DevelopingCustomerRelationship

LEARNING OUTCOMES

By the end of this topic, you should be able to:

1. Definecustomerrelationshipmanagement;

2. Reviewtheroleofqualityindevelopingcustomerrelationship;

3. Illustratetheimportanceofvalueindevelopingcustomerrelationship;and

4. Discusshowtomaintaincustomersatisfaction.

Topic

11 Developing Customer

Relationship

X INTROdUCTIONDevelopingasolidmarketingmixthateffectivelysatisfiescustomers’needsandwants has become difficult in today’s rapidly changing business environment.Thesimple fact is thatgoodsituationandSWOTAnalysis,alongwitheffectivesegmentation and differentiation, may not be enough to guarantee success,giventherapidpaceofchange.Intimespast,developingthe“right”marketingstrategy was really more about creating a large number of transactions withcustomers,ormarketshare, thanaboutfindingbetterways tosolvecustomers’problemsandsatisfytheirneeds.Intoday’seconomy,thebestmarketingstrategyisonethatprovidesthelevelofquality,value,andsatisfactionnecessarytoretaincustomers over the long term. Developing long-term customer relationshipswithcustomersisperhapsthebestwaytoinsulateafirmfromtherapidpaceofchangeintoday’senvironment.

196 TOPIC 11 DEVELOPING CUSTOMER RELATIONSHIP

11.1 CUSTOMER RELATIONShIp MANAGEMENT

Customer Relationship Management (CRM)istheholisticprocessofidentifying,attracting,differentiatingandretainingcustomers. Itmeans integratingafirm’sentiresupplychaintocreatevalueateverystep,eitherthroughincreasedbenefitsorloweredcosts,asshowninTable11.1.

Whatiscustomerrelationshipmanagement?

SELf-ChECk 11.1

The aim of customer relationship management (CRM) is to produce highcustomer equity. Customer equity is the total of the discounted lifetime valuesofallof thefirm’s customers.Clearly, themore loyal the customers, thehigherthe customer equity. Rust, Zeithmal, and Lemon distinguish three drivers ofcustomerequity,namelyvalueequity,brandequityandrelationshipequity.

Source: Ferrell,O.C.,Hartline,M.D.,&Lucas,G.H.(2002).Marketingstrategy(2nded.).Mason,Ohio,USA:South-Western,ADivisionofThomsonLearning

Table 11.1: StrategicShiftsfromAcquiringCustomerstoMaintainingClients

Acquiring Customers Maintaining Clients

Customersare“customers”. Customersare“clients”.

Massmarketing. One-to-onemarketing.

Acquirenewcustomers. Buildrelationshipwithcurrentcustomers.

Discreettransactions. Continuoustransactions.

Increasemarketshare. Increaseshareofcustomers.

Differentiationbasedongroups. Differentiationbasedonindividualcustomers.

Segmentationbasedonhomogeneousneeds.

Segmentationbasedonheterogeneousneeds.

Short-termstrategicfocus. Long-termstrategicfocus.

Standardisedproducts. Masscustomisation.

Lowestcostprovider. Value-basedpricingstrategy.

One-waymasscommunication. Two-wayindividualisedcommunications.

Competition Collaboration.

TOPIC 11 DEVELOPING CUSTOMER RELATIONSHIP 197

(a) Value equity is the customer’s objective assessment of the utility of anoffering, based on perceptions of its benefits relative to its costs. The sub-drivers of value equity are quality, price, and convenience. Each industryhastodefinethespecificfactorsunderlyingeachsub-driversinordertofindprogrammestoimprovethevalueequity.

(b) Brand equity is the customer’s subjective and intangible assessment ofthe brand, above and beyond its objectively perceived value. The sub-drivers of brand equity are customer brand awareness, customer attitudetowardsthebrand,andcustomerperceptionofbrandethics.Companiesuseadvertising,publicrelations,andothercommunicationtoolstoaffect thesesub-drivers.Brandequityismoreimportantthanotherdriversofcustomerequity, in which products are less differentiated and have more emotionalimpact.

(c) Relationship equity is thecustomer’s tendency tostay loyal to thebrand,above and beyond objective and subjective assessment of its worth. Sub-driversofrelationshipequityincludeloyaltyprogrammes,andknowledge-building programmes. Relationship equity is especially important wherepersonalrelationshipscountforalotandwherecustomerstendtocontinuewithsuppliersoutofhabitorinertia.

Figure 11.1 shows the main steps in the process of attracting and keepingcustomers. The starting point is everyone who might conceivably buy theproduct or service (suspects). From these the company determines the mostlikelyprospects,whichithopestoconverttofirst-timecustomers,andthenintorepeatcustomers,andthenintoclients;peoplewhomthecompanyacknowledgeand give special treatment. The next challenge is to turn clients into membersby starting a membership programme that offers benefits to customers whojoin. Then, the members become advocates, customers who enthusiasticallyrecommend the company and its products and services to others. The ultimatechallengeistoturnadvocatesintopartners.


Figure 11.1: ThecustomerrelationshipprocessSource:Kotler,P.(2003).Marketingmanagement(11thed.).UpperSaddle,

NewJersrey,USA:Prentice-Hall,Inc.


CRMinvolvesanumberofstakeholders,asstatednext.

(a) Employees Firmsmust manage relationshipswith their employees if theyare tohave

anyhopeoffullyservingcustomers’needs.

(b) Supply Chain Partners Virtually all firms buy and sell products upstream and/or downstream in

thesupplychain.

(c) Lateral Partners Relationshipswithotherstakeholdersmustalsobemanagedeffectively.

(d) Customers Theendusersofaproduct,whetherbusinessesorindividualcustomers.

Why is Customer Relationship Management very important to acompanyandwhoarethepeopleinvolved?

SELf-ChECk 11.2

ACTIvITy 11.1

Browsethroughthefollowingwebsite,http://www.onlinewbc.gov/docs/market/mk_sales_rltshpmkt.htmltoknowmoreaboutcustomerrelationshipmarketing.

11.1.1 Increasing Share of Customers

Increasingshareofcustomersinvolvesabandoningtheoldnotionsofacquiringnew customers and increasing transactions to focus more on fully servingthe needs of current customers. Focusing on share of customers requiresunderstanding that all customers have different needs, and therefore, notall customers have equal value to a firm. Some customers; those that requireconsiderable “handholding” or who frequently return products are simply tooexpensivetokeep,giventhelowlevelofprofitstheygenerate.

11.1.2 One-to-one Marketing and Mass Customisation

One-to-onemarketingandmasscustomisationcanbeprohibitivelyexpensivetodeliver.Tomakecustomisedmarketingmixesviable,therearethreecriticalissuestobeconsidered,asexplainedinthefollowingparagraphs.


(a) The delivery of the marketing mix (product, pricing, distribution andpromotion)mustbeautomatedtoadegreethatmakesitcostefficient;

(b) The second critical issue in mass customisation is the notion ofpersonalisation.This term isused todescribe the ideaofgivingcustomerschoices,notonlyintermsofproductconfiguration,butalsointermsoftheentiremarketingmix;and

(c) Togrowintoday’sbusinessenvironment,afirmmustbuilditsrelationshipcapital; the ability to build and maintain relationships with customers,suppliers, and partners. To build relationship capital, a firm must be ableto fulfill the needs of its customers better than its competitors. It must beable to fulfill those needs with high-quality goods and services, offerproductsthatare“valueforthemoney”andachieveahighlevelofcustomersatisfaction.

11.2 ThE ROLE Of QUALITy IN dEvELOpING CUSTOMER RELATIONShIp

Qualityreferstoaperceiveddegreeofsuperiorityregardingafirm’sgoodsandservicesintheeyesofthecustomers.Qualityappliestomanydifferentaspectsofafirm’stotalproductoffering,namelythefollowing.

(a) Core Product Thecoreproductisthefirm’sjustificationsforexistencethebenefitsdesired

by customers. Customers expect the core product to be of high quality tomeettheirneeds.

(b) Customer Services Customerservicesinvolveactivitiesthataddvaluetothecoreproduct.

(c) Symbolic Attributes Customersalso focusonsymbolicattributes, suchas image,style,prestige

andbrand.

Table11.2highlightsthecomponentsofthetotalproductoffering.

Why is Customer Relationship Management very important to acompanyandwhoarethepeopleinvolved?

SELf-ChECk 11.3


Deliveringsuperiorqualityonadailybasisisoneofthemostdifficultthingsforanorganisation.Mostbusinessesstrugglewithimprovingthequalityofservice,eitherasacoreproductorascustomerservicesthataddvaluetoacoreproduct.Researchhasdeterminedthatbusinessescanimprovethequalityoftheirservicesbyconsideringthefollowingfactors.

(a) Understanding Customers’ Expectation, Needs and Wants Improving service quality is the starting point for effective customer

relationship management. Delivery of superior quality begins with a solidunderstandingofcustomers’expectations.Managersmuststayintouchwithcustomersbyconductingresearch,tobetteridentifytheirneedsandwants.

(b) Translating Customer Research into Specification for Quality Firms that can successfully convert customer information into quality

specificationscanensurethatthevoiceofthecustomersisheard.Managersmustbecommittedtogivingcustomerswhattheywantandexpect.

(c) Delivering on Specifications The ability of managers and employees to deliver quality that is consistent

withestablishedspecificationsisanissue.Successfullyachievingspecificationsdependsmostlyonthetrainingandmotivationofthefirm’semployees.

Table 11.2: ComponentsoftheTotalProductOffering


Example Core Product Customer Services Symbolic Attributes

•SprintPCS •Communication •Rateplans •Leatherslipcase WirelessPhone •Freelongdistance •Changeable faceplates

•Chevrolet • Transportation • Financing • “Likearock” SilveradoPickup • Hauling/towing • Service • “Workandfun” department • “Buildyourown”

•JohnDeereLawn •Grasscutting •Financing •JohnDeere“green” Tractor •Delivery • Nothingrideslike aDeere”

•MichelinTires • Tires • Availability • Security– • Safety • Installation “Becausealotis • Financing ridingonyour tires”

•WaldorfAstoria • Bed/room • Mid-Manhattan • “Extraordinary NewYorkCity location hospitality” • Restaurants/room • Thefirst“Grand service Hotel” • Executivelounge • Art-Decostyle


(d) Promising only What can be Delivered Communicationswithcustomersmustbehonestandrealistic,withrespect

to thedegreeofquality that canbedelivered. Improvingqualityhasbeenthehallmarkofasuccessfulmarketingstrategyformanyyears.

Totestyourunderstanding,answerthefollowingexercise.

ACTIvITy 11.2

How can an organisation improve on the quality of the servicesprovidedtotheircustomers?

Complete the following exercise by circling the correct answers.

1. Whichofthefollowingisnotanimportantstakeholderin customerrelationshipmanagement?

A. Employees

B. Upstreamsupplychainpartners

C. Downstreamsupplychainpartners

D. Lateralpartners

E. Stockholders

2. When a firm begins to charge high fees for additional servicesto non-profitable customers, it has determined that the

of those customers is too low to warrantaddedeffortsatmaintainingarelationshipwiththem.

A. lifetimevalue

B. relationalValue

C. 80/20value

D. marketshare

E. relationalshare

EXERCISE 11.1


3. Manyexpertsarguethat capital,ortheabilitytobuildandmaintainrelationshipswithcustomers,suppliers,andpartners,ismoreimportantthantangibleassetsand/orequipment.

A. customer

B. relationship

C. one-to-none

D. clientele

E. market

4. Whichaspectofproductqualityarecustomersmost likely to takeforgranted?

A. Customerservices

B. Symbolicattributes

C. Relationshipquality

D. Coreproduct

E. Intangiblequality

5. Why do most businesses struggle with improving the quality ofcustomerservices?

A. Servicequalityispeople-driven.

B. Servicequalityisnotasimportantassymbolicquality.

C. Most businesses do a very poor job of understandingcustomers’needs.

D. Most businesses have a hard enough time maintaining thequalityof their coreproduct, socustomerservicesdonotgetmuchattention.

E. Customers do not know what they want in terms of goodservice.


11.3 CREATING vALUE TO dEvELOp CUSTOMER RELATIONShIp

Whatistheimportanceofvalueindevelopingcustomerrelationship?

SELf-ChECk 11.4

11.3.1 Importance of the value

An aspect of developing and maintaining solid relationship is to create goodvaluetocustomers.Valueisusefulbecause:

• Itincludestheconceptofquality;

• Ittakesintoaccounteverymarketingmixelement;and

• Itcanbeusedtoexplicitlyconsidercustomerperceptionsofthemarketingmixinthestrategydevelopmentprocess.

Valuemeansdifferentthingstodifferentpeople:

• Someequategoodvaluewithhighproductquality;

• Othersseevalueasnothingmorethanalowprice;and

• Themostcommondefinitionrelatescustomerbenefitstocosts.

Ourpremiseisthatcustomerswillbuyfromthefirmthattheyseeasofferingthehighestperceivedvalue,asshowninFigure11.2.

Customer Perceived Value (CPV) is the difference between the prospectivecustomer’sevaluationofall thebenefitsandall thecostsofanofferingandtheperceivedalternatives.

Total customer valueistheperceivedmonetaryvalueofthebundleofeconomic,functional, and psychological benefits customers expect from a given marketoffering.

Total customer cost is the bundle of costs customers expects to incur inevaluating,obtaining,usinganddisposingofagivenmarketoffering.


11.3.2 Customer Benefits

(a) Customer benefits can includeanything thata customer receives inhisorherdealingswithafirm,asshowninTable11.3.

(i) Thebenefitsfromthequalityofthefirm’scoreproducts,includeallofthefeaturespossessedbyitsprogrammes;

(ii) The benefits from customer services include installation, delivery,training, or layaway programmes. The quality of customer servicedependsonhowreliableandresponsivethefirmistocustomerrequest,andonemployeecharacteristics,suchasfriendlinessandempathy;and

(iii) Thebenefitsfromexperiencesincludebusinesscustomers’interactionswithsalespeople.

Figure 11.2: Determinantsofcustomer-deliveredvalueSource: Ferrell,O.C.,Hartline,M.D.,&Lucas,G.H.(2002).Marketingstrategy(2nded.).Mason,Ohio,USA:South-Western,ADivisionofThomsonLearning

Personnelvalue

Energycost

Imagesvalue

Psyhiccost

Customer delivered

value

Totalcustomer

value

Totalcustomer

cost

Productvalue

Monetary cost

Servicesvalue

Time cost


(b) Customer costs, which include monetary and non-monetary costs, arealsohighlighted inTable11.3.Monetaryandnon-monetarycustomercostsinclude anything that the customer must give up to obtain the benefitsprovidedbythefirms.

Themonetary costoftheproductcomesintwoforms;transactionalcostandlifecyclecost.

(i) Transactional cost includes the immediate financial outlay orcommitmentthatmustbemadetopurchasetheproduct;and

(ii) Life cycle cost includesanyadditionalcoststhatcustomerswill incuroverthelifecycleoftheproduct.

Non-monetary cost is the time and effort customers expend to find andpurchasegoodsandservices.

(i) Toreducetimeandeffort, thefirmmust increaseproductavailability;and

(ii) They must make it more convenient for customers to purchase thefirm’sproducts.

Table 11.3: ComponentsofCustomerBenefitsandCustomerCost

Source: Ferrell,O.C.,Hartline,M.D.,&Lucas,G.H.(2002).Marketingstrategy.(2nded.).Mason,Ohio,USA:South-Western,ADivisionofThomsonLearning

Customer Benefits Customer Costs

Core Product Quality Minetary Cost• Productfeature (a) TransactionCosts• Brandname • Retailorwholesaleprice• Stylinganddesign • Deliverycharges• Durability • Installationcharges• Easeofuse • Salestax• Image • Usagetax• Reputation • Registrationfees• Warrantiesandguarantees • Licensingfees • AdditionalfeesofchargesCustomer Service Quality • Reliability (b) LifecycleCosts• Responsiveness • Maintenancecosts• Timeliness • Repaircost• Friendlinessofemployees • Replacementcost

Experience-based Quality Non-monetary Costs• Retailatmosphereanddecor • Time• Advertisingandpublicity • Effort• Entertainmentbenefits • Risk • Safetyandsecurity • Opportunitycosts.


Risk, another non-monetary cost, can be reduced by offering good basicwarrantiesorextendedwarrantiesforanadditionalcharge.

Opportunity cost, the final non-monetary cost, is harder for the firm to

control.Somefirmsattempttoreduceopportunitycostby:

(i) Promoting their products as being the best or by promising goodserviceafterthesale;and

(ii) Considering all competitors, including total budget competitors, thatoffercustomeralternativesforspendingtheirmoney.

Byalteringeachelementofthemarketingmix,thefirmcanenhancevalue

by increasingcoreproduct, customerservice,orexperienced-basedqualityand/orbyreducingmonetaryornon-monetarycost.Themarketingmanagermustunderstandthedifferentvaluerequirementofeachtargetmarketandadapt the marketing mix accordingly. From a strategic perspective, it is torememberthatallfourmarketingmixelementsareimportanttodeliveringvalue.

11.4 MAINTAINING CUSTOMER SATISfACTION

Whatarethedifferencesbetweentransactionalcostandlifecyclecost?

SELf-ChECk 11.5

To maintain and manage customer satisfaction form a strategic point of view,managers must understand the differences between satisfaction, value andquality. They must also make customer satisfaction measurement, a long-termandcontinuouscommitment.

11.4.1 Satisfaction versus Quality versus value

Customer satisfaction is defined as the degree to which a product meets orexceedsthecustomer’sexpectation.Customerscanhaveexpectationsaboutanypartoftheproductoffering,includingqualityandvalue.

Doyouknowwhatittakestomaintaincustomersatisfaction?

SELf-ChECk 11.6


Quality is a concept in which customers judge the product on an attribute-by-attributebasis. (Consideramealatarestaurant.Thequalityof thatmealstemsfrom specific attributes. The quality of the food, drink, atmosphere and theserviceareall important.Wecouldevengoasfarasto judgethequalityof theingredientsinthefood.)

Value includes other aspects than quality, for example, price, time, effort, andopportunity costs. In this case, even the best meal in a great restaurant can beviewedasahavingpoorvalueifthepriceistoohighintermsofmonetaryand/ornon-monetarycosts.

When a customer considers satisfaction, he or she will typically respond basedonhisorherexpectationof the iteminquestion. If thequalityof thefoodisnotwhatthecustomerexpected,thenthecustomerwillbedissatisfiedwiththefood.Similarly,ifthevalueofthemealisnotwhatthecustomerexpected,thecustomerwillbedissatisfiedwiththevalue.Notethattheseareindependent judgments.Itisentirelypossibleforacustomertobesatisfiedwiththequalityofthemeal,butdissatisfiedwiththevalue.Theoppositeisalsotrue.

However, most customers do not make independent judgments aboutsatisfaction.Instead,customersthinkofsatisfactionbasedonthetotalityoftheirexperience,withoutovertlyconsideringissueslikequalityandvalue.Wearenotsayingthatcustomersdonot judgequalityorvalue.Rather,wearesayingthatcustomers think of satisfaction in more abstract terms than they do quality orvalue.Thishappensbecauseofcustomers’expectations,hencetheirsatisfactioncanbebasedonanynumberoffactors;evenfactorsthathavenothingtodowithqualityorvalue.

Continuing with our restaurant example, it is entirely possible for a customerto receive the absolute best quality and value, yet still be dissatisfied with theexperience.Theweather,othercustomers,abaddate,andbeinginabadmoodare just a few examples of non-quality and non-value factors that can affectcustomers’expectationsandcloudtheirjudgmentsofsatisfactions.

11.4.2 Important Considerations in Maintaining Customer Satisfaction

From a strategic point of view, there are three important considerations inmaintainingcustomersatisfaction.

• Understand What Can Go Wrong An endless number of things can and will go wrong in fulfilling customers’

needs and wants. The best strategies will not work when things are simplyuncontrollable.


• Focus on Issues that are Controllable Managers must focus on issues that can control the marketing mix. Core

product quality, customer service, atmosphere, experiences, pricing,convenience,distributionandpromotionmustallbemanaged.

• Make Customer Satisfaction Measurement an On-going Priority Know what customers want, need and expect. A programme to measure

customersatisfactionisthecornerstoneofcustomerrelationshipmanagement.

11.4.3 Tracking Customer Satisfaction

Whatisthedifferencebetweenqualityandvalue?

SELf-ChECk 11.7

Firms which are serious about customer relationship management haveadoptedrobustmeansoftrackingsatisfactionthatarebasedonactualcustomerbehaviours.

(a) Lifetime Value of a Satisfaction (LTV) This refers to the net present value of the revenue stream, generated by a

specificcustomeroveraperiodoftime.LTVrecognisesthatsomecustomersareworthmore thanothers.Companiescanbetter leverage theircustomersatisfactionprogrammesbyfocusingonvaluablecustomers.

(b) Average Order Value (AOV) This refers to a customer’s purchase dollars divided by the number of

ordersoveraperiodoftime.TheAOVwillincreaseovertimeascustomersatisfactionincreasesandcustomersbecomemoreloyal.

(c) Customer Acquisition/Retention Costs Itistypicallylessexpensivetoretaincurrentcustomersthantoacquirenew

customers.As long as this holds true, a company is better off keeping itscurrentcustomerssatisfied.

Doyouknowwhatare themethods thatareused to trackcustomersatisfaction?

SELf-ChECk 11.8


(d) Customer Retention Rate This refers to the percentage of customers who are repeat purchasers. A

decliningretentionrateisacauseforconcern.

(e) Referrals Dollars that are generated from customers referred to the firm by current

customers.Adecliningreferralrateisacauseforconcern.

(f) Viral Marketing An electronic form of word-of-mouth communication. The number of

Internetnewsgroupsandchatroomswherecustomerspraiseandcomplainabout companies is staggering. Companies can track customer satisfactionbycloselymonitoringthison-linecommentary.

Although the customer-centred firms seek to create high customer satisfaction,thatisnotitsmaingoal.Ifacompanyincreasescustomersatisfactionbyloweringitspriceorincreasingitsservices,theresultmaybelowerprofits.

The company might be able to increase its profitability through other meansthan increasing satisfaction (for example, manufacturing processes or investingmoreinR&D).Also,thecompanyhasmanystakeholders,includingemployees,dealers, suppliers and stockholders. Spending more to increase customersatisfaction might divert funds from increasing the satisfaction of other“partners”. Ultimately, the company must operate on the philosophy that it istryingtodeliverahighlevelofcustomersatisfaction.Therefore,thecompanyissubject todeliveringacceptable levelsof satisfaction for theother stakeholders,givenitstotalresources.Table11.4illustratesthetoolsfortrackingandmeasuringcustomersatisfaction.


11.4.4 The focus Group

Firms also have another research method at their disposal, which is the focusgroup.

(i) Focus groups are being used more often in the measurement of customersatisfaction;

(ii) Focus group allows the firm to fully explore the subtleties of satisfaction;and

Table 11.4: ToolsforTrackingandMeasuringCustomerSatisfaction

Complaint and Suggestion System

A customer-centered organisation makes it easy forcustomers to register suggestions and complaints. Somecustomer-centered companies like P&G, General Electric,and Whirlpool, establish hotlines with toll-free numbers.CompaniesarealsousingWebandE-mail forquick, two-waycommunication.

Customer Satisfaction Survey

Studies show that though customers are dissatisfied withone out of every four purchases, less than 5 percent willcomplain.Mostcustomerswillbuylessorswitchsuppliers.Responsive companies measure customer satisfactiondirectly by conducting periodic surveys. While collectingcustomersatisfactiondata,itisalsousefultoaskadditionalquestionstomeasurerepurchaseintentionsandtomeasurethe likelihood or willingness to recommend the companybrandstoothers.

Ghost Shopping Companies can hire people to pose as potential buyers,to report on strong and weak points experienced inbuying the company’s and competitors’ products. Thesemystery shoppers can even test how the company’s salespersonnelhandlevarioussituations.Managersthemselvesshould leave their offices from time to time, and entercompanyandcompetitorsalessituations,inwhichtheyareunknown,andexperiencethesituationfirsthand.Avariantof this is formanagers tophone theirowncompanywithquestionsandcomplaintstoseehowthecallsarehandled.

Lost Customer Analysis

Companies should contact customers who have stoppedbuyingandhaveswitchedtoanothersupplier, to identifythereason(s)behindit.Notonlyisitimportanttoconductexit interviews when customers first stop shopping; it isalsonecessarytomonitorthecustomerlossrate.



ACTIvITy 11.3

Ifyourcompany iscurrentlypromotinganewlineofshampoosandconditioners, who are the individuals you would select to be part ofyourfocusgroup?

True False

EXERCISE 11.2

Statements

Quality refers to the degree of superiority of a firm’sgoodsorservices.

Transactional cost includes any additional costs thatcustomerswillincuroverthelifecycleoftheproduct.

Customer services involve activities that add value tothecoreproducts.

Non-monetary cost is the time and effort customersexpendtofindandpurchasegoodsandservices.

Focus groups are being used more often in themeasurementofcustomerrelationship.

Customersatisfactionisdefinedasthedegreetowhichaproductmeetsorexceedsthecustomer’sexpectationsabouttheproduct.

Customer Relationship Management (CRM) is theholisticprocessofidentifying,attracting,differentiatingandretainingcustomers.

Tick“True”or“False”intheappropriateboxes.

(iii) Bybetterunderstandingtherootsofcustomersatisfaction,marketersshouldbe better able to develop marketing strategies that can meet customers’needs.


Totestyourunderstanding,answerthefollowingexercise.

EXERCISE 11.3

Complete the following exercise by circling the correct answers.

1. Time,effort,risksandopportunitycostareallexamplesof:

A. non-monetarycosts.

B. monetarycost.

C. experientialcost.

D. intangiblecost.

E. perceivedcost.

2. may be defined as a customer’s subjectiveevaluationoftheratiobetweenaproduct’sbenefitsandthecostsofacquiringit.

A. Satisfaction

B. Justice

C. Value

D. Quality

E. Fairness

3. Which of the following is the most narrowly defined concept intermsofunderstandingcustomerexpectations?

A. Value

B. Quality

C. Satisfaction

D. Relationshipquality

E. Opportunitycost

4. Thenetpresentvalueoftherevenuestreamgeneratedbyaspecificcustomeroveraperiodoftime,isreferredtoasthe:

A. averageordervalue.

B. lifetimeretentionvalue.

C. lifetimevalueofacustomer.

D. viralmarketingrate.

E. lifetimemetricvalue.


SUMMARy

•Thistopichighlightstheimportanceofcustomerrelationshiptothefirms.

•Customerrelationshipmanagementinvolvesall thestakeholders(employees,supplychainpartners,lateralpartnersandcustomers).

•Whenitcomestodevelopingandmaintainingcustomerrelationships,qualityisadouble-edgedsword.

•Ifthequalityofgoodsorservicesisbad,theorganisationobviouslyhaslittlechanceofsatisfyingcustomersormaintainingrelationshipswiththem.

•Thesecondimportantaspectofdevelopingandmaintainingsolidrelationshipsistocreategoodvalueforcustomers.

•As a guiding principle of marketing strategy, value is quite useful becauseit includes the concept of quality but is broader in scope, takes into accounteverymarketingmixelements,andcanbeusedtoexplicitlyconsidercustomerperceptionsofthemarketingmixinthestrategydevelopmentprocess.

•Howiscustomersatisfactiondifferentfromvalueandquality?Theanswerisnotobvious,asthedefinitionofeachtermcloselyoverlapstheother.

•Customer satisfaction is typically defined as the degree to which a productmeetsorexceedsthecustomer’sexpectations.

•Satisfaction is typically judged by customers within the context of the totalexperience,notjustwithrespecttoqualityandvalue.

•Customersatisfactioncanalsoincludeanynumberoffactorsthathavenothingtodowithqualityorvalue.

5. Withrespecttovalue,whichstatementisfalse?

A. Valueincludestheconceptofquality,butisbroaderinscope.

B. Valuetakesintoaccounteverymarketingmixelements.

C. Valuecanbeusedtoexplicitlyconsidercustomerperceptionsofmarketingmixvariables.

D. Valuecanbeusedtoorganisetheinternalaspectsofmarketingstrategy.

E. Value is easy to define because it means the same thing toeveryone.


Brandequity

Customerbenefits

Customercosts

Customerperceivedvalue(CPV)

Customerrelationshipmanagement(CRM)

Customersatisfaction

Focusgroup

Monetarycost

Opportunitycost

Quality

Relationshipequity

Totalcustomervalue

Value

Valueequity

Documents

DevelopingCustomerRelationship