Customer

Relationships
 Relationship Marketing
• is a philosophy of doing business 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
Customer Goals of Relationship Marketing
Customer Enhancement

Strangers

Acquaintances

Friends

Partners
 A Loyal Customer is One Who...
• Shows Behavioral Commitment
– buys from only one supplier, even though other options exist
– increasingly buys more and more from a particular supplier
– provides constructive feedback/suggestions

• Exhibits Psychological Commitment

– wouldn’t consider terminating the relationship
– has a positive attitude about the provider
– says good things about the provider
Underlying Logic of Customer Retention
Benefits to the Organization

Customer Satisfaction

Customer Retention & Quality

Increased Profits Service

Employee Loyalty
 Benefits to the Organization

• loyal customers tend to spend more with the organization over time
• on average costs of relationship maintenance are lower than new
customer costs
• employee retention is more likely with a stable customer base
• lifetime value of a customer can be very high
 Benefits to the Customer

• inherent benefits in getting good value

• economic, social, and continuity benefits
– avoidance of change
– simplified decision making
– social support and friendships
– special deals
Switching Customer
Costs Inertia
Advantage Retention
 Strategies for Building Relationships

• Foundations:
– Excellent Quality/Value
– Careful Segmentation

• Bonding Strategies:
– Financial Bonds
– Social & Psychological Bonds
– Structural Bonds
– Customization Bonds
• Relationship Strategies Wheel
 The “80/20” Customer Pyramid

Most Profitable
What segment spends more with
Customers us over time, costs less to maintain,
Best
Customers spreads positive word of mouth?

Other
Customers
What segment costs us in
time, effort and money yet
does not provide the return
Least Profitable we want? What segment is
Customers difficult to do business with?
 The Expanded Customer Pyramid
(Profitability tiers/ levels)

Most Profitable
Platinum What segment spends more with
Customers us over time, costs less to maintain,
spreads positive word of mouth?
Gold

Iron

What segment costs us in

Lead time, effort and money yet
does not provide the return
Least Profitable we want? What segment is
difficult to do business with?
Customers
Levels of Retention Strategies
Stable
Volume and Pricing
Frequency Bundling and
Rewards Cross Selling

Integrated I. Financial Continuous

Information Bonds Relationships
Systems

IV.
Excellent
Quality II.
Joint Structural Personal
Investments and Social Relationships
Bonds
Value Bonds

Shared Social Bonds

Processes III. Customization Among
and Bonds Customers
Equipment

Anticipation/ Customer
Innovation Intimacy
Mass
Customization
Key Metrics for Customer Loyalty
Programs
Retention
Rate

Effort
Churn
Score

Promoter
Score
 Key Metrics for Customer Loyalty
Programs
• Customer retention rate: how long customers stay with
you. In a successful loyalty program, this number should
increase over time.

• Negative churn: If churn is the rate at which customers

leave the company, then negative churn measures
customers who do the opposite by upgrading or
purchasing additional services.
 Key Metrics for Customer Loyalty
Programs
• Net Promoter Score: a customer satisfaction metric that
measures, on a scale of 1–10, the degree to which people
would recommend your company to others.

• Customer Effort Score: Measures actual experience,

specifically how much effort a customer has to make to
solve a problem with a company.
 “The Customer Isn’t Always Right”

• Not all customers are good relationship

customers:

– wrong segment

– not profitable in the long term

– difficult customers
 Customer-Defined
Service Standards
• Factors Necessary For Appropriate Service
Standards
What does a Customer Want?
What does a Customer Want?

Service Offer

Service Concept

Consumer Benefit
What does a Customer Want?

Service • Specifications about the service

form and delivery

Offer
Service • General service
• Specific service
Concept
Consumer • The consumer’s view is basic and
central

Benefit • The consumer takes away what is

required
 The Service Offer

• Service Elements: components/ parts

• Service Forms: options/ variety

• Service Levels: grades/ segments

Service Levels: grades/ segments
 Customer-Driven Standards and Measurements

Service Encounter Customer Requirements Measurements

Service
Quality
 Example: Ordering Grocery Online

Web browsing • Easy transition between sections

Colour scheme, find
• Well structured content 100% of what I want
(on the App.)
Finalizing the • Options for payment Billing, amounts and
deals available; could
order • Assembling the cart
mention pymt. options

Tracking the • Well updated status Exact location visible;

partner’s details visible
order • Availability of contact support

Receiving the
• Intimation of order delivery Correct delivery; within 2
days of order; intact
order
• Condition of items
condition
 Example: Child’s Schooling
• Analyzing/ evaluating
At least 85 % marks/ ‘A’
Skills • Thinking
• Understanding grade; one foreign
language

Interaction • Approachability and access Email and WhatsApp

access; response within 1
with teachers
• Regular meetings
hour; 2 meetings per term

• Interesting and variety activities At least one participation

Activities • Based on ethics and SDGs
• Development of hobbies
per month; one inter-
school event per term

Child’s • Share experiences Age- appropriate

behaviour; few good
happiness
• Wants to go back to school each day
friends
 Getting to Actionable Steps
Requirements: Diagnosticity:
Abstract Low
Satisfaction Value
Relationship General
Solution Provider Concepts
Dig Reliability Empathy
Deeper Assurance Tangibles Dimensions
Responsiveness Price

Dig Delivers on Time

Deeper Returns Calls Quickly Attributes
Knows My Industry

Dig Delivers by Weds 11/4 Behaviors

Deeper Returns Calls in 2 Hrs
Knows Strengths of
and Actions
My Competitors

Concrete High
 Process for Setting
Customer-Defined Standards
1. Identify Existing or Desired Service Encounter Sequence

2. Translate Customer Expectations Into Behaviors/Actions

3. Select Behaviors/Actions for Standards

4. Set Hard or Soft Standards

Measure by Measure by
Audits or Hard 5. Develop Feedback Soft Transaction-
Operating Data Mechanisms Based Surveys

6. Establish Measures and Target Levels

7. Track Measures Against Standards

8. Update Target Levels and Measures

 Importance/Performance Matrix
HIGH 10.0

Improve Maintain
Does whatever it takes to
correct problems (9.26, 7.96)
 Delivers on promises specified in proposal/contract (9.49, 8.51)

Gets project within budget, on time (9.31, 7.84)
Completes projects
 
correctly, on time (9.29, 7.68)
   Gets price we originally agreed upon (9.21, 8.64)
Tells me cost ahead of time (9.06, 8.46)
9.0   
Provides equipment that operates as vendor said it would (9.24, 8.14)
Gets back to me when
Takes responsibility for their mistakes (9.18, 8.01)
promised (9.04, 7.63)
Delivers or installs on
promised date (9.02, 7.84)

Importance

8.0

LOW 7.0
HIGH
8.0 9.0 10.0
Performance
Towards Service Innovation

No
No subjectivity
incompleteness

No
oversimplification
Towards Service Innovation

Major innovation
New service-
Start ups existing
market

Service line Service

Style changes
extensions Improvements
What this Leads to….
Perspectives on PoP and PoD
Positioning = Perceptual Mapping
Positioning = Perceptual Mapping
TYPES OF SERVICE PROCESSES

• Activities are arranged in a

Line or logical flow
flow • Output of one stage is input
for next stage
operations • Customer may move/ remain
at one location

• Determines activities on
Job shop the basis of the job at
hand
processes • Uses the fixed and
variable concept
 Service Mapping/Blueprinting
• A tool for simultaneously depicting the service process,
the points of customer contact, and the evidence of
service from the customer’s point of view.

Process

Service Points of Contact

Mappin
g Evidence
Service Blueprint Components

CUSTOMER ACTIONS

“ONSTAGE” CONTACT EMPLOYEE ACTIONS

“BACKSTAGE” CONTACT EMPLOYEE ACTIONS

SUPPORT PROCESSES
Service Blueprint Components

CUSTOMER ACTIONS

line of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONS

line of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONS

line of internal interaction

SUPPORT PROCESSES
Service Blueprint Components
 Express Mail Delivery Service
Truck Truck
Packaging
EVIDENCE
CUSTOME PHYSICAL

Packaging
Forms Forms
Hand-held Hand-held
Computer Computer
Uniform Uniform

Customer Customer Receive

Calls Gives Package
Package
R(Back Stage) (On Stage)
CONTACT PERSON

Driver
Picks Deliver
Up Pkg. Package

Customer
Service
Order

Airport Fly to
Dispatch
Receives Sort Unload Load
Driver Fly to
& Loads Center & On
Destinatio Sort Truck
SUPPORT

Load on
PROCESS

Airplane
n

Sort
Packages
 Overnight Hotel Stay
Bill
EVIDENCE
SUPPORT PROCESS(Back Stage) (On Stage) CUSTOMER PHYSICAL

Desk
Hotel Cart for Desk Elevators Cart for Room Menu Delivery Food Lobby
Exterior Bags Registration Hallways Bags Amenities Tray Hotel
Parking Papers Room Bath Food Exterior
Lobby Appearance Parking
Key
Arrive Give Bags Call Check out
Go to Receive Sleep Receive
at to Check in Room Eat and
Room Bags Shower Food
Hotel Bellperson Service Leave
CONTACT PERSON

Greet and
Process Deliver Deliver Process
Take
Registration Bags Food Check Out
Bags

Take
Take Bags Food
to Room Order

Registration Prepare Registration

System Food System
 Building a Service Blueprint

Step 1 Step 2 Step 3 Step 4 Step 5 Step 6

Identify the Identify the Map the Map Link Add

process to customer process contact customer evidence
be blue- or from the employee and contact of service
printed. customer customer’s actions, person at each
segment. point of onstage activities to customer
view. and back- needed action
stage. support step.
functions.
 Application of Service Blueprints
• New Service Development
• concept development
• market testing
• Supporting a “Zero Defects” Culture
• managing reliability
• identifying empowerment issues
• Service Recovery Strategies
• identifying service problems
• conducting root cause analysis
• modifying processes
 Blueprints Can Be Used By:
Service Marketers Human Resources
creating realistic customer empowering the human
expectations
service system design element
promotion job descriptions
selection criteria
appraisal systems

Operations Management
rendering the service as System Technology
promised providing necessary tools:
managing fail points system specifications
training systems
personal preference databases
quality control