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Managing Relationships and Building Loyalty Click to edit Master subtitle style
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Cognitive loyalty perception from brand attribute information that one brand is preferable to its alternatives Affective loyalty developing a liking for the brand based on cumulatively satisfying usage occasions Conative loyalty commitment to 3/18/12 rebuying the same brand
Loyalty is Important to Profitability : Index of Customer Profits (Year over Time (Fig. 12.1) 1=100)
350 3 0 2 0 5 2 0 0 1 0 5 1 0 0 05 0 0
Credit card
Year 1
Industrial laundry
Year 2
Year 3
Industrial distribution
Year 4
Auto
Year 5
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customers balances may grow may consolidate purchases to one supplier less need for information and assistance make fewer mistakes
Recommend new customers to firm (act as unpaid sales people) Trust leads to willingness to pay 3/18/12 regular prices vs. shopping for
Analyzing Why Customers Are More Profitable over Time (Fig. 12.2)
Profit from op. reduced costs Profit from increased usa ge Base Profit
3 Ye ar
7
Source: Reichheld and Sasser
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Value at Acquisition
revenues (application fee + initial purchase) Less costs (marketing +credit check + account set up)
Customer-Firm Relationship
Todays marketers seek to develop long-term relationships with customers. Relationship marketing includes:
Database Marketing: Involves the use of technology by delivering differentiated service levels to consumers and subsequently tracking the relationship. Interaction Marketing: Usually in B2B context where people and the social process also add mutually beneficial value. Network Marketing: Common in B2B context where companies commit resources to develop positions in a network of relationships with the stakeholders and relevant agencies.
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Discrete transactions Subscriber phone Pay phone Theater subscription Movie theater 3/18/12 Warranty repair Public transport
Target customers whose needs match firms capabilities Focus on value of prospective customers within each segment, not just numbers Avoid targeting customers who might abuse:
our employees, facilities other customers 3/18/12
User characteristics
demographics psychographics geographic location benefits sought
User behavior
when, where, how services
used quantity/value of purchases frequency of use profitability of relationship sensitivity to marketing variables
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Significant Projects
(Fig. 12.5)
Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?
Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?
less risk of something going wrong, less anxiety ability to trust provider know what to expect get firms best service level mutual recognition, known by name friendship, enjoyment of social aspects
Social benefits
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6 0 4 0 2 0 0 1
Very dissatisfied
2
Dissatisfied
4
Satisfied
5
Very Satisfied
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Satisfaction
Enabled through: Frontline staff Account managers Membership programs CRM Systems
Be selective in acquisition
Customer Loyalty
2. Create Loyalty Bonds
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Rewarding Value of Use, Not Just Frequency at British Airways (Best Practice in Action 12.2) Dedicated reservations
Reservations assurance Priority waitlist and standby Advance notification of
delays hours
exceeding 4
Upgraded check-in Preferred boarding Special services assistance Bonus air miles Upgrade for two
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Value Proposition
Pricing
Service Mistakes Billing Errors Service Catastrophe Uncaring Impolite Unresponsive Unknowledgeable Negative Response No Response Reluctant Response
Inconvenience
Service Switching
Others
Competition
Involuntary Switching
Ethical Problems
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Signifies the whole process by which relationships with customers are built and maintained. CRM as an enabler, offering a unified customer interface and allow firms to better understand and segment the customers etc. Applications include:
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Customer Relationship Strategies with CRM Systems: Key Questions How should our value proposition change to increase
customer loyalty? How much customization or one-to-one marketing and service delivery is appropriate and profitable? What is the incremental profit potential of increasing share of wallet with current customers? How much does this vary by customer tier and/or segment? How much time and resource can we allocate to CRM right now? If we believe in CRM, why have we not taken steps in that direction before? What can we do today to develop customer relationship without spending on technology?
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