Customer Relationship Management
The first three steps in the marketing process understanding the marketplace and customer needs, designing a customer-driven marketing strategy, and constructing a marketing program all lead up to the fourth and most important step: building profitable customer relationships.
Customer relationship management is perhaps the most important concept of modern marketing. Some marketers define it narrowly as a customer data management activity (a practice called CRM). By this definition, it involves managing detailed information about individual customers and carefully managing customer “touchpoints” to maximize customer loyalty.
Most marketers, however, give the concept of customer relationship management a broader meaning. In this broader sense, customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. It deals with all aspects of acquiring, keeping, and growing customers.
|Customer relationship management: The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction|
Relationship Building Blocks: Customer Value and Satisfaction
The key to building lasting customer relationships is to create superior customer value and satisfaction. Satisfied customers are more likely to be loyal customers and give the company a larger share of their business.
Attracting and retaining customers can be a difficult task. Customers often face a bewildering array of products and services from which to choose. A customer buys from the firm that offers the highest customer-perceived value the customer’s evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing for offers. Importantly, customers often do not judge values and costs “accurately” or “objectively.” They act on perceived value.
Customer-perceived value: The customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing for offers.
To some consumers, the value might mean sensible products at affordable prices, especially in the aftermath of the recent recession. To other consumers, however, the value might mean paying more to get more. For example, despite the challenging economic environment, GE recently introduced its new Profile washer-and-dryer set, which retails for more than $2,500 (more than double the cost of a standard washer-and-dryer set). Profile ads feature stylish machines in eye-catching colors, such as cherry red. But the ads also focus on down-to-earth practicality. They position the Profile line as a revolutionary new “clothes care system,” with technology that allocates the optimal amount of soap and water per load and saves money by being gentle on clothes, extending garment life. Are Profile washers and dryers worth the much higher price compared to less expensive appliances? It’s all a matter of personal value perceptions. To many consumers, the answer is no. But to the target segment of style-conscious, affluent buyers, the answer is yes.
Customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations. If the product’s performance falls short of expectations, the customer is dissatisfied. If the performance matches expectations, the customer is satisfied. If performance exceeds expectations, the customer is highly satisfied or delighted.
Outstanding marketing companies go out of their way to keep important customers satisfied. Most studies show that higher levels of customer satisfaction lead to greater customer loyalty, which in turn results in better company performance. Smart companies aim to delight customers by promising only what they can deliver and then delivering more than they promise. Delighted customers not only make repeat purchases but also become willing marketing partners and “customer evangelists” who spread the word about their good experiences to others.
Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s expectations.
For companies interested in delighting customers, exceptional value and service become part of the overall company culture. For example, year after year, Ritz-Carlton ranks at or near the top of the hospitality industry in terms of customer satisfaction. Its passion for satisfying customers is summed up in the company’s credo, which promises that it’s luxury hotels will deliver a truly memorable experience one that “enlivens the senses, instills well-being and fulfills even the unexpressed wishes and needs of our guests.”
This post contains the content of the book Principles of Marketing