Wyndham Worldwide Adopts A Stakeholder Orientation Marketing

Developing and Maintaining Long-Term Customer Relationships
Chapter 10
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Is not about creating a large number of transactions
Is one that attracts and retains customers over the long-term
Considers customer needs, wants, and expectations
Develops long-term relationships
The “Right” Marketing Strategy
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A business philosophy aimed at defining and increasing customer value in ways that motivate customers to remain loyal
CRM is about retaining the “right” customers.
CRM Stakeholders
Customers
Employees
Supply chain partners
External stakeholders (government, media, advocacy groups)
Customer Relationship Management (CRM)
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Shift from Acquiring Customers to Maintaining Clients (Exhibit 10.1)
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Goal is to move consumers through levels of increasing relationship intensity
Recognizes that not all customers have equal value to the firm (based on the lifetime value of customers)
Focuses on building share of customer
Fully serving the needs of current customers, rather than acquiring new customers
Encourage current customers to do more business with the firm
Developing Relationships in Consumer Markets
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Stages of Customer Relationship Development (Exhibit 10.2)
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Financial Incentives
Using financial incentives to increase customer loyalty
Examples: Coupons, frequent customer programs
Adv: Easy to use, effective in the short term
Dis: Easy to imitate, hard to end once started
Social Bonding
Using social and psychological bonds to maintain a clientele
Examples: Membership programs, customer-only events
Adv: Difficult to imitate, reduces brand switching
Dis: Takes time, must build customer trust
Customer Relationship Strategies (Exhibit 10.3)
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Enhanced Customization
Using intimate customer knowledge to provide one-to-one solutions or mass customization
Examples: Reminder notices, personal shoppers
Adv: Promotes brand loyalty, very hard to imitate
Dis: Can be expensive, takes time to develop
Structural Bonding
Creating customized product offerings that create a unique delivery system for each client
Examples: Contractual relationships; structured, lock-step programs
Adv: Ultimate reduction in brand switching
Dis: Time consuming and costly, customer resistance
Customer Relationship Strategies (Exhibit 10.3) (continued)
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Like CRM in consumer markets, involves moving buyers through increasing levels of relationship intensity
Typically based on creating structural connections between partners
Creates win-win scenarios
Is more involving and complex than CRM in consumer markets
Developing Relationships in Markets
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Change in Buyers’ and Sellers’ Roles
Shift from competitive negotiation to collaboration
Increase in Sole Sourcing
Creates solutions at lower costs
Increase in Global Sourcing
Easier to find partners that meet exacting needs
Increase in Team-Based Buying Decisions
Better decisions come from diverse expertise
Increase in Productivity through Better Integration
Reduces inefficiency and hard/soft costs; increases profitability
Changes in Relationships
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After firms rank their customers on profitability or lifetime value measures, highly profitable customers get special attention, while unprofitable customers get poor service or are “fired.” What are the ethical and social issues involved in these practices? Could CRM be misused? How and why?
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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Quality is a relative term that refers to the degree of superiority of a firm’s goods or services
The Core Product
Satisfies the basic customer need
Core product in services (people, processes, and physical evidence)
Supplemental Products
Goods or services that add value to the core product
Symbolic and Experiential Attributes
Usually based on image, prestige, or branding
Understanding the Role of Quality
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Components of the Total Product Offering (Exhibit 10.4)
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Most firms struggle with improving quality
Customers have very high expectations
Most products compete in mature markets
Very little differentiation among product offerings
Keys to improving quality
Understand customers’ expectations
Translate expectations into quality standards
Uphold quality standards
Don’t overpromise
Delivering Superior Quality
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Value is the subjective evaluation of benefits relative to costs to determine the worth of a firm’s product offering relative to other product offerings.
Value can be used to guide marketing strategy.
It balances the five types of utility.
It includes the concept of quality, but is broader in scope.
It takes into account every marketing program element.
It can be used to explicitly consider customer perceptions.
Understanding the Role of Value
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A simple formula for value (from Chapter 6):

A more strategic formula for value:
The Value Formula
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Perceived Value = Customer Benefits

Customer Costs

Perceived Value = Core Product Quality + Supplemental Product Quality + Experiential Quality

Monetary Costs + Nonmonetary Costs

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Core Product, Supplemental Product, and Experiential Quality
Firms can create unique combinations to drive value perceptions.
Monetary Costs
Transactional costs include the immediate financial outlay that must be made to purchase the product.
Life-cycle costs include additional costs that will be incurred over the life of the product.
Nonmonetary Costs
Time, effort, risk, and opportunity costs
Not as obvious as monetary costs, so customers sometimes ignore them.
The Value Formula (continued)
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Value and the Marketing Program (Exhibit 10.5)
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Understanding Customer Expectations
Range of customer expectations
Ideal expectations
Normative expectations
Experience-based expectations
Minimum tolerable expectations
Customer expectations can vary based on the situation
Expectations increase during highly involving or important purchase situations.
Expectations decrease when customers are more tolerant of poor performance, when they have few alternatives, or when performance is beyond the control of the firm.
Customer Satisfaction: The Key to Customer Retention
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Range of Customer Expectations
(Exhibit 10.6)
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The difference between the upper and lower end of the range of possible customer expectations
The width of the zone represents the degree to which customers recognize and are willing to accept variability in performance.
Three potential outcomes
Customer delight – performance exceeds desired expectations
Customer satisfaction – performance falls within the zone
Customer dissatisfaction – performance falls below adequate expectations
The Zone of Tolerance
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The Zone of Tolerance
(Exhibit 10.7)
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Of the two types of customer expectations, adequate performance expectations fluctuate the most. Describe situations that might cause adequate expectations to increase, thereby narrowing the width of the zone of tolerance. What might a firm do in these situations to achieve its satisfaction targets?
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Why are Customer Expectations Unrealistic?
Typically, customers are not unrealistic. They only want the basics of performance.
Should We Delight the Customer?
May not be worth the effort if:
It does not increase loyalty or retention.
It lowers performance for other customers.
It increases expectations over time.
Competitors can easily copy it.
The firm should look for small ways to delight customers without it becoming an everyday occurrence.
Managing Customer Expectations
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Quality is narrowly defined and judged on an attribute-by-attribute basis.
Value includes quality, but it also includes monetary and nonmonetary costs.
Satisfaction is based on expectations and is typically considered holistically.
Satisfaction can be based on quality, value, or factors that have nothing to do with quality or value.
Expectations and satisfaction can be affected by nonquality and nonvalue issues over which the firm has little control.
Satisfaction versus Quality versus Value
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Understand what can go wrong
Focus on controllable issues
Manage customer expectations
Offer satisfaction guarantees
Make it easy for customers to complain
Create relationship programs
Make customer satisfaction measurement an ongoing priority
Customer Satisfaction and Customer Retention
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Examples of Customer Satisfaction Guarantees (Exhibit 10.8)
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Measuring Expectations and Performance (Exhibit 10.9)
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Lifetime Value of a Customer (LTV)
Average Order Value (AOV)
Customer Acquisition/Retention Costs
Customer Conversion Rate
Customer Retention Rate
Customer Attrition Rate
Customer Recovery Rate
Referrals
Social Communication
Customer Satisfaction Measurement
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Given the commoditized nature of many markets today, does customer relationship management – and its associated focus on quality, value, and satisfaction – make sense? If price is the only true means of differentiation in a commoditized market, why should a firm care about quality? Explain.
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© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.