Module 2, Chapter 2 Review
AK47
mcr2e_chapter_2_slides.pptxManaging Customer Relationships: A Strategic Framework
Chapter 2
The Thinking behind Customer Relationships
Course Title Instructor
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
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Chapter 2 Preview
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Benefits of being customer-centric
What characterizes a business relationship?
One view on relationships (J.E. Britton)
Types of business relationships
Relationship development process
Relationship building blocks
Another view on relationships (J.G. Barnes)
Four levels of business relationships
The five Es of customer relationships
Customer loyalty and loyalty programs
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Why Do Companies Work at Being Customer-Centric?
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Customers are scarce
Customers are the sole source of the company’s revenue
Customers create value in two ways:
1. Current profit (short-term)
2. Customer equity (long-term), or likelihood to remain a customer and recommend company to others.
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What Characterizes a Relationship?
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Mutual
Interactive
Iterative
Provides ongoing benefit to both parties
Requires a change in behavior for both parties
Unique
Requires – and produces – trust
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Continued Roles for Mass Media and Branding
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Communicate to nonusers who have not yet raised their hands
Build image and brand identity
Establish a brand position with nonusers to help users make a statement about their own image
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One View on Customer Relationships (Britton)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Two types of business relationships:
Discrete Relational
Transactional Collaborative
Transactional
Traveler buying fuel with cash
Collaborative
Traveler buying same brand of fuel with affinity card
Transpires over time
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Relationship Development Process (Britton)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Awareness: Knowledge of each other
Exploration: Search and trial
Expansion: Increase in relationship benefits and interdependence
Commitment: Indicated by inputs, consistency, and durability
Dissolution: Value of the relationship no longer worthwhile
Enhancing agents: communication, cooperation, and conflict resolution
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Relationship Building Blocks (Britton)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Two primary relationship building blocks:
1. Trust
Benefits of trust: cooperation, commitment, relationship duration, and quality
Main contributors to trust: shared values, interdependence, quality communication, and non-opportunistic behavior
2. Commitment
Types of commitment: calculative (negatively correlated to trust) and affective (positively correlated to trust)
Main contributor to commitment: trust
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Relationship Building Blocks (Britton, cont.)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Other relationship building blocks:
Satisfaction
Positive relationship between customer satisfaction and loyalty
More complex relationship between customer satisfaction and duration of relationship
Customer weigh prior satisfying experiences more heavily than new experiences - thus early mishaps have greater weight than later mishaps
Customers weigh negative experiences more heavily than positive ones – thus companies should emphasize preventing negative encounters
Uncertainty and Dependence
Uncertainty increases dependence
Relationships based on uncertainty and/or dependence tend to be less stable
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Relationship Building Blocks (Britton, cont.)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Other relationship building blocks (cont.)
Fairness
Distributive
Procedural - higher effect on trust
Symmetry
Symmetric relationships are more stable than asymmetric ones
Trust and commitment can develop in asymmetric relationships if vulnerable party is treated fairly and with respect
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Another View on Customer Relationships (Barnes)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Four levels of relationship:
1. Intimate
2. Face-to-face
3. Distant
4. No-contact
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Emotional loyalty vs. functional loyalty (Barnes)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
To contrast with Britton’s perspective, Barnes posits that “retention is not a relationship” – that a customer relationship is only present when the customer has emotional loyalty, not just functional (behavioral) loyalty
Thus relationships are inherently based on feelings and emotions
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The Five Es of Customer Relationships (Barnes)
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
1. Environment
2. Expectations
3. Emotions
4. Experience
5. Engagement
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Customer Loyalty
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Two definitions of customer loyalty:
1. Attitudinal loyalty: loyalty is in the customer’s state of mind
2. Behavioral loyalty: relies on customer’s actual conduct
Both definitions are important to measure:
Attitudinal loyalty without behavioral loyalty has no financial benefit for a firm, but behavioral loyalty with attitudinal loyalty is unsustainable (p. 66).
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Best Practices for Loyalty Programs
Managing Customer Relationships: A Strategic Framework, Second Edition
Don Peppers and Martha Rogers
Never waste an opportunity to gain insight about a customer
An effective program offers modularity, enabling participants to mix and match aspects according to preferences
Consumers value openness – they want a program that works with other programs
A loyalty program should be managed around customers, not products
Above all else: simplicity
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