Long Term Customer Relationship

10 Key excerpts on "Long Term Customer Relationship"

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  eBook - PDF

  Marketing Strategy

  • O. C. Ferrell, Michael Hartline, O. C. Ferrell, Michael Hartline, Bryan Hochstein(Authors)
  • 2021(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 10: Developing and Maintaining Long-Term Customer Relationships 287 ● ● is a business philosophy aimed at defining and increas- ing customer value in ways that motivate customers to remain loyal to the firm. ● ● is about retaining the right customers. ● ● involves a number of stakeholders in addition to custom- ers including employees, supply chain partners, and ex- ternal stakeholders such as government agencies, inves- tors, the media, nonprofits, and facilitating firms. ● ● is supported by CRM systems that track customer data and provide information about customers to develop sales success and long-term relationships. ● ● shifts the firm’s marketing emphasis from “acquiring cus- tomers” to “maintaining clients.” ● ● involves the creation of relationship capital—the ability to build and maintain relationships with customers, sup- pliers, and partners based on trust, commitment, cooper- ation, and interdependence. CRM in consumer markets: ● ● is a long-term process with the goal of moving consumers through a series of stages ranging from simple awareness, through levels of increasing relationship intensity, to the point where consumers become true advocates for the firm and its products. ● ● attempts to go beyond the creation of satisfied and loyal cus- tomers to create true believers and sponsors for the company. ● ● can lead to customer advocacy, action on behalf of the customer to spread either positive or negative informa- tion about a company across their social media and on- line rating platforms. ● ● is usually based on strategies that increase share of cus- tomer rather than market share.

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  Business-to-Business Marketing

  A Strategic Approach

  • Michael H. Morris, Leyland F. Pitt, Earl Dwight Honeycutt, Jr.(Authors)
  • 2001(Publication Date)
  • SAGE Publications, Inc

    (Publisher)

  Profitability can also be enhanced when the marketer becomes intimately involved with the customer organization, so that he or she is continually identifying new needs and opportunities for value creation. Building Customer Relationships | 103 Recognition of these ways to improve the profitability of a given account has led some companies to prioritize a concept called customer equity and the related notion of customer lifetime value. Simply put, lifetime value refers to the total amount a cus-tomer will spend on a given product category over a strategically meaningful time period (e.g., the next 10-12 years). Customer equity refers to the proportion of the customer's total expenditures that the marketer seeks to capture. By placing a value on customer equity, the marketer knows what the customer is worth and, corre-spondingly, how much the firm can invest in marketing efforts directed toward the customer. The marketer also starts to modify the product/service mix to better reflect the customer's evolving requirements over time. One implication of this discussion is that the ability to engage in successful rela-tionship marketing requires that firms change the types of objectives that they are set-ting. Developing meaningful relationships with customers is unlikely if the firm is preoccupied with sales and market share. Relationships are facilitated when the mea-sure of marketing performance is long-term customer profitability and customer equity. Source Loyalty as an Outcome of Buyer Behavior Because buying decisions are normally negotiated compromises, once a vendor is selected, there is a strong tendency for the customer to remain with that vendor. In spite of the fact that the customer has viable alternatives, source loyalty emerges. This loyalty is particularly evident when the time comes for the customer to make additional buying decisions, because considering a new vendor only reawakens or heightens previous conflicts.

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  Customer Life Time Value

  • Zareen, Arshi(Authors)
  • 2021(Publication Date)
  • Scholars World

    (Publisher)

  Conceptual Framework of Customer Lifetime Value A new age of marketing started with the formation of the new concept of CRM (Customer Relationship management) in 1980’s and its revolutionary applications for the marketers. According to this concept, making a sale is just the beginning of a relationship with the customer, and not an end. Retained customers are known to be more profitable because they tend to buy more, are relatively cheaper to serve and may be less price sensitive. Developing relationships with customers give in addition the relationship benefits to the firm. These relationship benefits may, in some cases, create greater value for a firm than is obtained from the stream of customer profits. This phenomenon urged companies to acquire and retain long term relationships with their customers, rather than having discrete transactions with them. According to Payne & Frow (2005), “CRM is a strategic approach concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments. CRM unites the potential of relationship marketing strategies and Information Technology (IT) to create profitable, long term relationships with customers and other key stakeholders. CRM provides enhanced opportunities to use data and information to understand customers and also to co-create value with them. This requires a cross-functional integration of processes, people, operations and marketing capabilities that is enabled through information, technology and applications”. CRM principles and systems help organisation to focus on the dual creation of value: the creation of value for shareholders (via long term firm profitability) and the creation of value or utility for customers (Vargo & Lusch, 2004). These objectives are congruent because relationships represent market-based assets that a firm continuously invest in, in order to be viable in the market place.

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  Advances in Customer Relationship Management

  • Daniel Catalan-Matamoros(Author)
  • 2012(Publication Date)
  • IntechOpen

    (Publisher)

  3. Customer identification and prioritization Many marketers believe that resources of a company should be invested in developing and maintaining relationships with customers over an extended period of time, and posit a positive association between customer duration and firm performance (Morgan & Hunt, 1994; Reichheld, Markey, & Hopton, 2000; Sheth & Parvatiyar, 1995). The proposed advantages of customer retention and long lasting relationships are contended on several fronts——for example, in terms of (a) generation of recurring business, (b) higher expenditures per period, (c) lower price sensitivity (and the concomitant ability of sellers to charge higher prices), (d) lower costs of servicing, (e) greater dissemination of positive word-of-mouth to other potential prospects, and (f) higher forgiveness for poor service from customers of long standing than newer ones (Bendapudi & Berry, 1997; Reichheld et al., 2000). In other words, customers’’ contributions to firm profitability increase as initial acquisition costs are recouped and the ongoing marginal costs of maintaining them are outweighed by the marginal benefits accrued over time. A consequence of arguments supporting customer longevity has been the proliferation of expensive ‘‘customer loyalty programs’’ that provide primarily economic/utilitarian incentives for generating patronage and repeat business (e.g., the Air Miles program and other frequency marketing programs). There is scant empirical evidence, however, that backs up the arguments put forth in favor of customer retention as well as for the positive impact of loyalty programs on corporate bottom lines. In fact, Reinartz and Kumar (2000) used a broad-based sample of individual customers across four industries to demonstrate that customers of longer standing who are not bound by a contract don’’t necessarily pay price premiums, nor are cheaper to service, as compared to shorter term customers.

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  Implementing SAP® CRM

  The Guide for Business and Technology Managers

  • Vivek Kale(Author)
  • 2014(Publication Date)
  • Auerbach Publications

    (Publisher)

  The Relationship-Based Enterprise ◾ 45 1.2.5 Customer Relationships In today’s world of decreasing margins, increasing competition, and ever-changing business envi-ronment, corporate success depends on an enterprise’s ability to build and maintain loyal and valued customer relationships. In a market where loyalty has plummeted and the cost of acquiring new customers is prohibi-tive, companies have turned to their current customers in an attempt to retain and maximize the business potential from them. The value of relationship can be expressed as follows: I I I M Value of Relationship future value expected benefits cost of obtaining the benefits 1 ∑ ( ) = -= where Expected benefits = economic cost + hassle + risk Cost of obtaining the benefits = solution value = (customer value × customer fit ) economic cost is typically the cost of delivered solution hassle includes all noneconomic costs, such as effort required to place orders and locate potential providers risk includes all of the uncertainties about the delivered solution and the cost of protecting against risk such as insurance, inspections, and contracting fit is delivered solution effectiveness of the customized individual deliveries The customer-responsive enterprise adds value for the customer even by eliminating the hassle required to research the product and to learn how to use it. When relationships exist uninter-ruptedly for extended periods of time, they improve need diagnosis and delivered solution effec-tiveness as well as establish procedures that minimize the hassle of communicating needs and responses. 1.2.5.1 Why Cultivate Customer Relationship? The relationship-oriented organization sees the customer not as a single sale but as a long-term relationship in which the value of future solutions will always be greater than the value of any existing transactions. Relationships not only define and determine expectations but also minimize transaction costs.

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  Managing Customer Relationships

  A Strategic Framework

  • Don Peppers, Martha Rogers(Authors)
  • 2004(Publication Date)
  • Wiley

    (Publisher)

  15 When it comes to customers, businesses are shifting their focus from product sales transactions to relationship equity. Most soon recognize that they simply do not know the full extent of their profitability by customer. 16 Not all customers are equal. Some are not worth the time or financial investment of establishing EVOLUTION OF RELATIONSHIPS WITH CUSTOMERS 21 C ustomers, whether they are consumers or other enterprises, do not want more choices. Customers simply prefer getting exactly what they want— when, where, and how they want it. 14 Katherine Lemon, Don Peppers, and Martha Rogers, PhD, “Managing the Customer Lifetime Value: The Role of Learning Relationships,” working paper. 15 B. Joseph Pine II, Don Peppers, and Martha Rogers, PhD, “Do You Want to Keep Your Cus- tomers Forever?” Harvard Business Review (March–April 1995), pp. 103–114. 16 Ian Gordon, Relationship Marketing (New York: John Wiley & Sons, Inc., 1998). Learning Relationships, nor are all customers willing to devote the effort required to sustain such a relationship. Enterprises need to decide early on which cus- tomers they want to have relationships with, which they do not, and what type of relationships to nurture. (See Chapter 5 on customer value differentiation.) But the advantages to the enterprise of growing Learning Relationships with valuable and potentially valuable customers are immense. Because much of what is sold to the customer may be customized to his precise needs, the enterprise can potentially charge a premium (as the customer may be less price-sensitive to customized products and services) and increase its profit margin. 17 The product or service is worth more to the customer because he has helped shape and mold it to his own specifications. The product or service, in essence, has become decommoditized, and is now uniquely valuable to this particular customer. Managing customer relationships effectively is a practice not limited to prod- uct and services.

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  Customer Service for Hospitality and Tourism

  • Simon Hudson, Louise Hudson(Authors)
  • 2022(Publication Date)
  • Goodfellow Publishers

    (Publisher)

  The benefits to an orga- nization of maintaining and developing a loyal customer base are numerous, but they are linked directly to the bottom line. Among service organizations, reduc- ing customer defections by just 5% can boost profits by 25% to 85% (Reichheld and Sasser, 1990). Retained customers are much more profitable than new ones because they purchase more and they purchase more frequently, often at a price premium, while at the same time requiring lower operating costs. They also make referrals that cost the business nothing, and, of course, the acquisition cost of loyal customers is also nothing, which is significant because it costs a company five to seven times more to prospect for new customers than it does to maintain the current ones (Zeithaml and Bitner, 2000). Chapter 2 introduced the concept of lifetime value of a customer to understand the financial value of building long-term relationships with customers. This is a calculation that considers customers from the point of view of their potential lifetime revenue and profitability contributions to a company. This value is influ- enced by the length of an average lifetime, the average revenues generated in that time period, sales of additional products and services over time, and referrals generated by the customer. The Walt Disney Co., for example, has calculated that a typical household of 3.6 people have a lifetime value of more than $50,000 to the company (Schlaifer, 2006). Table 7.2: Benefits of relationship marketing to the company and the customer Benefits to the Company Benefits to the Customer Increased purchases Social benefits Lower costs Confidence and trust Employee retention Special treatment Increased profits Reduced risk Less customer defection Increased value Free advertising through word of mouth Customized services

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  Airlines: Managing to Make Money

  • (Author)
  • 2017(Publication Date)
  • Routledge

    (Publisher)

  (A recent development in the literature has in fact moved beyond the idea of lifetime value to look at customers' 'full profit potential' (Hallowell and Schlesinger, 2000). Whereas transactional marketing considers one exchange at a time and lifetime value looks at a series of exchanges over the life of a customer's relationship with the firm, 'full profit potential' is realised by taking positive action to increase lifetime value by proactively influencing each targeted customer's purchase be- haviour - by encouraging them to buy more, to buy more often, or to buy higher-margin services, for example.) The only way to secure long-term customer loyalty is to try to ensure that as many customers as possible have exceptionally good experiences at every point of contact with the airline - by which I mean experiences that exceed expectations, albeit subject to what is reasonable within the context of the particular service-price offer concerned. In other words, design, communicate, and deliver services capable of meeting and exceeding cust- omers' expectations. Clearly, this is a challenge that relies heavily on having the right people working in the right culture and giving them the right tools for the job - including customer information. This may not be easy or cheap and it will need to be a sustained long-term commitment, but in the long run it can be cheaper than losing customers who have a potent- ially high lifetime value. Loyalty programmes Airlines need to build loyalty amongst both their end-users and intermed- iaries such as travel agents and freight forwarders. Close attention has long been paid to intermediaries, who - despite recent assaults by some airlines on their distribution costs - are in many markets still plied with incentives in addition to 'standard' commissions.

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  Winning In Service Markets: Success Through People, Technology And Strategy

  Success through People, Technology and Strategy

  • Jochen Wirtz(Author)
  • 2016(Publication Date)
  • WS PROFESSIONAL

    (Publisher)

  This is true for many services, ranging from passenger transport to food service, or visits to a movie theater, in which each purchase and use is a separate event. Customer loyalty strategies in a transactional marketing context have to focus mostly on the foundation strategies of the Wheel of Loyalty, such as segmenting the market and matching customer needs with firm capabilities, and delivering high service quality. However, most other strategies require a good understanding of a firm’s customer behavior. For example, unless a firm knows the consumption behavior of individual customers, it cannot apply tiering of service, loyalty rewards, customization, personalization, churn management and the like. For all those strategies, a firm has to have individual customer data, which is the case in relationship marketing. Relationship Marketing The term relationship marketing has been widely used to describe the type of marketing activity designed to create extended relationships with customers. Ideally, both the firm and the customer have an interest in a deeper engagement and higher value-added exchange. A firm may have 476 · Winning in Service Markets transactions with some customers who have neither the desire nor the need to make future purchases, while working hard to move others up the loyalty ladder. 54 Evert Gummesson identified no fewer than 30 types of relationships. He advocates total relationship marketing , describing it as: …marketing based on relationships, networks, and interaction, recognizing that marketing is embedded in the total management of the networks of the selling organization, the market, and society. It is directed to long-term, win-win relationships with individual customers, and value is jointly created between the parties involved . 55 Relationship marketing requires a membership-type relationship.

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  Customer Relationships

  Sales 12.9

  • Roger Cartwright(Author)
  • 2003(Publication Date)
  • Capstone

    (Publisher)

  » 2002: Staff: 300; magazines: 14; book titles: 250. 42 CUSTOMER RELATIONSHIPS KEY LEARNING POINTS » When operating in a global marketplace organizations need to understand customer concerns regarding payments and complaints. » Organizations can only develop a good relationship with foreign customers if they take cultural differences into account. » Global success is best achieved by ‘‘thinking globally but acting locally.’’ » Organizations such as Kalmbach have thought through how to attract and retain their overseas customer base. 12.09.06 Customer Relations: the State of the Art This chapter considers the current state of the art in respect of customer relations. It explains how: » not all customers are good customers; » mere satisfaction is often not enough to engender loyalty; » delighting the customer and repeat business should be key objectives; » the customer accumulator operates; » the types of loyalty that customers can display; and » the fact that loyalty cannot be guaranteed. 44 CUSTOMER RELATIONSHIPS David Clutterbuck and Walter Goldsmith in The Winning Streak Mk II, (1997), a follow up to their 1985 text The Winning Streak, make four very important points that impact on the current state of the art of customer relations. They state that: » the best customer is usually an existing customer; » organizations should focus on developing a talent for focusing on the customers the organization really wants to keep; » it is critical to build firm relationships with customers; and » competitive advantage should be given a higher priority than cost. Not every customer is a good customer. Every organization probably has ‘‘folklore’’ relating to those customers that they do not want. Such customers may be bad payers, rude or expect far too much for what they are prepared to pay. Organizations may well decide to ‘‘fire’’ such customers.

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