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Strategy > L11: Relational marketing > Flashcards

L11: Relational marketing Flashcards

1
Q

The key to success of relationship marketing

A

Loyal repeat purchase behaviour - keep old customers for an efficient allocation of resources (5x times)

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2
Q

Relationship marketing (Gronroos, 1997)

A

To establish, maintain and enhance exchange relationships with customers and other partners at a profit, so the objectives of parties involved are met.
It is achieved by mutual exchange and promise fulfilment.

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3
Q

Benefits of customer loyalty

A
  • Customers: better customer insights, positive WOM, reduce churn rate.
  • Profit: Save cost from recruiting new customers, Prompt customers to spend more => Boost profits by ~100% by retaining just 5% more of their customers.
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4
Q

The difference between Relational marketing and transaction marketing

A
  • Quality: Functional, so it is the concern of all
  • Orientation: Customer retention (L-T), customer values
  • Unlimited emphasis on customer service, customer commitment, and high customer contact.
  • Method: Real-time customer feedback system and Directly by managing customer database
  • MKT: Interactive marketing-led; Interface and Internal marketing great strategic importance.
    => Less price-sensitive customers
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5
Q

The difference between relational marketing and Transaction marketing

A
  • Quality: Technical, so it is the concern of production
  • Orientation: Single sale (S-T), product features
  • Limited emphasis on customer service, customer commitment, and low customer contact.
  • Method: Ad hoc customer satisfaction surveys and Indirectly by monitoring market share.
  • MKT: Marketing-led; Interface and Internal marketing no strategic importance.
    => More price-sensitive customers.
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6
Q

Different types of strategic collaborative partnership

A
  • Lateral partnership
  • Internal partnership
  • Supplier partnership
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7
Q

Lateral partnership

A

Horizontal partnership with not-for-profit organizations to enhance the brand or increase sales.
Ex: Volvic and UNICEF provide safe water.

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8
Q

Internal partnership

A

Integrate different functions and BUs to maximize customer value, to implement effective marketing strategies and to build the right corporate culture.

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9
Q

Supplier partnership

A

Producing a quality product, being at the forefront of innovation.
Ex: Apple uses Intel processor for its products.

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10
Q

Partnership benefits

A

Partners get to know each other and each other’s way’s of working better, and one or both makes adaptations in their production, delivery or buying processes.

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11
Q

Good selection for partnerships require an understanding of

A
  • Its own core competencies

- Strategic priorities

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12
Q

Criteria to evaluate whether to enter into a collaborative relationship

A
  • Good relationship management/facilitation
  • Assess network effectiveness
  • Good communication to maintain customer focus
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13
Q

Model of relationship development

A

As long-term in orientation and interaction is intended to enhance stability, it suggests that relationships become closer and deeper over time.

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14
Q

Inter-organizational commitment and closeness (Hooley et al., 2012)

A

Outsourcing > Partnership > Strategic alliance > Joint venture > Vertical integration

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15
Q

Outsourcing in model of relationship development

A

Purchase of goods or services.

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16
Q

Partnership in model of relationship development

A

Co-ordinated activities and planning between partner companies.

17
Q

Strategic alliance in model of relationship development

A

Formal agreement between companies to collaborate and act jointly.

18
Q

Joint venture in model of relationship development

A

Shared ownership in an operation with a collaborator company.

19
Q

Vertical integration in model of relationship development

A

Full ownership of the activity or operation.

20
Q

Customer Relationship Management

A

A process of gathering information about its customers’ wants and needs to adjust its offerings to be better fit those wants and needs. It’s because increasing customers satisfaction is less expensive than investment on high switching barriers.

21
Q

Failure of CRM and Relational marketing

A
  • Implement CRM: before developing customer strategy. (clear defined customers based on personality) or before the organization becomes a customer-focused entity with suitable processes.
  • Technological-intensive CRM.
  • Potentially stalk customers or building relationships with people who do not want.
22
Q

Customer loyalty ladder

A
  • Suspects, Prospects, Customers: emphasize on new customers.
  • Clients.
  • Supporters, Advocates, Partners: emphasize on developing and enhancing relationships.
23
Q

The objectives of loyalty scheme

A
  • Convert a supporter to an outright advocate.
  • Reward loyal customer.
  • Manipulate customer behaviour by making use of information about each customer that is complete, specific and pertinent.
  • Defensive tool to combat a competing scheme.
24
Q

Benefits of loyalty scheme

A
  • Profit: a greater share in the wallet, prompt customers to purchase more, and generate more revenue.
  • Customers: Provide insight in behaviour and preferences; Positive WOM and reduce churn rate.
25
Q

Drawbacks of loyalty scheme

A
  • Method: Wrong metrics; Loyalty scheme is crude and simplistic.
  • Customer: Over-reward top users who aren’t doing much but still loyal; Over-promise that company is not capable of; People who signed on early for the scheme will reduce their use of product/service; Customer privacy issues.
26
Q

Example of loyalty scheme

A
  • Fee-Based Loyalty Programs: Amazon Prime ($119/year).
  • Cash Back Loyalty Program: Trainline
  • Points Loyalty Program: Tesco, Walgreens
27
Q

Choosing a loyalty strategy (Reinartz and Kumar, 2002)

A

Based on profit and long/short-term customers:

Butterflies, True friends, Strangers, Barnacle

28
Q

True friends

A
  • Aim to attitudinal and behavioural loyalty.
  • Communicate consistently but not often.
  • Delight them to nurture, defend and retain them.
29
Q

Butterflies (high profit, S-T customers)

A
  • Aim to transactional satisfaction.
  • Milk the account only as long as they are active.
  • Challenge: cease investment soon enough.
30
Q

Barnacle (low profit, L-T customers)

A

Measure both size and share of wallet.
+ Size: strict cost control
+ SoW: up and cross-selling

31
Q

Strangers

A

No investment. Just make profit on every transaction.

32
Q

Why do customers stay loyal?

A
  • Affiliation: social needs met through membership of associations.
  • High switching costs: procedural (time/effort of search and learning), relational (psychic/emotional costs) and financial.
  • Mutuality developed over time.
  • Moral/ values alignment
  • Personalization: customized service over time (haircut).
  • Power: relationship may reverse some asymmetry of power.
  • Recognition: feel more valued when addressed by name
  • Relationship with brand (identity, status, lifestyle statements or involvement) and with staff (personal).
  • Satisfaction with perceived value
  • Simplicity of buying process plus convenience, inertia and/or lack of time.
33
Q

80/20 rule

A

80% of company’s revenue comes from only 20% of its customers.

34
Q

Customer profitability (Blattberg et al., 2001) and (Pfeifer et al., 2005)

A
  • Accounting for mkt has shifted from product to customer profitability.
  • The customer is a financial asset that companies and organisations should measure, manage, and maximise just like any other asset.
  • The difference between the revenues earned from,
    and the costs associated with, the customer
    relationship during a specific period.
35
Q

CLV (Gupta and Lehman, 2005)

A

The current value of current and future profits generated from a customer’s lifetime with the company.

36
Q

Customer equity (Gleaves et at., 2008)

A

Total lifetime value of all current and future customers

37
Q

NPS

A

An index to check customer loyalty based on their willingness to recommend products/service to others.

38
Q

Limitation of NPS

A

It does not imply which action should be taken or explain the reason for results.

Strategy (5 decks)

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