4 Focusing on the Customer: Marketing Growth Strategies Customer Relationships Text not available due to copyright restrictions Looking AHEAD After studying this chapter, you should be able to 1 Define customer relationship management (CRM) and explain its importance to a small firm. 2 Discuss the significance of providing extraordinary customer service. 3 Illustrate how technology, such as the Internet, can improve customer relationships. 4 Describe the techniques for creating a customer profile.
5 Explain how consumers are decision makers and why this is important to understanding customer relationships. 6 Describe certain psychological influences on consumer behavior. 7 Describe certain sociological influences on consumer behavior. Always remember that the customer (consumer) is the heartbeat of every firm.
A better understanding of consumers and the transactional relationships a firm has with them will lead to a healthier small business. Chapter 13 is the first in a sequence of chapters comprising Part 4, Focusing on the Customer: Marketing Growth Strategies. It examines customer relationship manage- ment (CRM) and argues that CRM is a key factor in small business survival and growth. Chapter 13 also discusses the importance of building a behavioral profile of customers.
Chapters 14 through 17 discuss additional marketing topics essential to growth, based on the all-important customer focus developed in this chapter. What Is Customer Relationship Management? 1 Define customer relationship manage- Customer relationship management (CRM) means different things to different firms. To ment (CRM) and some, it is symbolized by simple smiles or comments such as “thank you” and “come again” communicated by employees to customers who have just made a purchase. For explain its importance others, CRM embodies a much broader marketing effort, leading to nothing short of com- to a small firm.
plete customization of products and/or services to fit individual customer needs. The goals of a CRM program for most small companies fall somewhere between these two perspectives. Regardless of the level of a firm’s commitment to customer relationship manage- ment, the central message of every CRM program is “Court customers for more than a one-time sale.” A firm that strongly commits to this idea will appreciate the many benefits a CRM program can offer. Formally defined, customer relationship management (CRM) is a “company-wide customer relationship business strategy designed to optimize profitability and customer satisfaction by focusing management (CRM) on highly defined and precise customer groups.”3 In a way, CRM is a mind-set—the imple- A company-wide busi- mentation of customer-centric strategies, which put customers first so that the firm can ness strategy designed to succeed.
CRM involves treating customers the way the entrepreneur would want to be optimize profitability and treated if he or she were a customer—the business version of the Golden Rule. customer satisfaction by The central theme of CRM isn’t new. For decades, entrepreneurs have recognized focusing on highly defined the importance of treating customers well; “the customer is king” is an old adage. What is and precise customer new is giving this idea a name and using technology to implement many of its techniques.
groups Modern CRM focuses on (1) customers rather than products; (2) changes in company 349 350 Part 4 Focusing on the Customer: Marketing Growth Strategies processes, systems, and culture; and (3) all channels and media involved in the marketing effort, from the Internet to field sales. The forerunners of many modern CRM techniques were developed in the 1960s by marketers like Sears and various book clubs. They simply stored information about their customers in computers for reasons other than invoicing. Their goal was to learn who their customers were, what they wanted, and what sort of interests they had.
Then along came marketers with ideas about the potential benefits of adopting a customer orienta- tion, followed by the rise of the Internet. It should be noted that CRM, in its purest form, has nothing to do with technology, although Internet technology has definitely been a major force in CRM’s development. Just as putting on the latest $300 pair of technologically designed basketball shoes doesn’t make the wearer a WNBA or NBA player, buying or developing CRM computer software does not, in itself, lead to higher customer retention. But it can help if it is used properly.
( The role of technology in CRM is discussed later in this chapter.) Most importantly, there must be company-wide commitment to the concept if CRM is to be productive. The Importance of CRM to the Small Firm As depicted in Exhibit 13-1, a firm’s next sale comes from one of two sources—a current customer or a new customer. Obviously, both current and potential customers are val- ued by a small firm, but sometimes current customers are taken for granted and ignored. While marketing efforts devoted to bringing new customers into the fold are obviously important, keeping existing customers happy should be an even higher priority.
A CRM program addresses this priority. Some firms, however, appear not to recognize this sim- ple truth, and this results in different levels of CRM initiatives. One interesting study of CRM involvement among family and nonfamily firms concluded that nonfamily busi- nesses are ahead of family-owned companies with respect to starting and completing CRM initiatives.”4 Brian Vellmure of Initium Technology, a provider of CRM solutions to small firms, has identified five economic benefits of maintaining relationships with current customers:5 1. Acquisition costs for new customers are huge.
Long-time customers spend more money than new ones. Happy customers refer their friends and colleagues. Order-processing costs are higher for new customers. Old customers will pay more for products.
exhibit 13-1 Sources of the Next Sale Happy Pay more to buy product Customers Refer friends and colleagues Current Customers Unhappy Buy from a Customers competitor next time New Have high acquisition costs Customers and order-processing costs Building Customer Relationships Chapter 13 351 exhibit 13-2 Essential Materials of a Successful CRM Program Successful CRM Program Building Block 1: Building Block 2: Outstanding Transactional Knowledge of Relationships with Customers Customer Behavior Material: Material: Material: Material: Material: Material: Extraordinary Technology Customer Decision Psychological Sociological Customer Service Support Profiles Making Influences Influences Essential Materials for a CRM Program When you build something—a house, for example—you have a plan (a blueprint) that lists appropriate materials or component parts. Likewise, assembling a CRM program re- quires a plan so that the entrepreneur knows what people, processes, and so on (parts) she or he needs—and there are many parts in a successful CRM program. In the remainder of this chapter, we consider two vital building blocks of any CRM program: (1) outstand- ing relationships with customers and (2) knowledge of consumer behavior. These blocks may be constructed with a variety of “materials,” as depicted in Exhibit 13-2.
In the sec- tions that follow, we examine those materials we believe to be tremendously important in constructing these two building blocks. Creating Positive Transactional Relationships 2 Discuss the sig- Through Extraordinary Service nificance of providing extraordinary cus- To be successful in the long run, small firms need to concentrate on building positive tomer service. transactional relationships with customers. A transactional relationship is an associa- tion between a business and a customer that relates to a purchase or a business deal.
transactional Consumers who have positive interactions with a business usually become loyal cus- relationship tomers. Three basic beliefs underlie our emphasis on providing exceptional customer An association between a service: business and a customer that relates to a purchase 1. Small businesses possess greater potential for providing superior customer or a business deal service than do large firms. Superior customer service leads to customer satisfaction.
Customer satisfaction results in a positive transactional relationship. As these beliefs suggest, failure to emphasize customer service jeopardizes any effort to attain a positive customer relationship. “My message to small companies is that big companies are coming after you with better customer service, so you’d better be pay- ing attention,” says Edward Reilly, president and CEO of the American Management Association.6 352 Part 4 Focusing on the Customer: Marketing Growth Strategies How They See It: Maintaining Customer Relationships Denny Fulk No matter what type of business you operate, building and If you operate a business, no matter how small or large, maintaining customer relationships is essential to its success. customers like to feel there is a person who really cares about A friend of mine who operates a very successful e-commerce– their needs.
Whether the information shared is by telephone based business responds regularly to his customers’ questions, or e-mail, promptness and a personal approach are keys to the even if he is traveling outside of the United States. Since customer’s having a good feeling about your company. Regard- many of his customers are located in other parts of the world, less of whether your business is a startup or a very established customer inquiries arrive and are answered from several dif- company, a customer who receives a prompt, accurate, and un- ferent time zones. His response mentions that he is traveling derstanding response will be very likely to continue doing busi- and is sending the e-mail from the city where he is located on ness with your company.
In the business-to-business setting, that particular day. His staff is required to respond to all cus- when I am dealing with a busy purchasing person or project tomer phone calls and e-mail within 24 hours. manager, I like to say, “My job is to make your job easier.” Components of Customer Satisfaction A number of factors under a firm’s control contribute to customer satisfaction. One classic article identifies the following four elements as keys to customer satisfaction:7 1.
Providing the most basic benefits of the product and/or service—the elements that customers expect all competitors to deliver 2. Offering general support services, such as customer assistance 3. Setting up a system to counteract any bad experiences customers may experience 4. Delivering extraordinary services that excel in meeting customers’ preferences and make the product and/or service seem customized Small firms are in a unique position to offer extraordinary service.
Relationship marketing advocate Patrick Daly, who oversees a customer relations program for a company in Redwood City, California, suggests the following ways to provide extraordinary service:8 Naming names. In today’s detached,“just give me your account number” world, nothing is more well received than individual, personalized attention. Even though you may al- ready be courteous and friendly to customers, greeting them by name is valued 10 times more on the “worthy of loyalty” scale. Customers pretty much know what they do and don’t want from your company.
If you remember what they want on an individual basis—even if it’s some- thing as simple as knowing a dry cleaning customer likes light starch in his collars— then you have mastered one of the key elements of a strong loyalty program. Keeping in touch.You can’t communicate enough on a me-to-you basis with your customers. And don’t just connect to make a pitch. Clip out a newspaper or magazine article that pertains to a customer’s business and send it to him or her with a note say- ing “FYI—thought you’d be interested.”When customers know that you’re taking time to think about them, they don’t forget it.
“Boo-boo research.” Part of any customer loyalty program is taking the time to reach out to lost customers to learn why they went elsewhere. In many cases, just contacting them and showing them that you really care about getting their business will win them back—along with their contribution to your profits. Building Customer Relationships Chapter 13 353 Living the Dream putting technology to work Put Me on Hold Please No one likes being put on hold, but entrepreneur and veteran radio talk show host Perry Wright knows how to keep you entertained while you wait. Known as the On-Hold Guy, Wright sells, through his website, software containing one-liners, odd facts, and puns to play for waiting customers.
“While I was doing radio, I spent a lot of time on the phone and on hold, listening to sterile, irritating messages,” he says.