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Chapter: 07

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Relationship Marketing, its goals, and benefits of long term relationship for firm and customers.
Customer profitability segments as the strategy for relationship marketing.

Relationship development strategies: Core service, switching barriers, and relationship bonds.

Challenges in relationship development, as customers are not always right.


S.M. Monirul Islam, DBA, NUB 2

Wednesday, May 02, 2012

It represents a paradigm shift within marketing away from an acquisitions focus toward a retention/relationship focus. It focuses on keeping and improving relationship with current customers rather than an acquiring new customers
Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 3

Evolution of Customer Relationship


Firms relationship with their customers like other social relationships tend to evolve over time. The relationship between service customer and provider have the potential to evolve from strangers to acquaintances to fiends to partners
Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 4

Customers as Strangers
Product Offering Source of Competitive Advantages Buying Activity Focus of selling Activities Relationship Time Horizon Attractive relative to competitive offering or alternative purchase Attractiveness

Interest, exploration and trial

Awareness of firm offering

Buyer may have had no previous interactions with or knowledge of the firm

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

Customers as Acquaintance
Product Offering Source of Competitive Advantages Buying Activity Focus of selling Activities Relationship Time Horizon Parity product as a form of industry standard Satisfaction

Satisfaction facilitates and reinforces buying activity and reduces need to search for market Familiarity and general knowledge of customers

Generally short because the buyer can often switch firms without much effort of cists

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

Customers as Friends
Product Offering Source of Competitive Advantages Buying Activity Focus of selling Activities Relationship Time Horizon Differentiated product adapted to specific market segments Satisfaction+trust

Trust inn firm is needed to continue the buying activity without perfect information Specific knowledge of customers connection to segment need abd situation facilities selling Generally longer than acquaintance relationships

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

Customers as Partners
Product Offering Source of Competitive Advantages Buying Activity Focus of selling Activities Relationship Time Horizon Customized product and dedicated resources adapted to an individual customers or organizations Satisfaction+ trust+ commitment

Commitment in the form of information sharing and idiosyncratic investments is needed to achieve customized product Specific knowledge of customers need and situation and idiosyncratic facilitates selling. Generally long because it takes time to build and replace interconnected activities and to develop a detail knowledge.

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

Goal of Relationship Marketing


1.
2. 3. 4.

Acquiring Customer Satisfying Customer Retaining Customer Enhancing Customer

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

Benefit For Customers


Confidence Benefit (Feeling of trust/confidence, reduced anxiety) Social Benefit (Customers develop a sense of familiarity and even a social relationship with their service providers) Special Treatment Benefit (Getting the benefit of the doubt, being given a special deal or price/getting preferential treatment as exemplified by the following quotes from the research)

Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 10

Benefits For firms

Economic Benefit Customer Behavior Benefit Human Resource Management Benefit

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Customer Profitability Segments


All firms are aware at some level that their customers differ in profitability, in particular ,that a minority of their customers accounts for the highest proportion of sales or profit. This finding has often been called the80/20 rule-20 percent of customers produce 80 percent of sales or profit. Different systems and levels can be helpful. One useful 4 tier system includes the following
Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 12

Customer Profitability Segments..


Platinum Tier Gold Tier Iron Tier Lead Tier

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Platinum Tier
It describes the companys most profitable customers, typically those who are heavy users of the products are not overly price sensitive are willing to invest in and try new offering and the committed customers of the firm

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Gold Tier
Where profitability levels are not as high, perhaps because the customers want price discounts that limit margins or are not as loyal. That may be heavy users who minimizes risks by working with multiple vendors rather than just local company

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Iron Tier
The iron tier contains essential customers who provide the volume needed to utilize the firms capacity, but their spending levels, loyalty & profitability are not substantial enough for special

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Lead Tier
It consists of Customers who are costing the company money. They demand more attention than they are due given their spending & profitability & are sometimes problem customers-complaining about the firm to others & tying up the firms resources.

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Customer Tier Pyramid


Most profitable customers
What segment spends more with us over time, costs less to maintain & spreads positive word of mouth

Least Profitable Customers

What segments costs us in time effort & money yet does not provide the return we want? What segment is difficult to do business with?

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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Relationship Development Outcomes Model Relationship


Drivers
Relationship Bonds

Customer Benefits

Core Service Provisions

Strong Customer Relationship

Firm Benefits

Switching Barriers
Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 19

Relationship Development Strategies


1. Core service Provision
A firm need begin to relationship development process by providing a good core service delivery meets minimum expectation

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2. Switching Barriers
Customer

Inertia

Here discussed why dissatisfied customers stay with provider. Because.. People dont like to change their habit. To retain customer firm consider increasing the perceived effort is needed to change companies.
Customer

cost

Cost involve in changing to and purchasing from a different firm. It may be real/perceive, monetary /non-monetary.
Wednesday, May 02, 2012 S.M. Monirul Islam, DBA, NUB 21

3.Relationship Bond
Level 1 Financial Bonds Level 2 Social Bonds

Level 3

Customization Bonds

Level 4

Structural Bonds

Wednesday, May 02, 2012

S.M. Monirul Islam, DBA, NUB

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3.Relationship Bond..
Financial

Bond

Volume & frequency Rewards Stable Pricing

Building & Cross Selling

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S.M. Monirul Islam, DBA, NUB

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3.Relationship Bond
Social

Bond

Continuous Relationship Personal Relationship

Social bonds among Customers

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S.M. Monirul Islam, DBA, NUB

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3.Relationship Bond..
Customization

Bond

Customer intimacy Mass Customization

Anticipation/Innovation

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S.M. Monirul Islam, DBA, NUB

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3.Relationship Bond..
Structural

Bond

Integrated information system Joint Investment

Shared Process and Equipment

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S.M. Monirul Islam, DBA, NUB

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