quiz
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Class9_MGT345_545.pptClass 9
Building Relationships
and Managing Capacity
Relationship Marketing
- A strategic orientation that focuses on keeping current customers and improving relationships with them
- Traditionally financially attractive for the firm
- Keeping a current customer costs less than attracting a new one
- 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:
- Confidence benefits:
- Trust
- Confidence in provider
- Reduced anxiety
- Social benefits:
- Familiarity
- Social support
- Personal relationships
- Special treatment benefits:
- Special deals
- Price breaks
- Benefits for Firms:
- Economic benefits:
- Increased revenues
- Reduced marketing and administrative costs
- Regular revenue stream
- Customer behavior benefits:
- Strong word-of-mouth
- Customer voluntary performance
- Social benefits to other customers
- Human resource management benefits:
- Easier jobs for employees
- Social benefits for employees
- Employee retention
A Loyal Customer is One Who...
- Shows Behavioral Commitment
- Buys from only one supplier, even though other options exist
- Increasingly buys more and more from a particular supplier
- Provides constructive feedback/suggestions
- Exhibits Psychological Commitment
- Wouldnt consider terminating the relationship
- Has a positive attitude about the supplier
- Says good things about the supplier
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The profits derived from loyal customers come from…
- increased purchases
- reduced operation costs
- referral of new customers, and
- price premiums
- Also, customer acquisition costs can be amortized over a longer period of time
The Wheel of Loyalty
Why are Customers Loyal?
Customers are only loyal if there is a benefit for them to be so. Common benefits customers see in being loyal include:
• Confidence benefits such as feeling there is less risk of something going wrong and the ability to trust the provider.
• Social benefits such as being known by name, friendship with the service provider, and enjoyment of certain social aspects of the relationship.
• Special treatment benefits such as better prices, extra services, and higher priority
The Customer Pyramid – Service Tiering
Customer Satisfaction
Strategies to Build Customer Relationships
Strategies to Reduce Customer Defections
“The Customer Is NOT Always Right”
- Limited Resources
- Make Employees Miserable
- Customer Isn’t An Expert
- Pits Management Against Employees
- Customer Will Not Adapt To Change
- Bad Customers Can Create Bad Experiences For Others
- The Customer Is Simply A “Bad Apple”
- Sometimes you have to “fire” the customer.
In Class Exercise:
Design A Loyalty Program
- Can be for any type of business
- Give your program a name
- Figure out “who” is your target audience
- Decide “what” your program looks like
- Sort through ”how” the program will work
- Assess “why” the program will encourage loyalty
Using tools from the course, explain why you think your plan will build strong customer relationships
BREAK
MANAGING CAPACITY AND DEMAND
Balancing the supply and demand sides of a service industry is not easy, and whether or not a manager does it well makes all the difference.
W. Earl Sasser, Professor Harvard Business School
THE MANAGER DOES IT WELL OR NOT MAKES ALL THE
DIffERENCE.
W. EARL SASSER
PROFESSOR AT HARVARD BUSINESS SCHOO
Lack of Inventory Capability
- Implications of the 4 characteristics that make goods and services different:
- It is all about the experience
- Guests are in the factory
- No “luxury” of having inventory on the factory floor
- In a factory, inventory is a buffer between stages of production
- True “inventory” is services is time-based, and it is perishable – it is our capacity
Optimal & Maximum Capacity
Optimal
Resources are fully employed but not overused – customers are receiving quality services in a timely manner
Maximum
Resources are being used to the fullest
Football game:
optimal = maximum
Restaurant or classroom:
optimal < maximum
Understanding Capacity Constraints
- Time
- If the service worker is not available, or if their time is not used productively, profits are lost
- If there is excess demand, additional time cannot be created to satisfy it
- Labor
- Equipment
- UPS/FedEx trucks and planes during holidays
- Facilities
Demand Variations
Four likely scenarios for most services:
Excess demand (lost business)
Demand exceeds optimum capacity (quality will likely be affected due to overcrowding)
Demand and supply are balanced (the “ideal” - no problems!!)
Excess capacity (resources are underutilized; individual quality may be very high; customers may be puzzled, or delighted)
Strategies for Shifting Demand to Match Capacity
Strategies for Adjusting Capacity to Match Demand
Managing Demand and Capacity in Services
- Yield Management: Balancing Capacity Utilization, Pricing, Market Segmentation, and Financial Return
- Waiting Line Strategies: When Demand and Capacity Cannot Be Matched
Waiting Line Strategies
- Manage the “waits” when you cannot match capacity with demand
- Employ “operational logic”
- Analyze process to remove “bottlenecks” in operations
- Adjust or redesign queuing system (next slide graphic)
- Establish a reservation process
- Differentiate waiting customers:
- By importance of the customer
- By urgency of the job
- By duration of the service transaction
- By payment of a premium price
- Make waiting fun, or at least tolerable
Making Waiting More Tolerable
- Unoccupied time feels longer than occupied
- Preprocess waits feel longer than in-process waits.
- Anxiety makes waits seem longer.
- Uncertain waits seem longer than known
- Unexplained waits seem longer than explained waits.
- Unfair waits feel longer than equitable waits.
- The more valuable the service, the longer the customer will wait.
- Solo waits feel longer than group waits.
Waiting Line Configurations
1. How does Rohit measure/understand his customers?
2. What does Yolk-ay do to better understand its customer?
3. How does the company use marketing to respond to its customers?
4. Should Yolk-ay expand its menu offerings? Why or why not?
5. Which customer should the restaurant listen to?
Yolk-ay
