Traditional vs.Traditional vs. Marketing Marketing

With the cost of customer attraction escalating, With the cost of customer attraction escalating, companies are paying more attention to holding on to companies are paying more attention to holding on to their existing customers their existing customers

Long-standing customers are less expensive to reach Long-standing customers are less expensive to reach and less expensive to serve and less expensive to serve

Customer relationships are assets that should be Customer relationships are assets that should be evaluated and managed as rigorously as any financial evaluated and managed as rigorously as any financial or physical assetsor physical assets

Relationship marketing not only focuses on customer Relationship marketing not only focuses on customer retention, but also takes a long-term perspectiveretention, but also takes a long-term perspective

Relationship Marketing Defined

“To establish, maintain, and enhance (usually but not necessarily long-term) relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises.”

___Grönroos (Service Management and Marketing, 1990)

What is Relationship Marketing?What is Relationship Marketing?

The cornerstone of marketing is getting The cornerstone of marketing is getting close to close to customerscustomers in order to better identify and satisfy their in order to better identify and satisfy their needs needs

Realize that marketing is responsible for Realize that marketing is responsible for more than more than “just the sale” “just the sale”

The focus is shifting from the transaction to the The focus is shifting from the transaction to the

relationshiprelationship

It is difficult to separate service operations and delivery It is difficult to separate service operations and delivery from relationship buildingfrom relationship building

Managing customer relationships continues to be Managing customer relationships continues to be paramount, so is the growing importance of managing paramount, so is the growing importance of managing relationships with suppliers and resellersrelationships with suppliers and resellers

Relationship Marketing - Relationship Marketing -

Goals and OutcomesGoals and Outcomes

Whereas the goal of traditional marketing is customer Whereas the goal of traditional marketing is customer acquisition, under relationship marketing the acquisition, under relationship marketing the focus shifts focus shifts to creating value to creating value

The objective is to create more value through The objective is to create more value through interdependent, collaborative relationships with interdependent, collaborative relationships with customers, customers, the outcome is customer retention the outcome is customer retention

Relationship marketing is ongoing, constantly looking for Relationship marketing is ongoing, constantly looking for opportunities to generate opportunities to generate new valuenew value

Retaining customers requires marketers to exhibit care Retaining customers requires marketers to exhibit care and concern and concern afterafter they have made a purchase they have made a purchase

The sale often represents only the beginning of the The sale often represents only the beginning of the relationship between the buyer and sellerrelationship between the buyer and seller

Building Lasting Building Lasting Customer RelationshipsCustomer Relationships

Sellers can resist the natural tendency toward decline and Sellers can resist the natural tendency toward decline and complacency by developing what we refer to as “relationship complacency by developing what we refer to as “relationship enablers”enablers”

It is the seller’s responsibility to nurture the relationship It is the seller’s responsibility to nurture the relationship beyond its simple dollar valuebeyond its simple dollar value

Using the relationship enablers sellers can minimize Using the relationship enablers sellers can minimize relationship decay and strengthen the bonds that lead to relationship decay and strengthen the bonds that lead to long-term, perhaps even lifetime associationslong-term, perhaps even lifetime associations

Supplier Rankings of Relationship Supplier Rankings of Relationship Enablers *Enablers *

TRUSTTRUST

COMMITMENTCOMMITMENT

DEPENDENCDEPENDENCEE

INFORMATION INFORMATION EXCHANGEEXCHANGE

COOPERATIONCOOPERATION

Transaction-Based

Relationship

Partnership Relationship

Transaction Selling

Relationship Selling

Low Account Penetration

High Account

Penetration

Services that the seller is willing to provide the relationship

Info

rmat

ion

, Tim

e, o

r T

rust

Lev

el

that

the

Buy

er is

wil

ling

to in

vest

in t

he r

elat

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Figure 11.3 - Information Sustains a Relationship

Customer Relationship ManagementCustomer Relationship Management ( (CRMCRM))

Definition of CRMDefinition of CRM CRM is a business strategy that involves CRM is a business strategy that involves

selecting and managing customer relationships selecting and managing customer relationships to optimize the long-term value of a companyto optimize the long-term value of a company

Goal of CRMGoal of CRM The goal of CRM is to acquire, grow, and retain The goal of CRM is to acquire, grow, and retain

the right customer relationships -- those with the the right customer relationships -- those with the best long-term profit potential best long-term profit potential

(Bob Thompson, founder of CRMGuru.com)(Bob Thompson, founder of CRMGuru.com)

Customer Relationship Management (CRM) Customer Relationship Management (CRM)

as Collaborationas Collaboration

CRM CRM is about collaborating with customers and is about collaborating with customers and partners so they receive superior partners so they receive superior valuevalue

Interactions with customersInteractions with customers regardless of the regardless of the sales channel should be constantly managed to sales channel should be constantly managed to optimize the value of those relationshipsoptimize the value of those relationships

Effective CRM systemsEffective CRM systems provide a “360 degree” provide a “360 degree”

view of the customer, including the frequency, view of the customer, including the frequency, response, and quality of customer interactions response, and quality of customer interactions

Characteristics of aCharacteristics of a Good CRM System Good CRM System

● ● A good CRM systemA good CRM system is capable of describing customer is capable of describing customer relationships in sufficient detail so that management, relationships in sufficient detail so that management, salespeople, customer service and even suppliers have salespeople, customer service and even suppliers have direct and real-time access to customer informationdirect and real-time access to customer information

● ● The information gathered should help match customer The information gathered should help match customer needs with product/service offerings, remind customers of needs with product/service offerings, remind customers of service requirements, predict future purchases, and alert service requirements, predict future purchases, and alert the company when a customer’s purchase behavior has the company when a customer’s purchase behavior has changedchanged

● ● A A key feature of CRMkey feature of CRM is sharing the customer experience is sharing the customer experience

across the organization and supply chainacross the organization and supply chain

CRM BUSINESS DRIVERSCRM BUSINESS DRIVERS

Automation/Productivity/EfficiencyAutomation/Productivity/Efficiency

Competitive AdvantageCompetitive Advantage

Customer Demands and RequirementsCustomer Demands and Requirements

Increased RevenueIncreased Revenue

Cost or Price ReductionCost or Price Reduction

Speed/Saving TimeSpeed/Saving Time

Keeping Track of All Aspects of BusinessKeeping Track of All Aspects of Business

Customer SupportCustomer Support

Inventory Control/Resource ManagementInventory Control/Resource Management

Better/Expanded CommunicationBetter/Expanded Communication

IntegrationIntegration

Customer SatisfactionCustomer Satisfaction

AccessibilityAccessibility

ConformityStandardizationConformityStandardization

33%

22%15%

14%10%

9%

7%

7%

6%6%

6%

6%

4%

4%

0% 5% 10% 15% 20% 25% 30% 35%

Source: AMR Research, 2002

CRMCRM & Critical Customer Data& Critical Customer Data

Companies should continuously gather critical Companies should continuously gather critical customer data known as customer data known as BADIBADI

☛☛BehaviorsBehaviors (how often and where customers visit) (how often and where customers visit) ☛☛AttitudesAttitudes (customers satisfaction, service (customers satisfaction, service quality assessments)quality assessments) ☛☛ DemographicsDemographics

☛☛InsightsInsights (share of market, (share of market, share of wallet)share of wallet)

Marketing Knowledge & CRMMarketing Knowledge & CRM

Marketing knowledge forms the basis of a customer strategy Marketing knowledge forms the basis of a customer strategy by analyzing, planning, implementing, and control – re:by analyzing, planning, implementing, and control – re:

a customer-centric orientation a customer-centric orientation a clearly defined value propositiona clearly defined value proposition alignment with key channel partnersalignment with key channel partners dominating the segment (focused on a particular market dominating the segment (focused on a particular market

segment) or cycle (dominate the evolving value segment) or cycle (dominate the evolving value proposition aimed a group of customers) proposition aimed a group of customers)

internal and supply chain process integration. internal and supply chain process integration. the coordination and practice of relationship marketing the coordination and practice of relationship marketing

activities activities

WWhy hy CRMCRM Efforts Fail Efforts Fail

Lack of focusLack of focus No change management policiesNo change management policies

No buy-inNo buy-in Complicated proceduresComplicated procedures

Poor trainingPoor training

Avoiding Avoiding CRMCRM Failure Failure

Careful planningCareful planning Appropriate use of people in the Appropriate use of people in the

organization organization Get supply chain members involvedGet supply chain members involved Using customer-driven processesUsing customer-driven processes Have a sound platform for introducing Have a sound platform for introducing

CRM systems and activitiesCRM systems and activities