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Managing Relationships

This document discusses managing customer relationships and key relationship management processes. It addresses conditions that foster strong customer relationships, different types of customer relationships, recognizing and addressing relationships at risk, measuring return on relationships, calculating customer acquisition cost, and optimizing the lifetime value to customer acquisition cost ratio.

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DEEPALI SINGH
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52 views18 pages

Managing Relationships

This document discusses managing customer relationships and key relationship management processes. It addresses conditions that foster strong customer relationships, different types of customer relationships, recognizing and addressing relationships at risk, measuring return on relationships, calculating customer acquisition cost, and optimizing the lifetime value to customer acquisition cost ratio.

Uploaded by

DEEPALI SINGH
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Managing Relationships

Conditions Conducive to Customer


Relationship Growth
• Frequency of contact
• Continuity of contact
• Perception of high risk
• Customer lacks expertise
• Level of involvement
• Intimacy
• Switching costs
Customer considerations
• Do they want a relationship?
• Timescales
• Types of loyalty: Premium, latent, No loyalty
and inertia
• Marketplace dynamics( Relationship seekers
and exploiters)
Loyalty stages

Committed

Likes
Considers it as a
friend
Satisfied
Switching cost

Habitual
No reason to change

Switchers
No loyalty
Nature of Relationship
• Close relationship: high volume of business and
high degree of trust and belief between the
two parties.
• Recurrent relationship: low volume of business
but high degree of trust and belief
• Dominant partner relationship: high volume of
business but low degree of trust and belief
• Discrete relationships: low volume of business
and low degree of trust and belief
Key account management
• Individually managing a select number of the
most profitable customers to protect and
maintain their custom.
• Strategic
• Selective
• Long term
• Mutually beneficial
Key Processes
• Mckinsey Seven S model
• Structure
• Strategy
• Systems
• Skills
• Staff
• Shared values
• style
Recognizing and Managing Customer
Relationships at Risk
• When are customer relationships most
vulnerable?

- When employees are promoted or transferred


or they resign or retire.
- When the customer relocates.
- At the time of store closure.
- When we don’t treat them fairly.
Recognizing and Managing Customer
Relationships at Risk

• Threats to strong relationships.


• Dealing with relationships at risk.
- Recognize weakening relationships.
- Determine causes.
- Create better conditions.
Measuring the return on relationship

Return on relationship: long term financial


worth of relationship.
ROI, ROCE, ROR
• ABC customers
• Pareto rule
Customer acquisition cost
Customer acquisition cost varies across
industries due to several different factors —
including, but not limited, to:
• Length of sales cycle
• Purchase value
• Purchase frequency
• Customer lifespan
• Company maturity
Components of cost
• Ad spend
• Sales and marketing employee salaries
• Content and creative services
• Technology cost related to Sales and
marketing
Example of CAC
• If a manufacturing company that sells building
materials spends $10,000 on marketing and
$5,000 on sales but acquires 200 new
customers, then the company’s CAC is:
• A real estate company that sells duplexes
spends $25,000 on marketing and $10,000 on
sales. After running their ads, the company
acquired 70 new customers. CAC will be:
Decrease Customer Acquisition Cost
• Invest in conversion rate optimization (CRO)
• Add value
• Collect customer feedback
• Implement a customer referral program
• Streamline your sales cycle
Map Customer Journey
• How quickly are customers reaching the “aha”
moment
• Where are customers experiencing friction
and dropping off
• Which features are the most sticky and lead to
higher retention
Life Time Value
LTV = Average value of sale * Number of
transactions * Retention time period
You predict Customer X will purchase your
product worth $10,000 twice a year over a 5-
year relationship with your business.
LTV to CAC Ratio
A healthy ratio of LTV to CAC is around 3:1 or
3.0x—your company retains a 3x ROI for each
dollar it spends to acquire a customer. Anything
below 3:1 indicates your company spends too
much on acquiring customers, or you’re not
retaining customers over time.

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