Customer Relationship Management

1. Chapter 4
Customer Relationship Management
Mr. Anthony F. Balatar Jr.
Subject Instructor

2. Introduction
“Customer is always right”. You may have heard of this
popular catchphrase, and while it may not always be
true, businesses strive to please their customers. If a
customer is unhappy with a product or service,
chances are the customer will not be coming back for
another transaction.

3. Introduction
Customers enjoy getting good value for their money.
They want to score the best deal when buying – the
items they are paying for may not necessarily be the
cheapest, but the benefits, features, and services they
get out of them are worth more than the actual price.
One way of keeping customers happy is by building a
relationship with them.

4. Introduction
Most retailers nowadays offer better value by offering
superb service, or giving customers “rewards” that
they can collect and use at a later time. Ensuring a
pleasurable experience for the customer will keep a
company in their mind.

5. Relationship Marketing
It is a strategy that concentrates on keeping and
improving relationships with existing customers. It
focuses on ensuring that prospective and current
customers maintain a long, profitable relationship
with the company. Some programs not only enhance
the relationship to keep the customers loyal, but also
encourage an increase in consumption of the
company’s products.

6. Relationship Marketing
Companies now understand that marketing no longer
aims for a transactional relationship, where
customers pay for an item, leave the store, and forget
about it. Sales-focused transactions only give
emphasis on making a sale for the day.

7. Relationship Marketing
Instead, most businesses now appreciate building a
full partnership with their customers – where both
the customer and the company create a mutually
beneficial relationship marketing no longer focus on
just making a sale for the day, but ensuring that they
make a sale from the same customers over and over
again.

8. Customer Value, Satisfaction, and
Retention
Customers are the lifeblood of every business. As the
marketplace becomes saturated with more products,
customers are faced with more choices for their
needs. A company must offer in order to turn them
into loyal customers.

9. Customer Value, Satisfaction, and
Retention
Customer
Value
Customer
Satisfaction
Customer
Retention

10. Customer Value, Satisfaction, and
Retention
Differences among Customer Value, Satisfaction, and Retention
Customer Value Customer Satisfaction Customer Retention
The customer’s perception
the benefits that he or she is
getting from a product, in
relation to the price paid to
obtain those benefits
The customer’s evaluation of
the performance of the
product in relation to his or
her expectations
The company’s effort to
maintain loyalty of
customers

11. Customer Value, Satisfaction, and
Retention
Customers want to get their money’s worth when
they purchase something. Customer value is the ratio
between the perceived benefits and the resources to
obtain those benefits. Customer satisfaction is the
evaluation of the product’s performance in relation to
the expectation set by the customer. Customer
retention is an effort made by the companies in order
to keep customers happy and loyal.

12. Customer Value, Satisfaction, and
Retention
Reasons why companies want loyal customers:
Loyal customers buy more products. If a customer
trusts a company, he or she will buy more products
from it, even if these are newly launched products.
They are less price sensitive. Customers usually will
not mind price increases or premium prices of a
product if it meets their needs.

13. Customer Value, Satisfaction, and
Retention
Reasons why companies want loyal customers:
They spread positive word of mouth. Loyal
customers usually spread positive feedback about a
product or a brand. They may either share their
positive experiences about a product or a brand to
their circle of friends or post them on their social
media accounts.

14. Relationship Development Strategies
Companies need to exert effort in order to satisfy the
needs of their customers and keep them buying.
Three factors affect the rationale of organizations’
strategies in keeping their customers: core service
provision, switching barrier, and relationship bonds.

15. Relationship Development Strategies
Core service provision includes service foundations
that are built upon delivery of excellent service. In
order to do so, the company must be able to satisfy
the customer by meeting the expectations from a
product. This, however, will be influenced by the
perceived quality of the product, or the subjective
evaluation of a product’s worth by a customer in
relation to his or her expectations from the product
and its perceived value.

16. Relationship Development Strategies
Switching barrier can also affect the loyalty of
customers. It is the economic and psychological
difficulty perceived by the customers if they switch
from one brand to another.

17. Relationship Development Strategies
Relationship bonds are retention strategies that keep
the customer buying the same brand.
Four levels:
1. Financial Bond – at this level, the customer
patronizes a brand because of the financial
incentives that he or she may receive from the
company. These may be in the form of discounts,
lower prices, or reward points.

18. Relationship Development Strategies
2. Social Bond – this type of bond focuses on the social
and interpersonal relationship between the
company and the customer. This may be commonly
observed in a customer’s relationship with his or
her stylist, massage therapist, or even doctors.
Because this bond is not price-sensitive
(consumers will not readily switch because of the
competitor’s lower price), it may be difficult to
make a customer switch to another company.

19. Relationship Development Strategies
3. Customization Bond – customer loyalty may be
encouraged when customers are allowed to avail
tailored services to fit their individual needs.
Elements in 1 and 2 may be combined at this level,
because a customer may enjoy the extra service
and incentives extended to him or her as a result of
the social bond developed with the business.

20. Relationship Development Strategies
4. Structural Bond – at this level, all previous levels
are combined in order to deliver services that fit
the need of the client or customer. This may apply
to business-to-business transactions. Over time, as
the relationship develops, the company may
provide additional incentives or discounts for its
loyalty and continued patronage.

21. Relationship Development Stages
Businesses deal with customers on a daily basis. A
company’s relationship with various customers
differs depending on how well the staff knows the
customer, how long the customer has been shopping
at the store, and how knowledgeable the customer is
of the company’s products, among others.

22. Relationship Development Stages
EVOLUTION OF CUSTOMER RELATIONSHIPS

23. Relationship Development Stages
Customers as Strangers
In this stage, the customers are not familiar with the
company’s products. They may have heard of the
company, but they are not entirely aware how they
can benefit from the company. Because the company
is introducing itself to its customers, its marketing
goal is to acquire customers and earn their
confidence.

24. Relationship Development Stages
Customers as Acquaintances
In this stage, the customers are trying out the products of
the company and investing a little by buying a product or
two. The goal of the company is to satisfy these new
customers. Because the relationship is still fragile at this
point, the company should avoid making a mistake and
instead focus on providing superior customer service and
product quality.

25. Relationship Development Stages
Customers as Acquaintances
The customers may ask a lot of questions, and may
even doubt the effectiveness of the company’s
products, but may be willing to take the risk so they
can try the products.

26. Relationship Development Stages
Customers as Friends
Over time, customers who are satisfied with the
company’s products and services will develop loyalty.
In this stage, the company and the customers become
friends. The company’s goal is to retain the customers
and keep them close through different marketing
activities. Customers will only stay if the company’s
products continuously satisfy them.

27. Relationship Development Stages
Customers as Friends
Maintaining product quality and consistent customer
service is important to ensure that customers
continue valuing the company’s products, and will not
stray to the competitors. Offering sales promotions
from time to time gives customers added value to
their purchase.

28. Relationship Development Stages
Customers as Friends
Giving superior customer service, like sending
customers a message when new stocks arrive,
remembering the customers’ preferences, and
knowing them by their first name may seem trivial
but are important simple services that the sales staff
can be trained to do.

29. Relationship Development Stages
Customers as Partners
Companies not only want to maintain the loyalty of
their customers but also enhance their relationship to
ensure that the customer will always choose to buy
from them and not from the competitors. Enhancing
the customer relationship also strengthens the
company’s brand equity, or its credibility in the eyes
of the consumers.

30. Relationship Development Stages
Customers as Partners
They are partners because as the company provides
value to the customers through loyalty programs, the
customers also provide value to the company by
recommending it to the friends, talking about it on
social media, promoting it in their social circle, and
keeping it in their top-of-mind choice.

31. Relationship Development Stages
Evolution
Stage
Strangers Acquaintances Friends Partners
Marketing
Goal
Acquiring Satisfying Retaining Enhancing
Marketing
Activities
Advertising,
sales
promotions
Superior
customer service
and product
quality
Product and
service
consistency,
special offers,
sales
promotions
Rewards,
points,
incentive
programs,
exclusive
privileges

32. Customer Relationship Management
It is the process of building and maintaining
profitable customer relationship by delivering
customer value and satisfaction (Kotler and
Armstrong, 2014). CRM is now being utilized by
companies to enhance their relationship with their
“partners” or customers who have become loyal to
their products.

33. Customer Relationship Management
On the other hand, a full CRM program usually
involves the use of a customer database and different
customer information in order to systematically
monitor consumer purchases and to fully maximize
the profit potential of each customer relationship.
Most retail stores now offer loyalty cards or rewards
program in order to give special benefits to loyal
customers.

34. Customer Relationship Management
While the CRM program is in place, some companies
choose to further segment their customer base. If
marketers before focus on mass marketing or one-
size-fits-all type of marketing products, now they are
finding ways to build lasting relationships with
selected customers.

35. Customer Relationship Management
Companies now realize that not all customers are
profitable, so they choose to focus their resources on
the needs of profitable customers. To be able to do
this, companies use digital technology to keep track of
the purchases of their customers and to offer better
benefits to those who are more profitable of the
company.

36. Customer Profitability-Focused
Marketing Pyramid
Four Types:

37. Customer Profitability-Focused
Marketing Pyramid
Four Types:
Lead customers are unprofitable customers who
only spread negative word of mouth. They require
more attention, but give very little business to the
company.
Iron customers may be regular customers, but their
purchase volume may not merit special treatment.

38. Customer Profitability-Focused
Marketing Pyramid
Four Types:
Gold customers are heavy users but are price-
sensitive. They may buy in bulk, but only when they
can enjoy discounts and promotions.
Platinum customers are heavy users and are not
price-sensitive. They may buy often with big
purchases, and would not care whether they are
getting discounts on their purchases.

39. The Changing Landscape of Customer
Relationships
Relating with Carefully Selected Customers.
Building a Deeper and More Interactive Relationship.
Consumer – Generated Marketing.