Professional Documents
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Chapter 2
Chapter 2
Exploratory,
Basic
Cooperative
Interdependent
Integrated
Dwyer, Schurr & Oh’s model of relationship change
1. Awareness
each party comes to the attention of the other as a possible
exchange partner.
2. Exploration
investigation and testing during which the parties explore
each other’s capabilities and performance
3. Expansion
there is increasing interdependence
4. Commitment
increased adaptation on both sides and mutually
understood roles and goals
5. Dissolution
Major relationship attributes
Trust
Commitment
Types of trust
Core attributes
● Trust
● Commitment
Additional attributes
● Relationship satisfaction
● Mutual goals
● Cooperative norms
Companies want relationships with customers
Why?
● because companies that manage their customer base in
order to identify, satisfy and retain profitable customers
enjoy better business results
● reduced customer churn creates
• A larger customer base
• Longer average customer tenure
• Reduced marketing costs to replace defected customers
• Better understanding of customer requirements
• More cross-selling opportunities
Impact of churn on customer numbers
Year
Service 0 1 2 3 4 5
Figure 2.3
Customers are potential income streams
And finally
Discount rate
The effect of discounting on customer value
$ $ $
Year Profit per net present Customer No. of Total annual
customer value at 15% retention rate(%) customers profit
discount
Figure 2.5
Core strategies to improve cohort profitability
Fear of dependency
Lack of perceived value in the relationship
Lack of confidence in the supplier.
Customer lacks relational orientation
Rapid technological changes
The satisfaction-profit chain
Figure 2.6
Customer satisfaction defined
repeat purchase
high low
true latent
strong
loyalty loyalty
attitude
spurious no
weak loyalty loyalty
Share of market vs. share of customer
high
CRM
share of
customer
spend Traditional
marketing
low
few many
Number of customers
Figure 2.8
Net Promoter Score (NPS®)
International data
National data
Industry data
Corporate data
Individual customer data
The American Customer Satisfaction Index (ACSI) model
Figure 2.9
Industry studies
Telecommunications
Banking
Airlines
Car distribution
Multi-industry
Returns from investments in customer satisfaction
High
repeat purchase rates
Low
1 2 3 4 5 6 7
not at all
satisfied
customer satisfaction level very satisfied
Figure 2.10
Relationship management theory: 5 schools of thought
Interaction
● Inter-firm exchanges occur in a broader context of ongoing
interactions.
Dialogue
● Suppliers and customers are in dialogue with each other.
Value
● Value in relationships is mutual. To generate value from
customers, companies need to generate customer-
perceived value, that is, create and deliver something that is
perceived to be of value to customers.
North American school
Figure 2.11
Asian (Guanxi) School
Customer Number of
Year Net present value at retention rate customer Total annual
Profit per customer
18% profit
0 ? 600 -900,000,000
1 1,200,000 ? 60% ? ?
2 1,300,000 ? 65% ? ?
3 1,500,000 ? 75% ? ?
4 1,800,000 ? 80% ? ?
5 1,900,000 ? 85% ? ?
6 2,100,000 ? 90% ? ?
After how many years, how much money can the company make from this
group of customers?