Relationship Marketing

10 Relationship Marketing and
Customer
Relationship Management
CHAPTER
Chapter
(CRM) Objectives
1 Contrast 4 Explain how firms 7 Describe how B2B
transaction-based can enhance marketing
marketing with customer incorporates
relationship- satisfaction and national account
based marketing. how they build selling,
2
buyer-seller electronic data
Identify and 5
relationships. interchange and
explain the four
Web services,
basic elements of Explain CRM and
VMI, CPFaR,
relationship the role of
managing the
marketing, as technology in
3 6 supply chains,
well as the building customer 8
and creating
importance of relationships.
alliances.
internal
Describe the
marketing. Identify and
buyer-seller
evaluate the most
Identify the relationship in
common
three basic B2B marketing and
CHAPTER 10 Relationship Marketing and (CRM)
THE SHIFT FROM TRANSACTION-BASED

MARKETING TO RELATIONSHIP MARKETING
• Transaction-based marketing Buyer and seller
exchanges characterized by limited communications
and little or no ongoing relationship between the
parties.
• Relationship marketing Development, growth, and
maintenance of long-term, cost-effective
relationships with individual customers, suppliers,
employees, and other partners for mutual benefit.
• Views customers as equal partners in
transactions.
• Encourages long-term relationships, repeat
purchases, and
multiple brand purchases from the firm.
• Collaborative exchange between buyer and
ELEMENTS OF RELATIONSHIP MARKETING

• Firms build long-term relationships by gathering
information about their customers, analyzing and
using the data to modify the marketing mix,
monitoring interactions with customers, and using
knowledge of customers and their preferences to
orient every part of the organization.
INTERNAL MARKETING
• Internal customers—employees or departments
within the organization whose success depends on
the work of other employees or departments.
• Internal marketing—managerial actions that enable
all organizational members to understand, accept,
and fulfill their respective roles in implementing
a marketing strategy.
• Effective internal marketing also increases
employee satisfaction.
THE RELATIONSHIP MARKETING CONTINUUM

• Firms try to move buyer-seller relationship from
the lowest to the highest level of the continuum of
relationship marketing to strengthen the mutual
commitment between them.
FIRST LEVEL: FOCUS ON PRICE

• Most superficial level, least likely to lead to
long-term relationship.
• Marketers rely on pricing to motivate customers.
• Competitors can easily duplicate pricing
benefits.
SECOND LEVEL: SOCIAL INTERACTIONS

• Customer service and communication are key
factors.
• Example: Wine shop holding a wine-tasting
reception.
THIRD LEVEL: INTERDEPENDENT PARTNERSHIP

• Relationship transformed into structural changes
that ensure partnership and interdependence between
buyer and seller.
ENHANCING CUSTOMER SATISFACTION

• Marketers use three major steps to measure and
improve how well they meet customer needs.
UNDERSTANDING CUSTOMER NEEDS
• Firms must understand what customers need, want,
and
expect.
• Must measure customer satisfaction.
OBTAINING CUSTOMER FEEDBACK AND

ENSURING CUSTOMER SATISAFACTION
• Sources of information include toll free numbers,
online
feedback, and evaluators posing as customers.
• Complaints help firms overcome problems and
demonstrate commitment to service.
BUILDING BUYER-SELLER RELATIONSHIPS

• Consumers form relationships to reduce choices
and simplify the buying process.
• Customers may switch loyalties if they perceive
better benefits from a competitor.
HOW MARKETERS KEEP CUSTOMERS

• Retaining customers is far more profitable than
losing them. According to one study, marketers have
• Firms generate more profits with each additional
year of a relationship.
• Frequency marketing Frequent-buyer or user
marketing programs that reward customers with cash,
rebates, merchandise, or other premiums.
• Affinity marketing Marketing effort sponsored by
an organization that solicits responses from
DATABASE MARKETING
• Database marketing Use of software to analyze
marketing information, identifying and targeting
messages toward specific groups of potential
customers.
• Help firms identify their most profitable
customers and improve customer retention and
referral rates while reducing marketing and
promotion costs.
• Data comes from multiple sources, including
credit applications, registrations, point-of-sale
scans and other sources.
• New technologies are providing more data.
CUSTOMERS AS ADVOCATES
• Grassroots marketing—connecting directly with
existing and potential customers through
nonmainstream channels.
• Viral marketing—satisfied customers get the word
about products out to other consumers.
• Buzz marketing—relies on volunteers to try
products and then talk abut their experiences with
friends and colleagues.
• Internet technology gives this word-of-mouth
approach far more
applications than in the past.
CUSTOMER RELATIONSHIP MANAGEMENT

• Customer relationship management (CRM)
Combination of strategies and tools that drives
relationship programs, reorienting the entire
organization to a concentrated focus on satisfying
customers.
BENEFITS OF CRM
• Software systems can make sense of huge amounts
of data.
• Simplify complex business processes while keeping
customers’ interests at heart.
PROBLEMS WITH CRM

• Requires companywide commitment and knowledge of
how to use system.
• Failures often result from failure to effectively
reorganize firm’s people and processes to take
advantage of benefits CRM system offers.
RETRIEVING LOST CUSTOMERS

• Customers leave for a variety of reasons.
• Customer winback—process of rejuvenating lost
relationships with customers.
BUYER-SELLER RELATIONSHIPS IN
BUSINESS-TO-BUSINESS MARKETS
• Business-to-business marketing—involves
organization’s purchase of goods and services to
support company operations or production of other
products.
• Advantages of buyer-seller relationship can
include lower prices, quicker delivery, improved
quality and reliability, and others.
• Partnership Affiliation of two or more companies
that help each other achieve common goals.
CHOOSING BUSINESS PARTNERS

• Partner firms must add value to the relationship,
complement each other, and share similar values and
goals.
TYPES OF PARTNERSHIPS
• Buyer partnerships, seller partnerships, internal
partnerships, and lateral partnerships.
COBRANDING AND COMARKETING

• Cobranding Cooperative arrangement in which two
or more businesses team up to closely link their
names
on a single product.
• Comarketing Cooperative arrangement in which two
businesses jointly market each other’s products.
IMPROVING BUYER-SELLER RELATIONSHIPS

IN BUSINESS-TO-BUSINESS MARKETS
NATIONAL ACCOUNT SELLING
• Technique of providing special attention to a
firm’s largest, most profitable customers by
assembling a team to serve just one or more large
accounts. BUSINESS-TO-BUSINESS DATABASES
• Just as indispensable as in consumer marketing.
ELECTRONIC DATA EXCHANGES AND WEB SERVICES

• Electronic data interchanges (EDI) Computer-to-
computer exchanges of invoices, orders, and other
business documents.
• Web services—allow companies to communicate even
if they’re not running the same or compatible
software, hardware, databases, or network
VENDOR-MANAGED INVENTORY
• Vendor-managed inventory (VMI) Inventory
management system in which the seller—based on an
existing agreement with a buyer—determines how much
of a product is needed.
MANAGING THE SUPPLY CHAIN

• Supply chain Sequence of suppliers that
contribute to the creation and delivery of a good
or service.
• May offers increased innovation, decreased costs,
improved conflict resolution within the chain and
improved communication and involvement among
members of the chain.
BUSINESS-TO-BUSINESS ALLIANCES
• Strategic alliances—partnership formed to create
a competitive advantage.
EVALUATING CUSTOMER
RELATIONSHIP PROGRAMS
• Lifetime value of a customer Revenues and
intangible benefits such as referrals and customer
feedback that a customer brings to the seller over
an average lifetime, less the amount the company
must spend to acquire, market to, and service the
customer.
• Company may analyze lifetime value or payback
from a customer relationship.
• May influence the types of customers a firm tries
to reach.
• Companies of all sizes can implement technology
that helps measure and improve customer value.

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10 Relationship Marketing and

THE SHIFT FROM TRANSACTION-BASED

ELEMENTS OF RELATIONSHIP MARKETING

THE RELATIONSHIP MARKETING CONTINUUM

FIRST LEVEL: FOCUS ON PRICE

SECOND LEVEL: SOCIAL INTERACTIONS

THIRD LEVEL: INTERDEPENDENT PARTNERSHIP

ENHANCING CUSTOMER SATISFACTION

OBTAINING CUSTOMER FEEDBACK AND

BUILDING BUYER-SELLER RELATIONSHIPS

HOW MARKETERS KEEP CUSTOMERS

CUSTOMER RELATIONSHIP MANAGEMENT

PROBLEMS WITH CRM

RETRIEVING LOST CUSTOMERS

CHOOSING BUSINESS PARTNERS

partnerships, and lateral partnerships.

COBRANDING AND COMARKETING

IMPROVING BUYER-SELLER RELATIONSHIPS

ELECTRONIC DATA EXCHANGES AND WEB SERVICES

MANAGING THE SUPPLY CHAIN

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