Building Customer Relationships

The Iirst three steps in the marketing process: understanding the marketplace and customer
needs, designing a customer-driven marketing strategy, and constructing marketing programs.
All lead up to the Iourth and most important step: building proIitable customer relationships.

Customer Relationship Management
Customer relationship management (CRM) is perhaps the most important concept oI modern
marketing. The overall process oI building and maintaining proIitable customer relationships by
delivering superior customer value and satisIaction. It deals with all aspects oI acquiring,
keeping, and growing customers.

Relationship Building Blocks: Customer Value and Satisfaction
The key to building lasting customer relationships is to create superior customer value and
satisIaction.
O Customer perceived value: The customer`s evaluation oI the diIIerence between
all the beneIits and all the cost oI a market oIIering relative to those oI competing oIIers.
For example: When deciding whether to purchase a Toyota Prius, customer will weigh its
beneIits against the beneIits oI owning another hybrid or non-hybrid brand.

Customer


Compares


Perceives






O Customer satisfaction: The extent to which a product`s perceived perIormance
matches a buyer`s expectations.
For example: Samsung delights its customers by Iocusing on its design and style, image,
a total brand experience. It enhances its image by being a sponsor oI the Olympic Games
and oIIers customers a total brand experience by sponsoring e-lounges at Hong Kong
International Airport.
Perceived value oI
market oIIering

Competing
oIIers
BeneIits and costs
oI marketing
oIIering

Customer Relationship Levels and Tools
Companies can build customer relationships at many levels.
O Basic Relationships are oIten used by a company with many low-margin customers.
For example: Procter & Gamble does notphone or call on all oI its Tide consumers to get
to know them personally. Instead, P&G creates relationships through brand-building
advertising, sales promotions, and its Tide FabricCare Network Web site
(www.Tide.com).

O ull Partnerships are used in markets with Iew customers and high margins, sellers
want to create Iull partnerships with key customers.
For example: P&G customer teams work closely with Wal-Mart, SaIeway, and other
large retailers.

The Changing Nature of Customer Relationships
This will be a point Ior a lively discussion.
O Relating with more carefully selected customers uses selective relationship
management to target Iewer, more proIitable customers.

O Relating more deeply and interactively by incorporating more interactive two
way relationships through blogs, Websites, online communities and social networks.

Partner relationship management
Marketers must work closely with a variety oI marketing partners. Major involves working
closely with partners in other company departments and outside the company to jointly bring
greater value to customers.
O Partners inside the company is every Iunction area interacting with customers.
lectronically.
Cross-Iunctional teams.

O Partners outside the company is how marketers connect with their suppliers,
channel partners, and competitors by developing partnerships.



Internal External

Finance Suppliers
Accounting Distributors
ManuIacturing Outside-industry cp
tc Ad agencies
tc
Type oI partners

Creating Customer Loyalty and Retention

Customer lifetime value is the value oI the entire stream oI purchases that the customer
would make over a liIetime oI patronage.
For example: Stew Leonard, who operates a highly proIitable Iour-store supermarket in
Connecticut and New York, says that he sees $50,000 Ilying out oI his store every time he sees a
sulking customer. Why? Because his average customer spends about $100 a week, shops 50
weeks a year, and remains in the area Ior about 10 years. II the marketing process, the company
creates value Ior target customers and builds strong relationships with them. To keep customers
coming back, Stew Leonard`s has created the 'Disneyland oI dairy stores. Rule 1the
customer is always right. Rule 2II the customer is ever wrong, reread Rule 1.

Growing Share of Customer

Share of customer is the portion oI the customer`s purchasing that a company gets in its
product categories.
For example:Amazon.com is highly skilled at leveraging relationships with its 50 million
customers to increase its share oI each customer`s purchases. Originally an online bookseller,
Amazon.com now oIIers customers music, videos, giIts, toys, electronics, home items,
accessories, jewelry and many many diIIerent products,.Base on each customer`s purchase
history, the company recommends related products that might be oI interest. In this way,
Amazon.com captures a greater share oI each customer`s spending budget.

Building Customer Equity

Customer equity is the total combined customer liIetime values oI all oI the company`s
customers.
For example: A visit to the Coke Web site always oIIers examples oI building customer equity.
They usually have a unique way oI engaging the customer whether it be online games, music
studios, or virtual worlds.

Building the right relationships with the right customers involves treating
customers as assets that need to be managed and maximized. DiIIerent types oI customers
require diIIerent relationship management strategies, such as: strangers (low proIitability, short-
term customers), butterIlies (high proIitability, short-term customers), true Iriends (high
proIitability, long-term customers), barnacles (low proIitability, long-term customers).