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Chapter: Business Science - Marketing Management - Buyer Behavior

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Customer Relationship Management

Over a century ago, in small-town America, before the advent of the supermarket, the mall, and the automobile, people went to their neighborhood general store to purchase goods.

Customer Relationship Management

 

Over a century ago, in small-town America, before the advent of the supermarket, the mall, and the automobile, people went to their neighborhood general store to purchase goods. The proprietor and the small staff recognized the customer by name and knew the customer's preferences and wants. The customer, in turn, remained loyal to the store and made repeated purchases. This idyllic customer relationship disappeared as the nation grew, the population

 

moved from the farm communities to large urban areas, the consumer became mobile, and supermarkets and department stores were established to achieve economies of scale through mass marketing. Although prices were lower and goods more uniform in quality, the relationship

 

between the customer and the merchant became nameless and faceless. The personal relationship between merchant and customer became a thing of the past. As a result, customers became fickle, moving to the supplier who provided the desired object at lowest cost or with the most features.

 

CRM is ―the development and maintenance of mutually beneficial long-term relationships with strategically significant customers

 

CRM consists of three components:

customer,

relationship, and

management

 

Customer: The customer is the only source of the company‗s present profit and future growth. However, a good customer, who provides more profit with less resource, is always scarce because customers are knowledgeable and the competition is fierce. Sometimes it is difficult to distinguish who is the real customer because the buying decision is frequently a collaborative activity among participants of the decision-making process [Wyner, 1999]. Information technologies can provide the abilities to distinguish and manage customers. CRM can be thought of as a marketing approach that is based on customer Information.

 

 

Relationship: The relationship between a company and its customers involves continuous bi- directional communication and interaction. The relationship can be short-term or long-term, continuous or discrete, and repeating or one-time. Relationship can be attitudinal or behavioral. Even though customers have a positive attitude towards the company and its products, their buying behavior is highly situational [Wyner, 1999]. For example, the buying pattern for airline

 

tickets depends on whether a person buys the ticket for their family vacation or a business trip. CRM involves managing this relationship so it is profitable and mutually beneficial. Customer lifetime value (CLV), discussed in Appendix C, is a tool for measuring this relationship.

 

 

Management. CRM is not an activity only within a marketing department. Rather it involves continuous corporate change in culture and processes. The customer information collected is transformed into corporate knowledge that leads to activities that take advantage of the information and of market opportunities. CRM required a comprehensive change in the organization and its people.

 

1.Determinants of CRM Trust

 

The willingness to rely on the ability, integrity, and motivation of one company to serve the needs

 

of the other company as agreed upon implicitly and explicitly.

 

Value

 

The ability of a selling organisation to satisfy the needs of the customer at a comparatively lower

 

cost or higher benefit than that offered by competitors and measured in monetary, temporal, functional and psychological terms.

 

In addition to trust and value, salespeople must:

 

Understand customer needs and problems;

 

Meet their commitments;

Provide superior after sales support;

 

Make sure that the customer is always told the truth  (must be honest); and

 

Have a passionate interest in establishing and retaining a long-

 

term relationship (e.g., have long-term perspective). Stages in the development of a Customer Relationship

 

he Pre-relationship Stage

 

The event that triggers a buyer to seek a new business partner.

 

The Early Stage

 

Experience is accumulated between the buyer and seller although a great degree of uncertainty and distance exists.

 

The Development Stage

 

Increased levels of transactions lead to a higher degree of commitment and the distance is reduced to a social exchange.

 

The Long-term Stage

 

Characterised by the companies‗ mutual importance to each other.

 

The Final Stage

 

The interaction between the companies becomes institutionalized. Functions of

 

Customer Relationship Management

 

Direct functions (are the basic requirements of a company that are necessary to survive in the competitive marketplace)

 

Profit; Volume; and Safeguard

 

Indirect functions (are the actions necessary to convince the customer to participate in various marketing activities).

 

Innovation: Market; cout: and Access.

 


 

2.The role of salespeople as relationship builders and promoters

 

Sales people

identifying potential customers and their needs;

 

approaching key decision makers in the buying firm; negotiating and advancing dialogue and mutual trust;

 

coordinating the cooperation between the customers and their company; encouraging the inter-organisational learning process;

 

contributing to constructive resolution of existing conflicts; and leading the customer relationship development team

 

Managing the customer Relationship

Initiating the relationship

 

Engage in strategic prospecting and qualifying; Gather and study pre-call information;

 

Identify buying influences; Plan the initial sales call;

 

Demonstrate an understanding of the customer‗s needs; Identify opportunities to build a relationship; and

Illustrate the value of a relationship with the customer

 

Developing the relationship

 

Select an appropriate offering; Customise the relationship;

 

Link the solutions with the customer‗s needs; Discuss customer concerns;

 

Summarize the solution to confirm benefits; and Secure commitment.

 

Enhancing the relationship

 

Assess customer satisfaction;

Take action to ensure satisfaction;

Maintain open, two-way communication; and

Work to add value and enhance mutual opportunities.

 

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