Crm | Customer Relationship Management | Customer Satisfaction

Customer Relationship Management

Basic Assumptions for this paradigm:
1. There is a lifetime-profitability correlation 2. Profits increase over time 3. Serving long-term customers is less costly 4. Long-life customers pay higher prices
András Bauer Marketing Management 1

Graphical representation of consumer/profit development
P R O F I T Price Premium

Cost Savings

Revenue Growth

Base Profit
András Bauer



4 5 Marketing YearsManagement


Acquisition 7 Cost

Average acquisition cost in the US: $ 300. In fast growing businesses. Cellphones are prime examples. firms are willing to spend upfront in hope of future recovery. (There is a market segmentation reason) András Bauer Marketing Management 3 . However high churn rates may not justify this.Some explanations • Acquisition costs: depending on the category. it could be quite substantial.

because of they are happy) • Operating costs: it is less costly to serve loyal customers András Bauer Marketing Management 4 .Further explanations • Base profit: the average margin • Revenue growth: retained customers might buy more from the company (partly because of cross-selling partly.

More explanations • Referrals: satisfied customers make recommendations (however if you force them they become suspicious) • Price premium: loyalty makes blind and customers are willing to pay higher prices (though it could just be inertia) András Bauer Marketing Management 5 .

Discussion • If the basic assumptions hold. firms should pursue loyalty building strategies • Loyalty strongly depends on customer satisfaction • However. caution is advised András Bauer Marketing Management 6 . if the basic assumptions do not hold.

The Customer Satisfaction Branch • Customer Satisfaction is usually approached based on the expectancy-disconfirmation theory: Looking at the match of expectations and experience András Bauer Marketing Management 7 .

price. attributes • Need for own measures: András Bauer Marketing Management 8 . • Usual dimensions: response.Customer satisfaction • Is a multidimensional construct based and measured on many dimensions. info exchange personal service. availability.

Customer satisfaction measures • • • • • Behaviour (based on data) Surveys Lost customer analysis Mystery shopping Benchmarking for competitors András Bauer Marketing Management 9 .

The impact of market segmentation • Not all customers are equal. therefore pursuing loyalty in general. is not a good strategy • Even highly satisfied customers switch • There could be some free-riding • Membership (contract) and nonmembership business can be different András Bauer Marketing Management 10 .

063 Ave.Low Lifetime Revenue High Long Lifetime Profit: 51 Mailing cost: .5 Short Source:Reinartz & Kumar András Bauer Marketing Management 11 . Price: $ 63.Price: 47.8 Lifetime Profit 258 Mailing Cost .142 Ave Price: 47.7 Lifetime Profit 289 Mailing Cost: .4 Lifetime Length Lifetime Profit: 51 Mailing Cost: .128 Ave.065 Ave.Price: $ 58.

Interpretation • This is a non-contractual business • In this business (direct marketing) rewarding long lifetime with the company is counterproductive • It might be different in contractual relations András Bauer Marketing Management 12 .

• Measurement is more and more possible. mass customization etc. though industry specific • Could be very important in B2B András Bauer Marketing Management 13 .Industry approaches • Industries might follow different approaches to customization such as one-toone.

Some examples • High-value customers receive better treatment • Can use more services • Receive more rewards • Low value customers are treated badly • « Customer apartheid ? » András Bauer Marketing Management 14 .

in the most profitable way. winning. across the complete spectrum of point to contact with the customer. call-center. It includes. sales force.Customer relationship management as an application • CRM is about identifying. the Internet • A technology enabled dialogue András Bauer Marketing Management 15 . retaining and expanding customer relationships.

The Dell model • Dell captures more customer value in its model than its competitors through differentiation in customer knowledge and therefore better problem solving • This leads to higher selling prices András Bauer Marketing Management 16 .

This is where the customer value can be driven by differentiation and tailorability to the customer András Bauer Marketing Management 17 .When is CRM a good tool ? • In businesses with complexity and high value.

 Consumers are co-producers..Beyond CRM. not just users  We can manage consumer by marketing and HR tools Customer Efficiency Management András Bauer Marketing Management 18 ..

Simple profit model: satisfied employees Satisfied employees Satisfied employees make customers happy Firm Employees Customer Satisfied customers increase company profit András Bauer Marketing Management 19 .

A more rational profit model: based on a process view Company systems allow employees to provide consistently better services Well supported employees provide consistently better services Firm Employees Customers Satisfied customers improve their relationship with the firm András Bauer Marketing Management 20 .

as well. András Bauer Marketing Management 21 .The efficient customer profit model Company systems support employees and customers to become more efficient Employees Well supported employees provide better services Firm Customer Efficient customers use company systems better and create better serv ices Satisfied customers have better relationship with the company and with other customers.

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