-most commonly known as CRM (Customer Relationship Management)

-also known as

•One-to-One Marketing

•Permission Marketing

•Customer Intimacy

•Communities of Commerce

-focus on understanding and responding to the customer

- database software and the internet are a means to this end

Relationship Marketing by any other name

Short Long

Customer Lifetime

Low

Hig

h

Pro

fita

bil

ity

-maintaining long-term customer relationships increases profitability

-costs less to serve existing customers (don’t have to spend money to identify and persuade)

-some evidence that established customers will pay higher prices than new customers (reward program with superior customer service helps take customer’s eyes off price)

-strong (and trusting) buyer-seller relationship increases likelihood that customer will disclose personal information which makes it easier to target and lowers cost

Moving Through the Relationship Stages

CommitmentCommitment DissolutionDissolutionExploration/Expansion

Exploration/Expansion

Customers can advance through the stages in several different ways

AwarenessAwareness

-no communication yet

-largely through traditional awareness-generating marketing levers (ex. advertising)

-simple web site address is easier to remember (ex. monster.com)

-maintain consistency between mother brand and web brand (ex. bmw.com, sears.com)

-first visits

Attraction - perceive value through better function, prestigious brand and emotional connection

Trust - “currency of the web”-Brand-established brand or partnered brand (ex. IBM Business Partner, Microsoft Certified)-Security and Privacy (ex. Verisign credit card protection) -Technology-Order FulfillmentCustomer Service and Support

-registration

Emotional - ex. Harley-Davidson and Apple lifestyle and evangelism

-Communication - ex. Yahoo email and chat-also related to community and sociability

-Customization-customers who take the time to customize a home page display a high level of commitment

-customers might switch to better or different service

-purchasing decreases over time

-inconsistent service

-customer outgrows service (ex music or video games)

-bad behaviour (cheating, meanness)

Four Key Stages of Customer Relationships

AwarenessAwareness Exploration/Expansion

Exploration/Expansion CommitmentCommitment DissolutionDissolution

No. 1 general auction service on the Internet

EBay encourages browsing before registration for the purpose of exploration

EBay offers (1) community, (2) individualization, and (3) interaction

Users can stop buying or selling at any time

Le

vel o

f In

ten

sit

y

Stages of Customer Relationships

Awareness Exploration Commitment Dissolution

IntensityIntensity

Level of intensity determined by:Frequency of connection (# of site visits)Scope of connection (# of points of contact)Depth of contact (thoroughness of site use)

The customer relationship stages are:

1. Awareness — The customer recognizes that the firm is a possible exchange partner, but has not initiated any communication with the firm or purchased its products

2. Exploration — The customer considers the possibility of exchange, gathers information and perhaps initiates trial purchases

3. Commitment — The parties in a relationship feel a sense of obligation or responsibility toward each other

4. Dissolution — This stage signals the separation of buyer and seller — the loss of connection

The Internet allows firms to interact and to individualize in powerful ways. As a result, firm-customer relationships can be formed and can progress very quickly

Firms don’t always want a relationship with all customers . . . and vice versa

Awareness Exploration / Expansion Commitment Dissolution

Product λ Packaging λ Attri butesa nd features

λ Fulfillment

λ Mas s customiz ed product

λ Br eadtho f inventory

λ Upgrades

λ Functionality

λ Availabilit y of complementar y products

λ Customer-specifi c attribu tes an d features

λ Post-sal es support

λ Increm entalallo catedbenefits

λ Experience

λ Custome r enabl ingcommunity

λ Custome r relationshi p management

λ Custome r care

λ Custome r care

Price λ Clic -k throu gh promotions

λ We b referral promotions

λ Brick -s and-clicks promotions

λ We bprice discountsλ Bundle

λ Frenz ypricing

λ Prestige

λ Pric e a s a si gn of quality

λ Hi-lo

λ Dynami c pric ing (as a nove l approac h— groupbuy , ing C2 )C

λ EDLP

λ Targ eted promotions

λ Futur e pric e promotions

λ J usti fy prices

λ Loyalt yprograms

λ Tier ed loyal ty programs

λ Wi devariety of prici ng plans

λ Bec ome evangelis ts (affili )ate

λ Profi t enhanc ing programs

λ Vol ume disc ount promotions

λ Targ eted promotions

λ Futur e pric e promotions

λ Fairness

λ Subscription

λ EDLP

λ Dynami c pric ing (gr oup buy , ing C2 )C

λ Discon tinueprici ng promotions

λ Reconfigur e loyal typrograms

λ Decreas e profit programs

Communication λ Television

λ Magazines

λ Radio

λ Ye llo w pages

λ Telemarketing

λ Billboar / ds outdoo r advertising

λ Onli ne billboard (s banner / s buttons)

λ Searc h engines

λ E-mail

λ Vira l marketing

λ Television

λ Radio

λ Newspapers

λ Packaging

λ Loyalt yprograms

λ Custome r service

λ Loyalt yprograms

λ Interactiv e onli ne billboard s lending towebsite

λ Link s fro m searc h lead towebsite

λ E-mai l wi th informat ion and lin k towebsite

λ Vira l marke tingleadi ng towebs ite an d / ordownload

λ Website

λ Seri al marketing

λ Permiss ionmarketin gw ith targete doffers

λ Loyalt yprograms

λ Custome r service

λ Loyalt yprograms

λ Custome r service

λ Permiss ione-mail

λ Personalized pages

λ Terminate dir ectmarketing

Community λ Outli ne communit ybenefits clearl y an d early on in the process

λ Antici pate an d readil yansw er questions andconcerns, quickl y establis hing asens e of trust

λ Establis h a cal l fo r action and furthe r exploration

λ Mak es communit yexplor ation eas y througheffici ent si testructure

λ Show everyon e individual attentio (n e. .,gwelcomi ng e-mail , s guide s fo r novices, chatconversation s fo r ne wmembers, use ofCRMmarke ting totail or site functionality)

λ Beg in theproces s of equi tycreatio n ( .e g., memberpoi nts an d loyalt yprograms)

λ Increa se equity buil ding( . ., e g throug h tier ed loyaltyprogr ,ams increas edrewards)

λ Recogniz e individuals’ contribution s andparticipation

λ Dev elopmember s ( . ., e g through leadershipopportunities, communi tyrole — s gui deso r watch-persons)

λ Spo t depar ting fri endsearl y an d findsolution s topreven t dissolution

λ Mak e the“leavin g process” fai r an defficientλ See k andlis tenclosel y to feedback

λ Allo w th e option of returning

Distribution λ Numbe r of intermediaries

λ Numbe r of channels

λ Degr ee ofintegration

λ Numbe r of channels

λ Degr ee ofinterest

λ Intermediar y type

λ Numbe r of channels

λ Interna l function

λ Eliminati on of types

λ Reduc tiono f intermediaries

λ Reduc tiono f integration

Relationship Stages

Ca

teg

ori

es

of

Le

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rs

Branding

Individual controls information flow

Allows more targeted communications

Individualized marketing communications are more relevant to the consumer

Allows consumers to specify preferences

Facilitates relationship building through two-way communication

Allows tracking of consumer response to marketing communications

IndividualizationIndividualization InteractivityInteractivity

CommunicationCommunication

Taking full advantage of the 2Is can move users through the customer relationship stages much faster than traditional

media.

Banner Ad(to promote awareness)

Banner Ad(to promote awareness)

Personalized Website

Permission e-mails

Individualized offerings

Personalized Website

Permission e-mails

Individualized offerings

Website Website

AwarenessAwareness CommitmentCommitmentExploration Exploration

2Is 2Is

User clicks on bannerto find out more

User can set up the webpageaccording to personal preferences,register for e-mails, give feedback,or make a purchase

One Seamless Experience

The 2Is Streamline Advancement Through the Stages

On

line

Off

line

OutdoorAdvertising (Billboards)

Yellow Pages

Radio

Television

Brochures

Newspapers

Sponsorships

Magazines

Newsletters

Point-of-Purchase Displays

Customer Service-can help move customer

into committment

Direct Mailings

Telemarketing

Sales force/Face-

to-Face

Banner Ads

Rich Media

Search Engines

Interstitials-between pages; includes pop-up windows

-strong brand recall and better click throughs than banners

Classifieds & Listings

Wireless Devices

Websites

E-MailMarketing

Personal Websites

Online and Offline Levers

-all points of contact with the firm

Mass Personal

Public Relations

Dynamic Ads

Interactive

Television

Profiles of Online Media Types

Medium Advantages Disadvantages

Websites/Personalized websites

Communicate rich, detailed information that users can navigate at will; can track users and customize site accordingly.

Narrow reach

Banner ads Link directly to buying opportunity; easy to measure effectiveness; wide reach; potential for effective targeting

Low attention and click-through rates; short life; limited “pass-along” audience; very high clutter; fleeting exposure

Interstitials Catch users’ attention; link to buying opportunity Can annoy users; limited “pass-along” audience

Rich media Attention-getting; link to buying opportunity Can annoy users without broadband access

Dynamic ad placement Serves up customized ads to users in real time Difficult to execute well; can annoy users, other advertisers

Search engines Good credibility; high believability; guarantee of position available; significant audience at major sites

High competition; information overload; limited “pass-along”

Classifieds and listings

Relatively inexpensive, potential for wide exposure; qualified audience

Clutter

Opt-in e-mail High demographic selectivity; high credibility; significant flexibility; proven high click-through rates; absolutely inexpensive; some pass-along

Requires substantial user base before effective; high clutter

Mass e-mail High reach; inexpensive; flexible Low attention and significant resentment (spam image)

Customer service Interested parties asking for help, thus high targeting value; generates loyal customers

Very expensive to provide comprehensive telephone, e-mail, and online support

Number of times a banner ad is downloaded to a user’s browser and presumably looked at

Ad Views (Impressions)

Ad Views (Impressions)

Percentage of ad views that are clicked upon; also “Ad Click Rate”Click-ThroughClick-Through

Formula used to calculate what an advertiser will pay to an Internet publisher based on number of click-throughs a banner generates

CPC(Cost-per-Click)

CPC(Cost-per-Click)

Cost per thousand impressions of a banner ad; a publisher that charges $10,000 per banner and guarantees 500,000 impressions has a CPM of $20 ($10,000 divided by 500)CPMCPM

Measurement recorded in server log files that represent each file downloaded to a browser; since page design can include multiple files, hits are not a good guide for measuring traffic at a website

HitHit

Number of individuals who visit a website in a specified period of time; requires the use of registration and cookies to verify and identify unique usersUnique UsersUnique Users

A series of requests made by an individual at one site; if no information is requested for a certain period of time, a “time-out” occurs and the next request made counts as a new visit — a 30 minute time-out is now standard

VisitsVisits

Internet Ad Terms

Step 1

Step 3

Step 2

Step 4

Step 5

Six Steps of the Communication Process

Step 6

Identify the Target Audience

Determine theCommunication Objective

Develop the Media Plan

Create the Message

Execute the Campaign

Evaluate the Effectiveness of the Campaign

CommunicationCriteria

MediaCriteria

Choose Media Mix

Tie Back toOverall

Plan

AllocateSpending

Behavioral objectives

Available spending

Customer segments

Ability to further behavioral objectives

CPM

Ability to reach target segments

Direct mail, Internet, broadcast, print, point-of-sale, etc.

Tie media plan back to communications plan (e.g., make sure the media plan will drive the trial or awareness required)

Allocation of spending across media mix elements and time periods based on relative priority

A Process for Defining Media Choice and Mix

Exhibit 9.13: Exploring the Levers Across the Relationship Stages

Television, iTV Magazines and newspapers Radio Yellow pages Billboards / outdoor

advertising Banner ads

AwarenessAwareness

Television, iTV Magazines and

newspapers Radio

Rich media ads and dynamic ad placement

Website

E-mail

Direct mail

Telemarketing

Customer service

Sales force

Exploratory /Expansion

Exploratory /Expansion CommitmentCommitment

Terminate marketing

DissolutionDissolution

Search engines Listings Classifieds

E-mail

Direct mail Telemarketing

Public relations

Permission e-mail

Permission direct mail

Sales force

Website Personalized pages

Customer service

Sales force

Communication — Conclusion

Effective marketing communications must be integrated and work together with synergy, and they must be consumer-centric

The communication marketing levers include various communication types that can be organized into the following categories: mass offline, personal offline, mass online, personal online

The communication process involves six steps: 1) Identify the target audience, 2) determine the communication objective, 3) develop the media plan, 4) create the message, 5) execute the campaign and 6) evaluate the effectiveness of the campaign

Specific levers can be applied that are appropriate for each relationship stage