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Chapter One

Chapter One. Managing Profitable Customer Relationships Idrees Alhassan MBA. Definition. The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. Satisfying needs profitably.

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Chapter One

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  1. Chapter One Managing Profitable Customer Relationships Idrees Alhassan MBA

  2. Definition • The process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return. • Satisfying needs profitably.

  3. The Marketing Process Capture Value from customers Create Value for Customers and Build Customer Relationships Ch. 1 Ch. 2 Ch. 2 Ch. 1 Ch. 1

  4. Understanding Marketplace & Customer Needs • Needs • A state of felt deprivation. • Physical needs, safety needs, social and individual needs for knowledge. • Wants • The form human needs take as shaped by culture and individual personality. • They are described in terms of products that will satisfy needs. • Demands • Wants backed by buying power.

  5. Understanding Marketplace & Customer Needs • Market offerings • Products • Services • Experiences • Persons • Places • Information • Ideas • Marketing Myopia • When sellers pay more attention to the specific products they offer than to benefits and experiences produced by these products. • Exchange, transaction and transfer • Relationship is repeated exchanges or transactions.

  6. Understanding Marketplace & Customer Needs • Markets • A market is the set of all actual and potential buyers. • Marketing means managing markets to bring about profitable customer relationships. • Elements of Modern Marketing System

  7. Understanding Marketplace & Customer Needs • Marketing Management Orientations • The production concept • The product concept • The selling concept (following slides) • The marketing concept (following slides) • The societal marketing concept (following slides)

  8. Understanding Marketplace & Customer Needs • Contrast between Selling and Marketing Starting Point Focus Means Ends

  9. Understanding Marketplace & Customer Needs • Societal Marketing Concept • A principle of enlightened marketing that marketing should materialize its definition and should also keep society’s (earthlings & green) long-term interests in view.

  10. Understanding Marketplace & Customer Needs • Customer Relationship Management • The first Three Steps of Marketing Process lead to CRM. • The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. • The key to building such relationships is; • Customer Value • The customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. • Customer Satisfaction • The extent to which a product’s perceived performance matches a buyer’s expectations. • They not only repeat purchases, but become “customer evangelists” who tell others about their experiences.

  11. Understanding Marketplace & Customer Needs • CRM (continued) • Customer Relationship Levels and Tools • At one extreme, a company with many low margin customers, keeps basic relationship through advertising, sales promotions etc. • At the other extreme, a company with few customers and high margins, keeps full relationship through phone calls, emails, personal visits etc. • All other following relationships types lie within the two.

  12. Understanding Marketplace & Customer Needs • CRM (continued) • Frequency Marketing Programs • Reward customers who buy frequently or in large amounts. • Club Marketing Programs • Create communities and offer special benefits. • Selective Relationship Management • Choosing the ones most profitable, and the nuisances out. • Relating Directly • Direct marketing (e.g. PlayStation website builds relationships with game players of all ages) • Usually, CRM involves a mix of financial and social benefits in some form other than exchange.

  13. Understanding Marketplace & Customer Needs Assignment Real Marketing Bike Friday: Creating Customer Evangelists (Principles of Marketing, 12th Edition, page 14-15)

  14. Understanding Marketplace & Customer Needs • PRM (Partner Relationship Management) • Partner’s inside the company • Every employee is customer focused. • As David Packard (co-founder of HP) said; • Marketing is far too important to be left only to the marketing department. • Partner’s outside the company • Suppliers • Channel partners/intermediaries(distributors, retailers etc.) • Even competitors • Supply Chain Management is the tool used by many. • Besides, Strategic Alliance is needed too.

  15. Capturing Value from Customers • The first Four steps of Marketing Process lead to the final step; • Capturing Value from Customers in Return • Creating Customer Loyalty and Retention • CRM, higher levels of Satisfaction, leads to higher levels of loyalty. • Creating customer delight helps retain customers longer. • Customer Life-Time Value - Losing one customer IS NOT losing a single sale, but rather an entire stream of purchases that the customer would make over a life time of patronage.

  16. Capturing Value from Customers • Growing Share of Customer • The portion of customer’s purchasing that a company gets in its product categories. • In order to increase Share of Customer, Amazon.com, a bookseller, offers more variety i.e. music, videos, consumer electronics, office products, lawns and gardens products, related products to the purchased item, jewelry etc. • Bakhtar can do it, by getting the same students enrolled in other programs.

  17. Capturing Value from Customers • Building Customer Equity • The total combined customer lifetime values of all of the company’s customers. • The ultimate goal of CRM is reach Higher Levels of Customer Equity of a company. • Sales and Market Share may reflect a good past performance, customer equity suggest the future.

  18. Capturing Value from Customers • Customer Equity (continued) • Different types of customers require different relationship management strategies. • Build right relationship with the right customers. • THREE Dimensions are important • Fit between company’s offering and their need • Profitability • Project Loyalty • Strangers (neither profitable nor potentially loyal) • Butterflies(profitable but not potentially loyal) • True Friends (both profitable and potentially loyal) • Barnacles(not profitable but highly loyal)

  19. Capturing Value from Customers High Profitability Potential Profitability Low Profitability Short-term Customers Long-term Customers Projected Loyalty

  20. Capturing Value from Customers Assignment Real Marketing Best Buy: Building the Right Relationships with the Right Customers (Principles of Marketing, 12th Edition, page 24-25)

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