Relationship Marketing of

services

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 Relationship Marketing
 The term relationship marketing describes the
type of marketing activity designed to create
extended relationship with customers and
other stakeholders.

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 Categories of Relationship
Marketing

 Three distinct categories of relationship

Marketing are-
 Database marketing
 Interactive marketing
 Network marketing

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Difference
Transactional Marketing
1 •It believes that competition and
self interest are the drivers of
value creation
2 Orientation to single sale
3 Discontinuous customer contacts
4 Focus on product feature
5 No measures to build on going
business
6 Reducing price based on
sensitivity analysis with
promotional measures
7 Limited emphasis on customer
service
Relationship Marketing
•It believes that mutual
cooperation is the drivers of
value creation
Orientation to customer
retention
Continuous customer contacts
Promote value and explain the
benefits
Measures to build on going
business
Data mining to develop and
enhance current relations
High emphasis on customer
service
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 Goals of Relationship Marketing

 Attracting customers
 Retaining customers
 Customer enhancement

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Leaky bucket Theory

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Customer enhancement( Ladder of
relationship )

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 Benefits of relationship marketing

A. To the customers

 Getting value
 Confidence benefit
 Social benefit
 Special treatment benefit

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Benefits of relationship marketing

B. Benefits to the Organization

 Profits derived from repeated and increased

purchase.
 Reduced operating cost
 Referrals to other customers ( mouth
publicity).
 Price premium

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Customer satisfaction and loyalty
relationship

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 Relationship value of Customer-
Lifetime value of customer

 Lifetime value truly means the ‘lifetime

profitability’.

 It is influenced by length of average lifetime,

average revenue generated, sales of additional
products and services, referral generated and
the cost associated with serving the customer.

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The lifetime customer value(LCV)

Lifetime value refers to lifetime Profitability. It

depends upon
 The length of an average lifetime
 The average revenue generated per relevant time
period (e.g. years) over the lifetime
 Sales of additional products & services during
that time
 Referrals generated by the customers over the
lifetime

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Example of LVC
LVC Option 1 Option 2

Services availed landline Landline, mobile ,

internet
Monthly bill 600 1500( 600+400+500)
cost 400 750
Profit monthly 200 750
Profit yearly 2400 9000

Average customer 40 40
life
Profit 96000 360000
Referral 1 4
Referral profit 96000 144000
Total profitability 192000
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1800000
 Steps in developing long term
relationship

 Targeting the right customers

 Analysing and managing customer base.
 Building customer loyalty

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 The Wheel of Loyalty
(Building customer loyalty)

Monitor churning
customer,
Build high level proactive,
bonds, give reactive retention
loyalty rewards, 2. 3. measure,
deepen the Create Reduce complaint
relationship loyalty churn handling, increase
bonds drive switching cost

1
Build foundation

Segmenting, selective targeting, deliver quality

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Analysing and managing customer
base.
 Customers are classified into different
profit tiers
 Platinum customers ( most profitable)
 Gold customers (profitable)
 Iron ( low profitability but desirable)
 Lead customers ( unprofitable and
undesirable)

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 Analysing and managing customer
base.
Good relationship customers
High value, spend more,
costless to maintain ,spread
Platinum positive word of mouth

Gold

Iron

Poor Segment which

Relationship lead cost in time,
money & efforts,
spread negative
word of mouth

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Targeting new customers

 Some customers are more profitable, some

may be unprofitable to serve, some may be
loyalty prone, some may be deal prone.
 Relationship marketing should make efforts
to identify those customers who are most
likely to be loyal and develop strategies
around delivering superior value to these
customers.

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 It involves study and analysis of loyalty and
defection prone customers, searching for
distinguishing patterns in why they stay or leave ,
what creates value for them and who they are.
 firm need to determine which types of customer
defectors they wish to try to save.( Price,
Product , service) and create value adding
strategies that fit their requirements

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 2.Levels of Relationship strategies
• Volume and frequency • Personal relationship
rewards • Continuous
• Bundling & cross relationship
selling
• Stable pricing
1. 2.
Financial Social

4. 3.
Customiza
Structural tion
• Anticipation
• Shared process & innovation
equipments • Mass customization
• Joint investment • Customer intimacy
• Integrated information
system
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Loyalty Bonds
Level Primary bond Degree of service Potential for
customization sustained
competitive
advantage
1 Financial Low Low

2 Social Medium Medium

3 Customization Medium to high Medium to high

4 Structural high high

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 Strategies for reducing customer
defections

 Analyze customer defection and Monitor

declining accounts.
 Address key churn drive.
 Implement effective complaint handling and
service recovery procedures.

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CRM
 Common CRM applications
 Data collection
 Data analysis
 Sales force automation
 Marketing automation
 Call center automation

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Key processes in CRM
 Strategy Development
 Value creation
 Multichannel integration
 Information Management
 Performance assesment

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