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Building Relationship

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on 8 September 2014

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Transcript of Building Relationship

Building Customer

Group 6
What is Relationship Marketing?
Relationship Marketing VS Traditional
There is a
in the
Theory:Why Relationship Development Makes Sense
Customers as Acquaintances
Customers as Partners
The Goal of Relationship Marketing
The primary goal of relationship marketing is to build and maintain a base of committed customers who are profitable for the organization.
Benefits for Customers and Firms
Customers will remain loyal to a firm when they receive greater value relative to what they expect from competing firms.
Confidence Benefits
*comprise feelings of trust or confidence in the provider along with a sense of reduced anxiety and comfort in knowing what to expect.
Social Benefits
*Customers develop a sense of familiarity and even a social relationship with their service provider.
Benefits for Firms
Customer Behavior Benefits
Relationship Value of Customers
* Is a concept or calculation that looks at customers from the point of view of their lifetime revenue and/or profitability contributions to a company.
Switching Costs
Customers develop loyalty to an organization in part because of costs involved in changing and purchasing from a different firm.It includes investments of time,money,or effort-such as setup costs,search costs,learning costs and contractual costs.
Relationship Development Strategies
*Core service provision- Retention strategies have a little long-term success unless the firm has a solid base of service quality and customer satisfaction on which to build.
*Switching Barriers-When considering a switch in service provider,a customer may face a nu of barriers that make it t difficult to leave one service provider and begin a relationship with another.
*is a philosophy of doing business that focuses on keeping and improving current customers
*does not necessarily emphasize acquiring new customers
*is usually cheaper (for the firm)--to keep a current customer costs less than to attract a new one
*goal = to build and maintain a base of committed customers who are profitable for the organization
*Thus, the focus is on the attraction, retention, and enhancement of customer relationships

Relationship Marketing
Why it is important?
The Evolution of Customer Relationships
*Customers as
*Customers as
*Customers as
*Customers as
Customers as Strangers
Strangers are those customers who have not yet had any transactions with a firm and may not even be aware of the firm.

To initiate communication with them in order to
them and
their business.
Once customer awareness and trial are achieved,familiarity is established and the customer and the firm become acquaintances, creating the basis for an exchange relationship.

the customer's needs and wants
Customers as Friends
As a customer continues to make purchases from a firm and to receive value in the exchange relationship, the firm begins to acquire specific knowledge of the customer's needs allowing it to create an offering that directly addresses the customer's situation
To retain the customer's business.
As a customer continues to interact with a firm,the level of trust often deepens and customer may receive more customized product offerings and interactions.

the relationship with the customer.
represents a trade-off for the customer between
the "give" and "get" components.
Special Treatment Benefits
*includes getting the benefit of the doubt,being given a special deal or price, or getting preferential treatment
*Economic Benefits.Relationship-oriented service firms achieve higher overall returns on their investments than do transaction-oriented firms.
increases purchases over time
It lower costs
The contribution that loyal customers make to a service business can go well beyond their direct financial impact on the firm.

Word-of-mouth communication
Customer voluntary performance
Social Benefits

Human Resource Management Benefits
*Assisting service delivery
*Employee retention
*Social Benefits
Factors that Influence Relationship Value
It is influenced by the length of an average "lifetime," the average revenues generated per relevant time period over the lifetime, sales of additional products and services over time, referrals generated by the customer over time, and costs associated with serving the customer.

Lifetime Value-refers to lifetime revenue stream only
Lifetime Profitability-when costs are considered
Profitability Tiers
Most profitable
Least profitable
Customer Inertia
*Sometimes consumers simplistically state that "it's just not worth it" to change service provider.

Inertia may even explain why some dissatisfied customers stay with a provider.
Relationship Bonds
*Switching barriers tend to serve as constraints that keep customers in relationships with firms because "they have to".However,firms can engage in activities that encourage customers to remain in the relationships because they "want to"-thus creating relationship bonds.
Relationship Challenges
"The Customer Is
Always Right
Levels of Relationships Strategies
"The customer is always right" is a motto or slogan which exhorts service staff to give a high priority to customer satisfaction.
* Wrong Segment
A company cannot target its services to all customers;some segments will be more appropriate than others.
*Not Profitable In the Long Term
Organizations will prefer not to have long-term relationships with unprofitable customers.
*Difficult Customers
Firms have service encounters that fail because of dysfunctional behaviors.
Dysfunctional customer behaviors
refers to actions by customers who intentionally, or perhaps unintentionally,act in manner that in some way disrupts otherwise service encounters.
*It costs five times as much to attract a new customer as it does to keep a current one satisfied.
*It is claimed that a 5% improvement in customer retention can cause an increase in profitability of between 25 and 85 percent depending on the industry.
*Likewise, it is easier to deliver additional products and services to an existing customer than to a first-time “buyer.”

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