MKT 723 Study Guide - G1 Phase, Reinforcement, Customer Retention

• School: Ryerson University
• Department: Marketing
• Course: MKT 723
• Professor: Armand Gervais

Document Summary

Relationship value of customers: profitability tiers- the customer pyramid, tiers- labels to categorize customers ( good, bad, ugly, 80/20 rule. 20% of customers produce 80% of sales profit. Four tier system: the platinum tier- most profitable customers, heavy users of the product, are not overly price-sensitive, willing to invest in and try new offerings, committed customers of the firm. Closing gap 1 is most critical for this group: gold tier- profitability levels are not as high, because the customers want price discounts that limit margins or are not as loyal. Relationship value of customers: core service provision, providing good core service that at minimum meets customer expectations; it does no good to design relationship strategies for inferior services, switching barriers- Influence consumers" decisions to exit from relationships with firms and, therefore, help to facilitate customer retention. Also called negative reinforcement model: customer inertia- certain amount of effort may be required to change firms.