2. Developing and Maintaining Long-Term Customer Relationships
ATM Semester 2
Lecture 7
By Sanemkhan Nurillaeva

3. Agenda What is Customer Relationship Management? 12 Differences of CRM
Stages of Customer Relationship Development
The Role of Quality
Total Product Offering
Formula of Perceived Value
Customer Satisfaction

4. Definition of CRM Customer Relationship Management (CRM)
Defined as a business philosophy aimed at defining and increasing customer value in ways that motivate customers to remain loyal.
About retaining the “right” customers
Recognizing that not all customers have equal value to the firm

5. The “Right” Marketing Strategy
Is not about creating a large number of transactions
Is one that attracts and retains customers over the long-term
Considers customer needs, wants, and expectations
Develops long-term relationships
Principle of Pareto or 80/20 rule
20% of loyal customers bring 80%of sales

6. CRM Involves: Customers Employees Supply Chain Partners
External Stakeholders

7. 12 Differences of CRM
According to Ferrel and Hartline (2008), Strategic Shift from Acquiring Customers to Maintaining Clients requires 12 changes
Differences
Acquiring Customers
Maintaining Clients
1st
Customers are “Customers”
Customers are “Clients”
2nd
Acquire a New Customer
Build Relationship with current customer
3rd
Increase Market Share
Increase Share of Customer

8. 12 Differences of CRM Differences Acquiring Customers
Maintaining Clients
4th
Short-term strategic focus
Long-term strategic focus
5th
Discrete Transactions
Continuous Transactions

9. 12 Differences of CRM Differences Acquiring Customers
Maintaining Clients
6th
Segmentation based on homogeneous needs
Segmentation based on heterogeneous needs
7th
Differentiation of products based on Groups
Differentiation of products based on Individual Customers
8th
Standardized products
Mass customization

10. 12 Differences of CRM Differences Acquiring Customers
Maintaining Clients
9th
Mass Marketing
One-to-one Marketing
10th
One-way Mass Communication
Two way Individualized Communication

11. 12 Differences of CRM Differences Acquiring Customers
Maintaining Clients
11th
Competition
Collaboration
12th
Lowest cost provider
Value Based Pricing Strategy

12. Developing Relationships in Consumer Markets
Attempts to create true believers and sponsors of the company
Recognizes that not all customers have equal value to the firm
Involves determining the lifetime value (LTV) of customers

13. Stages of Customer Relationship Development
by Ferrel and Hartline (2008)
Similar to Customer
Dispositional Funnel (CDF)
A long-term process
Goal is to move consumers
through levels of increasing
relationship intensity

14. The Role of Quality

15. Understanding the Role of Quality
The degree of superiority of a firm’s goods or services
Components of the Total Product Offering:
The Core Product
Satisfies the basic customer need
Core product in services (people, processes, and physical evidence)
Supplemental Products
Add value to the core product
Symbolic and Experiential Attributes
Usually based on image, prestige, or brand

16. Components of the Total Product Offering
Example: Michelin Tiers
The Core Product
Tiers Safety
Supplemental Products
Broad availability
Installation
Financing
Symbolic and Experiential Attributes
Security –”Because a lot is riding on your tiers”
A better way forward
Michelin Man

17. Components of the Total Product Offering
Example : Waldorf Astoria, New York City
The Core Product
Bed
Room
Supplemental Products
Mid-Manhattan location
Restaurants
Room Service
Executive Lounge
Symbolic and Experiential Attributes
Extraordinary hospitality
The first “Grand Hotel”
Art deco styling

18. More Examples of Components
by Ferrel and Hartline (2008)

19. Understanding the Role of Value
A simple formula for value:
by Ferrel and Hartline (2008)

20. Formula discussion
Customer Benefits= The Core Product Quality +Supplemental Products Quality +Experiential Attributes Quality Customer Costs = Monetary Costs (financial expenditures) + Non-monetary Costs (customer time, affords, risks)

21. Delivering Superior Quality
Understand Customers’ Expectations
Translate Expectations into Quality Standards
Uphold Quality Standards
Don’t Overpromise

22. Competing on Quality in Automobile Industry

23. Competing on Quality in Automobile Industry
In the face of high quality competition from Japanese automobile manufacturers, Ford adopted a strategy focused on quality.
Has that strategy been successful in convincing you of the quality of Ford’s products? How would you compare Ford in quality to Toyota or Honda?

24. Customer Satisfaction

25. Customer Satisfaction:
The Key to Customer Retention
Understanding Customer Expectations
Ranges of Customer Expectations
The Zone of Tolerance
Customer Delight
Customer Satisfaction
Customer Dissatisfaction
Managing Customer Expectations
Satisfaction vs. Quality vs. Value

26. Range of Customer Expectations
by Ferrel and Hartline (2008)

27. Customer Satisfaction & Customer Retention
Steps that can be undertaken to increase customer satisfaction and generate customer retention
Understand what can go wrong
Focus on controllable issues
Manage customer expectations
Offer satisfaction guarantees
Make it easy for customers to complain
Create relationship programs
Make customer satisfaction measurement an ongoing priority

28. Example of Satisfaction Guarantees
At Xerox we are committed to the highest quality in the design, manufacture and service of all we sell. We measure our success by one standard. Total Customer Satisfaction. Our winning of the Malcolm Baldrige National Quality Award testifies to this principle. Taking this commitment one step further, we offer this exclusive Xerox Total Satisfaction Guarantee: If you are not satisfied with the performance of your Xerox equipment, at your request Xerox will repair it or will replace it without charge to you with comparable features and capabilities . The term of Xerox Total Satisfaction Guarantee is three years from initial equipment delivery. If the newly delivered equipment is financed by Xerox for more than three years, the Guarantee to repair it or replace it will apply during the entire term of your Xerox financing. This Xerox Total Satisfaction Guarantee applies to Xerox equipment acquired by you from Xerox or Xerox reseller/dealer , and continuously maintained by Xerox or its authorized representatives under our manufacturer warranty or a Xerox Service Agreement. This guarantee is a subject of all limitations set forth in the warranty and service agreement for this agreement.

29. More Examples

30. Internal Efficiency vs. Customer Service
Northwest Airlines has damaged its relationships with customers through shortsighted attempts to reduce costs (e.g., cutting magazines, pillows, pretzels, etc.).
What strategic moves can NWA make to fight off low-cost carriers?

31. Thanks for Your Attention!

32. Reading
Ferrel and Hartline (2008). Marketing Strategy, Chapter 12.