copyright © 2001 by harcourt, inc. all rights reserved. 5-1 chapter five succeeding using database...

5-1

Copyright © 2001 by Harcourt, Inc. All rights reserved.

CHAPTER FIVE

SUCCEEDING USING DATABASE AND RELATIONSHIP MARKETING

Text by Profs. Gene Boone & David KurtzMultimedia Presentation byProf. Milton PressleyThe University of New Orleans

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CHAPTER OBJECTIVESCHAPTER OBJECTIVESCHAPTER OBJECTIVESCHAPTER OBJECTIVES• Contrast relationship marketing with transaction-

based marketing• Identify and explain each of the core elements of

relationship marketing• Outline the steps in the development of a

marketing relationship and the different levels of relationship marketing

• Explain the role of databases in relationship marketing

• Compare the different types of partnerships and explain how they contribute to relationship marketing

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CHAPTER OBJECTIVESCHAPTER OBJECTIVESCHAPTER OBJECTIVESCHAPTER OBJECTIVES• Relate to concepts of co-marketing and co-

branding to relationship marketing• Describe how relationship marketing

incorporates electronic data interchange, vendor-managed inventories, and national account selling

• Discuss the value of strategic alliances to a company’s relationship-marketing strategy

• Identify and evaluate the most common measurement and evaluation techniques within a relationship-marketing program

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THE SHIFT FROM TRANSACTION-THE SHIFT FROM TRANSACTION-BASED MARKETING TO BASED MARKETING TO RELATIONSHIP MARKETINGRELATIONSHIP MARKETING


• Relationship marketing: The development and maintenance of long-term, cost-effective relationships with individual customers, suppliers, employees, and other partners for mutual benefit

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Figure 5.1: Forms of Buyer-seller Figure 5.1: Forms of Buyer-seller InteractionInteractionFigure 5.1: Forms of Buyer-seller Figure 5.1: Forms of Buyer-seller InteractionInteraction

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Abebooks.Com Web Site Helps to Develop Relationships by Allowing Visitors to Search Their Data Base to Locate Book Stores in Specific Locations

Abebooks.Com Web Site Helps to Develop Relationships by Allowing Visitors to Search Their Data Base to Locate Book Stores in Specific Locations


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Another Abebooks.Com Web Page Allows Visitors to Browse Their Data Base by Subject Matter to Locate Books in Inventories of Over 5700 Independent Booksellers From Around the Globe.

Another Abebooks.Com Web Page Allows Visitors to Browse Their Data Base by Subject Matter to Locate Books in Inventories of Over 5700 Independent Booksellers From Around the Globe.


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• Transaction-based marketing: Involves buyer and Seller exchanges characterized by limited communications and little or no ongoing relationship between the parties

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Table 5.1: Comparing Transaction-Based Marketing and Relationship-Marketing Strategies

Table 5.1: Comparing Transaction-Based Marketing and Relationship-Marketing Strategies

Characteristic Transaction Marketing Relationship Marketing

Time orientation Short-term Long-term

Organizational goal Make the sale Emphasis on retaining customers

Customer service priority

Relatively low Key component

Customer contact Low to moderate Frequent

Degree of customer commitment

Low High

Basis for seller-customer

interactions

Basis for seller-customer interactions

Basis for seller-customer interactions

Conflict manipulation

Conflict manipulation Conflict manipulation

What Is Relationship Marketing?What Is Relationship Marketing?What Is Relationship Marketing?What Is Relationship Marketing?

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Figure 5.2: Relationship-Marketing Figure 5.2: Relationship-Marketing OrientationOrientationFigure 5.2: Relationship-Marketing Figure 5.2: Relationship-Marketing OrientationOrientation

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Promises in Relationship MarketingPromises in Relationship Marketing

• Most promises are made to potential customers through external marketing – efforts that a company directs toward customers, suppliers, and others outside of the firm.• These promises convey what a customer can expect from the firm’s good or service

Making PromisesMaking Promises

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Figure 5.3: Making a Promise to Customers

The small print promises that Gore-Tex outwear is “Guaranteed to Keep You Dry”

Figure 5.3: Making a Promise to Customers

The small print promises that Gore-Tex outwear is “Guaranteed to Keep You Dry”

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Eckerd

Making Promises to Customers

Eckerd

Making Promises to Customers


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Making Promises

Enabling PromisesEnabling Promises

• A firm must enable these promises through internal marketing – by recruiting talented employees and providing them with the tools, training, and motivation they need to do their jobs effectively• The company structure must facilitate, not hinder, this enabling effort

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KPMG, One of the “Big 5” Accounting Firms Maintains This Web Site to Recruit Talented Employees. Once Hired they continue the “Enabling Promises” by extensive training online and offline

KPMG, One of the “Big 5” Accounting Firms Maintains This Web Site to Recruit Talented Employees. Once Hired they continue the “Enabling Promises” by extensive training online and offline


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Making Promises

Enabling Promises

Keeping PromisesKeeping Promises

• The exchange, the third stage in the buyer-seller relationship following external and internal marketing, defines the point at which a firm keeps its promises• The exchange also provides the place where long-term relationships develop between buyers and sellers

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LL Bean, Known for Keeping It’s Promises of Absolute Satisfaction or Your Money Back (Without Hassle) Does a Superior Job of Developing Long-term Relationships With Its Customers. This is their Customer Service Page.

LL Bean, Known for Keeping It’s Promises of Absolute Satisfaction or Your Money Back (Without Hassle) Does a Superior Job of Developing Long-term Relationships With Its Customers. This is their Customer Service Page.


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Figure 5.4: The Dimensions of Marketing Figure 5.4: The Dimensions of Marketing RelationshipsRelationshipsFigure 5.4: The Dimensions of Marketing Figure 5.4: The Dimensions of Marketing RelationshipsRelationships

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The Four Dimensions The Four Dimensions Marketing RelationshipsMarketing RelationshipsThe Four Dimensions The Four Dimensions Marketing RelationshipsMarketing Relationships• Bonding: two parties must bond to

one another in order to develop a long-term relationship

• In other words, mutual interests or dependencies between the parties must be strong enough to tie them together

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The Four Dimensions The Four Dimensions Marketing RelationshipsMarketing RelationshipsThe Four Dimensions The Four Dimensions Marketing RelationshipsMarketing Relationships• Empathy: the ability to see

situations from the perspective of the other party

• Empathy is another key emotional link in the development of relationships

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Kemper

Empathy: A Key Dimension in Relationship Marketing

Kemper

Empathy: A Key Dimension in Relationship Marketing


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The Four Dimensions The Four Dimensions Marketing RelationshipsMarketing RelationshipsThe Four Dimensions The Four Dimensions Marketing RelationshipsMarketing Relationships• Reciprocity: every long-term

relationship includes some give-and-take between the parties

• This process, termed reciprocity, becomes a web of commitments among the parties in the relationship– binding them ever closer together

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The Four Dimensions The Four Dimensions Marketing RelationshipsMarketing RelationshipsThe Four Dimensions The Four Dimensions Marketing RelationshipsMarketing Relationships• Trust: reflects the extent of one

party’s confidence in another party’s integrity

• When parties follow-through on commitments, they enhance trust and strengthen relationships

• When parties do not follow-through on commitments, the opposite is true

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Table 5.2: Three Levels of Relationship MarketingTable 5.2: Three Levels of Relationship MarketingTable 5.2: Three Levels of Relationship MarketingTable 5.2: Three Levels of Relationship Marketing

Characteristic Level 1

Primary bond Financial

Degree of customization

Low

Potential for sustained competitive advantage

Low

Examples American Airlines’ AAdvantage program

The Relationship Marketing Continuum

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Chi-Chi’s

Using Financial Incentives Characterizes the First Level of Relationship Marketing

Chi-Chi’s

Using Financial Incentives Characterizes the First Level of Relationship Marketing


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Characteristic Level 1 Level 2

Primary bond Financial Social


Low Medium


Low Moderate


Harley-Davidson’s Harley Owners Group (HOG)


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Figure 5.5: Developing a Social Relationship With Customers

American Airlines’custom published magazine communicates with its customers

Figure 5.5: Developing a Social Relationship With Customers

American Airlines’custom published magazine communicates with its customers

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Jeep

Camp Jeep: Developing a Social Relationship with Buyers

Jeep

Camp Jeep: Developing a Social Relationship with Buyers


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Characteristic Level 1 Level 2 Level 3

Primary bond Financial Social Structural


Low Medium Medium to high


Low Moderate High


Harley-Davidson’s Harley Owners Group (HOG)

Federal Express’ PowerShip program


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FedEx

FedEx Develops Third-Level Relationships with Customers

FedEx

FedEx Develops Third-Level Relationships with Customers


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MEASURING CUSTOMER SATISFACTIONMEASURING CUSTOMER SATISFACTIONMEASURING CUSTOMER SATISFACTIONMEASURING CUSTOMER SATISFACTION

Figure 5.6: Three Steps Figure 5.6: Three Steps to Measure Customer to Measure Customer SatisfactionSatisfaction

Figure 5.6: Three Steps Figure 5.6: Three Steps to Measure Customer to Measure Customer SatisfactionSatisfaction

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BUYER-SELLER RELATIONSHIPS AND BUYER-SELLER RELATIONSHIPS AND CONSUMER GOODS AND SERVICES CONSUMER GOODS AND SERVICES MARKETSMARKETS

BUYER-SELLER RELATIONSHIPS AND BUYER-SELLER RELATIONSHIPS AND CONSUMER GOODS AND SERVICES CONSUMER GOODS AND SERVICES MARKETSMARKETS

• Many customers are seeking ways to simplify their lives, and relationships provide a way to do this

• Customers find comfort with brands that have become familiar through their ongoing relationships with companies

• Such relationships often lead to more efficient decision-making my customers and higher levels of customer satisfaction

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Figure 5.6: Promoting a Buyer-Seller Relationship

Sears ad points out the benefits of exclusive discounts that Sears offers customers that are members of its Pulse Card Program

Figure 5.6: Promoting a Buyer-Seller Relationship

Sears ad points out the benefits of exclusive discounts that Sears offers customers that are members of its Pulse Card Program

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The Rewards of Retaining The Rewards of Retaining CustomersCustomersThe Rewards of Retaining The Rewards of Retaining CustomersCustomers• Retaining customers as far more profitable than

losing them• Customers typically generate more profits for firm

with each additional year of the relationship• It has been noted that a 5 percent gain in customer

retention can lead to an 80 percent increase in profits

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Affinity ProgramsAffinity ProgramsAffinity ProgramsAffinity Programs• Affinity programs: a marketing effort

sponsored by an organization that solicits responses from individuals who share common interests and activities

• With affinity programs, extra value is created for members and stronger relationships are encouraged

• Credit cards, with the sponsor’s a name on the card itself and elsewhere, are a popular form of this marketing technique

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Figure 5.9: Using a Database to Personalize ServiceFigure 5.9: Using a Database to Personalize Service

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Frequent-buyer and Frequent-buyer and Frequent-user ProgramsFrequent-user ProgramsFrequent-buyer and Frequent-buyer and Frequent-user ProgramsFrequent-user Programs• Frequency marketing: frequent-buyer or user

marketing programs that reward customers with cash, rebates, merchandise, or other premiums

• Perhaps the most popular means to practicing relationship marketing

• Popular programs include airline and hotel frequent-user programs and retail frequent-customer programs

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Marriott Rewards

Marriott Advertising It’s Frequency Marketing Program

Marriott Rewards

Marriott Advertising It’s Frequency Marketing Program


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Starwood Hotel Group’s Preferred Guest Site: Their program encompasses six renowned brands the world over: Westin Hotels & Resorts, Sheraton Hotels & Resorts, St. Regis, The Luxury Collection, Four Points Hotels by Sheraton, Caesars and W Hotels

Starwood Hotel Group’s Preferred Guest Site: Their program encompasses six renowned brands the world over: Westin Hotels & Resorts, Sheraton Hotels & Resorts, St. Regis, The Luxury Collection, Four Points Hotels by Sheraton, Caesars and W Hotels


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Staples.Com “Dividend$ Program” Rewards Its Frequent Buyers with Discounts and CouponsStaples.Com “Dividend$ Program” Rewards Its Frequent Buyers with Discounts and Coupons


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Database MarketingDatabase MarketingDatabase MarketingDatabase Marketing• Database marketing: software that analyzes

marketing information, then identifies and targets messages toward specific groups of potential customers

• Benefits of databases include• Selecting the best customers• Calculating the lifetime value of their business• Creating a meaningful dialogue that builds

genuine loyalty

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American Express Uses Its Gold Card Member Database to Send Their Frequent Travelers Highly Targeted Marketing Messages Offering “Prime Tickets to the Nation’s Hottest Entertainment Events . . . “


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BUYER-SELLER RELATIONSHIPS IN BUYER-SELLER RELATIONSHIPS IN BUSINESS-TO-BUSINESS MARKETSBUSINESS-TO-BUSINESS MARKETSBUYER-SELLER RELATIONSHIPS IN BUYER-SELLER RELATIONSHIPS IN BUSINESS-TO-BUSINESS MARKETSBUSINESS-TO-BUSINESS MARKETS• Business-to-business marketing involves an

organization’s purchase of goods and services to support company operations or the production of other products

• Buyer-seller relationships between companies involve working together to provide advantages that benefit both parties

• Advantages might include the lower prices, quicker delivery, improved quality and reliability, customized product features, and more favorable financing terms

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Recent Global Alliances of Selected U.S. and Recent Global Alliances of Selected U.S. and Japanese Auto ManufacturersJapanese Auto ManufacturersRecent Global Alliances of Selected U.S. and Recent Global Alliances of Selected U.S. and Japanese Auto ManufacturersJapanese Auto Manufacturers

ISUZU

TOYOTA

IBC VehiclesLimited (UK)

New United Motor Manufacturing (Incl.

NUMMI)

SUZUKI GMSupplies Finished Small Cars

3.5% Investment

37.% InvestmentSupplies Fin. Sm. Cars, Sm. & Med. Trucks & Parts

40% Investment 60% Investment

50% Investment

Makes Vans in the UK

Makes Small Cars in U.S.

50% Investment


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Corbis, a Firm That Sells Pictures to Commercial Artists and Other Business Users or Encourages Users to Join the Corbis Club by Offering Special Benefits to Club Members

Corbis, a Firm That Sells Pictures to Commercial Artists and Other Business Users or Encourages Users to Join the Corbis Club by Offering Special Benefits to Club Members


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Sheraton’s Four Points Hotels “Convention Connections” SiteSheraton’s Four Points Hotels “Convention Connections” Site


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Building and Maintaining Building and Maintaining Business PartnershipsBusiness PartnershipsBuilding and Maintaining Building and Maintaining Business PartnershipsBusiness Partnerships• Partnership: an affiliation of two or more companies to

assist each other in the achievement of common goals• Benefits of forming partnerships include

• Protection or improvement of positions in existing markets

• Gaining access to new domestic or international markets

• Expansion of a product line• Resource sharing, cost reduction, avoiding the costs of

future competition, raising or creating barriers to entry, and learning new skills

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FroedtertMemorial Lutheran Hospital

Forming a Partnership to Achieve a Common Goal

FroedtertMemorial Lutheran Hospital

Forming a Partnership to Achieve a Common Goal


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Figure 5.10: A Partnership Based

on Common Goals

Figure 5.10: A Partnership Based

on Common Goals

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Choosing Business Choosing Business PartnersPartnersChoosing Business Choosing Business PartnersPartners• Locate firms that can add value to the

relationship• Organizations must share similar values and

goals• Many business relationships are designed to

achieve a specific purpose

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Types of PartnershipsTypes of PartnershipsTypes of PartnershipsTypes of Partnerships

BuyerBuyer • In a buyer partnership, a firm purchases goods and services from one or more providers• for example, a company may contract with all of management to consulting firm to improve its screening procedures when the hiring new employees

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Figure 5.11: Example of a Buyer Relationship

Figure 5.11: Example of a Buyer Relationship

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BuyerBuyer

SellerSeller

• Seller partnerships set up long-term exchanges of goods and services in return for cash or other valuable consider- ation• Most sellers prefer long-term relationships with their partners• Sellers also want prompt payment


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BuyerBuyer

SellerSeller

InternalInternal

• The importance of internal partnerships is widely recognized• The classic definition of the word customer as the buyer is now more carefully defined in terms of external customers• However, customers within an organization also have their own needs• Internal partnerships are the foundation of an organization and its ability to meet its commitments to external entities

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BuyerBuyer

SellerSeller

InternalInternal

LateralLateral

• Collateral partnerships include strategic relationships such as co-marketing and co-branding alliances, global strategic alliances, of with not-for-profit organizations, and research alliances with universities and colleges.• In each case, the relationship reaches external into please, and involves a no buyer or seller interactions


© PhotoDisc

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Oracle & Hewlett Packard

Co-Marketing by Oracle and HewlettPackard

Oracle & Hewlett Packard

Co-Marketing by Oracle and HewlettPackard


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Co-Marketing and Co-Co-Marketing and Co-BrandingBrandingCo-Marketing and Co-Co-Marketing and Co-BrandingBranding• Co-marketing: Formal links between two or more

businesses to jointly market each other’s products• Example: A computer manufacturer who puts

“Intel Inside” labels on their units• Co-branding: Partnership between two or more

companies that closely links their brand names together for a single product• Example: Whirlpool appliances labeled

“Kirkland Signature by Whirlpool” made for and sold in Costco’s Outlets

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AOL and VISA Co-BrandingAOL and VISA Co-BrandingAOL and VISA Co-BrandingAOL and VISA Co-Branding


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LINKS BETWEEN BUYERS AND LINKS BETWEEN BUYERS AND SELLERS AND THE BUSINESS-TO-SELLERS AND THE BUSINESS-TO-BUSINESS MARKETSBUSINESS MARKETS

LINKS BETWEEN BUYERS AND LINKS BETWEEN BUYERS AND SELLERS AND THE BUSINESS-TO-SELLERS AND THE BUSINESS-TO-BUSINESS MARKETSBUSINESS MARKETS• Organizations that know how to find and nurture

partner relationships can enhance revenues and increase profits

• Partnering often leads to lower prices, better products, and improved distribution

• This, in turn, results in higher levels of customer satisfaction

© PhotoDisc

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AOL and RTS Wireless Nurture a Partner Relationship That AOL and RTS Wireless Nurture a Partner Relationship That Can Enhance Revenues and Increase Profits for Both FirmsCan Enhance Revenues and Increase Profits for Both FirmsAOL and RTS Wireless Nurture a Partner Relationship That AOL and RTS Wireless Nurture a Partner Relationship That Can Enhance Revenues and Increase Profits for Both FirmsCan Enhance Revenues and Increase Profits for Both Firms


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The Use of DatabasesThe Use of DatabasesThe Use of DatabasesThe Use of Databases• Databases are indispensable tools in

relationship marketing• Databases are also used in

business-to-business situations

© PhotoDisc

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Electronic Data Electronic Data InterchangeInterchangeElectronic Data Electronic Data InterchangeInterchange• Electronic Data Interchange (EDI) involves

computer-to-computer exchanges of invoices, orders, and other business documents

• EDI is rapidly gaining popularity because it allows firms to reduce their cost and to improve their efficiency and competitiveness

• Quick-response strategies can be implemented by retailers a using EDI. Quick response strategies reduce the time that a merchandise is held in inventory and result in substantial cost savings

© PhotoDisc

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Utilizing the quick-response systems, Calvin Klein monitors its merchandise and is able to replenish stores with its cK suits.Utilizing the quick-response systems, Calvin Klein monitors its merchandise and is able to replenish stores with its cK suits.

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Washington Publishing Company (WPC) Specializes in Managing Washington Publishing Company (WPC) Specializes in Managing and Distributing Electronic Data Interchange (EDI) Informationand Distributing Electronic Data Interchange (EDI) InformationWashington Publishing Company (WPC) Specializes in Managing Washington Publishing Company (WPC) Specializes in Managing and Distributing Electronic Data Interchange (EDI) Informationand Distributing Electronic Data Interchange (EDI) Information


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EDI-TIE: A Global Firm Delivering Business-to-business EDI-TIE: A Global Firm Delivering Business-to-business Ecommerce Solutions in the Internet Era.Ecommerce Solutions in the Internet Era.EDI-TIE: A Global Firm Delivering Business-to-business EDI-TIE: A Global Firm Delivering Business-to-business Ecommerce Solutions in the Internet Era.Ecommerce Solutions in the Internet Era.


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National Account SellingNational Account SellingNational Account SellingNational Account Selling• Manufacturers use a technique called national

account selling to serve their largest, most profitable customers

• They assemble a team to service a single major account, and thus demonstrate the depth of their commitment to the buyer

• The buyer-seller relationship is thus strengthened• Rather than an adversarial relationship, buyers and

sellers work together to find solutions that benefit both parties

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Vendor-Managed Vendor-Managed InventoryInventoryVendor-Managed Vendor-Managed InventoryInventory• Vendor-Managed Inventory (VMI): is an

inventory-management system in which the seller–based on existing agreement with a buyer– determines how much of a product is needed

• New supplies are then automatically shipped to the buyer

© PhotoDisc

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Managing of the Supply Managing of the Supply ChainChainManaging of the Supply Managing of the Supply ChainChain• Supply (Value) Chain: sequence of suppliers

that contributes to the creation and delivery of a good or service

© PhotoDisc

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Figure 5.11: Dell Computer’s Supply ChainFigure 5.11: Dell Computer’s Supply ChainFigure 5.11: Dell Computer’s Supply ChainFigure 5.11: Dell Computer’s Supply Chain

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Managing of the Supply Managing of the Supply ChainChainManaging of the Supply Managing of the Supply ChainChain

© PhotoDisc

• Effect in supply-chain management can result in• Increased innovation• Decreased cost• Improved conflict resolution within the chain• Improved communication and involvement

among members of the chain

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Strategic AlliancesStrategic AlliancesStrategic AlliancesStrategic Alliances• Strategic alliance: a partnership formed to create

a competitive advantage• These more formal long-term partnership

arrangements improved each partner supply-chain relationships and enhance flexibility

• Strategic alliances include businesses on all sizes, all kinds, and in many locations

• What each partner can offer to other partners is what is important

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Compaq &RadioShack

Compaq and RadioShack: A Vertical Strategic Alliance

Compaq &RadioShack

Compaq and RadioShack: A Vertical Strategic Alliance


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Table 5.3: Resources and Skills That Partners Contribute to Table 5.3: Resources and Skills That Partners Contribute to Strategic AlliancesStrategic Alliances

Table 5.3: Resources and Skills That Partners Contribute to Table 5.3: Resources and Skills That Partners Contribute to Strategic AlliancesStrategic Alliances

Skills

Patents Product lines Brand equity Reputation - For product quality - For customer service - For product innovation Image - Company wide - Business unit - Product line/brand Knowledge of product-market

Customer base Marketing resources - Marketing infrastructure Sales force size Established relationship with: - Suppliers - Marketing intermediaries - End-use customers Manufacturing resources - Location - Size, scale economies, scope economies, excess capacity, newness of plant and equipment Information technology and systems

Marketing Skills - Innovation and product development - Positioning and segmentation - Advertising and sales promotion Manufacturing Skills - Miniaturization - Low-cost manufacturing - Flexible manufacturing Planning and implementation skills R&D skills Organizational expertise, producer learning, and experience effects

Resources

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StructuringRelationships

Managing Relationships for Superior Managing Relationships for Superior PerformancePerformance

Measure-ment &

Evaluation

AssessingCosts & Benefits


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• Identify and compare assets, both tangible and intangible

• Because customers are assets, a company can analyze its marketing and communication investments similar to the way it evaluates capital equipment investments



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• Partners should examine existing company systems involved in delivering customer service

• Should use databases to identify the prospects with the best profit potential



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• Lifetime value of customer: the revenues and intangible benefits that a customer brings to the seller over an average lifetime, less the amount of money which must be spent to acquire, market to, and service the customer

Measure-ment &

Evaluation



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RELATIONSHIP MARKETINGRELATIONSHIP MARKETINGRELATIONSHIP MARKETINGRELATIONSHIP MARKETING

• Additional techniques used to evaluate relationship programs include

• Tracking rebate requests, coupon redemptions, credit-card purchases, and product registrations

• Monitoring complaints and returned products and analyzing why customers leave

• Reviewing reply cards, common forms, and surveys

© PhotoDisc

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Hampton Inn Promises: “If You're Not Completely Satisfied, We'll Give You Your Night's Stay for Free” How Does This Exemplify “Relationship Marketing?”

Hampton Inn Promises: “If You're Not Completely Satisfied, We'll Give You Your Night's Stay for Free” How Does This Exemplify “Relationship Marketing?”

Class Discussion


copyright © 2001 by harcourt, inc. all rights reserved. 5-1 chapter five succeeding using database...

Documents

relationship marketing

relationship marketing

transaction based marketing

ongoing relationship

seller interaction slide

parties photodisc slide

specific locations copyright

mutual benefit photodisc