CUSTOMER RELATIONSHIP

MARKETING

CONTENTS1. Definition of CRM

What is relationship marketing?

2. Relationship marketing and the 4 P’s

3. Customer equity

4. Partnering to build to customer relationships

5. Role of trust in relationships

6. Types of relationship based transactions

7. Characteristics of the types of transactions

8. Deciding factors of transactions

9. Link of risk and relationships

10. Goal and impact of CRM

11. Strengths and weaknesses of CRM

DEFINITION OF CRMCRM is a BUSINESS PROCESS in which

CLIENT RELATIONSHIPS,

CUSTOMER LOYALTY , and BRAND

VALUE are built through MARKETING

STRATEGIES and ACTIVITIES.

WHAT IS RELATIONSHIP MARKETING?

RELATIONSHIP MARKETING is a customer relationship

management strategy designed to encourage STRONG,

PERSISTANT customer connections to a brand.

As more gravity & recognition was given to the impact

created by relationship marketing, it generated various other

marketing practices: Segmentation

B2B marketing(business to business)

Value chain management

RELATIONSHIP MARKETING AND THE 4P’S

Relationship marketing is practiced with the 4P’s which is also known as the marketing mix.

PRODUCT - product customised to customer preferences.

PRICE – Price is et on the relationship with the customer and the bundle of features and services ordered by the customer.

PLACE – Reduces the role of middlemen by offering to the customers directly.

PROMOTION – More individual and dialogue with customers.

CUSTOMER EQUITY plays and important role in building

relationship marketing.

CUSTOMER EQUITY- It is the total combined customer lifetime values of

all of a company’s customers.

Companies with high customer equity will be valued at a higher price

than companies with low customer equity & companies without customer

equity at all.

CUSTOMER EQUITY

FUTURE REVENUE

The 3 drivers to customer equity are,• Value equity • Brand equity• Retention equity

Value equity- is the customers assessment based on the offer, its price and

its convenience.

E.g.

Brand equity- is the customers subjective and intangible assessment of the

brand above and beyond its objectively perceived value. 

E.g.

Retention equity- is what makes a customer stay back with the preferred

brand rather than shift to any other.

E.g.

PARTNERING TO BUILD CUSTOMER RELATIONSHIPS

Partner Relationship Management plays a critical role in businesses undertaking

CRM. This involves;

Working with functions within the Organizations (value chain)

Working with other companies

Working with functions of other companiesE.g. Car industry – Toyota, Ford, Volvo Retail industry – Walmart, TescoCosmetic industry – Body shop Sports wear – Nike, Adidas

ROLE OF TRUST IN RELATIONSHIPS

TRUST plays a major part in any type of relationship.

Trust is relied on continuous successful delivery of its value promise and render priority to the exchange partners’ best interest.

TRUSTBenevolence

Competence

Firms show trust in their business by building consumer relationships through trustworthy dialogue and unbiased information.

Thus, the firms deliver their promise which is the value proposition that the consumers associate with the brand.

E.g.

With relationships based on exchanges constantly revolving, TRUST AND VALUE CONTRIBUTIONS by exchange partners will vary with time;

• Changes in technology • Market developments

Benefit

CostValue

TYPES OF RELATIONSHIP BASED TRANSACTIONS

Recurrent contracts- Repeated exchanges of assets that have ‘moderate degrees of asset specificity’.

Relational contracts- Long term investments involving asset specific investments.

Both these types of exchanges are alternative to markets and hierarchies.

Trust is a key factor for these relationships and due to the trust, risk is involved.

Modes of exchange - Markets, hierarchies and relationships

There are two other alternative methods of undertaking

transactions; Transactions

Market based(Between independent

firms)

Hierarchical (Within organizations)

Hence the four types of transactions; Market based Hierarchical Recurrent Relational

Types of risk that an organization faces; Commercial risk Technological risk Engineering risk

RISk

Time

Information

Control

CHARACTERISTICS OF RECURRENT RELATIONSHIPS AND RELATIONAL CONTACTING

COOPERATIVE AGREEMENTS – Repeated transactions with the same buyer.

TRANSACTION COST ECONOMIES ARE DEFICIENT – Trust and equity in transactions between firms are not serious.

CHARACTERSITICS OF MARKET BASED TRANSACTIONS1. Buyer only interested in price. (homogenous products)

2. No guarantee the consumer will stick to one seller.

3. Contracts are sharp in and sharp out – costs and benefits of monetary firms are clear to both parties.

4. When end of deal – end of relationship.

THE DECIDING FACTORS OF MARKETS, HIERARCHIES OR RELATIONSHIPS AND THE THEORY TO UNDERSTAND THE CONCEPT.

Bounded rationality – Managers of firms being intentionally rational

Opportunism – Managers making decisions pursuit of objectives (beneficial to themselves)

Asset Specificity – Consumers feeling towards the relationship when they are leaving which may affect them negatively.

Asset specific investments – tangible or intangible human physical assets required in supporting supplier.

Externality – pursuit of private goals by an agent.

THE LINK BETWEEN RISK AND TYPES OF RELATIONSHIPS

Market based

Match sticks

Recurrent

Clothes

Hierarchical

R&D for a product

Relational

Cars - Porsche

Low High

Low

High

Reliance

Risk

Market based Transactions

Risk Trust

(Because of the number of different suppliers)

Hierarchical Exchanges

Risk Trust

(Because the need for trust is low, exchanges are undertaken in-house & also they develop a business structure within the organization)

Recurrent Transactions Risk Trust

(Both parties build up trust in each other by demonstrating the extent to which they will reciprocate and how equitable they are willing to be in their transactions)

Relational Exchanges

(Firm use their resources to undertake joint R&D or product development)

Risk Trust

THE GOAL OF CUSTOMER RELATIONSHIP MARKETING

Why is it important for firms to do customer relationship marketing?

• It develops loyalty between a particular brand or company.• Helps to differentiate a company’s level of service and attention.• Provided cross selling opportunities.• Provides a way to directly evaluate customer value.

THE IMPACT OF CUSTOMER RELATIONSHIP MARKETING

• Purpose

• Design / methodology / approach

• Findings

• Practical Implications and originality/value

THE STRENGTHS OF CRM Improved customer experience Customer retention and reduce costs Communication

THE WEAKNESSES OF CRM Costs Company overhaul Security