The 12 Principles for Building Profitable Customer Relationships | Brad Cleveland
It should go without saying that you can't build profitable customer relationships when you don't know who your profitable customers are. Customer relationships are extremely important in any business, but how exactly do we maintain them? Here are seven effective principles to. Marketing: Managing Profitable Customer Relationships Chapter 1; 2. Learning Goals Define marketing and the marketing process.
While addressing the needs of every customer is important, it should not appear that you are trying to please everyone. Imagine if KFC started supporting veganism while their brand stands in direct contrast to the concept. If customers feel that you have no fixed ethics, they would start losing trust in you.
Profitable Customer Relationship | Geehan Group
Thus, the idea and ethos of your company must be the same, no matter what segment or demographic you are targeting. Share the CRM values with your employees Quite often, customers get disgruntled with a company because the ground employees do not echo the same values as that of the brand itself.
Simply stating that you value your customers and extending it to your customer support and sales team is not enough. You need to ensure that every single employee of your company shares the same vision. Only when the smallest unit of the company learns to value the customers with the same zeal will CRM be truly effective. For that purpose, you must share the insights you draw from the previous principle with your colleagues and subordinates.
Using good CRM marketing tools can also contribute to that effect. Everyone in the organization should be aware of the best ways about having effective customer relationships. Focus on sales, not discount One common trap most businesses fall into is overusing the concept of discounts. They believe that reduced costs would be the best way to make customers happy.
However, this is not really true. While discounts do have their benefits, they cannot replace the importance of customer relationships in any way. For instance, Apple clearly remains a favorite with customers despite its high prices because they have excellent customer relations. Better relations with customers mean more sales, which would naturally increase your revenue.
Balance between customer and your interests Sometimes, too much pleasing of customers may result in losses for you. Such cases result in a conflict of interest and make you wonder if incurring losses for the sake of keeping customers happy is worth it. However, it is not so difficult to strike a balance between the two.
You must value your customers while increasing value for them. In turn, they would help you in improving your sales, and therefore, your revenue. But remember, building customer relationships is not an easy task. It is a long-term strategy with long-lasting gains. Conclusion Customer relationships form the backbone of any business. It would be a big mistake to overlook the interest of your customers for any other factor. By managing profitable customer relationships, you can be sure of building a loyal base of customers who can take your business to greater heights.
Human needs are states of felt deprivation. They include basic physical needs, social needs, and individual needs. Wants are the form human needs take as they are shaped by culture and individual personality. Managing Profitable Customer Relationships d. When backed by buying power, wants become demands. Given their wants and resources, people demand products with benefits that add up to the most value and satisfaction.
They conduct consumer research and analyze mountains of customer data. Use Discussing the Concepts 2 here. Marketing Offerings—Products, Services, and Experiences f. Marketing offerings are not limited to physical products. They also include services and other entities, such as persons, places, organizations, information, and ideas. By orchestrating several services and products, companies create brand experiences for consumers.
Customers form expectations about the value and satisfaction that various marketing offers will deliver and buy accordingly. Marketers must be careful to set the right level of expectations. If they set expectations too low, they may satisfy those who buy but fail to attract enough buyers. If they raise expectations too high, buyers will be disappointed. Customer value and satisfaction are key building blocks for developing and managing customer relationships.
Exchanges and Relationships m. Marketing occurs when people decide to satisfy needs and wants through exchange relationships. Exchange is the act of obtaining a desired object from someone by offering something in return.
Marketing consists of actions taken to build and maintain desirable exchange relationships with target audiences. The goal is to retain customers and grow their business. Use Key Term Exchange here. A market is the set of actual and potential buyers of a product.
Marketing means managing markets to bring about profitable customer relationships. Defining Marketing and the Marketing Process r.
Buyers also carry on marketing. Consumers do marketing when they search for the goods they need at prices they can afford. Company purchasing agents do marketing when they track down sellers and bargain for good terms. The company and the competitors send their respective offers and messages to consumers.
All of the actors in the system are affected by major environmental forces. Each party in the system adds value for the next level. Use Chapter Objective 2 here. Use Key Term Market here. Designing a Customer-Driven Marketing Strategy a.
We define marketing management as the art and science of choosing target markets and building profitable customer relationships with them. Selecting Customers to Serve c. The company must first decide whom it will serve. It does this by dividing the market into segments of customers market segmentation and selecting which segments it will go after target marketing.
Some companies may seek fewer customers and reduced demand.
In cases of excess demand, companies may practice demarketing to reduce the number of customers or to shift their demand temporarily or permanently. Marketing management is customer management and demand management. Use Key Terms Marketing Management here. Choosing a Value Proposition f. The company must also decide how it will serve targeted customers— how it will differentiate and position itself in the marketplace.
Value propositions differentiate one brand from another. Use Applying the Concepts 1 here. Marketing Management Orientations i. There are five alternative concepts under which organizations design and carry out their marketing strategies. The production concept holds that consumers will favor products that are available and highly affordable. Management focuses on improving 4 Chapter 1: Managing Profitable Customer Relationships production and distribution efficiency.
The production concept can lead to marketing myopia. The product concept holds that consumers will favor products that offer the most in quality, performance, and innovative features. Marketing strategy focuses on making continuous product improvements.
The product concept can also lead to marketing myopia. This concept is typically practiced with unsought goods—those that buyers normally do not think of buying. Most firms practice the selling concept when they face overcapacity. The marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitors do.
This concept is customer centered. Use Chapter Objective 3 here. Use Discussing the Concepts 3 here. Preparing a Marketing Plan and Program a. Next, the marketer constructs a marketing program that will actually deliver the intended value to target customers. The major marketing mix tools are classified into four broad groups, called the 4 Ps of marketing: Building Customer Relationships a. The fourth and most important step in the marketing process is building profitable customer relationships.
Customer Relationship Management b. It is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. Defining Marketing and the Marketing Process d. Use Discussing the Concepts 4 here. Customers often do not judge product values and costs accurately or objectively. They act on perceived value. Use Key Term Customer Satisfaction here.
Highly satisfied customers make repeat purchases and tell others about their good experiences with the product. The key is to match customer expectations with company performance. The purpose of marketing is to generate customer value profitably. At one extreme, a company with many low-margin customers may seek to develop basic relationships with them. At the other extreme, in markets with few customers and high margins, sellers want to create full partnerships with key customers.
Most leading companies are developing customer loyalty and retention programs. They offer frequency-marketing programs that reward customers who buy frequently or in large amounts. The Changing Nature of Customer Relationships k. Companies are targeting fewer, more profitable customers. They are beginning to assess carefully the value of customers to the firm. Called selective relationship management, many companies now use customer profitability analysis to weed out losing customers and target winning ones for pampering.
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On average, it costs five to 10 times as much to attract a new customer as it does to keep a current customer satisfied. Companies are also connecting more directly. Direct marketing is booming.
Partner Relationship Management o. Companies must work directly with a variety of marketing partners; they must be good at partner relationship management. Every functional area inside a company can interact with customers, especially electronically.
Firms are linking all their departments in the cause of creating customer value. Most companies today are networked, relying heavily on partnerships with other firms. Managing Profitable Customer Relationships r. The supply chain describes a long channel, stretching from raw materials to components to final products that are carried to final buyers. Through supply chain management, many companies today are strengthening their connections with partners all along the supply chain.
Use Real Marketing here. Capturing Value from Customers a. The final step in the marketing process involves capturing value from the customer, in the form of current and future sales, market share, and profits.
Creating Customer Loyalty and Retention b. The aim of customer relationship management is to create not just customer satisfaction, but customer delight. Companies are realizing that losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage. This is called customer lifetime value.
Customer delight creates an emotional relationship with a product or service, not just a rational preference. Use Applying the Concepts 3 here. Growing Share of Customer e.
To increase the share of customer, firms can leverage customer relationships by offering greater variety to current customers. Or they can train employees to cross-sell and up-sell in order to market more products and services to existing customers.
Use Key Term Share of Customer here. Building Customer Equity g. The company can classify customers according to their potential profitability and manage its relationships with them accordingly. Each group requires a different relationship management strategy.
Strangers show low profitability and little projected loyalty. Butterflies are profitable but not loyal. True friends are both profitable and loyal.
Defining Marketing and the Marketing Process iv. Barnacles are highly loyal but not very profitable. Use Chapter Objective 4 here. Use Real Market here. Use Discussing the Concepts 5 here. Use Applying the Concepts 2 here. The New Marketing Landscape a. Dramatic changes are occurring in the marketplace; there are five major developments. The New Digital Age b. The technology boom has created exciting new ways to learn about and track customers, and to create products and services tailored to individual customer needs.
Technology is also helping companies to distribute products more efficiently and effectively. Perhaps the most dramatic new technology is the Internet. Internet penetration in the United States has reached 63 percent, with more than million people accessing the Web in any given month. The number of Internet users worldwide reached million last year and is expected to approach 1.
Use Key Term Internet here. Use Discussing the Concepts 6 here. Use Focus on Technology here. Many marketers are now connected globally with their customers and marketing partners. Almost every company, large or small, is touched in some way by global competition.
Companies are not only trying to sell more of their locally produced goods in international markets, they are also buying more supplies and components abroad.
Marketers are re-examining their relationships with social values and responsibilities and with the very earth that sustains us. Use Focus on Ethics here.
- 7 Principles For Building Profitable Customer Relationships
Marketing has become a major part of the strategies of many not-for- profit organizations. Government agencies have also shown an increased interest in marketing. The New World of Marketing Relationships o. Modern marketing companies are improving their customer knowledge and customer relationships.
Use Chapter Objective 5 here. So, What Is Marketing? Pulling It All Together a. With its marketing strategy decided, the company now constructs a marketing program—consisting of the four marketing mix elements, the 4 Ps.
Perhaps the most important step in the marketing process involves building value-laden, profitable relationships with target customers.
You can define marketing and its functions in many ways. In your own words, explain marketing to someone who has not yet read this chapter.
Students should talk about customers and managing profitable customer relationships. They might include the fact that a marketer must attract new customers and keep and grow current customers by delivering satisfaction. Some students will go right to the definition of marketing as a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging value with others.
Still other students will run through the marketing process. If they take this approach, they should highlight the fact that the process includes understanding customer needs, designing a marketing strategy, constructing a marketing program, building profitable relationships, and then capturing value. What is the difference between a need, a want, and a demand?
Describe the need versus the want for the following products: Gatorade, Nike, and iPod. Defining Marketing and the Marketing Process The need is a state of felt deprivation, which is physical, social, or individual. A want is the form the needs take as they are shaped by culture.
For Gatorade, there is a physical need for hydration, and the consumer wants a Gatorade. For Nike, the need is a physical need for clothing or the psychological need for status. For an iPod, the need is more individual, one for self-expression.
What are the five different marketing management orientations? Which orientation do you believe your college follows when marketing its undergraduate program? Students will list the production, product, selling, marketing, and societal marketing concepts. Many students at a large state school might feel a bit of the production concept, since the school provides affordable education for a large number of students.
If a school tends to market very innovative programs and markets itself on its high standings and selectivity, students might see their college as following the product concept. The selling concept might come through if students feel their school has a strong recruitment program that reaches many high school students. Students might mention the marketing concept if they feel the school is customer driven and bases its programs and offerings on student feedback.
A few students might mention the societal marketing concept if their schools offer programs or research that really helps society. When consumers order a t-shirt from an online retailer like landsend. Students should talk about benefits of buying online. They might mention the ease of ordering, the ease of payment, and the large assortment. The first cost they mention might be payment, which includes shipping.
Students should also realize that time is a cost and they are minimizing this cost by purchasing online. Some might even see the loss of privacy as a cost. What is customer equity?
How can a company increase its customer equity? Students may be confused by this statement. You might use the case of the local grocery store. But they spend this amount every week. But what if they graduate and stay in 10 Chapter 1: Managing Profitable Customer Relationships the area and continue to shop at the same store?
You can add this for as many years as you like— it helps them get the point. The grocery should have programs in place to increase loyalty—each customer is worth a lot! Companies can increase their equity by increasing loyalty, and they should work constantly to attract customers with high profitability and expected long-term potential.
How has the Internet changed consumers? We are all connected now and information travels faster. Marketers also can send information to the marketplace faster. In addition, marketers can now track their customers and their marketing efforts to a deeper level.
On the downside for marketers, much product information is no longer controlled by the marketer. Blogs, for example, are increasing and can influence brands in strongly positive or negative ways.
Applying the Concepts 1. When companies have close competitors, they try to choose value propositions that will differentiate them from others in the market. Choose three fast-food restaurants and describe their value propositions. Are they strongly differentiating themselves?
Have students focus on the set of benefits that the restaurants promise to deliver. Encourage them to talk about different target markets that a restaurant might have and how the value propositions might differ. Some restaurants focus more on price and offer large servings at lower prices. However, it has recently changed to a more healthy value proposition for several of its target markets.
Some might offer the benefit of great food, ethnic specialty, and fast delivery. For instance, Domino Pizza had the value proposition of speedy delivery for years. It might be interesting to talk to students about the many accidents the drivers encountered and whether this was a program that was good for society in general. What are the four customer relationship groups?
Managing Profitable Customer Relationships - Assignment Point
Is there a way marketers can move a Stranger to True Friend? Ask students to think back about value propositions and customer value. Perhaps a company could increase the benefits or reduce the costs. For instance, many marketers of designer products are attracting new customers with their lower cost luxury goods—coach and BMW have both done this in recent years. Defining Marketing and the Marketing Process brought in customers with its lower priced iPod Shuffle. Some marketers are adding benefits to improve the fit between the product and the consumer—many hotels have started offering Internet access in the room for business travelers.
One chain even has brown bag breakfasts for business people on the go. Colleges and universities often offer new programs to provide a benefit for a new group of students. What is the Customer Lifetime Value of this user to the cell phone company?
Although this CLV calculation is relatively simple when computed at the portfolio level, it can become very complicated when calculated on an individual customer basis.