Chapter 11: Relationship Marketing and Customer Relationship Management (CRM)

What are some qualities of a successful CRM system?

-They create partnerships with customers in ways that align with the company's mission and goals. -They reduce costs by empowering customers to find the information they need to manage their own orders. -They improve customer service by centralizing data and help sales representatives guide cus- tomers to information. -They reduce response time and thus increase customer satisfaction. -They improve customer retention and loyalty, leading to more repeat business and new business from word-of-mouth. -They provide access to vital customer information anytime or anywhere. -Their results are measurable.

What are the characteristics of relationship marketing?

-focuses on the long term rather than the short term -emphasizes retaining customers over making a sale -ranks customer service as a high priority -encourages frequent customer contact -fosters customer commitment with the firm -bases customer interactions on cooperation and trust -commits all employees to provide high-quality products

Marketers can improve buyer-seller relationships in business-to-business markets through:

1. National account selling 2. Business-to-business databases 3. electronic data interchange and web services 4. managing the supply chain 5. business-to-business alliances

What is a partnership?

Affiliation of two or more companies that help each other achieve common goals.

What are some characteristics of Level Two relationship marketing?

As buyers and sellers reach the second level of relationship marketing, their interactions develop on a social level—one that features deeper and less superficial links than the financially motivated first level. Sellers have begun to learn that social relationships with buyers can be very effective marketing tools. Customer service and communication are key factors at this stage.

What are some characteristics of Level Three relationship marketing?

At the third level of relationship marketing, relationships are transformed into structural changes that ensure buyer and seller are true business partners. As buyer and seller work more closely together, they develop a dependence on one another that continues to grow over time.

Describe the buyer-seller relationship in business-to-business marketing and the four types of business partnerships.

By developing buyer-seller relationships, companies work together for their mutual benefit. Advantages may include lower prices for supplies, faster delivery of inventory, improved quality or reliability, customized product features, or more favorable financing terms. The four types of business partnerships are buyer, seller, internal, and lateral. Regardless of the type of partnership, partners usu- ally share similar values and goals that help the alliance endure over time. Two other types of business marketing relationships are cobranding and comarketing.

What are some benefits of CRM

CRM software systems are capable of making sense of the vast amounts of customer data that technology allows firms to collect. Another key benefit of CRM systems is that they simplify complex business processes while keeping the best interests of customers at heart.

Distinguish between cobranding and comarketing.

Cobranding joins two strong brand names—perhaps owned by two different companies—to sell a product. In a comar- keting effort, two or more organizations join to sell their prod- ucts in an allied marketing campaign.

What is customer relationship management (CRM)?

Combination of strategies and tools that drives relationship programs, reorienting the entire organization to a concentrated focus on satisfying customers.

What are electronic data interchanges (EDI)?

Computer-to- computer exchanges of invoices, orders, and other business documents.

What is comarketing

Cooperative arrangement in which two or more businesses jointly market each other's products.

What is cobranding?

Cooperative arrangement in which two or more businesses team up to closely link their names on a single product.

Why are customer complaints valuable in evaluat- ing customer relationship programs?

Customer complaints give the organization information about customer priorities so managers can make changes to their systems, if necessary, and set appropriate, measurable goals for rela- tionship programs.

Explain customer relationship management (CRM) and the role of technology in building customer relationships.

Customer relationship management is the combination of strate- gies and technologies that empowers relationship programs, reori- enting the entire organization to a concentrated focus on satisfying customers. Made possible by technological advances, it leverages technology as a means to manage customer relationships and to integrate all stakeholders into a company's product design and development, manufacturing, marketing, sales, and customer ser- vice processes. CRM allows firms to manage vast amounts of data from multiple sources to improve overall customer satisfaction. The most effective companies approach CRM as a complete business strategy in which people, processes, and technology are organized around delivering superior value to customers. A recent outgrowth of CRM is virtual relationships, in which buyers and sellers rarely, if ever, meet face to face.

Define customer relationship management.

Customer relationship management is the combination of strategies and technologies that empowers relationship programs, reorienting the entire organization to a concentrated focus on satisfying customers.

What is viral marketing?

Efforts that allow satisfied customers to spread the word about products to other consumers.

What is grassroots marketing?

Efforts that connect directly with existing and potential customers through non- mainstream channels.

What is employee satisfaction?

Employee's level of satisfaction in his or her company and the extent to which that loyalty—or lack thereof—is communicated to external customers.

Internal customers are:

Employees or departments within an organization that depend on the work of another employee or department.

What is a sales forecast?

Estimate of a firm's revenue for a specified future period.

How does the exponential smoothing technique forecast sales?

Exponential smoothing weighs each year's sales data, giving greater weight to results from the most recent years.

What is frequency marketing?

Frequent- buyer or -user marketing programs that reward customers with cash, rebates, merchandise, or other premiums.

Define lifetime value of a customer.

In the lifetime value of a customer, the revenues and intangible benefits a customer brings to the seller over an average lifetime—less the amount the company must spend to acquire, market to, and service the customer—are calculated.

What are some characteristics of Level One in relationship marketing?

Interactions at the first level of relationship marketing are the most superficial and the least likely to lead to a long-term relationship. In the most prevalent examples of this first level, relationship marketing efforts rely on pricing and other financial incentives to motivate customers to enter into buying relationships with a seller.

Why is internal marketing important to a firm?

Internal marketing enables all members of the organization to understand, accept, and fulfill their respective roles in imple- menting a marketing strategy.

What is vendor managed inventory (VMI)?

Inventory management system in which the seller— in an existing agreement with a buyer—determines how much of a product is needed.

What is quick-response merchandising?

Just-in- time strategy that reduces the time a retailer must hold merchandise in inventory, resulting in substantial cost savings.

What is internal marketing?

Managerial actions that help all members of the organization understand, accept, and fulfill their respective roles in implementing a marketing strategy.

What are the benefits of effective supply chain management?

Managing the supply chain increases innovation, decreases costs, resolves conflicts, and improves communications.

How can marketers enhance customer satisfaction?

Marketers can enhance customer satisfaction by: 1. understanding customer needs 2. obtains customer feedback 3. ensuring satisfaction

Identify the ways marketers may obtain customer feed- back.

Marketers can include a toll-free phone number or website address in their advertising; monitor social media and blogs; and hire mystery shoppers to personally check on products.

Describe two steps a firm can take to rejuvenate a lost relationship.

Marketers can rejuvenate a lost relation- ship by changing the product mix, if necessary, or changing some of their processes.

Describe two ways marketers keep customers.

Marketers keep customers through frequency marketing— frequent-buyer or -user marketing programs that reward customers with rebates, merchandise, or other premiums. A second way is through affinity marketing—a marketing effort sponsored by an organization that solicits responses from individuals who share common interests and activities.

How is customer satisfaction measured?

Marketers monitor customer satisfaction through various marketing research methods.

Explain how firms can enhance customer satisfaction.

Marketers monitor customer satisfaction through various methods of marketing research. They look to understand what customers want—including what they expect—from goods or services. They also obtain customer feedback through means such as toll-free phone numbers, websites, and social media. Then they use this information to improve.

Describe how companies build buyer- seller relationships.

Marketers of consumer goods and services have discovered they must do more than simply create products and then sell them. One reason consumers form continuing relationships is their desire to reduce choices. Through relationships, they can simplify information gathering and the entire buying process as well as decrease the risk of dissatisfaction. One of the major forces driving the push from transaction-based marketing to relationship mar- keting is the realization that retaining customers is an important component of any successful business. Database marketing is a par- ticularly effective tool for building relationships because it allows sellers to sort through huge quantities of data from multiple sources on the buying habits or preferences of many customers.

What is affinity marketing?

Marketing effort sponsored by an organization that solicits responses from individuals who share common interests and activities.

What is buzz marketing?

Marketing that gathers volunteers to try products and then relies on them to talk about their experiences with their friends and colleagues.

Describe the six key elements of business-to-business marketing.

National account selling helps firms form a strong commitment with key buyers, resulting in improvements in efficiency and effec- tiveness for both parties. The use of electronic data interchanges allows firms to reduce costs and improve efficiency and com- petitiveness. Web services are software applications that allow firms with different technology platforms to communicate and exchange information over the Internet. Vendor-managed inven- tory (VMI) is a system in which sellers can automatically restock to previously requested levels. The collaborative planning, forecast- ing, and replenishment (CPFR) approach bases plans and forecasts on collaborative seller-vendor efforts. Managing the supply chain provides increased innovation, decreased costs, conflict resolu- tion, and improved communications. Strategic alliances can help both partners gain a competitive advantage in the marketplace.

What are strategic alliances?

Partnership in which two or more companies combine resources and capital to create competitive advantages in a new market.

External customers are:

People or organizations that buy or use a firm's goods or services.

Collaborative Planning, Forecasting, and Replenishment (CPFR) is:

Planning and forecasting approach based on collaboration between buyers and sellers.

Web services are:

Platform- independent information exchange systems thatuse the Internet to allow interaction between firms.

What is customer win-back?

Process of rejuvenating lost relationships with customers.

What is national account selling?

Promotional effort in which a dedicated sales team is assigned to a firm's major customers to provide sales and service.

Sales force composite is:

Qualitative sales forecasting method based on the combined sales estimates of the firm's salespeople.

What is the jury of executive opinion?

Qualitative sales forecasting method that assesses the sales expectations of various executives.

What is the Delphi technique?

Qualitative sales forecasting method that gathers and redistributes several rounds of anonymous forecasts until the participants reach a consensus.

Survey of buyer intentions is:

Qualitative sales forecasting method that samples opinions among groups of current and potential customers concerning their purchasing plans.

What is exponential smoothing?

Quantitative forecasting technique that assigns weights to historical sales data, giving the greatest weight to the most recent data.

Trend analysis is:

Quantitative sales forecasting method that estimates future sales through statistical analyses of historical sales patterns.

What is a buyer partnership?

Relationship in which a firm purchases goods and services from one or more providers.

What is an internal partnership?

Relationship involving customers within an organization.

What is a seller partnership?

Relationship involving long- term exchanges of goods or services in return for cash or other valuable consideration.

List three efforts that turn customers into advocates for products.

Relationship marketing efforts that turn customers from passive partners into advocates include grass- roots marketing, viral marketing, and buzz marketing.

What is the lifetime value of a customer?

Revenues and intangible benefits, such as referrals and customer feedback, a customer brings to the seller over an average lifetime of their relationship, less the amount the company must spend to acquire, market to, and service the customer.

What is the supply chain?

Sequence of suppliers that contribute to the creation and delivery of a product.

What is a lateral partnership?

Strategic relationship that extends to external entities but involves no direct buyer- seller interactions.

What is interactive television?

Television service package that includes a return path for viewers to interact with programs or commercials by clicking their remote controls.

What is the Delphi technique?

The Delphi technique solicits opinions from several people but also includes input from experts outside the firm.

Describe the six techniques used to evaluate relationship marketing programs.

The effectiveness of relationship marketing programs can be mea- sured using several methods. In the lifetime value of a customer, the revenues and intangible benefits a customer brings to the seller over an average lifetime—less the amount the company must spend to acquire, market to, and service the customer—are calculated. With this method, a company can determine its costs to serve each customer and develop ways to increase profitability. The payback method calculates how long it takes to breakeven on customer acquisition costs. Other measurements include review- ing customer comments on social media sites; tracking rebates, coupons, and credit card purchases; monitoring complaints and returns; and reviewing reply cards, comment forms, and surveys. These tools give the organization information about customer priorities so managers can make changes to their systems and set measurable goals.

What are the four basic elements of relationship marketing?

The four basic elements are database technol- ogy, database marketing, monitoring relationships, and customer relationship management (CRM).

Explain the four basic elements of relationship marketing, as well as the importance of internal marketing.

The four basic elements of relationship marketing are database technology, database marketing, monitoring relationships, and cus- tomer relationship management (CRM). Database technology helps identify current and potential customers. Database marketing ana- lyzes the information provided by the database. Through relation- ship marketing, a firm monitors each relationship. With CRM, the firm orients every part of the organization toward building a unique company with an unbreakable bond with customers. Internal mar- keting involves activities within the company designed to help all employees understand, accept, and fulfill their roles in the market- ing strategy.

What are the four key types of business marketing partnerships?

The four key types of business partnerships are buyer, seller, internal, and lateral.

Describe the jury of executive opinion

The jury of executive opinion combines and averages the outlooks of top executives from areas like marketing, finance, produc- tion, and purchasing.

What are some problems with CRM?

The strategy needs to be thought out in advance, and everyone in the firm must be committed to it and understand how to use it. If no one can put the system to work, it is an expensive mistake.

Identify the three levels of relationship marketing.

The three levels of relationship marketing are (1) focus on price, (2) social interaction, and (3) interdependent partnership. At the first level, marketers use financial incentives to attract customers. At the second level, marketers engage in social interaction with buyers. At the third level, buyers and sellers become true business partners.

Identify the three levels of the marketing relation- ship.

The three levels of the relationship marketing are(1) focus on price, (2) social interaction, and (3) interdepen- dent partnership.

Identify the two major types of sales forecasting.

The two categories of forecasting methods are qualitative and quantitative. Qualitative methods are more subjective because they are based on opinions rather than exact historical data. They include the jury of executive opinion, the Delphi technique, the sales force composite, and the survey of buyer intentions. Quantitative meth- ods include more factual and numerical measures, such as test mar- kets, trend analysis, and exponential smoothing.

What are the two major types of CRM systems?

The two major types of CRM systems are ones that are purchased and ones that are rented and hosted by another company.

Name four technologies businesses can use to improve buyer-seller relationships in B2B markets.

The use of electronic data interchanges (EDIs) allows firms to reduce costs and improve efficiency and competitiveness. Web services provide a way for companies to communicate even if they are not running the same or compatible software, hardware, databases, or network platforms. In a vendor-man- aged inventory (VMI) system, sellers can automatically restock to previously requested levels. The collaborative planning, forecasting, and replenishment (CPFR) approach bases plans and forecasts on collaborative seller-vendor efforts.

How many levels are there in relationship marketing?

There are three: Level One-focus on price Level Two-social interactions Level Three-interdependent partnership

Which level is the most complicated? Why?

Thethird level is the most complex because the strength of commit- ment between the parties grows.

Contrast transaction-based marketing with relationship marketing.

Transaction-based marketing refers to buyer-seller exchanges characterized by limited communications and little or no ongo- ing relationship between the parties. Relationship marketing is the development and maintenance of long-term, cost-effective relationships with individual customers, suppliers, employees, and other partners for mutual benefit.

What are the major differences between transaction-based marketing and relationship mar- keting?

Transaction-based marketing refers to buyer-seller exchanges involving limited communications and little orno ongoing relationship between the parties. Relationship marketing is the development and maintenance of long-term, cost-effective relationships with individual customers, suppli- ers, employees, and other partners for mutual benefit.

What is customer churn?

Turnover in a company's customer base.

What is database marketing?

Use of software to analyze marketing information, identifying and targeting messages toward specific groups of potential customers.

Quantitative Forecasting is:

Use of statistical forecasting techniques such as trend analysis and exponential smoothing.

Qualitative Forecasting is:

Use of subjective techniques to forecast sales, such as the jury of executive opinion, Delphi technique, sales force composite, and surveys of buyer intention.