Customer Retention Strategies Financial Bonds by pfx36430

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									Building Customer
  Relationships
              Today’s Objectives
       Building Customer Relationships
• Explain relationship marketing, its goals, and the
  benefits of long-term relationships for firms and
  customers.
• Explain customer lifetime value.
• Specify the foundations for successful relationship
  marketing--quality core services and careful
  market segmentation.
• Introduce the idea that “the customer isn’t always
  right.”
                Relationship Marketing

• is a philosophy of doing business that focuses on keeping
  current customers and improving relationships with them
• does not necessarily emphasize acquiring new customers
• is usually cheaper (for the firm)
   – keeping a current customer costs less than attracting a new one
• thus, the focus is less on attraction, and more on retention
  and enhancement of customer relationships
Customer Goals of Relationship
         Marketing
        Benefits of Relationship Marketing
• Benefits for Customers:          • Benefits for Firms:
   – Receipt of greater value         – Economic benefits:
   – Confidence benefits:                 • increased revenues
       • trust                            • reduced marketing and
       • confidence in provider             administrative costs
       • reduced anxiety                  • regular revenue stream
   – Social benefits:                 – Customer behavior benefits:
       • familiarity                      •   strong word-of-mouth endorsements
       • social support                   •   customer voluntary performance
       • personal relationships           •   social benefits to other customers
                                          •   mentors to other customers
   – Special treatment benefits:
       • special deals                – Human resource management
       • price breaks
                                        benefits:
                                          • easier jobs for employees
                                          • social benefits for employees
                                          • employee retention
         Relationship Value of Customers

• Lifetime Value or Profitability
  – Average revenues, sales of additional
    products/services, referrals, costs of serving the
    customer
  – Estimating Lifetime Value of Average Customer
     •   Increased revenue of core product
     •   Declining per-unit service costs
     •   Increasing revenues from a new product
     •   Profit from referrals
Profit Generated by a Customer
          Over Time
             Relationship Strategies

• Quality in Core Service
• Market Segmentation & Targeting
  – One-to-one marketing
• Monitoring Relationships
      Strategies for Building Relationships

• Foundations:
  – Excellent Quality/Value
  – Careful Segmentation
• Bonding Strategies:
  –   Financial Bonds
  –   Social & Psychological Bonds
  –   Structural Bonds
  –   Customization Bonds
     “The Customer Isn’t Always Right”

• Not all customers are good relationship customers:

  – wrong segment

  – not profitable in the long term

  – difficult customers
           The “80/20” Customer Pyramid

Most Profitable
                                What segment spends more with
 Customers                      us over time, costs less to maintain,
                      Best
                    Customers   spreads positive word of mouth?




                     Other
                   Customers
                                    What segment costs us in
                                    time, effort and money yet
                                    does not provide the return
Least Profitable                    we want? What segment is
  Customers                         difficult to do business with?
       The Expanded Customer Pyramid


 Most Profitable
                   Platinum   What segment spends more with
  Customers                   us over time, costs less to maintain,
                              spreads positive word of mouth?
                     Gold


                     Iron


                               What segment costs us in
                     Lead      time, effort and money yet
                               does not provide the return
Least Profitable               we want? What segment is
                               difficult to do business with?
  Customers

								
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