Step 4 in the Marketing Process
Build Profitable Customer
Relationships
Marketing Unit, Slide No. 1
Building Customer Relationships
• Customer relationship management
(CRM) is the process of building and
maintaining profitable customer
relationships by delivering superior
customer value and satisfaction.
• CRM deals with all aspects of acquiring,
keeping, and growing customers.
• The key to building lasting customer
relationship is to: create superior
customer value and customer
satisfaction. Satisfied customers are
more likely to be loyal customers and
give the company a larger share of their
purchases.
Marketing Unit, Slide No. 2
Customer Relationship
Management System
• Customer relationship
management system
- An information technology-based
(IT-based) knowledge
management system designed to
track a company’s customers –
what they are buying, how
satisfied they are, and how their
demands are changing.
- Consists of three components or
modules as shown on the right.
Figure 11.8
Marketing Unit, Slide No. 3
Changing Nature of Managing
Customer Relationships
• Today’s companies are focusing on building more direct and lasting
relationships with more carefully selected customers,
• Few firms today still practice true mass marketing, i.e., selling in a
standardized way to any customer who comes along. Firms now are
targeting fewer, more profitable customers.
• This is called selective relationship management. Involves using
customer profitability analysis to weed out losing (unprofitable) and
target winning ones for special treatment.
• Other changes:
- Serving chosen customers in a deeper, more lasting way. Going
beyond strategies to attract new customer and generate transactions,
focusing instead on retaining current customers and building profitable,
long-term relationships with them.
- Also striving to connect more directly with their customers. Direct
marketing, i.e., buying without going into a store, is booming.
Marketing Unit, Slide No. 4
Building The Right Relationships
With the Right Customers
Classifying Customers Based on Current and Future Value
High
Maintain
Protect
Cross-sell
and up-sell
Allow to
leave
Grow
Cross-sell
Current Value
Low
Low
Future Value
High
Marketing Unit, Slide No. 5
Customer Relationship Levels & Tools
• Relationships can be built at many
levels depending on the nature of the
target market. For example:
- Basic relationships with lower margin
customers; or
- Full partnerships with key customers.
• A variety of tools are available to build
stronger bonds with customers. For
example:
- Frequency marketing or loyalty marketing
programs that reward customers who buy
frequently or in large amounts; and
- Club marketing programs that offer
members financial and/or social benefits.
Harley-Davidson builds
customer relationships by
means of the social
benefits of the Harley
Owners Group (HOG).
Click here to visit HOG's
website
Marketing Unit, Slide No. 6
Partner Relationship Marketing
Partners Inside the Firm
Partners Outside the Firm
•All employees customer-focused.
•Not just marketing’s
responsibility; every functional
area can interact with customers.
•Firms are linking all departments
in the in the cause of creating
customer value, and crossfunctional teams coordinate
efforts toward customers.
•Supply chain management
•Strategic alliances
•Sometimes even competitors
work together for mutual benefit
Marketing Unit, Slide No. 7
Step 5 in the Marketing Process
Capture Value from
Customers
Marketing Unit, Slide No. 8
Capturing Value from
Customers
• Creating superior
value for customers
results in:
- Highly satisfied
customers
- Who stay loyal and
buy more
- Which, in turn, means
greater long-run
returns for the
organization.
Marketing Unit, Slide No. 9
The Rewards of Creating Customer Value
Customer
Lifetime Value
(CLV)
The value (profit) of the
entire stream of
purchases that the
customer would make
over a lifetime of
patronage.
Share of
Customer
The share a company
gets of the customer’s
purchasing in their
product categories. For
example, banks want to
increase their “share of
wallet.”
Marketing Unit, Slide No. 10
Capturing Value from
Customers
The importance of not just acquiring
customers, but of keeping and
growing them as well:
“The only value your company
will ever create is the value that
comes from customers—the ones
you have now and the ones you
will have in the future. Without
customers, you don‘t have a
business.”
—Don Peppers & Martha Rogers
Marketing Unit, Slide No. 11
Building Customer Equity
• Customer equity is
the combined
discounted
customer lifetime
values of all of the
company’s current
and potential
customers.
Marketing Unit, Slide No. 12
Pulling It All Together
An Expanded Model of the Marketing Process
Marketing Unit, Slide No. 13