customer relationship marketing
TRANSCRIPT
CUSTOMER RELATIONSHIP
MARKETING
CONTENTS1. Definition of CRM
What is relationship marketing?
2. Relationship marketing and the 4 P’s
3. Customer equity
4. Partnering to build to customer relationships
5. Role of trust in relationships
6. Types of relationship based transactions
7. Characteristics of the types of transactions
8. Deciding factors of transactions
9. Link of risk and relationships
10. Goal and impact of CRM
11. Strengths and weaknesses of CRM
DEFINITION OF CRMCRM is a BUSINESS PROCESS in which
CLIENT RELATIONSHIPS,
CUSTOMER LOYALTY , and BRAND
VALUE are built through MARKETING
STRATEGIES and ACTIVITIES.
WHAT IS RELATIONSHIP MARKETING?
RELATIONSHIP MARKETING is a customer relationship
management strategy designed to encourage STRONG,
PERSISTANT customer connections to a brand.
As more gravity & recognition was given to the impact
created by relationship marketing, it generated various other
marketing practices: Segmentation
B2B marketing(business to business)
Value chain management
RELATIONSHIP MARKETING AND THE 4P’S
Relationship marketing is practiced with the 4P’s which is also known as the marketing mix.
PRODUCT - product customised to customer preferences.
PRICE – Price is et on the relationship with the customer and the bundle of features and services ordered by the customer.
PLACE – Reduces the role of middlemen by offering to the customers directly.
PROMOTION – More individual and dialogue with customers.
CUSTOMER EQUITY plays and important role in building
relationship marketing.
CUSTOMER EQUITY- It is the total combined customer lifetime values of
all of a company’s customers.
Companies with high customer equity will be valued at a higher price
than companies with low customer equity & companies without customer
equity at all.
CUSTOMER EQUITY
FUTURE REVENUE
The 3 drivers to customer equity are,• Value equity • Brand equity• Retention equity
Value equity- is the customers assessment based on the offer, its price and
its convenience.
E.g.
Brand equity- is the customers subjective and intangible assessment of the
brand above and beyond its objectively perceived value.
E.g.
Retention equity- is what makes a customer stay back with the preferred
brand rather than shift to any other.
E.g.
PARTNERING TO BUILD CUSTOMER RELATIONSHIPS
Partner Relationship Management plays a critical role in businesses undertaking
CRM. This involves;
Working with functions within the Organizations (value chain)
Working with other companies
Working with functions of other companiesE.g. Car industry – Toyota, Ford, Volvo Retail industry – Walmart, TescoCosmetic industry – Body shop Sports wear – Nike, Adidas
ROLE OF TRUST IN RELATIONSHIPS
TRUST plays a major part in any type of relationship.
Trust is relied on continuous successful delivery of its value promise and render priority to the exchange partners’ best interest.
TRUSTBenevolence
Competence
Firms show trust in their business by building consumer relationships through trustworthy dialogue and unbiased information.
Thus, the firms deliver their promise which is the value proposition that the consumers associate with the brand.
E.g.
With relationships based on exchanges constantly revolving, TRUST AND VALUE CONTRIBUTIONS by exchange partners will vary with time;
• Changes in technology • Market developments
Benefit
CostValue
TYPES OF RELATIONSHIP BASED TRANSACTIONS
Recurrent contracts- Repeated exchanges of assets that have ‘moderate degrees of asset specificity’.
Relational contracts- Long term investments involving asset specific investments.
Both these types of exchanges are alternative to markets and hierarchies.
Trust is a key factor for these relationships and due to the trust, risk is involved.
Modes of exchange - Markets, hierarchies and relationships
There are two other alternative methods of undertaking
transactions; Transactions
Market based(Between independent
firms)
Hierarchical (Within organizations)
Hence the four types of transactions; Market based Hierarchical Recurrent Relational
Types of risk that an organization faces; Commercial risk Technological risk Engineering risk
RISk
Time
Information
Control
CHARACTERISTICS OF RECURRENT RELATIONSHIPS AND RELATIONAL CONTACTING
COOPERATIVE AGREEMENTS – Repeated transactions with the same buyer.
TRANSACTION COST ECONOMIES ARE DEFICIENT – Trust and equity in transactions between firms are not serious.
CHARACTERSITICS OF MARKET BASED TRANSACTIONS1. Buyer only interested in price. (homogenous products)
2. No guarantee the consumer will stick to one seller.
3. Contracts are sharp in and sharp out – costs and benefits of monetary firms are clear to both parties.
4. When end of deal – end of relationship.
THE DECIDING FACTORS OF MARKETS, HIERARCHIES OR RELATIONSHIPS AND THE THEORY TO UNDERSTAND THE CONCEPT.
Bounded rationality – Managers of firms being intentionally rational
Opportunism – Managers making decisions pursuit of objectives (beneficial to themselves)
Asset Specificity – Consumers feeling towards the relationship when they are leaving which may affect them negatively.
Asset specific investments – tangible or intangible human physical assets required in supporting supplier.
Externality – pursuit of private goals by an agent.
THE LINK BETWEEN RISK AND TYPES OF RELATIONSHIPS
Market based
Match sticks
Recurrent
Clothes
Hierarchical
R&D for a product
Relational
Cars - Porsche
Low High
Low
High
Reliance
Risk
Market based Transactions
Risk Trust
(Because of the number of different suppliers)
Hierarchical Exchanges
Risk Trust
(Because the need for trust is low, exchanges are undertaken in-house & also they develop a business structure within the organization)
Recurrent Transactions Risk Trust
(Both parties build up trust in each other by demonstrating the extent to which they will reciprocate and how equitable they are willing to be in their transactions)
Relational Exchanges
(Firm use their resources to undertake joint R&D or product development)
Risk Trust
THE GOAL OF CUSTOMER RELATIONSHIP MARKETING
Why is it important for firms to do customer relationship marketing?
• It develops loyalty between a particular brand or company.• Helps to differentiate a company’s level of service and attention.• Provided cross selling opportunities.• Provides a way to directly evaluate customer value.
THE IMPACT OF CUSTOMER RELATIONSHIP MARKETING
• Purpose
• Design / methodology / approach
• Findings
• Practical Implications and originality/value
THE STRENGTHS OF CRM Improved customer experience Customer retention and reduce costs Communication
THE WEAKNESSES OF CRM Costs Company overhaul Security