Customer Relationship Management Strategies Chapter 4

Customer Relationship Marketing Why do some companies succeed? Collaborative advantage “

Relationship Marketing “All activities directed toward establishing, developing, and maintaining successful changes with customers and other constituents.” Why?

Relationship Marketing

Relationship Marketing Transactional exchange Definition Distant exchanges One of many suppliers Few operational linkages What’s an operational linkage?

Relationship Marketing Collaborative exchange Definition Work closely together Value-adding exchanges Attracting customers Maintaining customers

Relationship Marketing Nature of relationships Transactional Standardized Competitive bidding Collaborative exchange Customized product Work together through linkages Relationship commitment Trust Reliability and integrity

Relationship Marketing Transactional Collaborative Availability of Alternatives Supply Chain Dynamism Importance of Purchase Complexity of Purchase Information Exchange Operational Linkages

Relationship Marketing Strategy Guidelines Match purchasing situations and supply chain conditions for each customer! Collaborative How to handle? Transactional

Measuring Customer Profitability Common mistake Two factors must be present for differentiation to work Activity Based Costing Aggregate v. Individual firms Unlocking Customer Profitability 20/80 rule Corollary Big companies are usually most profitable or least profitable

Measuring Customer Profitability Managing High- and Low-Cost-to-Serve Customers What makes some customers expensive? Look inside first Sharper profit lens See next slide

Measuring Customer Profitability

Measuring Customer Profitability Identifying Profitable Customers Location on chart How to maintain? Identifying Unprofitable Customers How to improve the situation? Fire customers?! Why? How?

Customer Relationship Management “Cross-functional process for achieving continuing dialogue with customers across all their contact and access points, with personalized treatment of the most valuable customers to ensure customer retention and the effectiveness of marketing initiatives”

Customer Relationship Management Develop Customer Strategy, THEN choose software Five Steps for Customer Strategy Acquiring the right customers Crafting the right value proposition Instituting best processes Motivating employees Learning to retain customers

Customer Relationship Management Acquiring the Right Customers Look at current and potential customers Balance desired level of relationship with profitability of doing so Choosing accounts Three factors How do they define value? Look at profit potential

Customer Relationship Management Crafting the Right Value Proposition Value proposition- “the products, services, ideas, and solutions that a business marketer offers to advance the performance goals of the customer organization.” Look at industry- what are others doing?

Customer Relationship Management

Customer Relationship Management Industry bandwidth The strategies competing firms in an industry pursue Flaring out by unbundling Flaring out with augmentation Create Flexible Service Offering

Customer Relationship Management Instituting the Best Practices Salespeople Others Motivating Employees Why? How? Retaining Customers Growth from existing customers Evaluate relationships

Gaining an Advantage at CRM Customer-Relating Capability Orientation toward relationships Customer retention is a shard goal Organizational members act quickly on info received from customers All employees understand and appreciate the lifetime value of a customer Employees have considerable latitude when taking actions Information about relationships Configuration Org. structure and performance measures

Gaining a Position of Advantage What works best?