Description
The marketing in the 21st century is compressed: the cycle between the product launch and the product death is very short;
ERASMUS PROGRAMME- TEACHER’s MOBILITY
march’ 2013
RELATIONSHIP MARKETING IN SERVICES:
Customer LTV and Retention Strategies
Prof. Dr. LINA ANASTASSOVA
Center for Business Studies
BURGAS FREE UNIVERSITY
www.bfu.bg
RELATIONSHIP MARKETING in services
1.Traditional/orthodox marketing
MARKETING is the analysing, organising, planning
and controlling of the firm’s resources, policies,
and activities with a view to satisfying the needs
and wants of chosen consumer/customer groups
at a profit.
Ph.Kotler, Marketing Management, 1967
The main framework for solving the marketing
problems of the company is the concept for the
four “Ps”.
Figure 1: The Orthodox/ Classical Marketing Mix
Concept
RELATIONSHIP MARKETING in services
Other concepts of the MARKETING MIX:
The Marketing Mix of the 5 Ps (Charles
Koffman)
PRODUCT,
PRICE,
PROMOTION,
PLACE,
PEOPLE
RELATIONSHIP MARKETING in services
Other Marketing Mix concept:
The 7 Ps:
Product
Price
Promotion
Place
Physical environment (very important for
the customer experience- IKEA, Apple
Computers, Marriott Hotels..
Processes
RELATIONSHIP MARKETING in services
The fundamental concept of the marketing mix still
applies today but
We need to remember that these original
frameworks for marketing actions were
developed in an unique environment:
They emerged from the United States during a
period of growth and prosperity and focused
on fast-moving consumer goods.
RELATIONSHIP MARKETING in services
But since the 90ies the markets are
totally different!
During the closing years of the 20
th
century
some of these basic tenets of marketing
were increasingly being questioned.
2. What changes in the consumer
behaviour and the markets occure in
the 90ies?
RELATIONSHIP MARKETING in services
? Consumers and customers became more
sophisticated and less responsive to the
traditional marketing pressures- particularly
advertising.
? Brand loyalty is weaker than it used to be in
the 7oies and 8oies because satisfied
consumers does not more mean loyal
consumers.
Brand Satisfaction ? Brand Loyalty
RELATIONSHIP MARKETING in services
As a result: many articles and papers are
along the lines of “Is marketing dead?”
In addition clients become more and
more pretentious: the characteristic of a
product/service which they perceived 5
years ago for an exceptional is now
perceived as normal standard.
RELATIONSHIP MARKETING in services
? The consumer focus is not more on “the
functional characteristics “ of the product but
on additional benefits and especially positive
experience and feelings;
? Consumers and customers exchange
knowledge and information not only among
them but they communicate directly with the
producers and traders as well;
RELATIONSHIP MARKETING in Services
• The marketing in the 21
st
century is
compressed: the cycle between the
product launch and the product death
is very short;
• The business environment and the
competition became very
unpredictable due to the dynamic
technological changes;
RELATIONSHIP MARKETING.
RELATIONSHIP MARKETING in services
So due to the changed markets and the
changed consumer behaviour
a need for new marketing paradygm
emerged:
and this marketing philosophy is called
RELATIONSHIP MARKETING
RELATIONSHIP MARKETING in services
The transactional approach has increasingly
been replaced by a relationship marketing
approach:
From the focus on a single
transaction profit to the focus on
long-term relationship with
customers!
Figure 3: Change from Transactional marketing to
Relationship marketing
Relationship
marketing
Transactional
marketing
Emphasis on
Customer Retention
Emphasis on
Customer Acquisition
Functionality-
based marketing
Cross-functionally
based marketing
RELATIONSHIP MARKETING in services
3. THE PARADYGM of RELATIONSHIP MARKETING
3.1. The fundamental principles of relationship
marketing:
? MAXIMISING THE CUSTOMER LIFETIME VALUE IS
A FUNDAMENTAL GOAL and PRINCIPLE OF
RELATIONSHIP MARKETING;
Definition of Customer Life Time Value (LTV): The
future flow of revenues/or net profit expected of
every customer for defined time period.
RELATIONSHIP MARKETING in services
The companies must recognise that
not all customers are equally profitable and
that they must develop/design strategies to
enhance the profitability of those customers
they seek to target.
In essence, companies, need to tailor and customise
their relationship marketing strategies even to the
extent of so called “one-to-one” marketing.
RELATIONSHIP MARKETING in services
Approaches for defining LTV:
LTV gives an opportunity to quantify the marketing aims
of the company. For instance
” to increase the LTV of the customer with 10%”.
In practice, increasing the LTV means to set 3 aims:
? To increase the period when the clients buy from
the company (to increase the customer life cycle
? To increase the amounts spent for every
purchase;
? To decrease the time between two purchases ;
??ble 1: Increasing LTV of the customer by
achieving 3 goals
Indicators Basic data After 10%
increase/decrease
of the indicators
Average amount spent by
a single purchase
50.0 EU 55.0 EU
Average time period
between the purchases
90.0 days 81.0 days
Average duration of the
customer relationship with
the company
10 years (3650
days)
11 years (4015
days)
???? 50x 3650/90 =
2027.5 Eu
55x 4015/81=
2255.0 Eu
2255.0- 2027.5 / 2027.5 x 100.0= 11.2 % increase of the LTV
RELATIONSHIP MARKETING in services
Another approach for calculating the LTV:
According to another concept for the essence of LTV the
calculation of the LTV must include:
? (+) The volume of all customer expenses for buying
company products during customer’s live time cycle
(S1);
? (+) Company revenue from attracted new customers
through this customer (S2);
? (-) company expenses for the product production for
this customer (Epp);
RELATIONSHIP MARKETING in servic es
(-)marketing expenses for attracting this customer
and for retaining him (Emrk);
(-)company expenses for the discounts offered to
this customer (Edisc);
LTV = S1 + S2 – Epp – Emrk – Edisc
Relationship marketing in services
We have to divide this value by a discount rate to get the
present value of the expected revenues!
The discount rate is needed because future revenue and
profits are not worth as much in today’s money
D= [1 + (i x rf )]?
where D=dicount rate, i-interst rate, rf- the risk factor
and n- number of years that company has to wait;
Example: D=[1 + (0.08 x 2)]² D= 1.35
Relationship marketing in services
There are some software for LTV –
CLTV toolshttp://blog.kissmetrics.com/wp-
content/uploads/2011/08/calculating-
ltv.pdf
Starbucks cafe example
RELATIONSHIP MARKETING in services
Two important reasons for determining the LTV
of customers
1.One is to identify different valuations for
customers with different characteristics.
2. Another could be the goal of influencing
the behaviour of different customers and
consequently changing their LTV;
RELATIONSHIP MARKETING in services
Retaining the right customer over time has a strong
impact on company profitability:
According to Harvard Business School research
articles:
Extended life cycle of customers:
?increases the profit from increased purchases (cross
selling);
?increases profit from reduces operating costs;
?Increases profit from refferals;
RELATIONSHIP MARKETING in services
Some examples of services sector:
Mobil TeL case: Mobil Tel- Bulgaria offers different
opportunities for extending the live time cycle of
its customers by offering different tariff plans and
to increase the revenues received per customer.
They give many bonuses for bigger monthly
spending and for subscription of more than 2
years.
For example: for 200 collected points the customer
gets 6 months per 30 gratis SMS or for 2 years
subscription the customer gets the cheapest tariff
plan, some times mobile phone as gift, home
telephone gratis etc. .
The Case of „HAPPY BAR AND GRILL“ and
some other restaurants.
The Loyalty Card provides many
benefits for the regular customers:
preferred table, special discounted
menu, home delivery, reserved parking
place etc.
RELATIONSHIP MARKETING in services
RELATIONSHIP MARKETING in services
? THE SECOND FUNDAMENTAL PRINCIP OF
RELATIONSHIP MARKETING IS THE CONCEPT OF
FOCUSING MARKETING ACTION ON MULTIPLE
MARKETS:
? For the conventional marketing the only market
is the customer market (consumer and industrial
markets) but according to RM there is a multiple
market model.
? There are 6 important markets to deal with if a
company wants to be successful and to retain the
most valuable clients:
FIGURE 4: RELATIONSHIP MARKETING:
THE SIX MARKETS MODEL
• Customers
• Suppliers
• Employees (to treat the employees as customers)
• Distributors
• Alliance partners
• Influencers
RELATIONSHIP MARKETING in services
? THE THIRD KEY PRINCIPLE of
RELATIONSHIP MARKETING IS THAT IT MUST
BE CROSS-FUNCTIONAL;
? “MARKETING IS TOO IMPORTANT TO BE LEFT ONLY TO
THE MARKETING DEPARTMENT”
David Packard, co-founder of
Hewlett Packard
? This is a call to bring marketing out of its
functional silo and distribute some functions and
tasks to other departments. All employees must
be involved in and devoted to the activities for
establishing long-term relations with customers.
RELATIONSHIP MARKETING in services
3.2. Characteristics of Relationship
marketing
? Emphasises a relationship, rather than a
transactional approach to marketing;
? extends the principles of traditional marketing to
a range of diverse market domains , not just
customer markets;
? recognises that quality, customer service and
marketing need to be much more closely
integrated;
Figure 5: Bringing together customer service,
quality and marketing
QUALITY
CUSTOMER
SERVICE
MARKETING
RELATIONSHIP MARKETING in services
? understands the economics of customer
retention and so that resources are
appropriately allocated between the two
tasks of retaining and attracting customers;
?highlights the critical role of internal
marketing in achieving external
marketing success;
RELATIONSHIP MARKETING in services
?ensures that marketing is considered in
a cross- functional context;
?switch from focus on market share
(volume) to share from the wallet of the
customer;
RELATIONSHIP MARKETING in services
4. The benefits of retaining satisfied
customers:
Researchers and management consultants
found that retained customers are more
profitable than new customers for the
following reasons:
- the cost of acquiring new customers can be
substantial. A higher retention rate implies
that fewer customers need be acquired more
cheaply;
RELATIONSHIP MARKETING in services
- established customers tend to buy more;
- regular customers place frequent,
consistent orders and, therefore, usually
cost less to serve;
- satisfied customers often refer new
customers to the supplier at virtually no
cost;
RELATIONSHIP MARKETING in services
- satisfied customers are often willing to
pay premium prices for a supplier they
know and trust;
- retaining customers makes market entry
or share gain difficult for competitors;
RELATIONSHIP MARKETING in services
5. From transaction to relationships
with customers
Relationship marketing paradygm
differs from transactional marketing
in a number of important ways.
Table 2: Transactional marketing v/s Relationship marketing
Transactional marketing Relationship marketing
? Focus on volume Focus on profitable
retention
? Emphasises product
features
Emphasises customer
value
? Short timescale
Longer-term timescale
? Little emphasis on
customer service
High customer service
emphasis
? Moderate customer
contact
? Primary concern with
product quality
High customer contact
Concern with
relationship quality
RELATIONSHIP MARKETING in services
Conclusion:
As the old model of transactional marketing
is inadequate to cope with today’s business
environment, marketing has entered a
new era.
In an environment characterised by
increasing global competition and
overcapacity, the focus has to switch
from volume growth to profit growth.
RELATIONSHIP MARKETING in services
6. STRATEGIES FOR RETENTION AND
DEVELOPMENT OF CUSTOMERS
One of the strategic aims of the
Relationship marketing is to retain the
valuable customers which means
that the company first have to take the
decision:
which customers are valuable and
deserve to be retained and loved.
RELATIONSHIP MARKETING in services
6. POSITIVE RETENTION STRATEGIES
6.1. Satisfying and exceeding customer
expectations
In order to satisfy the customer expectations
and desires the company must listen to the
clients and understand them.
The company must know well which are the
priorities in the customer expectations and
to deliver them.
RELATIONSHIP MARKETING in services
Means/tools for collecting and
analysing the data for the customers;
?-market research (primary and secondary
information) ;
?-customer reports;
?- data base with customer profiles;
?- panel research;
?-interactive web sites (forums, feed back
section);
?- online survey;
?-direct contacts with the customers etc.
RELATIONSHIP MARKETING in services
Important: Exceeding customer expectations
means delighting the customer. Some efforts for
delighting the customer may be not the
appropriate ones : for instance to deliver a
service faster not always means better.
Proactive Approach to Exceeding Customer
Expectations
? Understand market and customer expectations;
RELATIONSHIP MARKETING in services
?Segment customers based on multi-
dimensional criteria;
?Define customer service strategies and
goals based on customer segments;
?Define core business processes that
support service strategies;
RELATIONSHIP MARKETING in services
? Develop metrics which are quantifiable and
actionable;
? Build organizational support and capability;
? Implement strategies and action plans;
? Measure, analyze and interpret information;
RELATIONSHIP MARKETING in services
6.2. Discovering ways to add value
Schemes for rewarding the loyalty:
? The successful schemes provide 5 types of value
for the participants:
? Cash value: what is the size of the bonus in
cash compared to the amount spent for getting
it;
? Value of the choice: how big is the variety of
offered bonuses;
RELATIONSHIP MARKETING in services
? Desired value: to what extend the client wants
the bonus;
? Relative value: how accessible are the bonuses;
? Value of convenience: how easy is the collection
of points/credits in order to get the amount
required for the concrete bonus;
RELATIONSHIP MARKETING in services
EXAMPLES FOR GOOD PRACTICES in Relationship
Marketing of BULGARIAN COMPANIES in hotel ,
restaurant and retail sector
POSITIVE RETENTION STRATEGIS
STRATEGY “ADDING VALUE” by using the second
method in its frame:
PRORGRAMMES FOR AWARDING THE LOYALTY:
? HOTEL CHAIN “SHARLOPOV” :
S- CLUB CARD: The club card offers a variety of benefits
for the loyal customers including:
RELATIONSHIP MARKETING in services
- 10% discount of the prices on reception;
-10% discount in the restaurants and bars of
the hotel chain;
- 10% discount in the Spa-Center
- Priority for the reservations;
- Choice of favourable room;
Additional bonuses: free weekends, free
dinners, free short trips, gifts;
Free bulletin of the chain with news, new
offers and promotions;
Effects: increased revenues from the
loyal customers by 12-15%; increased
customer life-time value
RELATIONSHIP MARKETING in services
? GRAND HOTEL POMORIE (Award of
IHRA ‘2008 “The Best Hotel on the
Balkans”)
“GHP VIP CLUB”
The loyalty card guarantees a variety of
benefits for the regular customers
including:
-10% discount of the prices on reception;
-10% discount in the sky bar, winter garden
and the main restaurant;
- 10% discount in the Spa-Center
- Priority for the reservations;
- Choice of favourable room;
- Additional bonuses: free nights, free
dinners, free sightseeing of important
cultural sites around, gifts;
RELATIONSHIP MARKETING in services
RELATIONSHIP MARKETING in tourism and services
Examples from the international chains:
? The international hotel chains offer for their loyal
customers different club cards:
? Hyatt- Gold passport with three levels;
? The Marriott club card has also 3 levels:
Exceptional bonuses, Platinum cards, Dyamond
cards;
LOYALTY CARDS in the
RESTAURANTS in Bulgaria
There are many restaurants in Bulgaria
providing for their regular clients the so
called “Loyalty cards” which
guarantee between 5 and 10% discounts
of every order:
? Restaurant “ California”- Burgas
? Cafeterias “Face”- Burgas
Relationship marketing in services
RM with partners:
Strategy of Co-branding:
1. MOBILE operator GLOBUL and
banks or book shops:
When customers of Globul use the
credit card of a partner bank, they
get a bonus- discount of the
monthly bill.
Relationship marketing in services
2. Globul and book shop Helikon in
Bulgaria
Depending of the customers
turnover over POS-terminal he
can receive up to 500 minutes in
the Globul network.
Example from retail sector:
SUPER MARKETS “PICCADILLY” (14
years successful history of the chain):
“PICCADILLY CLUB” is a loyalty
programme for accumulating points
during shopping – every 5 leva is aqual
to 1 point.
www.piccadilly.bg
They are valid for the period of one
year and can be transferred to
another card if they are not less
than 20.
THE COMPANY STAFF treated as an
internal customer (staff care, not
only customer care!)
Induction training;
Every year courses and seminars for
professional dvlp;
Since 2005- Center for Training and
Qualification: yearly over 200
associates trained;
Relationship marketing in services
7. Strategies for winning back the lost
clients
Compensation strategy: the default products
are replaced by other not defected products
and the client gets a small gift or discount for
other products;
Relationship marketing in services
? Stimulating strategy: this strategy is similar
with the strategy for winning new clients (the
company uses sales promotions and different
types of discounts for winning back the
disappointed and lost clients;
? Improving strategy: this strategy includes
actions for repairing default products, for
improving services or solving some problems
of unsatisfied clients
Relationship marketing in services
8. TYPES OF RELATIONSHIPS in the B2B context
Social bonds: The social bonds are in essence
the positive interpersonal relations between
the customers and the suppliers.
The main characteristic of the social bonds is
the trust: not everything in the business
connectionis written down, sometimes there
can be a verbal promise which is with the
same power like contract.
Relationship marketing in services
Structural bonds: Their characteristic is that one
company invests in activities of the other or
both companies invest in each other’s activities:
Financial bonds: when the vendor offers financial
incentives for retention of the company-client;
Legal bonds: when both companies- supplier and
client have a contract, co-ownership which
connects them for joint activities and joint
competitive advantage;
Relationship marketing in services
Technological bonds: when the technologies of
both companies are connected and
synchronized: for instance electronic data
exchange, software for CRM;
Material bonds: when both companies invest in a
joint offering in order to prepare a competitive
offer for the customers (for instance some
suppliers of retail shops for food invest in the
shop equipment but with the aim to improve the
customer service;
Relationship marketing in services
Software support for Relationship
marketing in B2B:
CRM tool: The CRM systems provide
access to the entire history of every
customer or prospect;
enables the company to analyse the
marketing effectiveness of the
campaigns and relationships;
MAXIMIZER CRM software ,http://www.maximizer.com/
Conclusion:
The Relationship marketing is not an
universal panacea although it works in
most cases:
especially in all kinds of services, in the hotel
and restaurant sectors, in professional
services, in hypermarkets, in B2B sector etc.
RELATIONSHIP MARKETING in services
Thank you very much
for your attention
and welcome to BULGARIA!
doc_888989122.pdf
The marketing in the 21st century is compressed: the cycle between the product launch and the product death is very short;
ERASMUS PROGRAMME- TEACHER’s MOBILITY
march’ 2013
RELATIONSHIP MARKETING IN SERVICES:
Customer LTV and Retention Strategies
Prof. Dr. LINA ANASTASSOVA
Center for Business Studies
BURGAS FREE UNIVERSITY
www.bfu.bg
RELATIONSHIP MARKETING in services
1.Traditional/orthodox marketing
MARKETING is the analysing, organising, planning
and controlling of the firm’s resources, policies,
and activities with a view to satisfying the needs
and wants of chosen consumer/customer groups
at a profit.
Ph.Kotler, Marketing Management, 1967
The main framework for solving the marketing
problems of the company is the concept for the
four “Ps”.
Figure 1: The Orthodox/ Classical Marketing Mix
Concept
RELATIONSHIP MARKETING in services
Other concepts of the MARKETING MIX:
The Marketing Mix of the 5 Ps (Charles
Koffman)
PRODUCT,
PRICE,
PROMOTION,
PLACE,
PEOPLE
RELATIONSHIP MARKETING in services
Other Marketing Mix concept:
The 7 Ps:
Product
Price
Promotion
Place
Physical environment (very important for
the customer experience- IKEA, Apple
Computers, Marriott Hotels..
Processes
RELATIONSHIP MARKETING in services
The fundamental concept of the marketing mix still
applies today but
We need to remember that these original
frameworks for marketing actions were
developed in an unique environment:
They emerged from the United States during a
period of growth and prosperity and focused
on fast-moving consumer goods.
RELATIONSHIP MARKETING in services
But since the 90ies the markets are
totally different!
During the closing years of the 20
th
century
some of these basic tenets of marketing
were increasingly being questioned.
2. What changes in the consumer
behaviour and the markets occure in
the 90ies?
RELATIONSHIP MARKETING in services
? Consumers and customers became more
sophisticated and less responsive to the
traditional marketing pressures- particularly
advertising.
? Brand loyalty is weaker than it used to be in
the 7oies and 8oies because satisfied
consumers does not more mean loyal
consumers.
Brand Satisfaction ? Brand Loyalty
RELATIONSHIP MARKETING in services
As a result: many articles and papers are
along the lines of “Is marketing dead?”
In addition clients become more and
more pretentious: the characteristic of a
product/service which they perceived 5
years ago for an exceptional is now
perceived as normal standard.
RELATIONSHIP MARKETING in services
? The consumer focus is not more on “the
functional characteristics “ of the product but
on additional benefits and especially positive
experience and feelings;
? Consumers and customers exchange
knowledge and information not only among
them but they communicate directly with the
producers and traders as well;
RELATIONSHIP MARKETING in Services
• The marketing in the 21
st
century is
compressed: the cycle between the
product launch and the product death
is very short;
• The business environment and the
competition became very
unpredictable due to the dynamic
technological changes;
RELATIONSHIP MARKETING.
RELATIONSHIP MARKETING in services
So due to the changed markets and the
changed consumer behaviour
a need for new marketing paradygm
emerged:
and this marketing philosophy is called
RELATIONSHIP MARKETING
RELATIONSHIP MARKETING in services
The transactional approach has increasingly
been replaced by a relationship marketing
approach:
From the focus on a single
transaction profit to the focus on
long-term relationship with
customers!
Figure 3: Change from Transactional marketing to
Relationship marketing
Relationship
marketing
Transactional
marketing
Emphasis on
Customer Retention
Emphasis on
Customer Acquisition
Functionality-
based marketing
Cross-functionally
based marketing
RELATIONSHIP MARKETING in services
3. THE PARADYGM of RELATIONSHIP MARKETING
3.1. The fundamental principles of relationship
marketing:
? MAXIMISING THE CUSTOMER LIFETIME VALUE IS
A FUNDAMENTAL GOAL and PRINCIPLE OF
RELATIONSHIP MARKETING;
Definition of Customer Life Time Value (LTV): The
future flow of revenues/or net profit expected of
every customer for defined time period.
RELATIONSHIP MARKETING in services
The companies must recognise that
not all customers are equally profitable and
that they must develop/design strategies to
enhance the profitability of those customers
they seek to target.
In essence, companies, need to tailor and customise
their relationship marketing strategies even to the
extent of so called “one-to-one” marketing.
RELATIONSHIP MARKETING in services
Approaches for defining LTV:
LTV gives an opportunity to quantify the marketing aims
of the company. For instance
” to increase the LTV of the customer with 10%”.
In practice, increasing the LTV means to set 3 aims:
? To increase the period when the clients buy from
the company (to increase the customer life cycle
? To increase the amounts spent for every
purchase;
? To decrease the time between two purchases ;
??ble 1: Increasing LTV of the customer by
achieving 3 goals
Indicators Basic data After 10%
increase/decrease
of the indicators
Average amount spent by
a single purchase
50.0 EU 55.0 EU
Average time period
between the purchases
90.0 days 81.0 days
Average duration of the
customer relationship with
the company
10 years (3650
days)
11 years (4015
days)
???? 50x 3650/90 =
2027.5 Eu
55x 4015/81=
2255.0 Eu
2255.0- 2027.5 / 2027.5 x 100.0= 11.2 % increase of the LTV
RELATIONSHIP MARKETING in services
Another approach for calculating the LTV:
According to another concept for the essence of LTV the
calculation of the LTV must include:
? (+) The volume of all customer expenses for buying
company products during customer’s live time cycle
(S1);
? (+) Company revenue from attracted new customers
through this customer (S2);
? (-) company expenses for the product production for
this customer (Epp);
RELATIONSHIP MARKETING in servic es
(-)marketing expenses for attracting this customer
and for retaining him (Emrk);
(-)company expenses for the discounts offered to
this customer (Edisc);
LTV = S1 + S2 – Epp – Emrk – Edisc
Relationship marketing in services
We have to divide this value by a discount rate to get the
present value of the expected revenues!
The discount rate is needed because future revenue and
profits are not worth as much in today’s money
D= [1 + (i x rf )]?
where D=dicount rate, i-interst rate, rf- the risk factor
and n- number of years that company has to wait;
Example: D=[1 + (0.08 x 2)]² D= 1.35
Relationship marketing in services
There are some software for LTV –
CLTV toolshttp://blog.kissmetrics.com/wp-
content/uploads/2011/08/calculating-
ltv.pdf
Starbucks cafe example
RELATIONSHIP MARKETING in services
Two important reasons for determining the LTV
of customers
1.One is to identify different valuations for
customers with different characteristics.
2. Another could be the goal of influencing
the behaviour of different customers and
consequently changing their LTV;
RELATIONSHIP MARKETING in services
Retaining the right customer over time has a strong
impact on company profitability:
According to Harvard Business School research
articles:
Extended life cycle of customers:
?increases the profit from increased purchases (cross
selling);
?increases profit from reduces operating costs;
?Increases profit from refferals;
RELATIONSHIP MARKETING in services
Some examples of services sector:
Mobil TeL case: Mobil Tel- Bulgaria offers different
opportunities for extending the live time cycle of
its customers by offering different tariff plans and
to increase the revenues received per customer.
They give many bonuses for bigger monthly
spending and for subscription of more than 2
years.
For example: for 200 collected points the customer
gets 6 months per 30 gratis SMS or for 2 years
subscription the customer gets the cheapest tariff
plan, some times mobile phone as gift, home
telephone gratis etc. .
The Case of „HAPPY BAR AND GRILL“ and
some other restaurants.
The Loyalty Card provides many
benefits for the regular customers:
preferred table, special discounted
menu, home delivery, reserved parking
place etc.
RELATIONSHIP MARKETING in services
RELATIONSHIP MARKETING in services
? THE SECOND FUNDAMENTAL PRINCIP OF
RELATIONSHIP MARKETING IS THE CONCEPT OF
FOCUSING MARKETING ACTION ON MULTIPLE
MARKETS:
? For the conventional marketing the only market
is the customer market (consumer and industrial
markets) but according to RM there is a multiple
market model.
? There are 6 important markets to deal with if a
company wants to be successful and to retain the
most valuable clients:
FIGURE 4: RELATIONSHIP MARKETING:
THE SIX MARKETS MODEL
• Customers
• Suppliers
• Employees (to treat the employees as customers)
• Distributors
• Alliance partners
• Influencers
RELATIONSHIP MARKETING in services
? THE THIRD KEY PRINCIPLE of
RELATIONSHIP MARKETING IS THAT IT MUST
BE CROSS-FUNCTIONAL;
? “MARKETING IS TOO IMPORTANT TO BE LEFT ONLY TO
THE MARKETING DEPARTMENT”
David Packard, co-founder of
Hewlett Packard
? This is a call to bring marketing out of its
functional silo and distribute some functions and
tasks to other departments. All employees must
be involved in and devoted to the activities for
establishing long-term relations with customers.
RELATIONSHIP MARKETING in services
3.2. Characteristics of Relationship
marketing
? Emphasises a relationship, rather than a
transactional approach to marketing;
? extends the principles of traditional marketing to
a range of diverse market domains , not just
customer markets;
? recognises that quality, customer service and
marketing need to be much more closely
integrated;
Figure 5: Bringing together customer service,
quality and marketing
QUALITY
CUSTOMER
SERVICE
MARKETING
RELATIONSHIP MARKETING in services
? understands the economics of customer
retention and so that resources are
appropriately allocated between the two
tasks of retaining and attracting customers;
?highlights the critical role of internal
marketing in achieving external
marketing success;
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?ensures that marketing is considered in
a cross- functional context;
?switch from focus on market share
(volume) to share from the wallet of the
customer;
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4. The benefits of retaining satisfied
customers:
Researchers and management consultants
found that retained customers are more
profitable than new customers for the
following reasons:
- the cost of acquiring new customers can be
substantial. A higher retention rate implies
that fewer customers need be acquired more
cheaply;
RELATIONSHIP MARKETING in services
- established customers tend to buy more;
- regular customers place frequent,
consistent orders and, therefore, usually
cost less to serve;
- satisfied customers often refer new
customers to the supplier at virtually no
cost;
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- satisfied customers are often willing to
pay premium prices for a supplier they
know and trust;
- retaining customers makes market entry
or share gain difficult for competitors;
RELATIONSHIP MARKETING in services
5. From transaction to relationships
with customers
Relationship marketing paradygm
differs from transactional marketing
in a number of important ways.
Table 2: Transactional marketing v/s Relationship marketing
Transactional marketing Relationship marketing
? Focus on volume Focus on profitable
retention
? Emphasises product
features
Emphasises customer
value
? Short timescale
Longer-term timescale
? Little emphasis on
customer service
High customer service
emphasis
? Moderate customer
contact
? Primary concern with
product quality
High customer contact
Concern with
relationship quality
RELATIONSHIP MARKETING in services
Conclusion:
As the old model of transactional marketing
is inadequate to cope with today’s business
environment, marketing has entered a
new era.
In an environment characterised by
increasing global competition and
overcapacity, the focus has to switch
from volume growth to profit growth.
RELATIONSHIP MARKETING in services
6. STRATEGIES FOR RETENTION AND
DEVELOPMENT OF CUSTOMERS
One of the strategic aims of the
Relationship marketing is to retain the
valuable customers which means
that the company first have to take the
decision:
which customers are valuable and
deserve to be retained and loved.
RELATIONSHIP MARKETING in services
6. POSITIVE RETENTION STRATEGIES
6.1. Satisfying and exceeding customer
expectations
In order to satisfy the customer expectations
and desires the company must listen to the
clients and understand them.
The company must know well which are the
priorities in the customer expectations and
to deliver them.
RELATIONSHIP MARKETING in services
Means/tools for collecting and
analysing the data for the customers;
?-market research (primary and secondary
information) ;
?-customer reports;
?- data base with customer profiles;
?- panel research;
?-interactive web sites (forums, feed back
section);
?- online survey;
?-direct contacts with the customers etc.
RELATIONSHIP MARKETING in services
Important: Exceeding customer expectations
means delighting the customer. Some efforts for
delighting the customer may be not the
appropriate ones : for instance to deliver a
service faster not always means better.
Proactive Approach to Exceeding Customer
Expectations
? Understand market and customer expectations;
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?Segment customers based on multi-
dimensional criteria;
?Define customer service strategies and
goals based on customer segments;
?Define core business processes that
support service strategies;
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? Develop metrics which are quantifiable and
actionable;
? Build organizational support and capability;
? Implement strategies and action plans;
? Measure, analyze and interpret information;
RELATIONSHIP MARKETING in services
6.2. Discovering ways to add value
Schemes for rewarding the loyalty:
? The successful schemes provide 5 types of value
for the participants:
? Cash value: what is the size of the bonus in
cash compared to the amount spent for getting
it;
? Value of the choice: how big is the variety of
offered bonuses;
RELATIONSHIP MARKETING in services
? Desired value: to what extend the client wants
the bonus;
? Relative value: how accessible are the bonuses;
? Value of convenience: how easy is the collection
of points/credits in order to get the amount
required for the concrete bonus;
RELATIONSHIP MARKETING in services
EXAMPLES FOR GOOD PRACTICES in Relationship
Marketing of BULGARIAN COMPANIES in hotel ,
restaurant and retail sector
POSITIVE RETENTION STRATEGIS
STRATEGY “ADDING VALUE” by using the second
method in its frame:
PRORGRAMMES FOR AWARDING THE LOYALTY:
? HOTEL CHAIN “SHARLOPOV” :
S- CLUB CARD: The club card offers a variety of benefits
for the loyal customers including:
RELATIONSHIP MARKETING in services
- 10% discount of the prices on reception;
-10% discount in the restaurants and bars of
the hotel chain;
- 10% discount in the Spa-Center
- Priority for the reservations;
- Choice of favourable room;
Additional bonuses: free weekends, free
dinners, free short trips, gifts;
Free bulletin of the chain with news, new
offers and promotions;
Effects: increased revenues from the
loyal customers by 12-15%; increased
customer life-time value
RELATIONSHIP MARKETING in services
? GRAND HOTEL POMORIE (Award of
IHRA ‘2008 “The Best Hotel on the
Balkans”)
“GHP VIP CLUB”
The loyalty card guarantees a variety of
benefits for the regular customers
including:
-10% discount of the prices on reception;
-10% discount in the sky bar, winter garden
and the main restaurant;
- 10% discount in the Spa-Center
- Priority for the reservations;
- Choice of favourable room;
- Additional bonuses: free nights, free
dinners, free sightseeing of important
cultural sites around, gifts;
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RELATIONSHIP MARKETING in tourism and services
Examples from the international chains:
? The international hotel chains offer for their loyal
customers different club cards:
? Hyatt- Gold passport with three levels;
? The Marriott club card has also 3 levels:
Exceptional bonuses, Platinum cards, Dyamond
cards;
LOYALTY CARDS in the
RESTAURANTS in Bulgaria
There are many restaurants in Bulgaria
providing for their regular clients the so
called “Loyalty cards” which
guarantee between 5 and 10% discounts
of every order:
? Restaurant “ California”- Burgas
? Cafeterias “Face”- Burgas
Relationship marketing in services
RM with partners:
Strategy of Co-branding:
1. MOBILE operator GLOBUL and
banks or book shops:
When customers of Globul use the
credit card of a partner bank, they
get a bonus- discount of the
monthly bill.
Relationship marketing in services
2. Globul and book shop Helikon in
Bulgaria
Depending of the customers
turnover over POS-terminal he
can receive up to 500 minutes in
the Globul network.
Example from retail sector:
SUPER MARKETS “PICCADILLY” (14
years successful history of the chain):
“PICCADILLY CLUB” is a loyalty
programme for accumulating points
during shopping – every 5 leva is aqual
to 1 point.
www.piccadilly.bg
They are valid for the period of one
year and can be transferred to
another card if they are not less
than 20.
THE COMPANY STAFF treated as an
internal customer (staff care, not
only customer care!)
Induction training;
Every year courses and seminars for
professional dvlp;
Since 2005- Center for Training and
Qualification: yearly over 200
associates trained;
Relationship marketing in services
7. Strategies for winning back the lost
clients
Compensation strategy: the default products
are replaced by other not defected products
and the client gets a small gift or discount for
other products;
Relationship marketing in services
? Stimulating strategy: this strategy is similar
with the strategy for winning new clients (the
company uses sales promotions and different
types of discounts for winning back the
disappointed and lost clients;
? Improving strategy: this strategy includes
actions for repairing default products, for
improving services or solving some problems
of unsatisfied clients
Relationship marketing in services
8. TYPES OF RELATIONSHIPS in the B2B context
Social bonds: The social bonds are in essence
the positive interpersonal relations between
the customers and the suppliers.
The main characteristic of the social bonds is
the trust: not everything in the business
connectionis written down, sometimes there
can be a verbal promise which is with the
same power like contract.
Relationship marketing in services
Structural bonds: Their characteristic is that one
company invests in activities of the other or
both companies invest in each other’s activities:
Financial bonds: when the vendor offers financial
incentives for retention of the company-client;
Legal bonds: when both companies- supplier and
client have a contract, co-ownership which
connects them for joint activities and joint
competitive advantage;
Relationship marketing in services
Technological bonds: when the technologies of
both companies are connected and
synchronized: for instance electronic data
exchange, software for CRM;
Material bonds: when both companies invest in a
joint offering in order to prepare a competitive
offer for the customers (for instance some
suppliers of retail shops for food invest in the
shop equipment but with the aim to improve the
customer service;
Relationship marketing in services
Software support for Relationship
marketing in B2B:
CRM tool: The CRM systems provide
access to the entire history of every
customer or prospect;
enables the company to analyse the
marketing effectiveness of the
campaigns and relationships;
MAXIMIZER CRM software ,http://www.maximizer.com/
Conclusion:
The Relationship marketing is not an
universal panacea although it works in
most cases:
especially in all kinds of services, in the hotel
and restaurant sectors, in professional
services, in hypermarkets, in B2B sector etc.
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Thank you very much
for your attention
and welcome to BULGARIA!
doc_888989122.pdf