Building Customer Relationships Chapter 6

1
Building Customer Relationships (Chapter 6)

• Relationship Marketing
• Service Loyalty
• definition
• antecedents
• outcomes
• Lifetime Value of a Customer
• Retention Strategies

2
Relationship Marketing

• is a philosophy of doing business that
• does not necessarily emphasize acquiring new
  customers
• is usually cheaper (for the firm)
• goal
• thus, the focus is on the attraction, retention,
  and enhancement of customer relationships

3
Customer Goals of Relationship Marketing
Figure 6-1
4
Service Loyalty Research

• Research Questions
• What is service loyalty and how should it be
  measured?
• What factors lead customers to become loyal to
  service providers?
• What are the benefits to customers for being
  loyal to a service provider?

5
Model of Service Loyalty
Antecedents
Moderators
Outcomes
6
Assumptions

• Customers have choices
• Services where long-term patronage is likely
• excludes one-time consumption services
• e.g., emergency surgery, MBA degree,
• once-in-a-lifetime event

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Service Loyalty Model Components

• defining the construct
• four components of service loyalty
• antecedents of service loyalty
• interpersonal bonds, impersonal bonds
• moderators
• outcomes of service loyalty
• customer, provider

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Defining Service Loyalty

• Service Loyalty is the degree to which a
  customer
• (1)
• (2)
• (3)
• Service Loyalty is ultimately exhibited through

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Components of Service Loyalty
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Service Loyalty Components
behavior
(Oliver 1997)
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Basis for Model of Service Loyalty

• literature review
• brand loyalty
• services marketing
• relationship marketing
• phase 1 - qualitative study
• 40 depth interviews (customers, employees)
• phase 2 - survey
• 1600 bank customers, 400 dental patients

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Antecedents of Service Loyalty

• Overall Evaluation
• satisfaction, perceived quality, perceived value
• Competitive Environment
• competitors marketing mix
• competitive offerings
• relative price
• Impersonal Bonds
• Interpersonal Bonds

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Antecedents of Service Loyalty

• Impersonal Bonds

• switching costs
• effort (habit/inertia)
• search costs, setup costs
• contractual costs

• staying benefits
• customer learning
• optimum service
• continuity

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Antecedents of Service Loyalty

• Interpersonal Bonds
• dimensions
• familiarity
• care
• friendship
• rapport
• trust

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Outcomes of Service Loyalty

• Customer (Gwinner, Gremler, Bitner 1998)
• social benefits (Barnes 1994 Berry 1995
  Goodwin 1994)
• psychological benefits (Bitner 1995 Morgan
  Hunt 1994)
• economic benefits (Peterson 1995 Sheth
  Parvatiyar 1995)
• customization benefits (Berry 1995 Surprenant
  Solomon 1987)
• Service Provider
• economic benefits (Reichheld 1996 Schlesinger
  Heskett 1991)
• customer action benefits (Reichheld Sasser
  1996 Zeithaml et al. 1996)
• human resource (Schlesinger Heskett 1991
  Webster 1994) management benefits

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Lifetime Value of a Customer

• Assumptions
• Income
• Expected Customer Lifetime
• Average Revenue (month/year)
• Other Customers convinced via WOM
• Employee Loyalty??
• Expenses
• Costs of Serving Customer Increase??

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Customer Satisfaction
Employee Loyalty
Figure 6-3
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Is the customer always right?

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Strategies for Building Strong Relationships

• Foundations
• Excellent Quality/Value
• Careful Segmentation
• Bonding Strategies
• Financial Bonds
• Social Psychological Bonds
• Structural Bonds
• Customization Bonds
• Relationship Strategies Wheel

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Levels of Retention Strategies
Stable Pricing
Volume and Frequency Rewards
Bundling and Cross Selling
I. Financial Bonds
Continuous Relationships
Integrated Information Systems
Excellent Quality and Value
IV. Structural Bonds
II. Social Bonds
Personal Relationships
Joint Investments
Shared Processes and Equipment
Social Bonds Among Customers
III. Customization Bonds
Customer Intimacy
Anticipation/ Innovation
Figure 6-6
Mass Customization