Managing marketing relationships - Article Example

Managing Marketing Relationships Targeting, acquiring and retaining the 'right' s in at the core of many successful firms. We emphasize the importance of carefully choosing target segments and taking pains to build and maintain their loyalty through well- conceived relationship marketing strategies (Ramsey, 2002). Building relationships is a challenge, especially when a firm has many, often millions of customers who interact with the firm in many ways. More recently, customer loyalty has been used in a business context to describe a customer's willingness to continue patronizing a firm over the long term, purchasing and using its goods and services on a repeated and preferably exclusive basis, and recommending the firm's products to friends and associates. Richard Oliver (1999) has argued that consumers first become loyal in a cognitive sense, perceiving from brand attribute information that one brand is preferable to its alternatives. Precisely, a loyal customer can mean to a firm: a consistent source of revenue over a period of many years. However, this loyalty cannot be taken for granted. It will continue only as long as the customer feels that he or she is receiving batter value (including superior quality relative to price) than could be obtained by switching to another supplier. In a classic study, Reichheld and Sasser (1990) analyzed the profit per customer in various businesses, categorized by the number of year that a customer had been with the firm. The researchers found that the longer customers remained with a firm in each of these industries, the more profitable they became to serve. However, it would be a mistake to assume that loyal customers are always more profitable that those making one time transactions (Dowling & Uncles, 1997; Reinartz & Kumar, 2002). On the cost side not all types of businesses incur heavy promotional expenditures to attract a new customer, sometimes, it is more important to invest in a good retail location that will attract walk-in-traffic. Unlike banks, insurance companies and other "membership" organizations that require an application process and specific procedures to establish a new account, many services/businesses face no set up costs when a new customer first seeks to make purchase. On the revenue side, loyal customers may not necessarily spend more than one time buyers and in some instances may even expect price discounts. Finally, revenue does not necessarily increase with time for all types of customers (Reinartz & Kumar, 2000). But relationship marketing still has been adopted with aim to: build grater customer loyalty and relation; develop methods of creating longer term relationships; Lead ultimately to increase sales and profits. To build up customer loyalty, three kinds of marketing tools were designed: economic, psychological (creating links) and structural (partnerships) (Berry and Parasumaran, 1991). In order to increase loyalty relationship marketing has came into existence. Relationship marketing has been defined by Gronroos (1990, 1991, 1994) who has consistently argued for the importance of ensuring that relationships with customers should be continuously developed: "Marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involve are met. This is achieved by a Mutual exchange and fulfillment of promises." Gronroos argues that all marketing strategies lie on a continuum ranging from transactional to relational marketing where relationship marketing can be judged in terms of measures of customer retention rather than marketing share. RM requires the effective acquisition and retention of customers for the building of a more efficient operation and ultimately, a stronger competitive position. Now being familiar with a bank doing retail banking in the country, and having 500 branches and over 2 million customers. I will try to discuss the relationship marketing strategies for the particular bank. It is an important aspect of retail banking to have many different touch points (tellers, call enter staff, self service machines & websites), at multiple location apart from the bank branches. At a single large facility, it is unlikely that a customer will be served by the same frontline staff on two consecutive visits. In such situations, managers historically lacked the tools to practice relationship marketing. But after implementing Customer Relationship, management systems act as an enabler, capturing customer information and delivering it to the various touch points becomes easy. From the customer perspective, well implemented CRM systems has offered a unified customer interface, which means that at each transaction, the relevant account details, knowledge of customer preferences and past transactions or history of a service problem are at the fingertips of the person serving the customer. Recent empirical work supports the notion that, holding fixed the level of CRM investment, the effectiveness of CRM activities depends on the firm's preexisting capabilities and how CRM is integrated with the existing processes of the firm (Boulding et al. 2005, p. 158). With respect to dynamic modeling, an emerging frontier for models of service and relationships are models of customer portfolio management (e.g. Johnson and Selnes 2004, 2005) and customer equity. This has resulted in a vast service improvement. From the Banks perspective, CRM systems has allowed the it to better understand, segment and tier its customer base, better target promotions and cross selling and even implement churn alert systems that signal whether a customer is in danger of defecting (Quiring & Mullen,2002). Mainly in the bank, customer relationship management application has been implemented. We always watch customers' behavior and try to provide those services so that they remain loyal to the bank and are the long term investors. As we experienced those customers doesn't care how the bank stores information or how data from various sources must be combine to give them what they want. They don't even care if they have called the wrong location. All customers know is that they want excellent service and want it now. The timely delivery of excellent service is customer relationship management. CRM in the bank mainly comprises of there phases: acquiring, enhancing and retaining. Each stage/phase supports increased intimacy and understanding between the bank and its customers. Bank is acquiring new customers by promoting its services and products leadership. We provide different financial solutions and instruments to our customers. We are the leader in the market and being a leading and reliable name in the market, we redefine industries performance boundaries with respect to convenience and motivation. The value proposition to the customer is the offer of superior product backed by excellent service. The next step is enhancing our relationship with customer through encouraging excellence in cross-selling and up-selling thereby deepening and broadening the relationship. The value proposition to the customer is an offer of grater convenience at low cost (One-stop shopping). Bank's retention strategy focuses on service adaptability - delivering not what the market wants but what customer wants. The value proposition to customer is an offer of a proactive relationship that works in his or her best interest. Banks main focus is on retention much more than on attracting new customers. Relationship marketing places an emphasis on improved organizational performance more as a consequence of retaining existing consumers than of attracting new ones (Evans and Laskin, 1994; Gummesson, 1998). However, the benefits of relationship marketing are not restricted to organizations and their profitability. Once a relationship is established, all parties should realize benefits. The reasoning behind retaining the customer is simple i.e. if we want to be profitable and increase it, hold on to the good customers. To identify the good customers' bank has divided the customers in several tiers in terms of profitability and that these tiers often have quite different service expectations and needs. According to Valarie Zeithaml, Roland Rust and Katharine Lemony (2001) it's critical that organizations must understand the needs of customers. Customers within different profitability tiers and adjust their service level accordingly. Bank has developed customers around various levels of contribution, different needs (including sensitivities to such variables as price, comfort and speed) and identifiable personal profiles such as demographics. Bank has stratified its customers according to their requirements. At the top level, customers, who constitute a very small percentage of a bank's customer' base. They are heavy users of services and contribute a large share of the profits generated in the bank. Typically this segment is relatively less price sensitive but expects highest service levels in return and is likely to willing to invest in and try new services. The next tier forms a larger percentage of customers than the top one's and contributes less profit to the bank in comparison to top ones. They tend to be slightly more price sensitive and less committed to the firm. The third level of customers provides the bulk of customer base. Because their numbers give the bank economy of scale, they are often important so that bank can build and maintain a certain capacity level and infrastructure which is often needed for serving the upper too level of customers. However, these customers are in them selves are often only marginally profitable. Their level of business is not sufficiently substantial for special treatment. The last and lowest level of customers tend to generate low revenues for the bank but often still requires the same level of services as the third level customers which turns them into a loss making segment from the bank's perspective. Tiering of its clients helped the bank to better understanding of its customers. After tiering the customers' bank tries to maintain a good relationship with its customers. A closer relationship exists when there is face to face interaction between customers and representatives of the bank (or ear-to-ear interaction by phone). Although the services itself remains important, value is added by people and social processes. Interactions may include negotiations and sharing of insight in both directions. In the bank this type of relationship has long existed in many local environments where buyer and seller know and trust each other. In these type of relationship maintenance, bank and customers are prepared to invest resource (including time) to develop a mutually beneficial relationship. This investment may include time spent sharing and recording information. In general, conservation with the bank telecommunication operator, customer enters into a dialogue. Once the operator observed that "Customers demanded a continuing dialogue focused on an understanding of their needs as opposed to a tactical contact aiming to sell them the flavor of the month. Customers were also motivated continuity of contact, wanting to deal with a specific person on a regular basis. They would spend up to 20 minutes disclosing information about their business and needs but having invested that amount of time, they expect the relationship to be perpetuated". As the bank grows larger and make increasing use of such technologies as interactive web sites and self service equipments (ATM's) maintaining meaningful relationships with customer becomes a significant marketing challenge. Bank relied on good networking as communication channel with its customers. Good networking is able to put individuals in touch with others who have mutual interest. Though this type of networking is more required primarily in a business to business context where organizations commit resources to develop positions in a network of relationship with customers, distributors, suppliers, the media, consultants, trade associations, government agencies, competitors and even the customers of their customers. However, the concept of networking is also relevant in consumer marketing environment like retail banking where customers are encouraged to refer friends and acquaintances to the service provider. Individual customers may have relationships with different individuals or departments depending on the situation. As the Evert Gummesson (2001) advocates total relationship marketing as "Marketing based on relationships, networks and interactions, recognizing that marketing is embedded in the total management of the networks of selling organizations, the market, and society. It is directed to long-term win-win relationship with individual customers, and value is jointly created between the parties involved. He identifies no fewer than 30 types of relationships within the broader context of total relationship marketing. But in the context of banking, relationship with customers based on continuous delivery of services has to be maintained. This long term relationship has to be based on good communication channels which act as a vital link between customers and the bank. Bank views cross selling and event driven marketing as tools that provide a strategic advantage for their marketing departments. By implementing cross-selling strategy including the applications necessary to track customer contacts, event triggers can be established identifying prospects for additional sales. In a bank transaction, an event such as a large deposit, triggers sales person to call a customer and ask whether he or she is interested in investment options. Telesales, cross-sell and up-sell software enables users to schedule sales calls, keep detailed records about sales activities and check on the status of customer orders. The software may also be integrated with an inventory application. Tele-selling, cross selling and up-selling depends on identifying customer life path needs. Bank is attempting to build long lasting relationships with customers by matching their life path needs to complementary products and services. As some of our customers approach retirement, bank is recommending and pursuing investment in such assets as money markets, bonds and annuities. If customers with young children could be identified, bank tries to cross-sell plans for education saving or even loan consolidation. The bottom line of that is in order to prosper in today's business environment, bank tries to sell complementary products and services to deepen and lengthen their relationships with its customers. In short, call center applications enables the bank to manage, synchronize and coordinate all customer interaction over multiple communication channels such as the web, telephone, fax, e-mail, interactive voice response (IVR) system and voice over IP. These applications offer the bank out of box computer telephony integration (CTI) and work flow management to automatically assign customers or opportunities to the right call center representative, based on language, product, expertise, named account availability, lead quality, geography and other criteria. Automating the marketing function is critical as organizations grow larger. Managing multiple simultaneous programs and tracking costs across multiple channels becomes increasingly difficult as firms grow. Campaign management, a direct-marketing process, allows, bank to manage, integrate and leverage marketing programs by automating such tasks as managing customer responses, qualifying leads and arranging the logistics of events and transactions. New application software in the CRM system is looking up and sending e-mail reply containing the information the customer requested. Bank has started the permission marketing keeping in view of customer backlash due to unsolicited e-mails. This delivers personalized e-mail, which are relevant to customers and who have requested such information. Bank is providing information regarding request for product and services via the web and other channels. Effecting fulfillment strategies provide a myriad of information to customers and prospects quickly, easily and efficiently. Whether it's a product or a service inquiry, a direct mail response a pricing or billing issue or a request for literature, responding to customer request in a timely manner is critical. One of the most powerful marketing tools for client retention, which is also a critical point in relationship marketing programs (Lindgreen, 2001), is complaint management. So bank has developed the customer support applications which provide customers care services as service request management, account management, contact and activity management, customer surveys and detailed services arrangements. These discrete applications work together to permit customer service representatives to assign, create and manage services request quickly. The representative can also look up detailed information about customer services contract, contacts and activities. The bank's customer support capabilities assist customers with resolving a product or services problem. Help desk application automates the management and resolution of product support calls and improve the efficiency and effectiveness of the help desk process. Customer services functions have benefited greatly from automating their processes. Bank has developed packages to address all facets of customer services on multiple channels including e-mails, Internet, chat, IP telephony and conventional telephones. These new customer service applications developed the level of relationship with the customer and help the bank to provide superior customer services by enabling real time interaction via text chat through web browser directing the customer to his/her customized/personalized web page. Such real time web pages interaction is becoming an important component for all call centers. Armed with such complete customer and product information, services professionals of the bank can resolve customer issues efficiently and effectively. This whole system of CRM has improved relationship with the costumers and in the process customer loyalty and long-term relationship with the bank has developed tremendously. Now looking at the various level of relationship within the bank and changes in technologies and customers need, forced the bank to be dynamic and to change accordingly. The relationship marketing practices and communication with the customers has to be integrated so that bank knows the exact need of the customer. So bank's customer relationship system has to seamlessly integrate structured and unstructured customer data. In general, in the bank for example, customer services agnates and loan officers need across to various types of structure data such as customer and product information and to unstructured data, such as faxes digitized voice messages, images of applications and credit reports. Without a holistic view of the customer and the ability to understand his or her desires objectives of the relationship marketing communication cannot be fulfilled. Today's challenge is to make customer information easily accessible to all users in an organization, thus ensuring a clearer, more complete picture of bank's customers and their relationship with the bank. This accessibility, has fully integrated profile of the customer's and relationships with the bank. Excellence in relationship management means not forcing the customers to be treated preferentially every time, they call for service or support. In the present situation, manager's must pay close attention to bank's contact management capabilities, as the number of opportunities for customer interaction has increased significantly in recent years. Today customer inquiries and transactions can come from a variety of channels, including the call center and the Internet capturing and sharing these interactions within an organization should be the top priority of relationship marketing. Effective, relationship marketing management is the corner stone for achieving the bank's goal of zero leakage to customer information. Effective relationship management requires information about the customer relationship to be current regardless of when where and why that customer contacted the bank. The same business rules and procedures must be followed for every contact, no matter what channel the customer uses to make contact- a web, a call center or a store front. today's restructuring efforts must focus more on identifying solutions that anticipate and address customers needs and less on solving internal process problems. In order to make this shift in focus, the bank must first integrate its business processes across functions. In general sales and service are often viewed as different but in today's customer driven environment, services must start before the sales and be present in every interaction a customer has with the bank. In the present scenario, relationship marketing has been tremendously supported by the web. The web offers on unprecedented opportunity for business to achieve end-to-end integrated sales- and -service environment. However, the key to successful cross functional integration and customer interaction and constituency and simplicity. Today's prospects and customers want access to companies through a variety of channels in order to obtain fast, accurate, consistent information. The web continues to transform from a marketing channel to an interactive customer care and fulfillment center capable of handling multiple communication channels, including faxes, e-mail, video, Internet calls and of course traditional telephone contact. The web's shift from a marketing tool to a customer support tool places a premium on highly integrated customer self service interactions. Banks needs to share customer information with employees, customers and partners, or third-party service organization is critical as bank increasingly depends on outside alliances. From this perspective bank's partners are part of the Bank's extended enterprise. This perspective enables bank to share leads of customer support issues with everyone who comes in contact with the customer regardless of whether they work for the bank. Partner relationship management creates long term competitive differentiation by giving the bank and its partners the ability to trade information and to distribute leads and data about common customers. Providing the kind of service customers expect guarantees customer loyalty. In order to meet these customer service expectations, bank must extend CRM infrastructure to their partners, vendors via, the Internet and Intranets. The demand for complete relationship, management is driving the need to integrate telephone, web & database technologies to provide a 360-degree view of customer attributes and accounts history. Such integration means the bank could combine information on all products and services a customer used and share this information across all delivery channels and points of contact. Now if bank want to build successful customer relationships, its needs to be selective about the segments they target. Matching customers to the bank's capabilities is vital. Manager must think carefully about how customer needs relate to such operational elements as speed and quality, the time when service is available. As David Maister (1997) emphasizes, marketing is about getting better business, not simply more business. But in the bank with substantial customer bases, transactions can still be transformed into relationship by implementing loyalty reward programs, which require customers to apply for membership cards with which transactions can be captured and customers preferences, communicated to the front line. Account management programs may be added to the loyalty program by offering a special telephone number to call for assistance or even naming designated account representatives. Long-term contracts between suppliers and their customers take the nature of relationship to higher level, transforming them into partnership and strategic alliances. But no service company and neither the bank will initiate an awards program for frequent user can ever afford to lose sight of its broader goals of offering high service quality and good value relative to the price and other costs incurred by customers. Finally to remain competitive and to maximize profits, banks must align people, processes, strategy and technology and search for innovative, cost-effective ways to build, retain and deepen the life time value of customer relationship. Bank must understand its customers like never before and use relationship management, communication technologies and different communication channels to serve its customers. A well planned relationship communication management infrastructure and system which captures stores and analyze customer interactions is essential to the future of business. References: 1. Berry, L.L. and Parasuraman, A., (1991), "Marketing Services: Competing through quality" NY The free Press. 2. Boulding, William, Richard Staelin, Michael Ehret, Wesley J. Johnston. (2005). A CRM roadmap: What we know, potential pitfalls, and where to go. Journal of Marketing 69(4) 155-166. 3. Dowling, G. 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(2002), Introduction: Strategy first, then CRM, in the ultimate CRM handbook-strategies and concepts for building enduring customer loyalty and profitability, ed. John G. Freeland (New York: McGraw-Hill), Pp.13. 17. Reichheld, F. and Sasser, W. E. Jr (1990), "Zero Defections: Quality Comes to Services". Harvard Business Review, (Sep/Oct) pp. 105-111. 18. Reinnartz, W. J. and Kumar, V., (2002), The mismanagement of customer loyalty," Harvard business review (July): 86-94. 19. Reinnartz, W.J. and Kumar, V., (2000), on the profitability of long-life customers in a noncontractual setting: an empirical investigation and implication for marketing Journal of Marketing 64, October, 17-35. 20. Valarie, A. zeithaml, Roland, T. Rust, and Katharine N. Lemon, (2001), The customer pyramid: Creating and serving profitable customers, California Management Review, 43, no. 4 (summer): 118-142. Read More