CHAPTER 16
Customer Retention and Maximization
Chapter 16 - Customer Retention and Maximization
THE CUSTOMER RELATIONSHIP CONTINUUM
Always-A-ShareCustomer
Lost-For-GoodCustomers
SWITCHING COSTS
The Direct and Indirect costs a buyer will haveto pay to go to another supplier
Chapter 16 - Customer Retention and Maximization
LOST-FOR-GOOD ALWAYS-A-SHARE
Customers are tied to a system. Switching costs may include:
• Specific investments• Cancellation penalties• Setup costs for a new supplier• Retraining• Finding/Evaluating a new supplier
Customers can allocatetheir purchases toseveral vendors . Aperiod of no purchasescan be followed by anumber of purchases.Doesn’t want to rely on a single vendor.Suppliers are largelyinterchangeable
DEFINING CUSTOMER NATURE
Chapter 16 - Customer Retention and Maximization
PAYOFFS FROM LONG-TERM RELATIONSHIPS Grow additional business opportunities for new
products or increased purchases
Premium prices result from giving first-rate service and product quality
Reduced selling costs from tighter coordination of production and logistics (efficiencies)
Additional revenues possible from customers’ referrals and joint sales calls with customers
Chapter 16 - Customer Retention and Maximization
WHY COMPANIES STAY IN A RELATIONSHIP
THEY HAVE TO – No alternative, binding actions such as contracts, product ties
THEY WANT TO – Relationship is satisfying because of cooperation and meeting financial objectives
Chapter 16 - Customer Retention and Maximization
TIES THAT BUILD RELATIONSHIPS SUPERIOR PERFORMANCE at a good price
(value)
SOCIAL RELATIONSHIPS created by frequent interaction
TECHNICAL DEPENDENCIES brought about by reliance on a supplier’s products or support
FORMAL AGREEMENTS involving investments or contracts
Chapter 16 - Customer Retention and Maximization
RelationshipTermination
Costs
RelationshipBenefits
Shared Values
Communication
OpportunisticBehavior Uncertainty
FunctionalConflict
Cooperation
PropensityTo leave
Acquiescence
RelationshipCommitment
Trust
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TRUST AND COMMITMENT IN BUSINESS
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Chapter 16 - Customer Retention and Maximization
Process 5
(etc.)
Attribute 1
Attribute 2
Attribute 3
Suggest
change for improvement
Process 4
(Technical Support)
Attribute 1
Attribute 2
Attribute 3
Suggest
change for improvement
Process 3
(Service manuals
Attribute 1
Attribute 2
Attribute 3
Suggest
change for improvement
Process 2
(Parts reps)
Attribute 1
Attribute 2
Attribute 3
Suggest
change for improvement
Process 1
(Parts handling)
Attribute 1
Attribute 2
Attribute 3
Suggest
change for improvement
Loyalty questions• Willingness to recommend• Repurchase intentions
General overallSatisfaction question
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CUSTOMER SATISFACTION SURVEY
Chapter 16 - Customer Retention and Maximization
MEASURING SATISFACTIONAFTER THE SURVEYS
MANAGEMENT QUESTIONS
1. What do the surveys tell us?
2. How do we use the information we have?
3. How reliable is the information?
Chapter 16 - Customer Retention and Maximization
STRENGTHENING GOOD RELATIONSHIPS Develop and strive for shared goals
(SUPRAGOALS)
Anticipate customer needs
LAGNIAPPE (lan – yapp) – giving without obligation (sending birthday cards to clients)
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