mm fe ui - taw - 13. crm & relationship marketing 150513 (1).pdf

Relationship Marketing and

Customer Relationship Management

Session 13Dr. Triyono Arief Wahyudi

What is Marketing?

Previous Definition Previous Definition (est. in 2004)Marketing is an organizational function and a set ofProcesses for creating, communicating, and delivering Value to customers and for managing customer Relationshipsin ways that benefit the organization and its stakeholders.

New Definition of Marketing New Definition of Marketing (est. in 2007) Marketing is the activity, set of institutions, and processesfor creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners,and society at large.

(The American Marketing Association)(The American Marketing Association)

26/05/2013 Dr. Triyono Arief Wahyudi

What is Marketing?MARKETING (AMA’s Previous definitions)1985: The process of planning and executing the

conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.

1960: No change on the 1935 definition.

1935: The performance of business activities that direct the flow of goods and services from producers to consumers.


MARKETIndividuals and organizations who are

interested and willing to buy a particular product to obtain benefits that will satisfy a specific need or want, and who have the resources (time, money) to engage in such a transaction. (Mullins et.al.)

The set of all actual and potential buyers (and users-JK) of a particular product or service. (Kotler & Armstrong)


CUSTOMER VALUE

• The customer’s perception of what the product or service is really worth. (Mullins et.al.)

• A ratio between what the customer gets and what they gives. (Kotler)


CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

• CUSTOMER RELATIONSHIP MANAGEMENT (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

• EXCHANGE is the act of obtaining a desired object from someone by offering something in return.


NeedsNeeds - state of felt deprivation/deficit for basic items such as food and clothing and complex needs such as for belonging. i.e. I am hungry.

WantsWants - form that a human need takes as shaped by culture and individual personality. i.e. I want a hamburger, French fries, and a soft drink.

DemandsDemands - human wants backed by buying power. i.e. I have money to buy this meal.


CUSTOMER SATISFACTION A person’s feeling of pleasure or disappointment

resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations (Kotler & Keller, p.136)

Measuring Satisfaction: (-----, p.138)› Periodic survey› Customer lost rate› Mystery shoppers


CUSTOMER VALUE MIGRATION• The process of customers shifting their purchases

away from products generated by outmoded business designs to new ones that offer superior value. (Cravens & Piercy)

• The driving forces:– Technological changes– Economical changes– Cultural changes


MARKETING CONCEPTS/ORIENTATIONPRODUCTION CONCEPT. The idea that consumers

will favor products that are available and highly affordable.

PRODUCT CONCEPT. The idea that consumers will favor products that offer the most in quality, performance, and features and that the organization should therefore devote its energy to making continuous product improvements.

SELLING CONCEPT. The idea that consumers will not buy enough of the firm’s products unless it undertakes a large-scale selling and promotion effort.


MARKETING CONCEPTS/ORIENTATIONMARKETING CONCEPT. The marketing management

philosophy that holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.

SOCIETAL MARKETING CONCEPT. A principle of enlightened marketing that holds that a company should make good marketing decisions by considering consumers’ wants, the company’s requirements, consumers’ long-run interests, and society’s long-run interests.


Element of a modern marketing system

Suplliers

Company (Marketing)

Competitors

MarketingIntermedianries End User


THE MARKETING PROCESS - SIMPLE MODEL

Understand the Design amarketplace and customer-drivencustomer needs marketing

and wants strategy

Build profitable Construct arelationships and marketing programcreate customer that delivers

delight superior value

Capture value from customers in return (create profits andcustomer equity)

Create value for customers and build customer relationships


Relationship Marketing


WEAKNESSES OF TRADITIONAL MARKETING

• Marketing theory:– stuck in its ‘futile search for laws, regularities and

predictability’, using approaches (e.g. the marketing mix) better suited to marketing’s ‘golden age’

– proved very restrictive for industrial and services marketing

• Customers are viewed as either:– manipulation and exploitation targets and passive

recipients of messages or– one half of a controversial or adversarial relationship


26/05/2013

DEFINING RELATIONSHIP MARKETING (1)

• British CRM definition of marketing: – “The management process of identifying,

anticipating and satisfying customer requirements profitably”

• Early RM definition (Berry, 1983):– “The marketing approach aiming at attracting,

maintaining and enhancing customer relationships”

Dr. Triyono Arief WahyudiDr. Triyono Arief Wahyudi


• Nonetheless…– RM aims at profit and is not guided by altruistic

sentiments– NOT ALL RELATIONSHIPS ARE PROFITABLE (e.g.

research shows that 50% of a retail bank’s customers are unprofitable)

– Unprofitable customers can be either:• De-selected (i.e. dumped) or• Subsidised by profitable customers



• Refined RM definition (Gronroos, 1994):– “The marketing approach aiming to identify and

establish, maintain and enhance and, when necessary, terminate relationships with customers and other stakeholders, at a profit so that the objectives of all parties involved are met;and this is done by mutual exchange and fulfillment of promises”


CUSTOMER RELATIONSHIP MANAGEMENT

(CRM)



The overall process of building and maintaining profitable customer

relationships by delivering superior customer value and

satisfaction.



• A continuous performance initiative to increase a company’s knowledge of its customers

• The capabilities of a company to build profitable relationships with loyal customers

• A system designed to impact your customers so they’ll be satisfied and maintain long relationships with you


CRM Model


• CRM database: a database used to hold and analyse customer information, thereby helping create strategies for marketing

• A database stores:– Historical data (e.g. names, addresses,

responses to offers, recency, frequency, amount and category of purchases)

– Predictive data used to indicate customers’ future behaviour (e.g. type of house and business, past behaviour)



CAUTION!

• Data captured for data’s sake does not make a good database

• The important question is :what will you do with the data?

• “Without a corresponding marketing programme, database marketing should not be introduced” (Rohner, 2001)



• It is of utmost importance that the database is kept updated and maintains its integrity

• Databases can become ‘dirty’ due to:– Incorrectly captured data– Change of customer information– Data duplication



Acquisition

•Promotion•Incentives•Services•Profiles•Customerservice•E-mail

Retention

•Extranets•Personal-isation

•Community•Promotions•Loyalty•E-mail

Extension

•Direct e-mail•Learning•Onsite promotions


CUSTOMER LIFE-CYCLE (1)Offensive marketing

Defensivemarketing

Customeracquisition

Customerretention

Customerbase

Customer base as a leaky bucket


CUSTOMER LIFE-CYCLE (2)

Awareness

Exploration

Expansion

Commitment

Suspects

Prospects

Clients

Partners

(Dissolution)

First-time customers

Repeat customers

Members

Advocates

Tran

sact

iona

l mar

ketin

gRe

latio

nshi

p m

arke

ting

(Based on Dwyer et al,1987)

(Based on Kotler,1997)


RELATIONSHIP DRIVERS

Customer retention vsacquisition costs

Customer switchingcostsCustomer lifetime value

FINANCIAL DRIVERS

Risk, Salience andEmotion Customer satisfactionPerceived need for

closenessTrust and

Commitment

PSYCHOLOGICAL DRIVERS

Relationship marketing


KNOWING YOUR CUSTOMER (1)

• Not all customers contribute equally to the firm’s profit

• The consequences of losing a profitable customer may be very significant, whereas the loss of a non-profitable customer may be beneficial

• Constant effort must be made to calculate:– The customer’s contribution to the profitability of the

relationship– The costs of building and maintaining the relationship


KNOWING YOUR CUSTOMER (2)

1 2 3 4 5 6 7 8

123

4

5

6

7

8

Discourage

Reactive strategy

Large share of big wallet:

Small share of big wallet:

Large share of small wallet:

Small share of small wallet:

Retention strategy

Key target

Hig

hLo

w

High LowPROFIT CONTRIBUTION

POTE

NTI

AL


CORE FIRM RELATIONSHIPS (1)

• Firm relationship types:– Customer partnerships– Internal partnerships– Supplier partnerships– External partnerships


CORE FIRM RELATIONSHIPS (2) CUSTOMER PARTNERSHIPS

• Customer – Supplier relationship remains the core issue of RM

BUT IT DIFFERS SINCE…

• The focus is not on what you can do to your customer but on what you can do for your customer and what you can do with your customer


CORE FIRM RELATIONSHIPS (3) CUSTOMER PARTNERSHIPS

• Company prosperity remains the long-term aim of RM

• RM strategies as an answer to the shift of balance of power from producer to consumer

• Developing relationships with customers may be an effective way of building competitive advantage, since it is difficult to be replicated by competition


CORE FIRM RELATIONSHIPS (4) INTERNAL PARTNERSHIPS

• Internal marketing definition:– “A way of enabling an organisation to recruit,

motivate and retain customer-conscious employees in order to boost employee retention and customer satisfaction levels” (Clark, 2000)


CORE FIRM RELATIONSHIPS (5) INTERNAL PARTNERSHIPS

• RM implies empowering the employees and breaking down the organisation’s functional barriers leading to:– The generation of organisation-wide market

intelligence– Dissemination of that intelligence across

departments– Organisation-wide responsiveness to it


CORE FIRM RELATIONSHIPS (6) SUPPLIER PARTNERSHIPS

• Vertical relationships: all or part of the supply chain is integrated through component suppliers, manufacturers, and intermediaries

• Horizontal relationships: organisations at the same point in the distribution channel (including competitors) cooperate for mutual benefit


CORE FIRM RELATIONSHIPS (7) SUPPLIER PARTNERSHIPS

• Partnering foundation:

Partners share proprietary data and processes used in decision making


CORE FIRM RELATIONSHIPS (8) EXTERNAL PARTNERSHIPS

• Industry collaborations are formed by competitors from the same market sector

• It should be a ‘win-win’ relationship if it is to succeed• The main objectives may include:

– Effectiveness and efficiency of distribution channels– Servicing or other support facilities– Market sector growth– Market sector dominance


CORE FIRM RELATIONSHIPS (9) EXTERNAL PARTNERSHIPS

• External collaborations are formed by firms from different market sectors, bringing different skills, competences and assets

• The main objectives may include:– To take advantage of a new sector (e.g. web portals owned

by media and retail stores)– To improve the total package offering (e.g. airlines and car

rental companies)– To promote existing sector differentiation (e.g. TV

companies and football teams)


E-MARKETING SITUATION

B2B C2B

C2CB2C

FROM

TO

•Auctions (QXL,EBay)•Consumer reviews(Bizrate.com,Deja.com)

•Customer bids:(LetsBuyit.com,Priceline.com)

•Organisationsites (Dell)•Business marketplaces(CommerceOne,VerticalNet)

•Organisationsites(Dell, Amazon)•Consumer marketplaces(Kelkoo.com,Shopsmart.com)C

onsu

mer

sBu

sine

ss

Business Consumers


E-MARKETING OBJECTIVES

• Sell – using the internet as a sales tool• Serve- using the internet as a customer service

tool• Speak – using the internet as a

communications tool• Save – using the internet for cost reduction• Sizzle – using the internet as a brand-building

tool


E-BUSINESS FRAMEWORK

Supplier Organisation(In-side) Customer

Intermediaries

Intermediaries

Upstream supply chain

Buy-side e-business and e-models

Downstream supply chain

Sell-side e-business and e-models

E-Business


SUPPLIER RELATIONSHIPS E-MODELS (1)

• Internet technology can be used to facilitate an organisation in areas such as:– Purchasing (E-Procurement)– In-bound logistics– Stock management– Re-ordering


SUPPLIER RELATIONSHIPS E-MODELS (2)

• The organisation can create extranets to open up certain aspects of its business to selected suppliers to build an ‘extended enterprise’

• A great facilitator towards that direction is the integration of the partnering organisations IT systems

• This sharing of information and goals move the partners from independence to interdependence


INTERNAL RELATIONSHIPS E-MODELS (1)

• The organisation intranet can:– Replace cumbersome paper-based systems– Create ‘responsive knowledge workers’– Lead to better decisions– Support employee ‘just-in-time learning’

processes


INTERNAL RELATIONSHIPS E-MODELS (2)

• Examples of organisation intranet IT tools:– File management systems– Document management systems– Workflows– Timesheet– Message boards


CUSTOMER RELATIONSHIPSE-MODELS (1)

• Maintaining online customer relationships is not an easy task:– “That’s what’s so scary about customer retention

in the online space. We’ve created this empowered, impatient customer who has a short attention span, a lot of choices, and a low barrier to switching” (Laurie Windham, 2001)



• The IDIC approach for using the web to form and build relationships with customers (Pepper and Rogers, 1998):

1. Customer Identification: identify each customer on their first and subsequent visits

2. Customer Differentiation: build profiles to segment customers

3. Customer Interaction: online interactions (e.g. customer enquiries, tailored product)

4. Customer Communications: personalisation or mass-customization of content or emails according to segmentation



• The marketer must continuously measure the success of customer relationship drivers with metrics such as:– Order fulfilment: % that ship on time exactly as

the customer specified– Product performance: frequency of problems

experienced by customers– Post-sale service and support: % of problems

solved on the first visit


The End


mm fe ui - taw - 13. crm & relationship marketing 150513 (1).pdf

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