Customer Relationship Management Strategies For Business Markets

Chapter 3
Customer Relationship
Management Strategies
for Business Markets
Developed by Cool Pictures and MultiMedia Presentations
Copyright 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved.
Relationship Marketing
Centers On:
Establishing,
Developing and
Maintaining
Successful exchanges with customers.
Why is CRM important?
- Loyal customers are more profitable
- Important and durable advantage that is hard
for competitors to understand, copy or displace.
Types of Relationships
The buyer seller relationships are positioned on a
continuum with transactional exchange and collaborative
exchange serving as the end points.
The Relationship Spectrum
Types of relationship
Transactional exchange
Time exchange of basic products for highly competitive
market prices
Operational linkages
Systems, procedures, routines of buying and selling firms
needs to be connected to facilitate operations
Collaborative exchange
Close information, social and operational linkages as well as
mutual commitments made in expectation of long term
benefits
Buyers and sellers craft different types of relationships in response to:

a) market conditions and
b) characteristics of the purchase situation.
The Spectrum of Buyer-Seller Relationships
Managing Buyer Seller

Relationships
Transactional exchange
When competitive supply market features many alternatives, purchase
decision is not complex and supply market is stable.
Centers on timely exchange of basic products for highly competitive market
prices.
Collaborative exchange
When alternatives are few, the market is dynamic, and the complexity of
purchase is high
Features close information, social, and operational linkages as well as
mutual commitments.
Switching cost
Organisational buyers invest in the relationships with suppliers. Because of
these investments, they may hesitate to incur disruptions and switching cost.
Managing Buyer Seller

Relationships
Strategy guidelines
Collaborative customers
Relationship building, targeting strong and lasting
commitments
Transactions customers
These customers display less loyalty or commitment to a
particular type supplier and can easily switch part or all
of their purchase from one vendor to another
Measuring Customer Profitability
Activity based costing

Activities that are associated with serving a particular
customer and how these activities are linked to revenues
and consumption of resources.
Unlocking customer profitability
By accurately tracing costs to individual customers,
managers are better equipped to diagnose problems and
take appropriate actions
The profitable few
Implements ABC approach and plots cumulative profitability
against customers, (see graph)
The Whale Curve Illustration: 20%

customers generate 175% of
cumulative profits
The Characteristics of High vs

Low Cost-to-serve Customers
High-Cost-to Serve
Customers
Low-Cost-to Serve
Customers
Presale Costs
Extensive presales support

required (ie technical and
sales resources)
Limited presale support (ie

standard pricing and ordering)
Production Cost
Order custom products

Small order quantities
Unpredictable ordering
pattern
Manual processing
Order standard products

Large order quantities
Predictable ordering cycle
Electronic processing
Delivery cost
Fast delivery
Standard delivery
Post-sale service cost
Extensive post-sales support

required (ie customer training,
installation , technical support)
Standard delivery
Limited post sales support
Customer Relationship
Management
CRM is a cross functional process for
achieving:
A continuing dialog with customers
Across all contact and access points, with
Personalised treatment of the most
valuable customers
To ensure customer retention and the
effectiveness of marketing initiatives.
CRM Crafting the right value

proposition
A value proposition represent products, services, ideas and
solution that a business marketer offers to advance the
performance goals of the customer organisation
The bandwidth strategies to develop customer specific product
offerings
Flaring out by unbundling unbundling strategy
Flaring out with augmentation coordinated cost reduction
programmes, technical assistance, delivery schedule
guarantees and cooperative advertising.
Creating flexible service offerings
Bare min no of services (naked solutions )&
Optional services
Performance attributes that

influence customer satisfaction
The responsiveness of the supplier in
meeting the firms needs
Product quality
A broad product line
Delivery reliability
Knowledgeable sales and service personnel
Learning to retain customers

Pursuing growth from existing customers
Estimating the current share of wallet the firm has
attained
Pursuing opportunities to increase that share
Carefully projecting and enhanced customer
profitability that will result
Evaluating relationships
Continually update the value of their product and
relationship offerings
Drivers of relationship marketing

effectiveness
Relationship quality high caliber relational bond with an

exchange partner that captures a number of interaction
characteristics such as commitment and trust
Relationship breath the number of interpersonal ties that a
firm has with an exchange partner.
Relationship composition centers on the decision making
capabilities of relational contacts at the customer firm; a contact
portfolio that includes high level decision makers increases a
sellers ability to effect change in the customer organisation.
Relationship strength reflects the ability of relationship to
withstand stress or conflict
Relationship efficacy captures the ability of an interfirm
relationship to achieve desired objectives.
Relationship Marketing (RM)

programmes
Social RM programs
Use social engagements customized
communication to personalize the relationship
Structure RM programs
Designed to increase productivity through targeted
investments that customers would not likely make
for themselves.
Financial RM programs
Provide economic benefits, such as special
discounts, free shipping, or extended payment
terms to increase customer loyalty.
Financial Impact of RM programs

Social
Social RM investments have a direct and
significant impact on profits
Structural
Strategiest should target those customers for
whom structural solutions offer the most value.
Financial
Financial RM fail to generate positive economic
returns.

Customer Relationship Management Strategies For Business Markets

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Chapter 3

Developed by Cool Pictures and MultiMedia Presentations

Developed by Cool Pictures and MultiMedia Presentations

Developed by Cool Pictures and MultiMedia Presentations

Developed by Cool Pictures and MultiMedia Presentations

Buyers and sellers craft different types of relationships in response to:

The Spectrum of Buyer-Seller Relationships

Developed by Cool Pictures and MultiMedia Presentations

Managing Buyer Seller

Developed by Cool Pictures and MultiMedia Presentations

Managing Buyer Seller

Developed by Cool Pictures and MultiMedia Presentations

Measuring Customer Profitability

Activity based costing

Developed by Cool Pictures and MultiMedia Presentations

The Whale Curve Illustration: 20%

Developed by Cool Pictures and MultiMedia Presentations

The Characteristics of High vs

Extensive presales support

Limited presale support (ie

Order custom products

Order standard products

Post-sale service cost

Extensive post-sales support

Developed by Cool Pictures and MultiMedia Presentations

Developed by Cool Pictures and MultiMedia Presentations

Developed by Cool Pictures and MultiMedia Presentations

CRM Crafting the right value

Performance attributes that

Developed by Cool Pictures and MultiMedia Presentations

Learning to retain customers

Drivers of relationship marketing

Relationship quality high caliber relational bond with an

Developed by Cool Pictures and MultiMedia Presentations

Developed by Cool Pictures and MultiMedia Presentations

Relationship Marketing (RM)

Financial Impact of RM programs

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