Marketing Services and the Customer Experience
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Lecture_Buildingcustomerrelationships.pptxBuilding relationships with customers Marketing Services and the Customer Experience Study unit 11
What is relationship marketing?
Identify, establish, maintain and enhance, and when necessary terminate, relationships with customers and other stakeholders, at a profit, so that the objectives of all parties are met
(Grönroos, 1994).
Differentiation through relationships
‘Most companies are now competing with more commoditised products, so the only differentiation is the customer relationship’
(CEO of IBM’s CRM Unit)
Birth of relationship marketing
In services marketing, the customer interacts with the provider to a greater extent, over a longer period of time with the result that a relationship can develop.
The transaction approach to marketing failed to capture this, so RM was born
Differences between RM and TM
| Transaction Marketing | Relationship Marketing |
| Focus on single exchange | Focus on continual stream of interactions |
| Short-term profit-maximization perspective | Long-term perspective to develop trust and loyalty |
| Marketing is the concern of the marketing department | Marketing is the concern of everyone in the organization |
| Focus on customer attraction | Focus on retention |
| Adversarial relationships with suppliers motivated by self-interest | Collaborative relationships based on mutual and reciprocal benefits. |
| Low/moderate customer contact | High customer contact |
| Emphasis on product | Emphasis on service as well as core product |
| Focus on customer | Develop relationships with all stakeholders |
Benefits for the firm
More profitable to retain existing customers than it is to attract new customers (Reichheld, 1994)
The lifetime value of the customer is worth more than the diminishing returns from one-off transactions
Loyal customers understand how the service process works
Loyal customers act as advocates
Loyal customers can be less price sensitive
Benefits for the customer
Confidence
Knows what to expect; reduced anxiety
Social benefits
Interpersonal relationship
Special treatment
Service firm understands customer’s needs and delivers personalized attention
(Gwinner et al., 1998)
Showing the customer you care
| Partnership marketing Work with customers to help improve their performance |
| Proactive marketing Regular contact with customer informing them of offers/new services |
| Accountable marketing Seller calls customer after sale to check customer is satisfied |
| Reactive marketing Encourage customer to get in touch if there are problems or questions |
| Basic marketing One-off single transaction |
Relationship dimensions
Relationship satisfaction
Overall evaluation of, and attitude towards, the provider
Trust
Belief in the competence,
benevolence,
and integrity of the provider
Social bonds
Liking and friendship
Commitment
Desire to continue a relationship
Loyalty
Attitudinal and behavioural
(Cater and Zabkar, 2009)
Degrees of loyalty
| High repeat patronage | Low repeat patronage | |
| High attitude relative to other brands | True Loyalty | Latent Loyalty |
| Low attitude relative to other brands | Spurious Loyalty | No Loyalty |
(Dick and Basu, 1994)
Ladder of loyalty
| Partner: Commitment (interdependence) |
| Supporter: Friend (customize offerings to develop trust) |
| Repeat customer: Acquaintance (anticipate and satisfy needs) |
| Prospect (communicate, attract, acquire) |
(Christopher et al., 1991)
Relationships: not just for customers
(Christopher et al., 1991)
Supplier markets adversarial relationships to mutual support and commitment
Recruitment markets
right quantity and quality of employees
Internal markets
motivation and retention
Referral markets
Develop relationships and reward
Influence markets
legislators, press, consumer/trade associations
Relationship development strategies
| Relationship bonds | Financial bonds (discounts, bundling, fixed price) Social bonds (personal relationships) Customization bonds (learn, anticipate/adapt) Structural bonds (integrate systems and processes) |
| Core service provision | Customer experience management (satisfaction, service recovery, etc.) |
| Switching barriers | Inertia (excessive effort) Switching costs (monetary and non-monetary) |
(Palmatier et al., 2007)
Customer relationship management
Data collection
profile, purchase history
Data analysis
identify preferences and purchase patterns
Value proposition development
identify value propositions for each customer segment (or individual)
Segment by profitability
Lead
Most profitable
customers
Least profitable
customers
Gold
Iron
Platinum
Segment by profitability
Offer special treatment to customers with best potential
Tier customers according to ‘customer lifetime value
Platinum and gold spend more, are more committed, spread +WOM, and cost less to maintain. Deserve significant attention
RM not always appropriate
Not all customers want a relationship and see marketing relational behaviour as intrusive
Some customers develop unreasonable expectations and an ‘entitlement’ to preferential treatment
(Harris and Ogbonna, 2008; Ma et al., 2018)
‘Dark side’ of relationships
Complacency
Static ‘mental models’
Opportunism
Over-dependence
(Vafeas and Hughes, 2016)
References
Cater, B. and Zabkar, V. (2009) Antecedents and consequences of commitment in marketing research services. Industrial Marketing Management. 38 (7), 785-797.
Christopher, M., Payne, A., and Ballantyne, D. (1991) Relationship Marketing. Oxford: Butterworth-Heinemann.
Dick, A. and Basu, K. (1994) Customer loyalty: toward an integrated conceptual framework. Journal of the Academy of Marketing Science. 22 (2), pp. 99-113.
Grönroos, C. (1994), From marketing mix to relationship marketing: towards a paradigm shift in marketing. Management Decision. 32 (2), pp. 4-20.
Gwinner, K., Gremler, D., and Bitner, M.J. (1998) Relational benefits in service industries: the customer’s perspective. Journal of the Academy of Marketing Science. 26 (Spring), pp. 101-114.
Harris, L. and Ogbonna, E. (2008) The dynamics underlying service firm-customer relationships. Journal of Service Research. 10 (4) 382-399.
Ma, B., Li, B., and Zhang, L. (2018) Effects of loyalty programs in services. Journal of Services Marketing. 32 (3), 300-310.
Palmatier, R., Scheer, L., Houston, M., Evans, K., and Gopalakrishna, S. (2007) Use of relationship marketing programs in building customer–salesperson and customer–firm relationships: Differential influences on financial outcomes. International Journal of Research in Marketing. 24 (3), 210–223.
Reichheld, F. (1994) Loyalty and the renaissance of marketing. Marketing Management. 2 (4), pp. 10-21.
Vafeas, M. and Hughes, T. (2016) An examination of the dimensions and antecedents of institutionalised creativity. Industrial Marketing Management. 55 (May), 59-69.
