Chapter 14
Building Customer Relationships
CHAPTER OUTLINE
Spotlight: United Supermarkets LLC
(http://www.unitedtexas.com)
1 What Is Customer Relationship Management?
Define customer relationship management CRM broader marketing effort
 Focuses on
 Customer rather than products
 Changes in company processes, systems, and culture
 All channels and media involved in marketing effort, from the Internet to field
sales
Have students tell why they return to a business to purchase the same or
additional products. Then ask them if they have ever had a bad experience with a
purchase they have made from a business. Indicate you don’t want them to tell the
name of the business, but have them tell about what happened and how the
situation was resolved or not resolved.
 Benefits of CRM to the Small Firm
 Sales are either from a current customer or a new customer
 Both types of customer are important to the firm and should be carefully managed
Emphasize CRM’s role in keeping existing customers and the economic benefits
of maintaining relationships with current customers: acquiring new customers is
expensive, long-time customers spend more, happy customers make referrals to
others, order-processing is cheaper for existing customers and long-term
customers will pay more for products.
 Essential Materials for a CRM Program
 Two vital aspects of CRM Program
 Outstanding relationships with customers
 Knowledge of consumer behavior
2 Creating Outstanding Customer Relationships through Extraordinary Service
Discuss the significance of providing extraordinary customer service.
 Four basic beliefs underlie emphasis on providing exceptional customer service
 Small businesses possess greater potential for providing superior customer service
than do large firms
 Superior customer service leads to customer satisfaction
 Customer satisfaction results in a positive transactional relationship
 Positive transactional relationship lead to increased firm profits
 Transactional relationship – an association between a business and a customer
that begins (or ends) with a purchase or a business deal
 Managing Customer Satisfaction
 Happy customers are loyal customers
 Companies control some factors that shape interactions with customers
 Product must meet basic expectations to satisfy customers and create repeat
business
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Chapter 14
Building Customer Relationships

Customers expect assistance at purchase and after purchase if there are
problems
 Personal Attention
 Common signposts of extraordinary, persona, customer service:
 Doing business on a firs-name basis
 Keeping in touch
 Finding ways to help
 Customizing your service to meet customer preferences
 Addressing problems promptly
 Customer experience management (CEM) - An approach that recognizes that,
with every interaction, customers learn something about a company that will
affect their desire to do business there in the future.
 Evaluating a Firm’s Customer Service Health
 Start with firm’s “customer service quotient” which indicates how well the firm is
currently serving its customers
 Exhibit 14-4 Customer Service Strategies
 Potentially small firms are able to respond to grievances quickly and achieve
greater customer satisfaction
 Exhibit 14-5 Consumer Options for Dealing with Product or Service
Dissatisfaction
 Evaluating customer service is critical for any business
 Some forms of customer service are inexpensive or even free
3 Using Technology to Support Customer Relationship Management
Understand how technology, can improve customer relationships.
 CRM software programs
 All customer contact information provided in a single data management program
 Online shopper expect excellent customer service
 Deciding which marketing activity should get initial CRM support is not always
easy
 Customer information management systems
 Self-service inquiries handled on the Internet less expensive than customer
service rep on telephone, text chat, or email
 FAQs becoming more useful and better organized by companies on their
websites
 Tools for supporting CRM
 Web 2.0 source of marketing support tools
 Format of web site can be a tool
4 Building Customer Profiles for a CRM Program
Describe techniques used to create a customer profile.
 Built from many sources
 Warranty cards
 Accounting records
 Four major categories of information identified
 Transactions
 Customer contacts
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Building Customer Relationships
Descriptive information
Responses to marketing stimuli
5 Customers as Decision Makers
Explain how consumers are decision makers and why this is important Have students
provide examples of each stage of this model using the purchase of a product such as a
car or a TV.
 Need Recognition (Stage 1)
 Exhibit 14-6 Simplified Model of Consumer Behavior
 Consumer must recognize a problem before purchase behavior can begin
 Information Search and Evaluation (Stage 2)
 Evaluative criteria – the features or characteristics of a product or service that
customers use for comparison
 Evoked set – a group of brands that a consumer is both aware of and willing to
consider as a solution to a purchase need
 Purchase Decision (Stage 3)
 Decision must be made about how and where to purchase
 Choices available from nonstore and store settings
 Post-Purchase Evaluation (Stage 4)
 Exhibit 14-7 Post-Purchase Activities of Consumers
 Cognitive dissonance – the anxiety that occurs when a customer has second
thoughts immediately following a purchase
Ask students if they experienced cognitive dissonance after enrolling in the class.
 Deal with issues and complaints ASAP
6 Understanding Psychological Influences on Customers
Identify certain psychological influences on consumer behavior.
 Needs
 Often described as starting point for all behavior
 Never completely satisfied
 Perceptions
 the individual processes that give meaning to the stimuli confronting consumers
 Perceptual categorization – the process of grouping similar things so as to manage
huge quantities of incoming stimuli
 Affected by brand loyalty
Discuss with students the following statement: “What we perceive to be true, is
true to us.”
 Motivations
 Goal-directed forces that organized and give direction to the tension caused by
unsatisfied needs
 Social, physiological, psychological, and spiritual needs
 Attitudes
 An enduring opinion, based on knowledge, feeling, and behavioral tendency
 May act as an obstacle or a driver to connect a customer to a product
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Chapter 14
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Ask students to relate their personal experiences with marketing appeals (whether
they were persuaded to buy or not). What psychological factors were the
foundations for those marketing efforts?
7 Understanding Sociological Influences on Customers
Recognize certain sociological influences on consumer behavior
 Culture
 Behavioral patterns and values characterizing a group of customers in a target
market
 Cultural norms create a range of product-related acceptable behaviors
Mention some traditional subcultural classifications (e.g., religious preference,
ethnic orientation). Then, ask students to give examples of products and life style
distinctions that pertain to these groups.
 Social Class
 Divisions within a society having different levels of social prestige
 Implications for marketing
 Different lifestyles correlate with different levels of social prestige
 Reference Groups
 Small groups that an individual allows to influence his or her behavior
 Must understand why this influence occurs and how it can be used to promote the
sale of a product or service
 Five kinds of power recognized (Reward, coercive, referent, expert, and
legitimate)
 Opinion Leaders
 A group member who plays a key communications role
 Generally knowledgeable, visible, and exposed to mass media
 Enhance the business by identifying with these leaders
 CRM Leads to Customer Satisfaction
 A satisfied customer is likely to be a repeat customer who will tell others about
your company
ANSWERS TO END-OF-CHAPTER DISCUSSION QUESTIONS
1. Define customer relationship management. What is meant by the statement
“CRM is primarily a mindset?”
CRM is a firm’s efforts to create nothing short of complete customization of
products and/or services to fit individual customer needs. It is a message from the
firm to the customer that they will be “courted” for more than a one-time sale. CRM
is primarily a mindset because no set of policies or programs will create the
intended goal unless individual employees put the customer first every day. The
focus is on customers but the focus comes from the mindset of the employees.
2. Does CRM put more emphasis on current or potential customers? Why?
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A small firm values both current and potential customers, but sometimes current
customers are taken for granted and ignored. Keeping existing customers is the
first priority of CRM.
3. What are the two essential building blocks of a successful CRM program? What
“materials” are used to construct these building blocks?
The essential building blocks are depicted in Exhibit 14-2 on page 414. They are:
(1) Outstanding relationships with customers, and (2) Knowledge of consumer
behavior. Building Block 1 is “built” with a) extraordinary customer service, b)
technology support, and c) customer profiles. Building Block 2 is “built” with
understanding a) customer decision-making b) psychological influences upon
customers, and c) sociological influences on customers.
4. Why is a small business potentially in a better position to achieve customer
satisfaction than a large firm?
Four factors are listed in the chapter and discussed briefly on pp. 414 and 415. The
reasons are: a) Small businesses possess great potential or providing superior
customer service than do large firms b) Superior customer services leads to
customer satisfaction. c) Customer satisfaction results in a positive transactional
relationship d) Positive transactional relationships lead to increased firm profits.
5. Discuss how technology can be used to support customer relationship
management.
Long-term transactional relationships with customers are fostered by good
information and numerous software packages containing word-processing,
spreadsheets, and database tools are available to assist the small firm in CRM
efforts. 1-800-Flowers.Com CRM software is one example which helps make it
possible to e-mail selected customers once a month to remind them of upcoming
dates which may generate sales.
6. What types of information should be a part of a customer profile?
Four major categories of customer profile information are listed on page 426 of the
text. They are: 1) Transactions, 2) Customer contacts, 3) Descriptive information,
and 4) Responses to marketing stimuli.
7. What techniques or sources of information can be used to develop a customer
profile?
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accessible website, in whole or in part.
Chapter 14
Building Customer Relationships
Customer profile information can be derived from sources such as warranty cards
and accounting records and other points of contact such as online visits. Formal
interviews can also gather customer profile data. These interviews can sometimes
be conducted in the store or online
8. Briefly describe the four stages of the consumer decision-making process. Why
is the first stage so vital to consumer behavior?
Stage 1: Need Recognition—this stage is occurring when a consumer realizes that
her or his current state of affairs is not the same as some ideal state. It can arise out
of routine conditions of depletion, such as a lack of food or it may evolve slowly as
in the recognition of a need for a new car or truck.
Stage 2: Information Search and Evaluation: The stage where the consumer is
collecting and evaluating information from both internal and external sources.
Stage 3: Purchase Decision: The activities related to deciding on how and where
to make a purchase.
Stage 4: Post-Purchase Evaluation: Consumer activities occurring after the
purchase, including post-purchase dissonance, as well as the other activities
depicted in Exhibit 14-6.
Stage 1 is so vital because it must occur before the other stages can exist. The car
engine—to use an analogy—must start before it can be expected to take occupants
to their destination.
9. List the four psychological influences on consumers that were discussed in this
chapter. What is their relevance to consumer behavior?
The four psychological influences discussed in the chapter are needs, perceptions,
motivations, and attitudes. They are each relevant to consumer behavior because
they all influence the way consumers respond to marketing stimuli.
10. List the four sociological influences on consumers that were discussed in this
chapter. What is their relevance to consumer behavior?
The four sociological influences discussed in the chapter are culture, social class,
reference groups, and opinion leaders. Each of these influences reflects external
forces that impact consumer behavior. Notice culture is the largest number of
people and opinion leaders—one or two individuals, maybe—is the smallest
number. (See detailed discussions of these influences on pp. 432-433.)
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COMMENTS ON CHAPTER “YOU MAKE THE CALL” SITUATIONS
Situation 1
1. What consumer loyalty techniques would you recommend to Shepherd?
Superior delivery and after the sale service are the two most important loyalty
techniques for Shepherd. It encourages repeat business with a “Pearl Points”
program. In this program each order earns several “Pearl Points” coupon cards
which can be used for later purchases.
2. What information would be appropriate to collect about customers in a database?
Almost any demographic information would be helpful to build a customer
database as well as past purchasing behavior with their business and other suppliers.
Special personal dates such as a spouse’s birthday or anniversary would be useful
in creating a CRM program.
3. What specific computer-based communication could be used to achieve
Shepherd’s goal?
Shepherd includes an option for visitors to the web site to fill out a very short
questionnaire. It asks, “What type of pearls are you most interested in?” and “What
price ranges are you most interested in?” as well as a few questions about the web
site. There is a place for the visitor to enter their name.
PearlParadise.com also uses an opt-in customer database used to offer special sales
to its repeat customers. Sheppard can send an e-mail message out to customers in
the database to inform them of a special inventory of pearls. Note: One Mother’s
Day he offered this type of special and sold out of nearly 100 pearl strands within
a matter of hours
Situation 2
1. What psychological concepts of consumer behavior are relevant to marketing this
service? Be specific.
Every psychological—and sociological –concept discussed in the chapter can be
tied to this type service. For example, a family’s attitude toward death and eternity
can determine the type of funeral service purchased. How elaborate should it be?
This business has positioned its appeal as a low cost alternative which may or may
not be what certain customers (client’s family) wants or needs. Perception of how
a funeral arranged by this firm will “look” to others may be a major consideration.
2. How can the stages of consumer decision-making be applied to a person’s
decision to use a particular funeral home?
This type of product (service) is typically and unsought good—meaning most
purchases are not made in advance of the need. However, the funeral industry has
marketed a Pre-Need program for many years. Aspen also promotes pre-Planning.
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Chapter 14
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Their web site provides a Pre Planning Form which can be submitted to them.
There is no cost for this service.
The Information Search and Evaluation stage is a critical one for Aspen’s success
simply because there is usually not much time after Stage 1, before Stage 3 must
be completed.
3. What types of CRM could be used by this type of business?
The Pre Planning Form is one effort to create some information that could be used
in a CRM effort. The form requests information such as the person’s telephone
number, address, marital status, occupation and disposition preference—burial,
cremation, etc.
The web site also provides some helpful questions and answers related to burial
issues.
Situation 3
1. As a long-run strategy, will Goltz’s approach to superior customer service quality
be successful?
Maybe or maybe not. Goltz is right in thinking he needs to provide excellent
customer service but if he fires employees so quickly, his employee turnover rate
will increase and he won’t be able to deliver superior customer service. Goltz falls
short in not valuing his employees- this is a very big mistake.
2. Would you want to work for a company with such policies? What would be the
pros and cons of working there?
The pros to working for a company like this would be working as a true artisan
rather then a “framer”. There would be great freedom of creativity in being able to
assist customer with their framing needs and being able to show them some creative
options that they may not have thought of. That would be fulfilling. On the other
hand, it may be difficult to work for Goltz. He doesn’t value his employees and in
return they won’t value him. Goltz’s priorities are wrong and ultimately he’ll have
a very unhappy group of employees who will work poorly for him.
4. What suggestions would you have for Goltz and his system? Can you see any
ways to improve them?
He needs to change his focus and appreciate his employees. He needs to train them
well, respect and them and convey this appreciation to them. He commitment to
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Chapter 14
Building Customer Relationships
his customers is outstanding, now he just needs to do the same to his artisanal
employees.
SUGGESTED SOLUTION TO CASE 13: NUMI TEA
1. Do you consider Numi’s relationships with its producers as important to its marketing
as the relationships with its customers?
Absolutely. It's these close connections that ensure good communication and a quality
product. It's important for Numi to be able to explain the lineage of its product- the
supply chain process. This increases Numi's credibility with its customers and
demonstrates to them that Numi cares deeply about these relationships and goes to great
lengths to maintain them. Embedded in this thinking is the notion that Numi will also
take these same careful and diligent steps to ensure that it's customers are happy as well.
2. How does Numi use technology to enhance its customer relationships? Can you
suggest other ways in which the management team can use technology to reach
consumers of Numi teas?
It's currently taking advantage of social media- a clever way to attract new customers.
Word of mouth is an extremely powerful advertising medium. As is viral marketing.
Numi recognizes this and is taking advantage of this. However, Numi must also invest
time and effort to monitor this type of advertising to ensure that their product is being
adequately represented by these public spokespersons Students will also suggest other
sources of advertising but may include, Yelp!, and local coupon advertisers like Groupon
or other types of smartphone mobile applications. .
3. What methods would you suggest that Numi use to collect customer data?
Students answers will vary but may include: Numi can collect personal data so that it can
target it's add to the consumer on their webpage browser via google. The same for
Facebook. Personal data such as birthday, email address so that they can enhance their
customer relationship management strategy.
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