Relationship Marketing

Presentation for SMEI July 1997

By Theo Muller

 

DEFINITION

Relationship Marketing is the process whereby both parties - the buyer and provider - establish an effective, efficient, enjoyable, enthusiastic and ethical relationship: one that is personally, professionally and profitably rewarding to both parties.

Enlightened Marketing (Clive Porter) Enlightened Marketing is not focusing on what you want to sell but what customers want to buy. Market leadership is bringing the organisation's customers more visual value than any competing organisation.

 

WHY RELATIONSHIP MARKETING?

• To create customer loyalty
• To create a competitive advantage
• Possible through modern technology
• Customers/consumers are discerning - customers demand service

 

THE 4 P's VS. THE 4 C's

4 P's  vs 4 C's

Product  vs Customer

Price vs  Customer

Promotion vs Customer

Place (Distribution) vs Customer

 

• Customerisation is a culture - not just a fad or a "oncer "

 

DEVELOP CUSTOMER CENTERED STRATEGIES

• Are your customers (internal and external) involved in your planning process?
• What are your competitors doing for their customers? (they are also your customers)
• Measure your performance - What you measure you can manage!

 

CUSTOMER SEGMENTATION

The 80 / 20 rule

• The future value of core customers
• More business from existing customers
• Understanding the customers' wants and needs
•  " .... a primary means of achieving a competitive advantage is to have a better understanding of the wants and needs of clients than does the competition" - David Maister
• Treat customers as individuals and align the company resources to deliver customer requirements.

 

DELIVER PRO-CUSTOMER SERVICE

• The three F's of service

- Fast

- Flexible

- to come from the FIRST person contacted

• Customer satisfaction is out..., Customer delight is in the WOW factor - "How did you do that??!!"
• Turn your customers into advocates
• How can I add value to my customers today

 

THE NEED TO RETAIN EXISTING CUSTOMERS

• It costs 5x less to retain an existing customer than it does to acquire a new one.
• Customer retention is relationship building
• Effective customer relationships are characterised by - accessibility/ accountability/ responsibility/ commitment/ enhancement/ longevity/ mutual profitability/ mutual respect
• Develop customer records/ Database

 

CUSTOMER RETENTION IS PROFITABLE

•  A credit card company calculated that a 5% increase in customer retention would create 125% increase in profits
• AMEX believes that extending customer life cycles by five years could treble its profit per customer
• Coca Cola reckons that a 10% increase in retailer retention may translate into a 20% increase in sales.

 

COMPETE FOR TALENT

• "An incompetent insurance agent is an incompetent insurance company"
•  "A rude waiter is a rude restaurant"
•  "An attentive professional stockbroker is a professional broking firm"
•  "Service is an attitude" - Theo Muller

 

WATCH OUT WHO YOU HIRE

A bank manager says:

"A continual challenge is finding people ... who have the qualities necessary to provide the topnotch customer service that we require. Creative interviewing techniques must be utilized to obtain a clear picture of how the applicant truly feels about the public. Most applicants have had some degree of customer contact in previous employment. However, very few really thrive on customer contact. We look until we find that person - "

 

GO FOR RELIABILITY

• Breaking a promise is the quickest way to lose customers.
• Research has shown that customers rate reliability as the single most important feature in judging service quality.
• Reliability is the heart of excellent service.
• A "zero defects" attitude is as important in services as in manufacturing.

 

USUALLY ISN'T GOOD ENOUGH!

• Do you want to travel on an airline whose pilots are usually dependable?
• Do you trust the surgeon who usually knows what part of the body he/she operates on?
• Do you stay with a bank which usually keeps good records?

 

The President of a telephone company in Canada says....

"Think for a moment about what it would mean in our daily lives if people got things right only 99% of the time: at least 200,000 wrong prescriptions would be processed every year; there would be nine misspelled words on every page of a magazine; we'd have unsafe drinking water four times each year; there would be no telephone service for fifteen minutes every day..."

 

DO-IT-RIGHT FIRST

The following mission statement makes a lot of sense: ...

"Once I make a commitment to a customer or another associate, I promise to fulfill it on time. I will do what I say when I say I will do it... I Understand that one claim or one mistake is one error too many. I promise to do my job right the first time and to continually seek performance improvement."

 

BE GREAT AT PROBLEM SOLVING

Three scenarios when a customer makes a complaint:

• The customer complains and is satisfied with the company's response
• The customer complains and is not satisfied with the company's response
• The customer does not complain to the company and remains dissatisfied

 

The latter two are dangerous

COMMON (EX) CUSTOMER BEHAVIOUR

• They don't complain to the company but spill the beans to everybody else that wants to hear about their bad experiences.
• They also take their custom elsewhere.

 

CUSTOMERS ARE THE SOLE JUDGE OF QUALITY SERVICE

•  On average an unhappy customer tells 11 other people of the bad experience
•  A satisfied customer on average shares the experience with 4 other people
•  Most unhappy customers do not complain to the product supplier or service provider. THEY SIMPLY STAY AWAY (and tell 11 other people).

 

CUSTOMER RESEARCH

Three Steps:

1. Determine Customer Expectations
2. Define Service Standards
3.  Measure your performance

 

DEVELOPING RELATIONSHIPS THAT LAST WITH:

• Your top customers
• Second tier customers who have potential to be top customers
• New customers who have the potential to be top customers

 

CUSTOMERS FOR LIFE

"your ability to keep customers for life is directly related to your ability to develop and maintain a value adding relationship with your customers". Theo Muller

 

REMEMBER...

" People do business with people"

 

ADDING VALUE

• Exceed expectations
• Under-promise, Over-deliver
• Something extra
• Information
• Attention/Recognition
• Support for a third party (indirect added value)
• A thought, a thank you
• A referral or introduction
•  A gift???
• Knowing your customers' business

 

BE CAREFUL ADDING VALUE IS NOT:

• A discount
• Something for free may not add value

 

Adding value ...... get good at it! "an effective lasting relationship is based on mutual respect, understanding and a genuine desire to add value"

 

ADDING VALUE AS A CULTURE

Adding Value...

• Is NOT stop/start
• Requires consistency
• Is an attitude, a conscious decision, that permeates through the entire organisation " what can I do today to add value to my Customers"
• Requires training
• Is a culture that requires commitment from everybody in the organisation

 

THE ULTIMATE PROPOSITION

When our customers acknowledge our company or organisation as one that CONSISTENTLY adds value.

...IT'S PREDICTABLE!!

 

Customer Satisfaction & Customer Loyalty (a study by Thomas Jones & Earl Sasser)

 

POPULAR MYTHS

• It is sufficient to merely satisfy customers.
• As long as a customer rates himself as a satisfied customer, the company-customer relationship is strong.
• A level of satisfaction below total satisfaction (delight) is acceptable • The investment required to change a customer from satisfied to totally satisfied (delight) will not provide an attractive financial return.
• Focus your attention on customers with a low satisfaction rating.

 

PROVEN TRUTHS

• Total customer satisfaction is the key to customer loyalty. (A small drop in the level of customer satisfaction may result in a major drop in customer loyalty.)
• There are wrong customers

- Customers who are hard to please even at the best of times

- 'Right' customers who have had one or more bad experiences and the provider do not have the means or processes to turn this customer around.

 

• Different satisfaction levels reflect different issues and require different actions.

 

FOUR ELEMENTS WHICH AFFECT CUSTOMER SATISFACTION

• Basic, ie delivery of product and services.
• Support, ie customer assistance to make the product or service more effective or easier to use.
• Recovery process, ie to solve a bad experience or complaint.
• Extra-ordinary services, ie exceeding the customer's expectations in a way that it makes the product or service seem customised.

 

The XEROX Experience

Proven Beliefs:

• High quality product and services create high level of customer satisfaction.
• High levels of customer satisfaction will lead to increased customer loyalty.
•  Increased customer loyalty drives long-term financial performance.

 

Pleasant surprise:

• Totally satisfied (delighted) customers are six times more likely to re-purchase Xerox products over the next 18 months than satisfied customers.

 

Conclusion:

• Merely satisfying customers who have the freedom to make choices is not enough to keep them loyal.
• The only true loyal customers are totally satisfied (delighted) customers.

 

MEASURES OF CUSTOMER LOYALTY

• Intent to re-purchase
• Primary behaviour

- recency/frequency/amount/retention/longevity

• Secondary behaviour

- customer referrals/endorsements/spreading the word.

 

LOYALISTS AND APOSTLES

Loyalist: A completely satisfied customer, the company's bedrock, easy to serve

Apostle: As above, PLUS they share their strong feelings towards your company with others, create referrals.

 

DEFECTORS AND TERRORISTS

Defector: More than dissatisfied. Could be satisfied customers who have experienced one or more failures that have not been put right.

Terrorist: As above, PLUS they can't wait to tell others about their bad experiences. Very often these bad experiences are embellished to make for a more interesting story.

 

LEARNING FROM FAILURE

"Give me a fruitful error any time, full of seeds, bursting with its own corrections" (Vilvredo Pareto)

 

CUSTOMER DEFECTIONS

Customer defections hold nearly ALL the information a company needs to compete, profit and grow!!!

 

THE LEARNING ORGANISATION

Effective change comes through employee learning. Effective learning comes from the recognition and analysis of failure.

 

"MISTAKES ARE LEARNING EXPERIENCES"

Customer defections include:

• Customers who close their accounts with one supplier and shift all the business to other suppliers (complete defection)
• Customers who shift some of their business to other suppliers (fractional defection)

 

THE SUCCESSFUL COMPANY...

has systems in place to...

• Identify customer defections
•  Learn from them
• Put into practice what has been learned to avoid future defections.