Building Customer Relationships

Chapter 7
Basharatullah Malik
Relationship Marketing

 Relationship Marketing is a Paradigm Shift

 From an Acquisition/Transaction Focus to
Retention/Relationship Focus
 “Relationship marketing
 is a philosophy of doing business,
 a strategic orientation that focus on keeping and
improving relationships with current customers
 rather than on acquiring new customers.”
Relationship Marketing
 ----Relationship Marketing----

 Many business Customers and Consumers

prefer working with same vendor than to
switch
 Old customer cheaper to retain
 Finding new much expensive
 Marketers work for effective Strategies to
retain Customers
Relationship Marketing

 Bucket Theory of Marketing (James L. Schor)

 Fill the bucket with product, promotion, placement and
right price
 Any short fall in strategies means a hole in the bucket
 Bigger the mistake bigger the hole
 Perfect strategies means no hole- customers are
retained
 If the hole is bigger than the input speed the
business tarnishes
Relationship Marketing
 Plug the Holes through change in:
 The Mindset
 Shift from Transaction Strategy to Relationship
Strategy
 Organization Culture
 Employee Reward system
 Incentive for retention of customers
 Measure repeat orders
 Research customer satisfaction to loyalty levels
 Absence of Incentive for retention of customers does not support
Relationship management in spite of seeing logic in Retaining
Customers
The Goals of Relationship Marketing

Primary Goal
 To build and Maintain a base of committed
customers who are profitable for the
organization
Enhancing
Retaining
Satisfying
Acquiring
Benefits for Customers and Firms

 Benefits for Customers

 Confidence Benefits Trust Comfort of
 Human Nature makes customers
& Knowing what
To Expect
to prefer not to switch vendors Confidence
 Specially when huge investment
is involved
 Switching costly affair
 Associated Psychological cost
 Time related cost
 Simplified Decision Making Reduced
 Free time for other Concerns Anxiety
Benefits for Customers and Firms

 Social Benefits
 Familiarity and Social Relationship Developed, over
time with Service Providers
 Less likely to switch-even for low price or quality
 Customers do not change their Hair stylist as has
good jokes to share (Research)
 Or “ we enjoy doing business with him”
Benefits for Customers and Firms

 ---Social Benefits---
 Service Provider becomes part of Customer Social
Support System
 Hair Stylist becomes personal Confidant
 Hugh of Nilofer with Para gliding Instructor
 Family Physician involved in patients very private
affairs like marriage of children, Managing Conflict
amongst Patient husband and wife
 True for B to B and end user alike
Benefits for Customers and Firms

 Risk---- Social Benefits---

 Close personal and professional relationship
 can lead to Loss of customers when service provider
Personal leaves the Organization
 Special Treatment benefits
 Preferential Treatment Example BOP
 Less important than other factors
Benefits for Customers and Firms

 Economic Benefits
 Higher Return for Relationship Oriented
Firms (research) through:
 Increased Revenues from individual Customers over
time
 Reduced Marketing and Administrative Costs
 Maintain margin without reducing price
Benefits for Customers and Firms

 Customer Behavior Benefits

 Free Advertising- Word of Mouth
 Customers Voluntary Performance
 Helping staff in cleaning, Reporting messy rest rooms to an
employee
 Social benefit to other customers, friendship
and encouragement
 Patients comforting fearful patient before surgery
Benefits for Customers and Firms

 Human resource Management Benefits

 1st benefit Loyal Customers may contribute to co production of
service by assisting in service delivery
 eg helping doctor in handling child patient to accept injection
 Bringing file of previous medication being used or the medicine
for doctors understanding
 2nd Benefit Employees also receive social benefits
for regular interaction with customers
 3rd Benefit Employees are retained when
customers are retained due to a stable base
 Employees like to work with companies
whose customers are satisfied, happy and
loyal- respectable for the employees
 Employees longer stay-improves service
quality, reduces cost of turnover, adds further
profits