marketing unit, slide no. 1 build profitable customer relationships step 4 in the marketing process

Marketing Unit, Slide No. 1

Build Profitable Customer Relationships

Step 4 in the Marketing Process


Building Customer Relationships

• Customer relationship management (CRM) is the process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

• CRM deals with all aspects of acquiring, keeping, and growing customers.

• The key to building lasting customer relationship is to: create superior customer value and customer satisfaction. Satisfied customers are more likely to be loyal customers and give the company a larger share of their purchases.


Customer Relationship Management System

• Customer relationship management system

- An information technology-based (IT-based) knowledge management system designed to track a company’s customers – what they are buying, how satisfied they are, and how their demands are changing.

- Consists of three components or modules as shown on the right.

Figure 11.8


Changing Nature of Managing Customer Relationships

• Today’s companies are focusing on building more direct and lasting relationships with more carefully selected customers,

• Few firms today still practice true mass marketing, i.e., selling in a standardized way to any customer who comes along. Firms now are targeting fewer, more profitable customers.

• This is called selective relationship management. Involves using customer profitability analysis to weed out losing (unprofitable) and target winning ones for special treatment.

• Other changes:- Serving chosen customers in a deeper, more lasting way. Going beyond

strategies to attract new customer and generate transactions, focusing instead on retaining current customers and building profitable, long-term relationships with them.

- Also striving to connect more directly with their customers. Direct marketing, i.e., buying without going into a store, is booming.


Building The Right Relationships With the Right Customers

Future Value

Current Value

High

LowLow High

Allow to leave

Maintain

GrowCross-sell

ProtectCross-sell and up-sell

Classifying Customers Based on Current and Future Value


Customer Relationship Levels & Tools

• Relationships can be built at many levels depending on the nature of the target market. For example:- Basic relationships with lower margin

customers; or

- Full partnerships with key customers.

• A variety of tools are available to build stronger bonds with customers. For example:- Frequency marketing or loyalty marketing

programs that reward customers who buy frequently or in large amounts; and

- Club marketing programs that offer members financial and/or social benefits.

Harley-Davidson builds customer relationships by

means of the social benefits of the Harley Owners Group (HOG).

Click here to visit HOG's website

Harley-Davidson builds customer relationships by

means of the social benefits of the Harley Owners Group (HOG).

Click here to visit HOG's website


Partner Relationship Marketing

Partners Inside the Firm•All employees customer-focused.•Not just marketing’s responsibility; every functional area can interact with customers.•Firms are linking all departments in the in the cause of creating customer value, and cross-functional teams coordinate efforts toward customers.

Partners Outside the Firm•Supply chain management•Strategic alliances•Sometimes even competitors work together for mutual benefit


Capture Value from Customers

Step 5 in the Marketing Process


Capturing Value from Customers

• Creating superior value for customers results in:

- Highly satisfied customers

- Who stay loyal and buy more

- Which, in turn, means greater long-run returns for the organization.


The Rewards of Creating Customer Value

Customer Lifetime Value

(CLV)The value (profit) of the

entire stream of purchases that the

customer would make over a lifetime of

patronage.

Share of Customer

The share a company gets of the customer’s

purchasing in their product categories. For example, banks want to increase their “share of

wallet.”


Capturing Value from Customers

The importance of not just acquiring customers, but of keeping and growing them as well:

“The only value your company will ever create is the value that comes from customers—the ones you have now and the ones you will have in the future. Without customers, you don‘t have a business.”

—Don Peppers & Martha Rogers

The importance of not just acquiring customers, but of keeping and growing them as well:

“The only value your company will ever create is the value that comes from customers—the ones you have now and the ones you will have in the future. Without customers, you don‘t have a business.”

—Don Peppers & Martha Rogers


Building Customer Equity

• Customer equity is the combined discounted customer lifetime values of all of the company’s current and potential customers.


Pulling It All TogetherAn Expanded Model of the Marketing Process

marketing unit, slide no. 1 build profitable customer relationships step 4 in the marketing process

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