding/knowing exceptional customer experience at every step of
the customer and tangibles are the determinants of the customer journey to stand-out from the com-
service quality (Parasuraman, Zeithaml, & Berry, petition. Companies should take into consideration
2000). Company needs to deliver reliable customer the importance of qualified and skilled employees
service and be able to perform promised service in delivering service to the customers; because, $
consistently and dependably. Being trustworthy, 338.5 billion is the cost of bad customer service
believable, and honest influences the credibility in the world per year (Hisaka, 2013). As indicated
of the company, and customers want to business in customer service infographics, 86% of consum-
with credible companies who are able to provide ers have quitted doing business with a company
service free from risk and doubt. Employees are because of a bad customer experience and 91% of
required to have skills and knowledge to perform unhappy customers will not willingly do business
the service as well they should have the ability to with the company again (ClickSoftware, 2011).
convey trust and confidence during the interactions Moreover, infographic which is produced by
with customers. Moreover, they need to be respon- Monetate (2012) shows that 73% of consumers
sive and willing to provide service. Since courtesy are willing to buy again from a company if they
of employees also determines the service quality, have a superior customer experience. Therefore,
employees need to give individualized attention to it is evident that another important component
customers. Focusing on understanding customers’ of the customer retention marketing strategy
needs, and building interactive communication is to manage relationships in internal markets.
are essential to improve customer service quality. Company needs to provide employee training and
While improving the service quality, company has support programs in order to improve employees’
to focus on increasing customers’ accessibility to performance and enthusiasm as well as make the
its services, and appearance of physical facilities, quality of the customer service consistent. By
equipment, personnel and communication materi- ensuring employee enthusiasm, employees of
als (Parasuraman et. al., 2000). the company can serve customers efficiently. To
The quality of the customer service provides deliver outstanding customer service, companies
customer loyalty. Delivering personalized service, need to create an internal culture which assists
being responsive and competent, and accessing and supports development of a customer oriented
service conveniently are considered among the culture within the organization.
determinants of good service (Hisaka, 2013). Companies have to spend their time and re-
Friendly employees or customer service rep- sources studying its defectors in order to increase
resentatives (73%), easy access to support and the rate of customer retention. As Bill Gates in-
information (%55), and personalized services dicates “the company’s most unhappy customers
(36%) make customer fall in love with the brand are the company’s greatest source of learning”
(RightNow, 2011). For delivering exceptional (Fonolo, 2012); because of this reason, compa-
customer service, company requires to align its nies also need to consider customer complaints
organization around its customers, hire competent as well as take feedback from their ex-customers.
agents, provide multichannel support, personal- Learning the source of dissatisfaction helps the
250

company to improve its products, services, and more formal the system for complaint, the less
processes. A good source of information about accessible it is to customers), complaints need to
how to improve customer loyalty can be obtained be handled quickly (the quicker the complaints are
by examining the customers who defect. Learn- dealt with, the greater the satisfaction), adopting a
ing about the causes of defections provides an customer focused approach (invites complaining
opportunity for a company to revise and improve and indicating the commitment of resolving the
all of its procedures (Reichheld, 2000). Marketing complaints), someone in the company has to take
research studies often focus on current custom- the responsibility for complaint handling, looking
ers or potential customers but rarely focus their for the root causes and fix them. A successful
attention on ex-customers. However, companies complaint management system must ensure that
can determine the root cause of the defection by the complainant is kept informed, the staff under-
focusing on ex-customers. Companies can do stands the complaint process, the complaints are
interviews with former customers to learn the taken seriously and the employees are empowered
reasons for their defection. In this way, other to handle complaints (Rai, 2012). To improve
defections can be prevented. the complaint management process, a company
Loyal customers account for a valuable amount requires to (Buttle, 2009):
of company profits; therefore, a company should
not risk losing a customer by ignoring their • Make its complaints-handling policy and
complaints. The best thing a company can do processes visible and accessible to custom-
is to make it easy for the customer to complain. ers and employees,
Analysis of complaint data can be a golden op- • Train employees about how to respond to
portunity for the firms to improve their services complaints,
and products. Companies must make investments • Empower employees to resolve complaints,
in complaint handling; in turn, this will lead to • Enable customers to complain at all
an increased customer commitment and loyalty. touch-points,
Effective complaint handling can have a dramatic • Ensure all employees understand the com-
impact on customer retention rates (Tax, Brown, plaints management process,
& Chandrashekaran, 1998). A company can take • Collect complaints data and analyze root
feedback from their customers through suggestion causes,
forms, inquiries, toll-free numbers, online social • Implement technology to support com-
platforms, e-mail and mails. Listening to customer plaints-handling and generate useful, and
complaints can also lead to a generation of new • Management reports.
ideas. Listening to customer complaints is not
enough, the company must respond to customer Customization is another requirement for cus-
complaints quickly and constructively in order tomer retention and loyalty and it is an important
to increase customer satisfaction (Kotler, 2000). tool for building loyalty when mass market quality
Typically customers just want their complaints is no longer a sufficient differentiator (Gilmore
be resolved quickly. Research shows that when & Pine, 1996). CRM aims to build mutually
companies resolve problems quickly and effec- beneficial relationships with customers and a
tively there are positive consequences for customer fundamental approach to achieving this goal is to
satisfaction, customer retention and word of mouth customize the value proposition in order to attract
(Tax et al., 1998). and retain targeted customers. In today’s turbulent
Customers should know where to complain, business environment, demands of the customers
customers should know how to complain (the are no longer homogenous. Therefore, firms have
251

to identify the needs of their customers and try to its customer portfolio, achieve its strategic CRM
develop exact products that will meet their needs. objective that is winning and keeping profitable
Advancements in information technology make customers, and deliver satisfying customer experi-
it possible to know about customer needs and al- ence for the profitable customers while ignoring
low firm to communicate with customers on an the other customers and market segments.
individual basis. Long-term relationships with cus- With the help of database marketing, compa-
tomers can be established through customization. nies can develop long-term customer relationships
Customization generates competitive advantage. and increase customer loyalty. Database marketing
To do customization, company needs to be aware is an important marketing tool that allows firms to
of, and responsive to customers’ differing require- target the right customer segments, and through
ments. Information systems allow the company database marketing, firms can generate strategic
to capture, store and distribute customer-related tactics for each of the customer segments. More-
data. Based on the customer data, a company pro- over, database marketing helps firms to identify
vide customized offers. Customization does not the needs of their customers. Thus, database mar-
mean offering customers more choice, customers keting strengthens the customer relationships; in
certainly want their needs to be met. They do not turn, this will lead to customer retention (Fletcher,
necessarily want more choices; however they want Wheeler, & Wright, 2000). Companies use their
their needs have to be met. databases in order to (Kotler, 2000):
Companies can maintain customer retention
and loyalty when they choose their target markets • Identify Prospects: Companies use data-
carefully and prepare tailored marketing programs bases to identify the best prospects. When
according to the needs of their target markets. A firms select the appropriate prospects with
company can rarely satisfy everyone in the market; the help of the database marketing, then
therefore, companies have to find and keep the right they try to convert them into customers.
customers (Kotler, 2000). The right customers are • Decide Which Customers Should
the ones to whom the best value can be delivered Receive a Particular Offer: Firms iden-
by the company. Companies should establish and tify the ideal target customer for an offer.
enhance relationships with the right customers. Then they search their customer databases
Companies have to analyze their customer bases in order to find the people who resemble
and target right customers who are profitable to the ideal type.
serve and strategically significant. Strategically • Deepen the Customer Loyalty: Customer
significant customers are the ones who have high databases can be used to increase customer
lifetime value and potential to use the product/ satisfaction; in turn, this will provide cus-
service in the long term, buy in large amounts, tomer loyalty. Companies can store their
serve as benchmarks for other customers, gener- customers’ preferences in their databases
ate references and help companies access new and serve their customers according to
customers and markets, and inspire change and their preferences.
improvement in the company’s business (Buttle, • Reactivate Customer Purchases: With
2009). Thus, there is a need to make a customer the help of customer databases, firms
base segmentation on the basis of customer profit- can make attractive and timely offers.
ability, relationship revenue and relationship cost Companies can send birthday or anniver-
(Storbacka, 2000). The implementation of a CRM sary cards, seasonal shopping reminders
strategy and the utilization of CRM technolo- and promotions to the individuals in order
gies allow the company to effectively manage to reactivate customer purchases.
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Customer retention can occur at four different CUSTOMER COMMITMENT

levels and each level binds the customer a little
closer to the company. The four level of retention Building long term relationship requires mutual
strategies are (Rai, 2012): reciprocity, trust, and commitment. Commitment
can be defined as an enduring desire to maintain
• Financial Bonds: Customers are offered a valued relationship (Moorman, Zaltman, &
financial incentives either for greater vol- Deshpande, 1992; Morgan & Hunt, 1994). Since
ume purchases or for continuation of rela- commitment refers to the motivation to continue a
tionship for a longer period of time. The relationship (Moorman et al. 1992), commitment
more the customers use the service, the exists only when the relationship is considered
more they get discounts. The risk for finan- important and if there is no commitment, the
cial model is that customers come for this relationship will soon come to an end. Therefore,
financial gain. relationship commitment is seen as an important
• Social Bonds: At this level, the company driver of customer loyalty (Morgan & Hunt, 1994;
intends to develop long term relation- Fullerton, 2003; Rauyruen, Miller, & Barrett,
ships with customers through social and 2007). Customers may have different motivations
interpersonal relationships. The services to commit to do business with the company. The
are customized to fit individual needs. marital relationship is similar to the relationship
Companies look for ways to keep in touch between the company and its customers (Dwyer,
with their customers by providing personal Schurr, & Oh, 1987). Johnson, Caughlin, and
touch and building informal relationships. Huston (1999) mention about the tripartite nature
• Customization Bonds: Tailored offers are of marital commitment and they argue that the
provided for the customers. They take the experience of marital commitment is not unitary
views and opinions of customers in the of- and there are three distinct types of marital com-
fer design. If a customer feels that his opin- mitment: personal, moral and structural commit-
ion is taken into account, it will certainly ment. Each commitment type has different set of
lead to building special relationships with reasons to continue a marital relationship.
the company. Many customers visit a par- Personal commitment to a marriage refers to
ticular restaurant because they believe that the sense of wanting to stay in the relationship.
the chef knows exactly what taste they like. A person may feel committed to the marriage
The customer stops going to that restaurant because he or she feels attraction to the partner.
when the chef goes. Personal commitment is the function primarily
• Structural Bonds: The company estab- of love, marital satisfaction, and couple identity
lishes a network with the customers and (Johnson et al, 1999). Personal commitment has
offers everything required in the service positive impact on marital quality because personal
delivery process. They tie the customers in commitment can lead partners to act constructively
the structure of the organization and then to solve problems and to reduce destructive com-
leverage them. These bonds are created by munication during conflicts (Tang, 2012). As
providing highly customized services to Stanley, Markman, and Whitton (2002) indicate,
the clients. spouses with high personal commitment to the
marriage work together to improve relationship
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satisfaction, show less interest to alternative op- have high personal commitment, work together to
portunities that can weaken their partners’ sense of improve relationship satisfaction. Customers show
trust. Moral commitment in marital relationships less interest to competitors. Personal commitment
refers to feeling morally obligated to stay married. has also positive impact on business relationship
Spouses prefer to stay married because of his or quality because personal commitment can lead
her moral standards about childrearing or divorce. partners to act constructively to solve problems
Partners may feel that a marriage ought to last only during conflicts. On the other hand, in the context
with death or partner might feel a personal moral of moral commitment business partners continue
obligation to another person because with the mar- to the relationship because they feel a sense of
riage he or she gives promise to stay with his or obligation to continue the relationship. In moral
her partner for the rest of life, and may think it is commitment there is a limitation but the decision
not fair to leave (Johnson et al., 1999). Spouses, to continue the relationship is given by internally
who attach the marriage morally, perceive the (Peelen, 2005). However, in structural commit-
marriage as a lifelong relationship and because of ment customers are unsatisfied with relationship
this reason they show tolerance to their spouses but stay in the relationship because of external
especially when coping with difficulties in the constraints. High switching costs and barriers,
marriage (Lambert & Dollahite, 2008). However, lack of alternatives, and troublesome termination
in structural commitment spouses are unsatisfied procedures lead customers to continue to do busi-
with relationship but stay in the relationship be- ness with the company. In structural commitment
cause of external constraints (Tang, 2012). They there is no way to escape because investments have
stay married regardless of the level of personal or been made; so there is limitation and the decision
moral commitment (Johnson et al., 1999). Bar- to continue to the relationship is given because of
riers to leave a relationship or perceived costs of external reasons (Peelen, 2005).
dissolution of a relationship lead spouses to stay Structural commitment can be considered
married. Unfavorable alternatives, troublesome with the scope of calculative or continuance
termination procedures (division of properties), commitment. Calculative commitment is based
irretrievable investments in the marriage (invested on rational and economic calculation; while af-
time and resources into a relationship), and social fective commitment (personal commitment) is
pressure (reactions of family members and friends, driven by an emotional and social attachment.
they may not approve divorce) may create barriers However, normative commitment (moral commit-
to leave the relationship (Johnson et al., 1999). ment) is an attachment driven by felt obligation.
The tripartite nature of marital commitment In calculative commitment customer commits
that is the personal, moral, and structural reasons to the relationship by calculating the benefits
to stay married (Johnson et al., 1999) can be associated with continuing the relationship and
also seen in relationship commitment between the costs of relationship termination. There are
the company and its customers. Customers may two types of calculative commitment: negative
commit to do business with the company because and positive calculative commitment. Negative
of personal, moral, and structural reasons. In calculative commitment is referred as locked-in
personal commitment, customers prefer to con- commitment which arises due to the irretrievable
tinue the relationship with the company; because relationship-specific investments, perceived lack
customers feel satisfaction and comfortable to of alternatives, and/or perceived switching and
do business with the company. This is a personal termination costs. Positive calculative commit-
and internal choice to commit to the relationship ment is considered as value-based commitment,
(Peelen, 2005). Partners of the relationship, who which is based on the rational calculation of ben-
254

efits that arise from continuing the relationship. customer’s future purchase intentions and intention
In value-based commitment, customers continue to stay in the relationship. Dick and Basu (1994)
their relationship because they benefit from staying identify four forms of loyalty based on the relative
in the relationship (Sharma, Young, & Wilkinson, attitudinal strength and repeat purchase behaviour:
2006). Sometimes customers commit to the re-
lationship because of high switching cost or lack • Loyalty: A high level of both repeat buying
of alternatives and this causes customers to feel and relative attitude (their repeat purchas-
that they are trapped in the relationship. Although ing is explained by affective commitment).
calculative commitment maintains continuance, • Spurious Loyalty: A low relative attitude
there is no relational bond. Since calculative com- accompanied by high repeat buying (their
mitment is based on task oriented and rational repeat purchasing can be explained by
bond, customer may terminate the relationship locked-in commitment).
if he receives an economically attractive offer • Latent Loyalty: Having a strong relative
from competitors (Gilliland & Bello, 2002). In attitude but not accompanied by repeat
affective commitment customer attaches the re- buying.
lationship due to the liking or feeling of positive • No Loyalty: A low relative attitude com-
affect towards the firm. Affectively committed bined with low repeat patronage.
customers stay in relationship because they want
to and they like and enjoy working with the firm Customer loyalty can be handled from two
(Fullerton, 2005). However, in normative (moral) perspectives: behavioural and attitudinal loyalty.
commitment compliance is due to the felt obli- Attitudinal loyalty includes attitude such as be-
gations, identification with or internalization of liefs, feelings and purchasing intention. Whereas,
partner’s value. behavioral loyalty reflects customer purchasing
Commitment is one of the essential drivers of behavior. Behavioral loyalty is considered as the
developing long term sustainable relationships customer’s willingness to repurchase the product
and customer loyalty (see Figure 2). Loyalty is and to continue a relationship with the company.
the degree to which a customer exhibits repeat On the other hand, attitudinal loyalty expresses
purchasing behavior from the company, possesses the level of the customer’s psychological attach-
a positive attitudinal disposition toward the comments and attitudinal advocacy to the company
pany, and considers using only this company when (Rauyruen et al., 2007). Behavioral loyalty is the
a need for this product or service arises (Gremler observable outcome of attitudinal loyalty.
and Brown, 1996). Commitment has an impact on
Figure 2. Commitment is a driver of loyalty
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Customer loyalty is a strategy that creates mu- aim for achieving affective commitment in order
tual benefits for the company as well as customers. to achieve sustainable and profitable long term
To achieve customer retention and loyalty, compa- relationships with their customers, and ensure
nies provide value added benefits and rewards to customer advocacy (see Figure 3).
their customers for their repeat purchases. On the Calculative commitment has a weaker effect
other hand, with loyal customers, companies can than affective commitment on customer retention
maximize their profit because loyal customers are (Fullerton, 2003; 2005) and makes a negative
willing to buy more frequently, purchase cross- impact on advocacy intentions and word of mouth
sell and up-sell offers, recommend products and communication (Fullerton, 2005). This means that,
services to others, and act as customer referrers. in calculative commitment customers continue
Therefore, both parties of the relationship benefit to repurchase; but they do not show attitudinal
from the development of long term relationships. loyalty. Since in calculative commitment espe-
Companies that want to promote longer-term cially for the locked-in commitment, customers
customer relationships, maintain customer reten- feel that they are being locked in the relationship.
tion, and reduce customer defection rates, should They may think to terminate the relationship as
focus on understanding the drivers of customer soon as possible when they have the opportunity
loyalty and why customers stay. So that, compa- to exit the relationship (Fullerton, 2003). When
nies can develop strategies that promote customer the incentives or barriers that lead to calculative
retention. In efforts to achieve customer loyalty, a commitment are removed, customers can easily
company should focus on building relationships terminate the relationship or switch to the other
based on affective aspects of commitment rather company that provides an attractive offer. Thus,
than calculative aspects. As customer retention customers who feel trapped in the relationship
strategy, affective commitment, which is based are unlikely to act as referrer. However, in highly
on attraction between partners, has to be preferred competitive markets, encouraging customer re-
over calculative commitment. Since calculative ferrals is an essential part of customer retention
commitment is based on constant weighing of the strategies. Companies that want to completely reap
benefits of a relationship with a partner against the benefits of their loyal customer base require to
the costs of that relationship, relationship that is
based solely on calculative commitment most
likely not to last for a long time. Figure 3. Positive customer retention strategy
Affective commitment, which is considered
as personal commitment, has a negative impact
on switching intentions and a positive impact
on advocacy intentions of customers (Fullerton,
2005). As it is known, customer loyalty has a
positive effect on customer willingness to accept
price increases. Customers, who experience high
levels of affective commitment, are more likely to
accept high prices. However, the presence of cal-
culative commitment in the relationship decreases
the positive effects of affective commitment on
willingness to pay more (Fullerton, 2003). Af-
fective commitment is key to the maintenance
of customer retention. Thus, companies need to
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focus on creating affective commitment as well as bill is $52, cost to serve a customer is $30 monthly,
decreasing locked-in commitment activities and and customer churn rate roughly is 24% for each
increasing value based commitment activities. year, mobile communication carriers do not find
There are some strategies and tools that a meaningful to acquire new customers, who do not
company can use in order to build and enhance use the phone for business purposes or who do not
customer affective commitment or at least value already subscribe to a mobile phone service. So
based commitment to the company within the that mobile communication carriers try to main-
context of customer retention program. Companies tain the commitment of their customers through
that want to enhance customer affective commit- contractual agreements generally for a period of
ment require to avoid creating switching barriers one to two years. There is a high level of customer
and costs, which are going to create a sense of be- dissatisfaction in the USA market. Financial pres-
ing trapped in the relationship. Harvard Business sures on mobile carriers make their sales process
Review analyses the case of Virgin Mobile USA and pricing plans complex, and force them to use
and this case reveals the fact that companies can lock-in contracts, hidden fees and pricing buckets
also enhance customer retention without using to increase margins, cut some customer services
structural commitment or locked-in commitment to reduce costs, and aggressively promote low
tools (see Box 1). prices. Complex pricing plans (e.g., pricing buck-
There is high competition in the mobile com- ets, hidden costs, and peak/off-peak distinctions),
munications industry in the USA. As indicated in credit checks, forced contacts, and poor service
the HBR case study, in context of the USA market, lead high level of customer dissatisfaction in the
where the average cost to acquire a customer is ap- USA mobile carrier industry. Forced contracts
proximately $370, average monthly mobile phone that cause customers feel trapped in tariffs, pe-
Box 1. Virgin Mobile achieves customer retention without using locked-in commitment tool
The case company Virgin uses a number of different managerial tools to counter negative effects of eliminating locked-in commitment
tools such as contracts through identifying a niche market, understanding real needs of target market, customizing offers based on the
needs of the target market, lowering customer acquisition costs, embracing additional pricing elements that the target market value and
willing to pay, developing a highly differentiated positioning through new service and new pricing proposition. Virgin mobile analyzes
the current situation and realizes that customers do not want contracts, pricing buckets, hidden fees, peak/off-peak hours distinction, and
credit check; but want simple sales process and great service. However, designing a consumer friendly plan causes potential problems.
For instance, eliminating the contracts increases the customer churn rate, excluding the hidden fees, pricing buckets, and peak/off-peak
hour distinction strategies from the pricing plans lowers operating margins, and delivering great service increases the costs. Virgin
Mobile focuses on delivering consumer friendly plan based on the customer needs and wants; at the same time it tries to minimize
potential problems of consumer friendly plan. Virgin Mobile develops a different approach compared to its competitors, who are trying
to sustain commitment of customers through locked-in tools (e.g. forced contracts) or cope with financial pressures through complex
pricing plans (e.g. hidden fees, peak/off-peak hour distinction). First of all, Virgin Mobile identifies a niche market in the crowded
market. It targets consumers aged 15-29; because big players in the industry have not targeted this segment. Moreover, penetration rate is
low and the growth rate among this target market is expected to robust. Identifying a niche allows the Virgin Mobile to develop a highly
differentiated competitive advantage through new services packages and pricing proposition. It lowers customer acquisition costs through
utilizing a different distribution channel to decrease sales commissions, reducing advertising costs, and offering handset subsides at
half the rate of the industry average. As opposed to its competitors, Virgin Mobile offers prepaid subscription to this new target market.
Prepaid plan eliminates the need of contracts and credit checks, simplifies the selling process, encourages trial, and lowers to cost to
serve. It provides simple per minute price; and it does not offer pricing buckets as well as it does not charge any hidden fees. Briefly,
Virgin mobile delivers a consumer friendly plan that is designed and based on the customer needs and wants, and minimizes the potential
problems through developing a highly differentiated new services packages and pricing proposition. This new approach enables Virgin
Mobile to surpass its goal of acquiring 1 million customers within a year launch, achieve the lowest churn rate in the prepaid world, and
simplify the sales and pricing complexity which delights its customers. With this offer, the only thing that keeps customers coming back
is satisfaction.
Source: Jallat, F. (2011). Virgin Mobile USA: Pricing for the very first time (Final). Retrieved April 25, 2013, from http://www.
slideshare.net/nguyenhamar/virgin-mobile-final
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nalization of customers due to the pricing bucket tive commitment to the company. Because of this
shortfalls and over usages, hidden costs, and peak/ reason, customer retention program of companies
off-peak distinctions are among the main sources needs to include activities to improve service
of dissatisfaction. In the USA market, over 90% quality. Companies’ need of delivering improved
of all subscribers have a contractual agreement customer service quality is crucial because it can
with their service providers. Contracts provide be used to differentiate a firm’s products, keep
carriers protection against customer churn and customers loyal and in turn increase sales and
guarantee annuity revenue stream. Even with the profits. Moreover, delivering superior customer
contracts, mobile carriers experience averagely %2 service provides an opportunity for a firm to
industry churn rate per month. When the mobile gain a sustainable advantage in the market place
carriers shorten or eliminate the contracts, it is (Sharma & Lambert, 2000). Customer retention
estimated that churn would be averagely 6% per management programs that are built on value
month (McGovern, 2007). based commitment and support are likely to be
Carriers in the USA market try to create struc- more effective than programs that emphasize
tural commitment through offering buckets of switching costs and barriers in building customer
minutes and in order to get a good rate customers retention (Fullerton, 2003). Establishing affec-
sign contracts for a period of one to two years. tive commitment can be possible by increasing
This type of contractual commitment is based on the relationship benefits (delivering more value
economic calculation. In calculative commitment to customers), focusing on communication and
customer commits to the relationship by calculat- listening the voice of customers instead of con-
ing the benefits associated with continuing the vincing them for sales, establishing interactive
relationship and the costs of relationship termina- communication, and avoiding opportunistic and
tion. They do not feel an emotional attachment to self-interest maximization behavior (Morgan &
the company. Customers demonstrate locked-in Hunt, 1994).
commitment due to the signed contracts. When
customers experience dissatisfaction about the
core services (e.g. network coverage, roam- LOYALTY PROGRAMS
ing), customer service (e.g. complaint handling,
customer service speed and competency), and/ Creating customer loyalty is essential for the
or pricing (e.g., billing, charges for exceeding financial health of the company. Long-term com-
limit), they cannot terminate the relationship pany success depends on the company’s ability
easily. They need to wait until the end of their to cultivate from loyalty. Thus, it is significant
contracts. Therefore, customers feel trapped in to ensure and coordinate the activities that will
the relationship. Although they seem to be com- foster customer retention and loyalty. Loyalty pro-
mitted to the relationship, there is no relational grams also facilitate customer retention. Loyalty
bond. Customer may terminate the relationship programs allow the company to track the buying
if he receives an economic pricing package offer behaviour of the customers, develop commitment,
from another carrier. and reward loyal and frequent buyers. Companies
Creating satisfaction appears to be a crucial use loyalty programs in order to encourage repeat
factor in maintaining purchase intentions; whereas, purchasing and increase customer retention. Loy-
service quality strongly enhances both purchase alty programs perform two significant roles in
intentions and attitudinal loyalty (Rauyruen et CRM implementations. First, they generate data
al., 2007). Service quality is expected to have that can be used to guide customer acquisition,
significant effect on the development of affec- retention and development. Secondly, loyalty
258

programs may serve as an exit barrier. Custom- these initiatives make customers not just pleased,
ers who have accumulated credits in a scheme but grateful. For instance, Interflora launches
may be reluctant to exit the relationship (Buttle, a social media campaign in the UK in order to
2009). These programs usually take the shape of make lives of Twitter users happier by sending
membership and loyalty card programs in which them flowers. Interflora tracks Twitter accounts
customers are rewarded for their loyalty. These to find out Twitter users who need to be cheered
rewards may range from privileged services to up. Then the brand contacts with them in order to
receiving points for money spent, special pur- send them flowers as a surprise. This random act
pose membership cards, bonuses and discounts of kindness delights customers, starts conversation
(Raphel, 1995). about the brand and can be attractive to attract
According to the Trendwatching.com (October, first time customers (Trendwatching.com, March/
2008) report perks and privileges are the new April, 2011).
currency. Perkonomics defined as a new breed Perks can be provided in various forms. A
of perks and privileges which is added to brands’ few perks examples will be given in the below
regular offerings in order to allow customers to (Trendwatching.com, October 2008):
achieve status, helps customers save time, make
their life convenient, and/or deliver free love • Only and First Perks: Perks that are given
which means gesture of kindness. Customers only a specified group of customers with a
truly appreciate the exclusive access to privileges priority. This form of perk creates unique-
and perks; therefore it can be used as a part of a ness and customers feel they are privileged.
loyalty program in order to reward loyal customers For example, Amex provides its cardhold-
or create enjoyable experiences to foster loyalty. ers exclusive access to purchasing a dress
Perks that deliver free love in the form of gestures which is selected by famous designer Diane
lead customers to love the brand more. Exclusive von Furstenberg; however this dress cannot
access to privileges and perks creates a sense of be purchased by non-Amex customers.
uniqueness which in return enables customers to • No Queue Perks: No queue perks allow
achieve status in the society. Sense of uniqueness customers save time by passing queue
fosters customer loyalty as well as helps the brand directly. This form of perk provides con-
attract first time customers. When the perks and venience for customers. Avis provides its
privileges are consumed by customers, others also customers a preferred membership, which
see or customers tell their experiences about perks allows its customers to get their keys with-
to others. Since perks are excellent conversation in 3 minutes and go directly to their car
starters, they can be used to create buzz and at- skipping paperwork and without waiting in
tract first time customers. A good perk story may lines.
also function as public relation activity. Perks also • Concierge Perks: Brand can offer con-
make brands enjoyable, attractive and desirable cierge perks by caring their customers’ res-
(Trendwatching.com, October 2008). ervations, repairs, bookings, shopping, etc.
Perks and privileges help satisfy consumers’ A good example for concierge perks can
needs for status or convenience or empathy, or be given from Insinger de Beaufort. The
all of them at the same time. Random acts of Amsterdam based bank offers a new ser-
kindness delights customers. Integrating perks, vice to its customers in order to help their
privileges and random acts of generosity to loyalty customers save time and organize their per-
programs require careful planning to get ROI and sonal finance tasks. Every month they send
259

their clients a shoebox and clients put their Companies should also analyze and find out
bills, bank statements, receipts, tax returns, if customers give any early warning signals of
and all other financial documents into the defection. If the company identifies signals of
box. Then the bank takes the box from customer churn, it can take pre-emptive action.
them and processes its content. Bank takes Signals might include the following (Buttle, 2009):
care of the entire follow-up process and
sends a complete overview of actions and • Reduced RFM scores (recency–frequen-
transactions within three business days. cy–monetary value),
• Parking Perks: Parking perks also make • Non-response to a carefully targeted offer,
customers’ life easy and provide hassle- • Reduced levels of customer satisfaction,
free parking or free parking to custom- • Dissatisfaction with complaint handling,
ers. Lexus offers free parking privileges • Reduced share of customer,
in Australia. Owners of Lexus access to • Inbound calls for technical or product-re-
free parking at a number of cultural cen- lated issues,
ters throughout the country, including the • Late payment of an invoice, and
Sydney Opera House. This privilege is pre- • Querying an invoice.
cious both from a status and convenience
perspective and can also take attention of Customer recall management is about winning
potential customers. back the customers who have either reduced their
level of business transactions with the company or
have stopped transaction at all. It aims to rebuild
WIN BACK STRATEGIES relationships with the customers who have aban-
doned the company. Regain management aims at
In the last stage of the purchase cycle, companies former customers who have experience with the
require to make defection analysis. There are two company. In traditional recruiting, segmentation
types of defection: avoidable defection and natural is solely based on the external data and commu-
(unavoidable) defection. Customers defect for nication is directed mainly one way toward the
various reasons and some of these reasons are prospect. With regain management marketing
preventable. Thus, knowing this fact the company can rely on proprietary database for segmenta-
needs to implement win back strategies to prevent tion and communication more often initiated by
them from avoidable defections. On the other hand the expired customers (Bose & Bansal, 2001).
some of the defections cannot be preventable. Quantifying the value of customer is essential in
The company can learn a great deal by listen- regain management. Without knowing the value
ing the voice of customers. The company should of customers it is difficult to know how much the
analyse why the customers leave the company company should spend in order to reacquire the
and take corrective actions if it is an avoidable customer. Customization, differentiation and wow
defection. The company requires to analyze the strategies are among the regain strategies for lost
complaint and service data in order to identify customers (Bose & Bansal, 2001).
the problems that may cause defection and if it is Vtrenz (2004) identifies nine principles for
needed it can change its processes and systems. winning back profitable customers:
Defection analysis is a key component for the
company’s customer retention strategy by this • Identify at risk customers early
way it can win back its customers. • Evaluate customer value
260

• Understand motivations for defection maintain customer satisfaction, companies need

• Track the competition to learn about customers’ expectations and needs.
• Improve on the attributes most valued Listening the voice of customers is essential
• Leave on a good note to learn about the customers’ expectations and
• Stay in touch needs. Company can listen the voice of customers
• Ask for another chance through customer satisfaction indices (e.g., making
• Provide a peace offering surveys to measure customer satisfaction), market
research, feedbacks (e.g., evaluating complaints,
comments, and questions), and frontline employee
CONCLUSION (frontline employees, who have direct interaction
with customers, provide customer insight). Based
The primary goal of relationship marketing is to on the gathered customer feedback, company may
build and maintain a committed customer base improve its products, services, and processes; so
who is profitable for the company. Loyal custom- that it can achieve customer satisfaction. More-
ers provide a solid base of revenue stream for the over, a good source of information about how
company as well as they may represent growth to improve customer loyalty can be obtained by
potential; because they buy more products and examining the customers who defect. Learning
services from the company over time. Companies about the causes of defections provides an op-
implement retention marketing practices in at- portunity for a company to revise and improve
tempt to increase customers’ commitment to the all of its procedures. The quality and consistency
company. In the context of retention marketing, of the service are critically crucial for customer
company needs to identify customers who are retention. A company that wants to increase cus-
profitable to serve, and find out ways to keep them tomer retention must provide superior service to
with the company. Improving customer retention its customers. To deliver outstanding customer
rates while decreasing the defection rates is an service, companies need to ensure employee
important objective for the CRM strategies; be- enthusiasm and create an internal culture which
cause long-term company success depends on the assists and supports development of a customer
company’s ability to cultivate from loyalty. Thus, oriented culture within the organization.
marketing’s mission is to ensure and coordinate Loyal customers account for a valuable amount
the activities that will foster customer retention of company profits; therefore, a company should
and loyalty. not risk losing a customer by ignoring their com-
A company can maintain customer retention plaints. Since effective complaint handling can
and loyalty through customer satisfaction, supe- have a dramatic impact on customer retention
rior service, loyalty programs, defection analysis, rates, company must respond to customer com-
complaint handling, mass customization, customer plaints quickly and constructively. Customization
targeting and database marketing. Companies must is another requirement for maintaining customer
aim for high satisfaction; because high satisfaction retention and loyalty. Customization help the
creates an emotional bond with the firm and in company build mutually beneficial relationships
turn, this will lead to customer retention. Provid- with customers. To do customization, company
ing superior value, which will delight customers, needs to be aware of, and responsive to custom-
is the most reliable way to ensure sustainable ers’ differing requirements. Information systems
customer satisfaction and customer loyalty. On allow the company to capture, store and distribute
the other hand, delivering poor product and/or customer-related data and based on the customer
service is the main source of dissatisfaction. To data, a company can provide customized offers.
261

Companies can maintain customer retention and win back their lost customers, they have to give
loyalty when they choose their target markets care- them an opportunity to tell why they left. They
fully; because a company cannot satisfy everyone need to listen the voice of ex-customers as well as
in the market. Therefore, companies have to find dissatisfied existing customers. In return, company
and keep the right customers who are profitable can gain valuable insight about its weakness, and
for the company to serve. Database marketing is have a chance to improve its processes, products
an important marketing tool that allows firms to and services with the purpose of wining some
target right customer segments, identify customer customers back. Companies can implement cus-
needs, and provide tailored products and services tomer recall management in order to win back
for each of the customer segments. Thus, database customers who have either reduced their level of
marketing strengthens the customer relationships; business transactions with the company or have
in turn, this will lead to customer retention. stopped transaction at all. It aims to rebuild rela-
Commitment can both enhance and erode relationships with the customers who have abandoned
tionship between the company and its customers. the company.
Affective commitment efforts enhance the rela-
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KEY TERMS AND DEFINITIONS customers, develop commitment, and reward loyal
and frequent buyers. Loyalty programs perform
Affective Commitment: Affective com- two significant roles in CRM implementations.
mitment refers to a desire based attachment to First, they generate data that can be used to guide
the firm. Affective commitment is driven by an customer acquisition, retention and development.
emotional and social attachment. In affective com- Secondly, loyalty programs may serve as an exit
mitment customer attaches the relationship due barrier.
to the liking or feeling of positive affect towards Moral Commitment: Within the context of
the firm. Affectively committed customers stay moral commitment, business partners continue
in relationship because they want to and they like to the relationship because they feel a sense of
and enjoy working with the firm. obligation to continue the relationship. In moral
Attitudinal Loyalty: Attitudinal loyalty commitment there is a limitation but the decision
includes attitude such as beliefs, feelings and to continue the relationship is given by internally.
purchasing intention. Attitudinal loyalty expresses Negative Calculative Commitment: It is
the level of the customer’s psychological attach- referred as locked-in commitment which arises
ments and attitudinal advocacy to the company. due to the irretrievable relationship-specific in-
Behavioral Loyalty: It reflects customer pur- vestments, perceived lack of alternatives, and/or
chasing behavior. Behavioral loyalty is considered perceived switching and termination costs.
as the customer’s willingness to repurchase the Perkonomics: According to the Trendwatch-
product and to continue a relationship with the ing.com report perks and privileges are the new
company. Behavioral loyalty is the observable currency. Perkonomics defined as a new breed
outcome of attitudinal loyalty. of perks and privileges which is added to brands’
Cult Brand: Cult Brands are a special class regular offerings in order to allow customers to
of magnetic brands that command super-high achieve status, helps customers save time, make
customer loyalty and almost evangelical customers their life convenient, and/or deliver gesture of
or followers devoted themselves to the company. kindness.
Cult brands create customers who love them so Personal Commitment: In personal commit-
much that they won’t do business with anyone else. ment, customers prefer to continue the relation-
Cult brands do not just offer great products and ship with the company; because customers feel
services, they provide social interaction, esteem, satisfaction and comfortable to do business with
and self-actualization. the company. This is a personal and internal choice
Locked-in Commitment: Locked-in commit- to commit to the relationship. Customers show
ment arises due to the irretrievable relationship- less interest to competitors. Personal commitment
specific investments, perceived lack of alterna- has also positive impact on business relationship
tives, and/or perceived switching and termination quality because personal commitment can lead
costs. In locked-in commitment, customers feel partners to act constructively to solve problems
that they are being locked in the relationship. Al- during conflicts.
though locked-in commitment ensures customer Positive Calculative Commitment: It is
continuance, customers may think to terminate the considered as value-based commitment, which is
relationship as soon as possible when they have based on the rational calculation of benefits that
the opportunity to exit the relationship. arise from continuing the relationship. In value-
Loyalty Program: Loyalty programs facilitate based commitment, customers continue their
customer retention. Loyalty programs allow the relationship because they benefit from staying
company to track the buying behaviour of the in the relationship.
266

Structural Commitment: In structural com- there is no way to escape because investments have
mitment customers are unsatisfied with relation- been made; so there is limitation and the decision
ship but stay in the relationship because of external to continue to the relationship is given because
constraints. High switching costs and barriers, of external reasons. Structural commitment can
lack of alternatives, and troublesome termination be considered with the scope of calculative or
procedures lead customers to continue to do busi- continuance commitment.
ness with the company. In structural commitment
267
268
Related References
To continue our tradition of advancing business and management research, we have compiled a list of
recommended IGI Global readings. These references will provide additional information and guidance
to further enrich your knowledge and assist you with your own research and future publications.
Acilar, A., & Karamasa, Ç. (2011). Factors Ahmed, A. M. (2011). Customer relationship and
affecting e-commerce adoption by small satisfaction: The Jumeirah beach hotel case study.
businesses in a developing country: A case [IJCRMM]. International Journal of Customer
study of a small hotel. [IJICTHD]. International Relationship Marketing and Management, 2(1),
Journal of Information Communication 19–35. doi:10.4018/jcrmm.2011010102
Technologies and Human Development, 3(3),
Alhawari, S. (2012). The practice of Jorda-
31–41. doi:10.4018/jicthd.2011070103
nian banking to improve customer retention.
Acilar, A., & Karamasa, Ç. (2012). Factors af- [IJCRMM]. International Journal of Customer
fecting the e-commerce adoption by small hotels: Relationship Marketing and Management, 3(2),
A comparative case study. [IJEA]. International 47–60. doi::10.4018/jcrmm.2012040104
Journal of E-Adoption, 4(1), 1–10. doi:10.4018/ Al-Khaffaf, M. M., & Abdellatif, H. J. (2011).
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319
About the Author
Süphan Nasır received her BS degree in Sociology from Boğaziçi University, Turkey, and her PhD
degree in Marketing from Istanbul University, Turkey. She was assigned as Assistant Professor in the
Department of Business Administration at Istanbul University in 2007 and promoted to the position of
Associate Professor in 2009. She is currently Associate Professor at İstanbul University and she has
been holding the positions of Chair of Production Management and Marketing discipline, vice chair of
Business Administration Department, and Coordinator of Business Administration e-Learning program
since 2009. She has been also actively dealing with higher education issues. She has been Editor-in-Chief
of International Journal of E-Entrepreneurship and Innovation and Associate Editor of Yükseköğretim
Dergisi / Journal of Higher Education since 2010. She is the advisory board member of Journal of
Higher Education and Science and The Society of Digital Information and Wireless Communications
(SDIWC). She also undertook important roles such as organization committee member and advisory board
member of international conferences about higher education such as The International Higher Education
Congress: New Trends and Issues (UYK-2011), International Congress on Trends in Higher Education:
Innovations and Entrepreneurship (ICTHE2012), National Congress on E-Learning Technologies (2013),
and International Summit of Istanbul Economists (2013). Customer relationship management as well
as consumer behavior, innovation management, entrepreneurship, and higher education issues are the
scope of her interest area. Her latest book entitled Modern Entrepreneurship and E-Business Innovations
was published in USA in 2013. Her articles have been published in reputable books and international
academic journals. She attended some major international conferences as keynote speaker. She has also
presented her research papers at major international conferences and received several scientific publica-
tions and best presenter awards.

320
Index
A customer commitment 46, 94, 131, 187, 196, 247,

251, 253
Advocacy Program 206-207, 209-210, 217 customer contact management 157-159
Affective Commitment 43, 46-47, 254-258, 262, 266 customer conversion 146, 199
Analytical CRM 136, 147-150, 152, 157, 160, 171, customer data analysis 150, 152
174, 180-181, 213 customer development 160, 199, 203-204, 213, 246
Attitudinal Loyalty 247, 255-256, 258, 266 customer experience 12, 16-17, 55, 89, 92-104,
106-108, 110-117, 119-120, 122-125, 129, 131,
B 136-142, 146, 148, 153, 155-156, 169-171,
175, 182-183, 186-188, 193-195, 198, 201,
Bare Bones Relationships 87
204, 208, 213, 217-218, 220-221, 223, 226,
Behavioral Loyalty 255, 266
245, 248, 250, 252
Big Data Analytics 106-107, 129
customer experience management 89, 95-97, 99-
brand value 1, 13, 109
101, 104, 108, 111-112, 187, 208, 250
Business Alliance 73-76, 85, 87
Customer Insight 1, 6, 13, 15-16, 24, 56, 89, 97-98,
103, 105-107, 123-124, 130, 134, 136, 139,
C 141, 148, 150-152, 156-157, 160, 162, 167-
Collaborative CRM 131, 136, 147-150, 152, 156- 169, 171, 174-175, 180, 184, 186-187, 190-
157, 174, 180, 213 191, 193-195, 200, 204-205, 208, 212, 217,
Collaborative Relationships 28, 38, 41, 79, 85, 87, 220, 224, 226-227, 239-240, 250, 261
171 customer intimacy 51, 55, 183-187, 190-191, 212,
competitive strategy 2, 106, 184-186, 217 217
Contractual Transaction Relationships 87 Customer Intimacy Value Strategy 185, 187, 217
Cooperative Systems 87-88 Customer Lifetime Value 140, 162, 201, 228, 239,
CRM Ecosystem 131, 146-147, 157, 169, 180 242, 245
CRM implementation 95, 131, 135, 137-138, 142- customer loyalty program 3, 5, 8, 12, 14, 16, 18,
143, 199 31, 44-46, 48, 50, 63, 91-92, 95, 113, 116-117,
CRM information system 139 132-134, 137, 144, 146, 156-157, 167, 173,
CRM life cycle 142-143, 202 175, 183, 186, 188-190, 192, 195, 202-204,
CRM philosophy 182-183, 198 206, 212, 217, 219, 221, 244, 246-248, 250-
CRM technology 134, 140, 142, 146, 153, 157, 170, 253, 255-256, 258-259, 261, 266
172, 183-184 customer profiling 150, 160, 224, 228
Cult Brand 246, 266 customer profitability 112, 144, 146, 157-160, 173,
customer acquisition management 219-222, 237 175, 196, 229, 239, 247, 252
Customer Age 2, 23, 149 customer retention 1, 5, 12, 16, 18-19, 25-26, 28,
customer centric business strategy 187-188, 190, 31, 34, 37, 39, 42-43, 45, 50, 55, 89, 91, 94-96,
198 112-113, 129, 131, 136, 143, 146, 154, 156-
customer centric strategy 98 157, 162, 166-167, 170, 173, 187-190, 193-
194, 196, 199, 202, 205, 208-209, 212-213,
219-221, 238, 244-253, 256-258, 260-262, 266
Index
customer scoring 160, 164 I

customer segments 1, 3, 16, 19, 24, 136, 141, 144,
149, 156, 160-161, 165, 194-195, 212, 228- IDIC Model 147-148, 181
229, 237, 247, 252, 262 Industrial Era Marketing Practices 36
customer self-service 116-117, 124, 153, 169 industrial marketing and purchasing (IMP) 30
customer service 12, 32, 37, 56, 83, 89-90, 92, 94- Influence Markets 42-43, 62-63
97, 100-124, 129, 131, 133-134, 136, 145, 147, integrated CRM system 171
149-150, 152-153, 156-158, 163-164, 166, 168- Internal Marketing 30, 33, 53, 89-91, 93-94, 122,
171, 174-175, 180, 182-184, 186-187, 192-193, 129, 136
195-196, 198, 203-205, 209, 213, 217, 220, internal partnerships 39
246-250, 258, 261 internal service quality 94, 130
customer service automation 153, 168-169
customer service experience 89, 94-97, 100-103, K
105-107, 109-112, 120-124, 129, 163
Key Account Management (KAM) 69, 88
customer targeting 131, 159-160, 228, 247, 261
Key Mediating Variable (KMV) Model 43, 62
customer understanding 156-158
Customer Value 1, 3, 5-6, 16-17, 19, 24, 37-38, 41,
55-57, 64, 74, 79, 85, 90, 94, 105-106, 131,
L
133-134, 137-139, 141, 150, 173-174, 182-184, lateral partnerships 39
186, 190-191, 201, 212-213, 227, 229, 242, 247 Lead Generation 9, 154, 162, 166-167, 180, 195,
219, 223, 229-234, 238-239, 242-243
D Lead Management 136, 162, 164-165, 198-199, 201,
219, 221, 223-226, 229-230, 232, 234, 237-
database marketing 41, 136, 247, 252, 261-262
240, 243
data mining 57, 84, 134, 149-150, 158, 160-161,
Lead Nurturing 154-155, 166, 219, 223, 230, 232-
172, 174, 180, 224, 227
235, 237-240, 242-243
deep-sell 205
lead qualification 162, 223, 227, 232, 238, 243
defection analysis 247, 260-261
Lead Scoring 154, 166, 224, 228, 232-234, 237, 243
Devoted Customer 206, 208, 213, 217, 246
Locked-in Commitment 47, 254, 256-258, 262, 266
differentiation 1, 6, 11-12, 31, 96, 122, 138-139,
183, 191, 226, 260
digital advertising 9
M
drip campaigns 166, 234, 240 marketing automation 147, 153-155, 157, 161, 165-
Drip Marketing 166, 234-235, 240, 242-243 167, 174, 207
marketing communication 1, 6, 9, 19-20, 23, 230
E mass production 27, 29, 36
micro-blogging 231
economic downturn 8-9, 16, 19, 122
mobile channels 117-118, 124, 149
employee satisfaction 93-94, 122, 129-130, 138, 190
multi-channel customer support 112
Enterprise Marketing Management (EMM) 161-162,
Mutually Adaptive Relationship 88
180
F N
Nano Relationships 40, 62
facilitators of relationship marketing 52
Negative Calculative Commitment 47, 254, 266
feedback channels 106, 249
networking relationships 68
feedback management 158
Nordic school 30
normative commitment 46-47, 254
H
high performing relationships 68
321
Index
O Relationship Life Cycle 197, 217

Relationship Marketing 5, 25-26, 28-34, 37-46, 48-
online communities 114, 209, 212, 221 57, 62-64, 69, 74-75, 81, 85, 88-95, 122, 129,
Online Customer Service Channels 114-115, 129 131-132, 135, 154, 200, 202, 221, 225, 227,
online live chat 108, 114 238, 243-244, 261
Operational CRM 147-149, 152-157, 159, 167, 171, Relationship Termination Cost 43, 62
174, 180-181 Relationship Trust 63, 73
Operational Excellence Value Strategy 217 Revenue Performance Management (RPM) 167, 181
order management 163, 169
S
P
sales force automation 146-147, 153, 155, 157, 162-
performance assessment 140-141 164, 167, 169-170
Perkonomics 259, 266 Sales Pipeline Management 164-165, 181
Personal Commitment 253-254, 256, 266 Service Profit Chain 89, 93-94, 129-130
Positive Calculative Commitment 47, 254, 266 services marketing 29-30, 38-39, 41, 93
post-industrial era 25-26, 28-29, 33 Six Market Model 42, 63
potential customer 224, 234 Social Customer Support Programs 109-110, 130
predictive analytics 105, 107-108, 123, 150, 213 Structural Commitment 88, 253-254, 257-258, 267
Pre-industrial Era Marketing Practices 37 supplier partnerships 39, 79, 81
premium price 11-14, 119 supplier relationships 65, 79, 197
price cuts 3, 12-13, 19
Product Leadership Value Strategy 185-186, 217 T
Q Transactional Marketing 25, 27, 29, 31, 33-34, 37,
54, 131
Qualified Prospect 217, 237 Trigger Email 236-237, 243
trigger event 235
R trigger marketing 166, 234-235, 240, 243
recession strategies 10, 24
Recruitment Markets 42-43, 57, 62-63
V
Referral Market 62 Value Creating Networks 65, 82, 88
referral program 17-18 Virtual Agent 114, 116-118, 129-130
relational campaign 205 Virtual Helpdesk 116, 124, 130
Relationship Commitment 43, 45-47, 49-50, 62, Voice of the Customer Program 193-194, 218
253-254
322
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INTRODUCTION nities and promotional offers to their advantage

Figure 1. Characteristics of the age of customer

Table 1. Suggested marketing strategies for competitive and challenging markets

• Position the company in multiple markets and geographies

continued on following page

cutting fixed costs is desirable, the opposite is New products Increase

CUSTOMER INSIGHT information, an enterprise can make its decisions,

Figure 2. Management framework in rapidly changing markets

Figure 3. Marketing strategies in challenging markets

Choosing activities that are cost efficient and REFERENCES

INTRODUCTION encourages repeated and increased frequency in

Table 1. Differences between transactional marketing and relationship marketing

Transactional Marketing Relationship Marketing

of industrial era became transaction-oriented Relationship Marketing: The aim of re-

INTRODUCTION ture. The review finally generated 209 research

Figure 1. The six-markets model

Figure 2. Antecedents and outcomes of relational mediators

Figure 3. Relationship commitment

Figure 4. Attitudinal commitment forms

Trust trust theory of relationship marketing, commit-

Under some conditions, customers terminate the

Figure 5. Facilitators and barriers for relationship marketing success

to implement relationship marketing strategies marketing. They may show resistance

REFERENCES Berry, L. L. (2000). Relationship marketing of

INTRODUCTION competitors. The role and contribution of busi-

• Cooperation or competition, linkages, legal bonds, cooperative norms, and

• Custom Supply Relationships: The dis- ment in mutually adaptive relationships.

Figure 1. Classifiyng value creation function of business relationships

Figure 2. Evaluation of potential partners

Figure 3. Determinants of relationship development process in B2B markets

Figure 4. Objectives of business alliance formation

Figure 5. Critical factors for successful supplier partnerships

INTRODUCTION ence to the customers. Therefore, management of

of implementing relationship marketing (Ben- Inter-functional cooperation is needed in all

• Empowerment of employees provides Especially empowerment of frontline employ-

Figure 1. Creating relationship marketing culture in internal markets

Figure 2. Service profit chain

Figure 3. Main motivations for enterprises to improve customer service experience

Figure 4. Customer experience maturity model

Together, with implementing three “Ds” of cus-

Figure 6. Reqirements for achieving excellence in customer service experience

Creating Customer Keeping Culture Willingness is important for delivering great

Figure 7. Creating customer keeping culture

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