PRIM/ABM

HANDOUT # 4

RELATIONSHIP DEVELOPMENT STRATEGIES

Customer service – is the act of taking care of the customer’s needs by providing and delivering
professional, helpful, high quality service and assistance before, during and after the customer’s
requirements are met

Relationship Marketing

 is a philosophy of doing business, a strategic orientation, that focuses on keeping current

customers and improving relationships with them
 does not necessarily emphasize acquiring new customers
 is usually cheaper (for the firm)
 keeping a current customer costs less than attracting a new one
 thus, the focus is less on attraction, and more on retention and enhancement of customer
relationships

The “Bucket Theory of Marketing” Customer Goals of Relationship Marketing

Prepared by: Francheska Gizelle S.Pangilinan

 Relationship development strategies

1. Core Service Provision

 For all these strategies, the starting point is the strong base of service quality, and
customer satisfaction, on which strategies can be built.
 The Company need not be the very best, but it must be competitive always and
sometimes even better.
 Thus the company should start the relationship development process with a very good
core service delivery which at least meets the customers’ expectations.
2. Switching Barriers
 Customers change service firms sometimes, but most of the times they face some
constraints, which are known as switching barriers.
 In fact this helps the firms to facilitate customer retention, and the firms must try to
use it positively, as given below
Customer Inertia:

 This is just the laziness in breaking relationship, because it needs some

amount of effort to switch. This is one of the reasons why some
dissatisfied customer stay with the firm. Several salient features are
given below
 Breaking a relationship requires the customers to restructure or
reorganize their life styles. That is to develop new habits, new
environment, new fashion, and so on. In other words people don’t
want to change their behavior.
 To retain their customers, firms may consider increasing the perceived
effort needed on the part of customers to switch firms. If a customer
believes that a great deal of effort is required to change companies, the
customers are more likely to stay as such.
 On the other hand, if a company tries to attract a competitor’s
customer, it might make the process of switching easier for the
customer to switch as far as practicable. Ex., credit card companies
offer lower interest rate on the existing loans of a switching customer

Switching Costs:

 This is the financial or the cost aspect of switching, or the costs

involved in switching, which may be monetary or nonmonetary. This
includes, time cost, effort cost, searching cost, setup cost, learning
cost, contract cost, etc. These act as a barrier to the customer. Setup
costs are those required for the initial expenses for a new service and
its provider. (Dish TV)

Prepared by: Francheska Gizelle S.Pangilinan

  Search costs may be required to obtain suitable information about
alternate services. Learning costs are the costs associated with
acquiring skills to use the particular service.
 Contractual cost is the penalty charged by the old provider when
leaving. (Mobile Phones)
 In order to retain the customers, the firms need to increase the
perception of switching costs to the extent that customer is in a
monetary loss to leave.
 And conversely, the firms must try to lower these costs for the
competitor’s customer so as to attract him to come to the firm, and
give it a try.

3. Relationship Bonds

 Switching barriers tend to serve as constraints that keep customers from

switching because they “have to” (being forced).
 There can be strategies for the firms which encourage the customers to
remain in the relationship because they “want to” (acting willingly).
 Such a strategy was developed by Berry, and Parasuraman, which
suggests that relationship marketing can occur at different levels.
 Each of these levels of strategy results in tying the customer a little
closer to the firm. Also, the potential for sustained competitive
advantage increases in each step. They are divided into four levels one
each for Financial, Social, and Customization and Structural Bonds, as
given below :

CUSTOMER RELATIONSHIP-BUILDING STRATEGIES

Pick Up the Phone

To build a strong relationship with your client, you need to pick up the phone and call at least
once a week to discuss the customer's satisfaction with your company and any improvements the
client would like to see. Set up personal meetings to present new product information, sales
presentations or close deals.

Stay Proactive

To retain your client's business, you need to constantly be offering innovative suggestions on
how he can get a better return on his investment in your company's product or service.

Become a Resource

Prepared by: Francheska Gizelle S.Pangilinan

 Your client relies on you for the products and services that you supply regularly, and she may
start to come to you for items that seem associated with your product line but you do not sell. For
example, if you sell a company its computer equipment, then they may start asking you about
office equipment such as copiers.

Provide Extras

Reach out to your clients with free promotional items from time to time such as mouse pads,
sticky pads or any office supplies that the client can use every day

HOW TO BUILD EFFECTIVE CUSTOMER RELATIONSHIPS

1. Interact directly with customers.

This might mean putting on special events, calling a customer to let her know that the
style she's looking for is now in stock or simply spending time chatting with customers
about topics that aren't necessarily related to business.
2. Vary the type of communications you send your customers.
All too often, the only mail a customer receives from a company is promotional. Send
emails and direct mail that provide notice of special events, helpful tips or that offer a
reward or freebie. This approach can help you get back on customers' radar when they've
been feeling overwhelmed by too aggressive an approach.
3. Strive to genuinely improve your customers' lives.
First Interstate Bank provides a good model for developing customer relationships. FIB
employees will tell customers where they can get the best loan, even if it is at a
competing bank, according to a 2001 report compiled by the U.S. Department of Health
and Human Services. Progressive Insurance also follows this model. As a result, these
companies enjoy plenty of return business because they have cultivated an atmosphere of
transparency and trust.
4. Hire people who genuinely care about your company and customers.
Frontline employees, especially, will help a customer form an opinion about the
company---including whether she wants to continue doing business with it. Cultivate an
environment in which customers experience consistent excellent customer service to
facilitate ongoing relationships.
5. Solicit customer input when making changes to your product or services.

Prepared by: Francheska Gizelle S.Pangilinan

 This approach helps customers feel invested in the company and that their opinion is
valued.
6. Use social media to stay on customers' radar.
Offer specials available only to online followers or friends, interesting tidbits about your
business and events in which your business is participating. With their permission, take
photos of customers and post them on your social media page. Customers will check in to
see who's being featured, and your business will generate buzz.

Tips
If you sell big-ticket items or have a few accounts that you manage, go to social events
where you might be likely to see your existing customers or meet new ones.
Never hesitate to send a handwritten note of appreciation to a customer. It may be the
detail that sets your business apart from others.
Warning
In your eagerness to develop customer relationships, take care not to overwhelm
customers. Ensure that all of your communications have value to the customer.

“Strong customer relationships drive sales, sustainability, and growth.” –

Tom Cates, chairman and founder of The Brookeside Group

Prepared by: Francheska Gizelle S.Pangilinan