Relationship Management Marketing (CH.1,2,3,4,5, & 6)

CRM Definition

(Customer relationship management) is an enterprise-wide approach to understanding and influencing customer behavior through meaningful analysis and communications to improve customer acquisition, customer retention, and customer profitability.

5 E's of Customer Relationship (Barnes)

1) Environment 2) Expectations 3) Emotions 4) Experience 5) Engagement

The Role of a trusted agent

Always prioritizes customer's interest- even if it means referring a competitor's product- because such a transaction builds trust. Improves the customer's ability to make choices that best manage his life of business. Is confident that knowledge of customer's needs and preferences will be monetized at a higher value and with greater dependability long term than a product-based model.

Both definitions are important to measure:

Attitudinal loyalty without behavioral loyalty has no financial benefit for a firm, but behavioral loyalty with attitudinal loyalty is unsustainable.

Relationship Development process ( Britton)

Awareness: Knowledge of each other. Exploration: Search and Trial. Expansion: Increase in relationship benefits and interdependence. Commitment: Indicated by inputs, consistency, and durability. Dissolution: Value of the relationship no longer worthwhile.

Trusted Agent Behaviors 1) Corporate Heresy

Becoming a trusted agent flies directly in the face of traditional belief that the customer's and enterprise's interests are diametrically opposed.

Directly supplied data:

Behavioral data: purchase and buying habits. Attitudinal data: satisfaction levels, unmet needs, lifestyle, values. Demographic data: age, income, education, household.

Learning Relationship Benefits

Customer loyalty, the customer learns more about his or her preferences, the enterprise learns more about its own strengths and weaknesses.

Identify ( Analysis)

Customers as unique addressable individuals.

Share of customer strategies

Customers by definition only source of revenue. Sells as many products as possible to one customer at a time, Differentiates customers from each other. Collaborates with customers. Finds a constant stream of new business from established customers. Makes sure each customer is profitable, even if loses money on occasional product or transaction. Uses interactive communication to determine needs and communicate individually.

Methods for differentiating customers by needs

Customers may find different uses for the same product: Legos used in make-believe role. Legos used as step-by-step building project. Legos used to create a child's own configuration (not on the box) Defining customers needs, rather than product benefits or attributes, allows company to develop and offer other products that also meet this need.

Identification Tasks

Define, Collect, Link, Integrate, Recognize, Store, Update, Analyze, Make Available, and secure.

Relationship Building Blocks 5) Fairness

Distributive. Procedural- higher effect on trust.

Customer Definition

End user, retailer, etc

The IDIC Model

Identify , Differentiate, Interact, and Customize. Customer information is an economic asset, and trust is the currency of all commerce.

Get, grow, keep strategies

If customers are key to competitive advantage, the main task of the enterprise becomes growing the value of the customer base. To grow the value of the customer base, the enterprise must get, keep, and grow customers. This kind of customer relationship management is an enterprise-wide strategy, not merely the implementation of the right technology or a quick add-on to one department.

Trusted Agent behavior 3) Commoditization

Internet technologies have made products easier than ever to find, compare, and purchase, so companies must offer something more for competitive advantage. Customers are looking to meet needs, not just purchase products.

Trust Equation common myths

Intimate customer relationships require time and proximity (Truth: can be instantaneous and via interactive technologies). Trust takes time ( Truth: not all aspects of trust require time) More customized contact is better (Truth: context and content are everything) People trust companies (Truth: most aspects of trust associated with individual persons) People like to be asked their opinion (Truth: people like to be listened to)

Community Knowledge

Is the accumulation of information about the preferences of a community of customers, allowing an enterprise to anticipate what a customer will need. Fueled by collaborative filtering software, a matching engine that can serve up products and services based on what other customers with similar preferences have preferred. Most beneficial for companies that have: Routine, cost-effective, interactive communications with customers. Customers highly differentiated by needs.

Customer Lifetime Value (CLV)

LTV: The net present value of the expected future stream of financial contributions from the customer. LTV is calculated according to the customer's trajectory: positive contributions (product and service purchases, as well as non-monetary referrals) minus expenses (cost of maintaining a relationship) In practice, no company can calculate LTV precisely.

Attitudinal Loyalty

Loyalty is in the customer's state of mind.

Customer Value categories

Most valuable customers: Retain. Most Growable customers: Grow. Low-Maintenance Customers: Streamline/ automate servies. Super-Growth Customers: Retain and mine for more. Below-Zero customer: make them profitable, churn them out

Best Practices for Loyalty Programs

Never waste an opportunity to gain insight about a customer. An effective program offers modularity, enabling participants to mix and match aspects according to preferences. Consumers value openness- they want a program that works with other programs. A loyalty program should be managed around customers, not products. Above all else: simplicity.

Relationship Building Blocks: 3) Satisfaction

Positive relationships between customer satisfaction and loyalty. More complex relationship between customer satisfaction and duration of relationship. Customer weigh prior satisfying experiences more heavily than new experiences-thus early mishaps have greater weight than later mishaps. Customers weigh negative experiences more heavily than positive ones -thus companies should emphasize preventing negative encounters.

Market Share strategies

Products and brands as source of company value, sells one product at a time to as many customers as possible. Differentiates products from competitors. Sells to customers. Finds a constant stream of new customers. Makes sure each product is profitable, even at expense of customer confidence. Uses mass media to build brand and announce products.

Behavioral Loyalty

Relies on customer's actual conduct.

Characteristics of Customer Needs

Situational, dynamic, different intensities, often correlate with customer value, most fundamental are psychological, some shared, some unique, No single best way to differentiate by needs- Whatever way most effectively changes customer behavior to increase value for company. Even in B2B, customers are still individuals- not just a homogenous company, but purchasing agents, end users, etc., with specific needs)

Customize (Action)

Some aspect of the company's behavior offerings or communications.

Customer Data Revolution

Stan Rapp: the computer's "three awesome powers": 1) The power to record 2) The power to find 3) The power to compare.

Relationship building blocks 6) Symmetry

Symmetric relationships are more stable than asymmetric ones. Trust and commitment can develop in asymmetric relationships if vulnerable party is treated fairly and with respect.

"Customer needs" definition

The "why" behind the behavior- what a customer wants or prefers from an enterprise.

Trusted Agent Behaviors 2) Transparency:

The conditions that make it competitively important for a company to become a trusted agent: Transparency: Interactive technologies make it virtually impossible for companies or individuals to hide disingenuousness.

Industrial age to the information age

The customer-enterprise relationship has changed. Industrial age businesses structured around: Competitive advantage from product innovation, assembly-line technology: mass production and mass distribution, and mass media branding.

Unrealized potential Value

The difference between a customer's potential value and a customers actual value.

Actual Value

The net present value of the future financial contributions attributable to a customer, behaving as we expect her to behave- knowing what we know now, and with no different actions on our part.

Potential Value

The net present value of the future financial contributions that could be attributed to a customer, if through conscious action we succeed in changing the customers behavior.

Operational CRM

The software installations and day-to-day procedural changes needed in a firm to build customer value.

Analytical CRM

The strategic planning needed to build customer value, as well as, the cultural, measurement, and organizational changes required to implement that strategy successfully.

Reasons for differentiating customers

To treat each customer differently is the essence of managing customer relationships. Different customers have different needs. Different customers represent different values to the enterprise. Customer value is future oriented. Actual value, potential value. Customer differentiation helps an enterprise increase customers' actual value and realize customers' potential value.

Trust Equation ( Green)

Trust= C+R+I)/S Rational: C=credibility(words) R=Reliability (action) Non-rational: I= intimacy (safety) S= self-orientation(focus)

Relationship Building Blocks (Britton) 1) Trust:

Two primary relationship building blocks: 1) Trust: Benefits of trust: cooperation, commitment, relationship duration, and quality. Main contributors to trust: shared values, interdependence, quality, communication, and non-opportunistic behavior.

Relationship Building Blocks: 2) Commitment

Types of commitment: Calculative (negatively correlated to trust) and affective ( positively correlated to trust) Main contributor to commitment: trust.

Relationship Building Blocks 4) Uncertainty and dependence

Uncertainty increases dependence. Relationships based on uncertainty and/ or dependence tend to be less stable.

Trusted Agent

an enterprise the customer trusts to act in his own interest- even if it conflicts with the enterprise's self-concept (in the short-term)

Information (Interactive) Age

businesses structured around: customer information as competitive advantage, interactive technologies, and two-way brands or branded relationship.

Differentiate ( Analysis)

by value, behavior and needs.

Technology Revolution and the customer revolution

increased enterprises' ability to connect with customers one-to-one. Increased customers' expectations to be treated as an individual.

Interact (Action)

more cost efficiently and effectively.

RFM analysis:

most common proxy variable R: recency F: frequency M: monetary value.

Types of Customer Data 1) Customer Identity tag

name, e-mail address, user name, etc.

CRM Key impact on business functions

technological advancements in interactivity, such as the internet, mobile technologies, and social media, have driven the growth capacity of CRM, but such technology is a means of managing customer relationships, not the end in itself.

Types of Customer Data 2) Internally generated Data

transactions, billing and account status, customer service interactions, etc.