Reasons For Lost Customers

• Novelty seeking
• Dissatisfaction
• Relative advantage
• Conflict
• Loss of Trust
• Cease to need
 Customer Retention Strategies
• Welcome
• Reliability
• Responsiveness
• Recognition
• Personalization
• Reward Strategies

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 A welcome strategy
The organization’s appreciation for the initiation of
a relationship.
• Creating a delightful surprise, making a good first
impression
• First touch: additional customer information
• Reassure the buyers that they have made the
correct choices.
• Treat like a first date. Don’t overdo it!

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 Reliability
The organization can repeat the exchange time
and time again with the same satisfying
results.
– Keep promise
– Ensure consistent quality
– Continuous promotion is still the key.

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 Responsiveness
• The organization shows customers it really cares
about their needs and feelings.
• Loyal employees create loyal customers. Internal
marketing.
• Customer-contacted employees should have the
authority as well as the responsibility for date to
date operational activities and CRM decision.

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 Responsive Strategies
• A CRM program cannot help unless a
company employs the proper strategy to
secure and retain profitable customers.

• Special attention must be given to five areas.

CRM Strategy - Priorities
1. Acquire the right customer.
2. Craft the right value proposition.
3. Institute the best processes.
4. Motivate employees.
5. Learn to retain customers.
 #1 - Acquiring the Right Customer
Account selection demands a clear understanding
of:
1. Seller’s resources
2. Customer’s needs
3. Cost of serving various groups of customers
4. Potential profit opportunities
5. How customers define value and how to meet
those expectations
 What do customers value?

• Some demand low price

• Some demand customer service
• Some demand quick delivery
• The question is: “Can the seller deliver it
profitably?”
• Many sellers try to meet all their customer’s
needs, and may do so, but fail to do it
profitably.
#2 – Crafting the Right Value Proposition

• A value proposition encompasses the

products, services, ideas and solutions
that a business marketer presents to the
prospect/customer that is designed to
solve the customers’ problems.
• They can be generic or customized.
 Value Proposition
A value proposition may include:
1. Points of parity to a competitive option
2. Points of difference

Best practice suppliers base their value

proposition on their target market’s needs by
communicating their offering of superior
performance in a way that conveys they
understand their customer’s business priorities.
 Creating Customized Products
The seller starts with a core service
(“naked solutions”) and adds
customized services to it (“custom
wrapped”) that create more value.
 #3 - Institute Best Practices
• The sales force plays a key role in establishing and growing a
customer from a transactional account to a collaborative
partnership.
• They can do this by aligning and deploying technical and
service support units to match with their customers’ units.
• Technical groups can consist of research, logistics and
customer service units.
• Through careful management and screening, transactional
accounts can progress to partnerships.
 Best Practices Follow-Up
• In addition to using best practices, successful
organizations (like IBM) employ follow-up techniques
such as:
1. Assigning a client representative to take ownership of
the relationship.
2. Assigning a Project Owner who completes the project
or solves project problems.
3. Developing an in-process feedback and measurement
system.
 #4 - Motivating Employees
Dedicated employees are the key to a
successful customer relationship strategy.
The best approach is to:
1.Hire good people.
2.Invest in them to increase their value to the
company and its customers.
3.Develop challenging careers and align
incentives to performance measures.
 Why Retain Loyal Customers?

Established customers buy more.

Cost of serving loyal customers declines.

Less expensive than acquiring new customers.

 #5 - Retaining Customers

Retain customers by:

• Providing superior value (more than expected) to ensure

high satisfaction.
• Nurturing trust.
• Developing mutual commitment.
• If possible, helping customers grow their business.
 How to Pursue Growth from Existing
Customers
Identify and cultivate customers that offer the
most growth potential by:
1.Estimating current percent “share of wallet”
2.Pursuing opportunities to increase share
3.Projecting and enhancing customer
profitability
 Recognition
• Special attention or appreciation that
identifies someone as having been known
before.
• People respond to recognition.
• Recognition and appreciation help maintain
and reinforce relationships.

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 Personalization
Use CRM system to tailor promotions and
products to the specific customers.
• Offer engine: take customer data after it is
analyzed and applies it to create the offer or
message that is appropriate to the individual
customer. Ex., My site, Click stream analysis,
free ride, etc.

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 Access strategy
• Identify how customers will be able to interact
with the organization.
• General contact, product return, technical
report, service representative, change a
mailing address
• Is the access quick and easy?

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A Communication process

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 Organization vs. customer initiated
communication
• In organization-initiated communication,
organizations must consider the intended
message, channel (medium), and receiver
characteristics.
• In customer-initiated communication, consider
the establishment of toll free calls, web sites,
priority access for providing services and
collecting customer data.

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Customer-initiated communication

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 Reward strategies
• Frequent, best customers
• Partnership Management Program
• Switching costs: financial penalty, time loss,
psychological barrier
• Termination Penalty

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 Problem Identification and Management

• Rather tell the company than switch to a

competitor or tell someone else. Acting rather
than reacting.
• Build numerous mechanism for identifying
customer problems.
– Customer satisfaction survey
– Mysterious shoppers
– Websites, other contacts points

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 Conflicts and Customer Complaints
• Level of dissatisfaction
• Attrition of blame
• Cost/benefits of actions
• Personal characteristics:
– highly educated,
– self-confident,
– aggressive,
– Older women.

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 Dealing with complaints
Having the skill to interact with different types of
people. Trained in methods of interaction and in
different style of communication.
• Be customer-centric. Let the customers know that
they have been understood.
• Express regret
• Resolve conflict
– Accommodation, Compromise, Termination
• Follow-up and prevent recurrence
• Keep in touch and listen to customer

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 Resolve conflict
A disagreement in which the views of the
customer and the organization appear to be
incompatible.
• Accommodation: a settlement that
emphasizes cooperative behavior.
• Compromise: mutually acceptable middle
ground that is somewhat satisfactory to both
parties.
• Termination

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 Evaluating Relationships
• Some relationship-building efforts fail because
expectations of the parties don’t mesh.
• Example: Seller wants a business relationship
whereas the customer responds in a transactional
mode.
• By understanding and isolating customer needs,
the marketer is better equipped to match their
product offerings to a particular customer’s needs.
 Drivers of RM Effectiveness: Definitions

• Relationship Quality: High-caliber relational

bond characterized by commitment and trust
• Relationship Breadth: Number of interpersonal
ties that connect the relationship
• Relationship Composition: Portfolio of
contacts ranging from low-level influencers to
high-level decision makers
• Relationship Strength: The ability of the buyer-
seller relationship to withstand stress and/or
conflict
• Relationship Efficacy: The ability of an inter-
firm relationship to achieve desired objectives
Levels of Retention Strategies
Stable
Volume and Pricing
Frequency Bundling and
Rewards Cross Selling

Integrated I. Financial Continuous

Information Bonds Relationships
Systems

IV.
Excellent
Quality II.
Joint Structural Personal
Investments and Social Relationships
Bonds
Value Bonds

Shared Social Bonds

Processes III. Customization Among
and Bonds Customers
Equipment

Anticipation Customer
/ Innovation Intimacy
Mass
Customization
 RM Programs

• Social RM Programs
• Structural RM Programs
• Financial RM Programs
 Social RM Programs
• Social RM programs:
– Social engagements (sporting events, meals, etc.)
– Frequent and personalized communications that develop
bonds
– Make the relationship special
• Results:
– Customers reciprocate with repeat business and referrals
– Difficult for rivals to duplicate
• Affect:
– Has a direct affect on profits & is long lasting
 Structural RM Programs
• Structural RM programs:
– Provide a service/product to increase productivity
and/or efficiency for customers through targeted
investment that customers would not make for
themselves.
For example they provide:
– Order-processing interfaces
– Free analysis of operations

• Results:
– Creating a structural bond makes it difficult for
companies to switch to competitors
 Financial RM Programs

• Financial RM programs provide economic benefits

such as:
• Discounts
• Free shipping
• Extended payment terms

• Results:
Companies respond financially to protect customer
relationships, but they do not necessarily enhance the
relationship because all companies do it.
 Targeting RM Programs

• Some companies are Relationship Oriented (RO), and some

are not.
– RO companies seek to develop relationships with current or
potential supplier.

• RO buyers look for companies that:

– Offer expertise
– Are able to be flexible (i.e., payment terms, R&D, etc.)
– Help reduce risk for both parties benefit
– Help both parties benefit from the relationship
 Strategy for Dealing with
High and Low RO
• HIGH RO: Target those with high RO goals since
they are looking for and are open to developing
relationships

• LOW RO: For these companies, the strategy is to

create high switching cost:
– Tie them into electronic ordering interfaces
– Stay in constant contact to keep what exists
– Align RM resources as closely as possible to the
customer’s needs