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Lesson 2 - Understanding Relationships

This document discusses key concepts in customer relationship management (CRM). It explains that CRM focuses on building relationships between companies and customers over time through repeated interactions. Relationships typically pass through phases from awareness to commitment or dissolution. Building trust through benevolence, honesty and competence is important. Companies seek to improve customer retention and lifetime value by increasing revenue from existing customers over time through loyalty programs and referrals. However, relationships also require resource commitments and can reduce company control. Customers also consider factors like complexity, cost and reciprocity in deciding whether to form relationships with suppliers.

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Nora Abdulhakim S ALHAIDAR
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© © All Rights Reserved
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114 views

Lesson 2 - Understanding Relationships

This document discusses key concepts in customer relationship management (CRM). It explains that CRM focuses on building relationships between companies and customers over time through repeated interactions. Relationships typically pass through phases from awareness to commitment or dissolution. Building trust through benevolence, honesty and competence is important. Companies seek to improve customer retention and lifetime value by increasing revenue from existing customers over time through loyalty programs and referrals. However, relationships also require resource commitments and can reduce company control. Customers also consider factors like complexity, cost and reciprocity in deciding whether to form relationships with suppliers.

Uploaded by

Nora Abdulhakim S ALHAIDAR
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Customer Relationship

Management
Joe Di Donna
Understanding relationships

• CRM, the R is relationship.


• A relationship is composed of a series of
interactive episodes between two parties
over time.
Change within relationships

• Dwyer has identified five general phases


through which customer-supplier
relationships can evolve:
• Awareness
• Exploration
• Expansion
• Commitment
• Dissolution
Trust

• One party may trust the other party’s


• Benevolence (one party acts in the interest of
the relationship, not out of self-interest)
• Honesty (reliable & credible)
• Competence (expertise)
Commitment

• Commitment is shown
by an exchange
partner believing that
an ongoing relationship
with another is so
important as to warrant
maximum effort to
maintain it.
Relationship quality
When do companies want relationships
with customers?

• The fundamental reason


that companies want to
build relationships with
customers is economic.
• Improving customer
retention rates has the
effect of increasing the
size of the customer
base.
Reduced marketing costs

• Improving customer retention reduces a


company’s marketing costs.
• It has been estimated that it costs an
advertising agency at least 20 times as
much to recruit a new client than to retain
an existing client.
Better customer insight
Customer life-time value

• The lead to the core CRM idea


that a customer should be not
be viewed as an independent
transaction but as a life-time
income stream.
• Customer life-time value is the
present-day value of all net
margins earned from a
relationship with a customer.
Customer life-time value

• The causes that profit margins tend to


accelerate are:
• Revenue grow (customers buy more)
• Cost-to-serve is lower
• Loyal customers may pay more (less incentives
than new customers)
• Value-generating referrals (word-of-mouth)
Share your • Are you sensible of customer loyalty
programs?
experience of
• If yes, how they can convince you to
customer apply to it?
loyalty • Which industrial sector is better
incentives prepared on loyalty programs?
When do companies not want
relationships with customers?

• Loss of control (when you loose the give-


and-take on both side)
• Exit costs (no ROI)
• Resource commitment (people, time,
money)
• Opportunity costs (if resources are
committed to one customer, they cannot be
allocated to another).
When do customers want relationships
with suppliers?

• Product complexity
• Product strategic significance
• Service requirements
• Purchase cost
• Reciprocity
When do customers want relationships
with suppliers?
• Benefits for the customers:
• Confidence benefits
• Social benefits (affiliation)
• Special-treatment benefits
When do customers not want relationships
with suppliers?

• Fear of dependency
• Lack of perceived value in the relationship
• Lack of confidence in the supplier
• Customer lacks relational orientation (when
less relationship and more transactional)
• Rapid technological changes
Customer satisfaction, loyalty and
business performance.

• Customer satisfaction is the customer’s


fulfilment response to a customer
experience.
Two-dimensional model of customer
loyalty

(beliefs, feelings, purch. intention)

(Inertia)
NPS=Net Promoter Score

• How likely is it that you would recommend


(name) to a friend or colleague?
Researching the Satisfaction-Profit-Chain

The American Customer Satisfaction Index (ACSI) model.


Customer engagement (CE) and
customer loyalty.

• Behavioral (customer
acts favorably towards
the brand)
• Social (interacts with
the brand with other
customers in social
channels)
Customer engagement (CE) and
customer loyalty.

• The are two forms of engagement


• Cognitive (the customer knows a lot about the
brand)
• Emotional (strong liking and attachment to a
brand)
Relationship management theories

• The Asian (guanxi)


model
• Guanxi refers to
informal social bonds
and reciprocal
obligations between
various actors, i.e.
families, friendships,
and clan membership
Which is your relation with an hospitality
brand? Choose one.

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