Ervices Arketing: Integrating Customer Focus Across The Firm

Copyright © 2013 by McGraw Hill Education (India) Private Limited. All rights reserved.
Valarie A Zeithaml | Mary Jo Bitner
6E
Dwayne D. Gremler | Ajay Pandit
Integrating Customer Focus Across the Firm
SERVICES MARKETING
BUILDING CUSTOMER
RELATIONSHIPS
66
 Relationship Marketing
 Relationship Value of Customers
 Customer Profitability Segments
 Relationship Development Strategies
 Relationship Challenges
6-3
Objectives for Chapter 6:
Building Customer Relationships
 Explain relationship marketing, its goals, and the
benefits of long-term relationships for firms and
customers.
 Explain why and how to estimate customer relationship
value.
 Introduce the concept of customer profitability
segments as a strategy for focusing relationship
marketing efforts.
 Present relationship development strategies—including
quality core service, switching barriers, and relationship
bonds.
 Identify challenges in relationship development,
including the somewhat controversial idea that “the
customer is not always right.” 6-4
Relationship Marketing
 is a philosophy of doing business, a strategic
orientation, that focuses on keeping current
customers and improving relationships with them
 does not necessarily emphasize acquiring new
customers
 is usually cheaper (for the firm)
 keeping a current customer costs less than attracting a
new one
 thus, the focus is less on attraction, and more on
retention and enhancement of customer
relationships
6-5
The “Bucket Theory of Marketing”
Figure 6.1
Holes in the Bucket:
Why Relationship
Development Makes
Sense
6-6
Customer Goals of
Relationship Marketing
Figure 6.2
The Goal of Relationship
Marketing: Moving
Customers Up the Ladder
6-7
A Typology of Exchange Relationships
Exhibit 6.1
Customers as… Strangers Acquaintances Friends Partners
Product offering Attractive relative to On a par with Differentiated with Customized,

competitors industry standards adaptation to individualized
segments offerings
Source of Attractiveness Satisfaction Satisfaction + Trust Satisfaction + Trust +
competitive Commitment
advantage
Buying activity Interest, exploration, Reduced need for Buying without Commitment in the
(what customer trial search perfect information form of information
does) sharing, specific
investments
Focus of selling Encouraging trial Familiarity and Specific segment Specific knowledge,
activities (what firm facilitates initial general knowledge knowledge idiosyncratic
does) selling investments
Relationship time None Short Medium: trust takes Long: detailed
horizon time to build knowledge,
interconnections
Sustainability of Low: must continue Low: must build Medium: must High: depends on
competitive to attract, induce trial unique value into understand various uniqueness &
advantage standard product customer needs effectiveness of
interconnections
Primary relationship Acquire customer’s Satisfy customer Retain customer’s Enhance relationship
marketing goal business needs business with customer
6-8
Benefits of Relationship Marketing
Benefits for Customers Benefits for Firms
 Receipt of greater value  Economic benefits:

 Confidence benefits:  increased revenues
 trust  reduced marketing and
administrative costs
 confidence in provider
 regular revenue stream
 reduced anxiety
 Customer behavior benefits:
 Social benefits:  strong word-of-mouth
 familiarity endorsements
 social support  customer voluntary performance
 personal relationships  social benefits to other customers
 mentors to other customers
 Special treatment benefits:
 special deals
 Human resource management
benefits:
 price breaks
 easier jobs for employees
 social benefits for employees
 employee retention
6-9
6-10
Profit Generated by a Customer over
Time
Customer Loyalty Exercise
 Think of a service provider to whom you are

loyal.
 What do you do (your behaviors, actions,
feelings) that indicates you are loyal?
 Why are you loyal to this provider?
 What factors have influenced the formation
of your loyalty?
6-11
6-12
Lifetime Value of a Customer
The Customer Pyramid
Figure 6.4
What segment spends more with

Most Profitable us over time, costs less to maintain,
Customers Platinum
spreads positive word of mouth?
Not as
profitable:
Gold discounts or
less loyal
Utilize capacity, but

Iron do not merit special
treatment
Lead
What segment costs us in
Least Profitable time, effort and money yet
does not provide the return
Customers
we want? What segment is
difficult to do business with?
6-13
The Customer Pyramid
Company’s most profitable customers, typically heavy users
Platinum of the product, not overly price sensitive, willing to invest in
Tier and try new offerings, and committed customers of the firm

Profitability levels are not as high, perhaps because

customers want price discounts that limit margins or are
Gold Tier simply not as loyal. May be heavy users who minimize risk
by working with multiple vendors.
Essential customers that provide the volume needed to

utilize the firm'’ capacity but their spending levels, loyalty,
Iron Tier and profitability are not substantial enough for special
treatment
Customers who are costing the firm money. They demand
more attention than they are due given their spending and
Lead Tier profitability and are sometimes problem customers—
complaining about the firm to others and tying up firm
resources.
6-14
6-15
Relationship Development Model
Strategies for Building Relationships
 Core Service Provision

 service foundations built upon delivery of excellent
service
 satisfaction, perceived service quality, perceived value
 Switching Barriers
 customer inertia
 switching costs
 set up costs, search costs, learning costs, contractual costs
 Relationship Bonds
 financial bonds
 social bonds
 customization bonds
 structural bonds
6-16
6-17
Levels of Relationship Strategies
“The Customer Is NOT Always Right”
Not all customers are good relationship

customers:
 wrong segment
 not profitable in the long term
 difficult customers
6-18
6-19
Ending Business Relationships
Should firms fire their customers?

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Copyright © 2013 by McGraw Hill Education (India) Private Limited. All rights reserved.

Valarie A Zeithaml | Mary Jo Bitner

Integrating Customer Focus Across the Firm

 Relationship Value of Customers

 Customer Profitability Segments

 Relationship Development Strategies

Product offering Attractive relative to On a par with Differentiated with Customized,

 Receipt of greater value  Economic benefits:

 Think of a service provider to whom you are

What segment spends more with

Utilize capacity, but

Profitability levels are not as high, perhaps because

Essential customers that provide the volume needed to

 Core Service Provision

Not all customers are good relationship

 not profitable in the long term

Should firms fire their customers?

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