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MKT 723 (71)
Chapter 7

Chapter 7.docx

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Department
Marketing
Course
MKT 723
Professor
Armand Gervais
Semester
Winter

Description
Chapter 7 – Building Customer Relationships Relationship Marketing Relationship marketing focuses on relationship/retention (Keeping and improving relationships with current customers) instead of acquisition/transaction (acquiring new customers). This assumes customers prefer to have an ongoing relationship with an organization than to switch. It is suggested that firms focus on attracting but pay little attention to retention. Evolution of Customer Relationships Firms’ relationships with their customers evolve over time. Marketing exchange relationships between providers and customers have the potential to evolve from strangers to partners.  Customers as strangers – Customers who are not aware of or had no interactions with a firm. Consequently, the firm’s primary goal with these potential customers is to initiate communication with them in order to attract and acquire.  Consumers as Acquaintances – Once awareness and trial are achieved, familiarity is established and the relationship become acquaintances. The main goal of the firm is to satisfy the customer. Firms are concerned with providing a value to customers that is comparable with the competition. Acquaintanceship is effective if the customers are relatively satisfied. The customers gains experience with the firms and uncertainty decreases, thus increasing attractiveness. Repetitive interactions improve the firm’s knowledge of the customer.  Customers as Friends – As customers continue to make purchases from a firm, the firm acquires specific knowledge of the customer’s needs that allows to directly address the customer’s situation. This unique offering transforms the exchange relationship to a friendship. This transition develops trust. As the relationship becomes friends, customers trust that the service provides superior value. The main goal of the firm is customer retention. The friends are satisfied with the firm’s current offering while are also open to other offerings.  Customers as Partners – Trust deepens and the customer may receive more customized product offerings and interactions. The firm’s main concern is enhancing the relationship. Customers are more likely to stay if they feel that the company understands their changing needs and is willing to invest. Customers are less likely to stray. The Goal of Relationship Marketing As the relationship value of a customer increases, the provider is more likely to pursue a closer relationship. Thus, the main 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  Benefits for Customers – Customers will remain loyal when they receive greater value relative to what they expect from competing firms. Value represents a tradeoff between the “give” and “get” components. Customers stick with a brand when the gets exceed the gives. o Confidences Benefits - Comprise feelings of trust of confidence in the provider along with a sense of reduced anxiety. o Social Benefits – A sense of familiarity and a social relationship make it less likely that they will switch, even if the competition has better quality. o Special Treatment Benefits – Include getting the benefit of the doubt, given a special deal or price, or preferential treatment.  Benefits for Firms o Economic Benefits – Bottom-line benefits come from a variety of sources: Increased revenues over time from the customer, reduced marketing and admin costs, and ability to maintain margins without reducing prices. One of the most common retention benefits is increased purchases over time. Also, lower costs. As more customers make repeat purchases, 90% less marketing expenditure is needed. o Cons
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