customer relationships-custorm 2014

8/10/2019 Customer Relationships-custorm 2014

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Managing External Relationships

Customers


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Management is intrinsically linked with organisations

But what is the purpose of any organisation?


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What is an organisation

for?

To operate without a loss To operate legally

To deliver something

The purpose of an organisation


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Task

In your groups discuss:

Who are all the different people and groups that an organisation

might have a relationship with?

Which of these relationships do you think are the most important?

And why?

Be prepared to report back to the class


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Employees

Owners

Suppliers Customers

Society

Family

groupsInstitutional

Fund ManagersIndividual shareholders

Government

Pressure groups

Internal

Possible Stakeholders

External

Individual

Managers

Workers

Competitors


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Who does an organisation

have relationships with to

achieve its purpose?

Stakeholders

those individuals or groups who depend on the

organisation to fulfil their own goals and on whom, in turn,

the organisation depends (Johnson & Scholes 1997:196)

But not all stakeholders are equal!


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Customers

One key stakeholder group are customers

Organisations are interested in

Customer satisfaction

In an average business existing satisfied customers are around

70% of volume

Customer perceptions of quality

Customer intention to repurchase

Customer likelihood of word of mouth, etc.


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How do we evaluate

products?

To understand satisfaction an organisation needs to know

how customers evaluate products

If you bought one of your favourite products what would

make you dissatisfied with it?

What expectations did you have about the product before

you bought it?


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The customer evaluation

process


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Meeting expectations

Every point of interaction between company

and customer is evaluated

Interactions are therefore key to quality and

value creation.

It is crucial that organisations are aware of

this and act accordingly.


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Where do expectations

come from?

Your own experience (most trusted source)

Your friends advice (next most trusted)

Marketing information ( least trusted)

Third party communications eg reviews (considered tobe especially valid and objective)

Recent evidence suggests that electronic word of mouth

(WOM) is now highly significant

In the US, between 1 and 3 bad reviews will deter the majority(62%) of consumers from purchasing a particular product or

service Lightspeed Research 2011

More than two-thirds of global internet users seek online

product reviews, recommendations from discussion forums or

feedback from social media sites when making a purchase

decision Nielsen


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What do customers

evaluate?

Customers evaluate the core of the purchase Reliable performance, tangible cues to quality, etc.

If the core is good, satisfaction is not affected much because the

customer expects the core to be good

If the core is bad, dissatisfaction occurs

Customers also evaluate the interpersonal aspects of

service when applicable Responsiveness, competence, empathy, etc.

Supplemental components can affect both satisfaction and

dissatisfaction


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What role does level of

involvement play?

Low involvement Comparison process may be instantaneous and quickly

forgotten e.g. Purchasing toothpaste

Expectations are usually subconscious

If do not receive what expected, expectations become more

explicit e.g. Toothpaste tastes different High involvement

Comparison process is deliberative and conscious e.g.

Purchasing athletic shoes

Customers think about purchases

Customers have expectations that must be met


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How else does evaluation

vary?

Evaluation is also linked to purchase attributes of search,

experience, credence


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Search

Qualities are obvious from visual examinationComparative process is straightforward


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Experience

Expectations may not be fully formed prior to purchaseExperience and expectations simultaneously shape theevaluation


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Barriers to the matching ofexpectations and

experiences

Barriers

misconceptions

inadequate resources

inadequate delivery

exaggerated promises

Expectations

Perceptions of experience


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Value gaps or

discontinuity

Expectation model highlights possibility of value gaps or

discontinuity.

Important to understand these as they eitherProvide existing supplier with opportunity to enhance customer

value

Or

Open up access for competitors to do so


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Source: Grnroos, C. (1983) Strategic Marketing and Marketing in the Service Sector, Marketing Science Institute, Cambridge, MA, p. 75. Reproduced with permission

Customer relationship lifecyclein airline industry


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Why is loyalty important?

Loyal customers are assetsthey generate more profitas they buy more product, cost less to service, are lessprice sensitive and recommend company to others

Its up to 6 times more expensive to win a new customer

as to retain an existing one Dissatisfied customers will on average tell 14 others (so

business lost may be considerably higher than just 1customer)

The average of customers lost is 10% p.a. All retentionsreduce loss in profits

Only 14% of customers are lost due to product problemsbut around 70% are because of indifferent or inaccessibleservice people


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Valuing customers

The more of a customers business that can be attracted, andthe longer it can be kept by retaining the customer, the morevalue that customer will have. Happy customers spendincreasing amounts on the purchase of a specific

product/service over time.So customer retention is an important goal for any company

There are calculations to find out exactly how much each

customer is worth. These calculations are known as CustomerLifetime Value (CLTV) calculations.


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The loyalty ladder

The loyalty ladder is a shorthand way of assessing customervalue.


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How to hold on to existing

customers

Targeting customers for retention

Bonding

Internal marketing Building trust

Promise fulfillment

Service recovery


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The importance of

building relationships

Strong relationships help to retain customers and are thebasis of strong competitive advantage

Thus managing relationships with customers should be a

key focus for an organisation

The corporate solution is the creation of a customerrelationship management (or CRM) system which takes

planning, money and constant work

CRM is a process by which a firm gathers information about

the wants and needs of its customers to enable it to adjust itsofferings to better fit those wants and needs. It requires

ongoing monitoring of customers


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Loyalty development withCRM

Loyalty very weak

what have you done for me lately?

High likelihood of switching

Organisation focused on gaining customers

Customer no longer totally focused on price and product;Relationship is becoming a factorbut they may still switch

Organisation shifts to maximising relationship including segmenting

customer groups in terms of value

High customer satisfaction and beginning of customer dependency

Both organisation and customer must receive positive benefits

(even if there are some hitches along the way)


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A shift to CMR

Increasing shift to Customer Managed Relationships

Customer empowerment

More control over how much personal data to share

More customised service

Permission marketing

Active role of customer and constructive 2 way dialogue

Learning organisation

Co-creation

Changed buying process

But organisations must be careful not to totally hand over

power to customers

customer relationships-custorm 2014

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