Services Marketing Chapter 6

relationship marketing
philosophy of doing business, a strategic orientation, that focuses on keeping and improving relationships with current customers rather than on acquiring new customers
customers as strangers
those who have not yet had any transactions with the firm and may not even be aware of the firm
customers as acquaintances
customer awareness and trial are achieved, familiarity is established
customers as friends
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 teh customer’s situation
Primary goal for firms – friend stage
customer retention
Primary goal – acquaintance stage
satisfying the customer
Primary goal – stranger stage
familiarize with firms offerings and get them to give the firm a try
customers as partners
continues to interact with the firm, the level of trust often deepens and the customer may receive more customized product offerings and interactions
Primary goal – partner stage
enhancing the relationship
goal of relationship marketing
Build and maintain a base of committed customers who are profitable for the organization
customer benefits
confidence, social, special treatment
firm benefits
economic, customer behavior, hr management
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
develop a sense of familiarity and even a relationship with their service providers
special treatment benefits
getting the benefit of the doubt, given a special deal or price, preferential treatment
economic benefits
increased purchases over time, lower costs
customer behavior benefits
word of mouth advertising, social support to other customers
hr management benefits
due to familiarity, assisting in service delivery (making employees job easier), realistic expectations, employee retention
relationship value of a customer
concept or calculation that looks at customers from the point of view of their lifetime revenue and/or profitability contributions to a company
lifetime value
refers to revenue only
lifetime profitability
considers both revenue and cost
platinum tier
company’s most profitable customers, typically those who are heavy users of the product, and are not overly price sensitive, are willing to invest in and try new offerings and are committed customers of the firm
gold tier
profitability levels are not as high, perhaps because these customers are not as loyal or they want price discounts that limit margins – they may be heavy users who minimize risk by working with multiple providers rather than just the focal company
iron tier
essential customers who provide the volume needed to utilize the firm’s capacity, but their spending levels, loyalty, and profitability are not substantial enough for special treatment
lead tier
customers who are costing the company money – they demand more attention than they are due given their spending and profitability and are sometimes problem customers
Customers always appreciate being categorized into tiers
core service provision
providing a good core service delivery that, at a minimum, meets customer expectations and provides customers with perceived values
switching barriers
factors that make it difficult to leave one service provider and begin a relationship with another
customer inertia
when it is “just not worth it” to switch, explains why some dissatisfied customers stay with a provider
Increasing perceived effort required on the part of the customer to switch providers may help improve retention
switching costs
the costs involved in changing to and purchasing from a different firm
setup costs
paying for initial services, visits etc
learning costs
associated with learning the idiosyncrasies of how to use a product or service
contractual costs
when a customer is required to pay a penalty to switch providers
There are 2 ways to utilize switching costs – increasing them for current customers and decreasing them for consumers not yet using your service.
relationship bonds
firms engaging in activities that encourage customers to remain in the relationship because they “want to”
Relationship Bonds Level 1
Financial Bonds – lower prices for greater volume purchases or lower prices for customers who have been with the firm a long time
Relationship Bonds Level 2
Social Bonds – build long-term relationships through social and interpersonal as well as financial bonds
Relationship Bonds Level 3
Customization Bonds – customer loyalty can be encouraged through intimate knowledge of individual customers – often referred to as customer intimacy and through the development of one-to-one solutions that fit the individual customer’s needs
Relationship Bonds Level 4
Structural Bonds – involve all other types of bonds and are created by providing services to the client that are designed right into the service delivery system
Sometimes it is preferable for the firm to not continue its relationship with a particular customer.
Wrong Segment
cannot target services to all customers; some segments are more appropriate than others.
Not Profitable in the Long Term
some segments of customers will not be profitable for the company even if their needs can be met by the services offered
Difficult/Dysfunctional Customers
customers who intentionally, or perhaps unintentionally, act in a manner that in some way disrupts otherwise functional service encounters

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