BUILDING CUSTOMER

RELATIONSHIPS
BM006-3-3

CHAPTER 1
Understanding Relationship
Marketing
 LEARNING OUTCOME
At the end of this lecture, YOU should be able
to:

1.Define and explain what is relationship

marketing
2.Know the difference between the
transactional based marketing and
relationship based marketing

Module Code and Module Title Title of Slides

 Marketing is defined as...

Process by which individuals and groups

obtain what they need and want through
creating and exchanging products and
value with others.

Simply put: Marketing is the delivery of

customer satisfaction at a profit.

Module Code and Module Title Title of Slides

 More Definitions of Marketing
(cont.)

• From the societal perspective; some marketers

describe marketing as the creation and delivery of
a standard of living.

• From the managerial perspective; marketing

(management) is the process of planning and
executing the conception, pricing, promotion and
distribution of goods and services to create
exchanges that satisfy individual and
organizational goals.
Module Code and Module Title Title of Slides
 What is Marketing?

• No single correct definition or approach

• Common subject matters:
– The ability to satisfy customers,
– The identification of favorable marketing opportunities,
– The need to create an edge over competitors,
– The capacity to make profits to enable a viable future for
the organization,
– The use of resources to maximize a business’ market
position,
– The aim to increase market share mainly in target
markets

Module Code and Module Title Title of Slides

 Core Concepts of Marketing

Needs, wants,
and demands

Markets Products
and services

Exchange,
Value and
transactions,
satisfaction
and relationships
Module Code and Module Title Title of Slides
 Core Concepts of Marketing

• Need
• Needs, wants, and – Basic human requirements
demands – State of self deprivation
• Marketing offers: • Example: Need food
including products, • Wants
services and experiences – Needs directed to specific
objects
• Value and satisfaction – The form of needs as
• Exchange, transactions shaped by culture and the
and relationships individual
• Example: Want a Big Mac
• Markets • Demands
– Wants which are backed by
buying power

Module Code and Module Title Title of Slides

 Core Concepts of Marketing

• Needs, wants, and • Marketing offering

demands – Combination of
• Marketing offers: products, services,
information or
including products, experiences that satisfy
services and experiences a need or want
• Value and satisfaction – Offer may include
services, activities,
• Exchange, transactions
people, places,
and relationships information or ideas
• Markets

Module Code and Module Title Title of Slides

 Core Concepts of Marketing

Products
Anything that can be Offered to a Market to Satisfy a Need or Want

Experiences
Experiences Persons
Persons Places
Places

Organizations
Organizations Information
Information Ideas
Ideas

Services
Activities or Benefits Offered for Sale That Are Essentially
Intangible and Don’t Result in the Ownership of Anything
Module Code and Module Title Title of Slides
 Core Concepts of Marketing

• Value
• Needs, wants, and
– Customers form
demands expectations regarding
• Marketing offers: value
including products, – Marketers must deliver
services and experiences value to consumers

• Value and satisfaction • Satisfaction

– A satisfied customer will buy
• Exchange, transactions again and tell others about
and relationships their good experience
• Markets

Module Code and Module Title Title of Slides

 Core Concepts of Marketing

Value Gained From Owning a Product and

Costs of Obtaining the Product is
“Customer Value”

Product’s Perceived Performance in Delivering Value

Relative to Buyer’s Expectations is
“Customer Satisfaction”

Total Quality Management Involves Improving the Quality

of Products, Services, and Marketing Processes

Module Code and Module Title Title of Slides

 Core Concepts of Marketing
• Exchange
• Needs, wants, and – The act of obtaining a
desired object from someone
demands by offering something in
• Marketing offers: return
including products, • Transaction
services and experiences – Trade of values between two
• Value and satisfaction or more parties
• One exchange is not the goal,
• Exchange, transactions relationships with several exchanges
and relationships are the goal
• Markets
• Relationships are built through
delivering value and satisfaction
– Marketing network consists of
the company and all its
supporting stakeholders

Module Code and Module Title Title of Slides

 Evolution of Marketing Thought

• How marketing has become

“marketing” as we understand it
and apply its practices today?

Module Code and Module Title Title of Slides

 Evolution of Marketing
Thought
• Production Era (1850s-1920s)
– Industrial revolution; mass production
– Few products and little competition
• Sales Era (1920s-1950s)
– The focus was on personal selling and advertising
– Sales seen as the major means for increasing profits
• Marketing Era (1950s-present)
– Customer orientation replaced the “hard sell” of the sales-led era
– Determination of the needs and wants of customers before
introducing products or services

Module Code and Module Title Title of Slides

 Evolution of Marketing
Thought
• Relationship Marketing Era: 1990s-
– Marketing era has recently shifted from being “transaction-
based” to focusing on “relationships”
– The argument traditional marketing practices focused on
attracting new customers rather than retaining existing
ones.
– It is equally important to hang on to existing customers so
that they become repeat buyers and long term loyal
customers
» “customer relationship management”!

Module Code and Module Title Title of Slides

 Company Orientations
Towards the Marketplace

Consumers prefer products that are

Production
Production Concept
Concept widely available and inexpensive

Consumers favor products that

Product
Product Concept
Concept offer the most quality, performance,
or innovative features

Consumers will buy products only if

Selling
Selling Concept
Concept the company aggressively
promotes/sells these products

Focuses on needs/ wants of target

Marketing
Marketing Concept
Concept markets & delivering value
better than competitors
Module Code and Module Title Title of Slides
 Production Concept

• Consumers will favor those products that are

widely available and low in cost.
• Managers concentrate on achieving high
production efficiency and wide distribution.

• The assumption is valid at least in 2 situations :

– The demand for a product exceeds supply (suppliers will
concentrate on finding ways to increase production)
– The product’s cost is high and has to be decreased to
expand the market.

Module Code and Module Title Title of Slides

 Product Concept

• Consumers will favor those products that offer

the most quality, performance or innovative
features.
• Managers in product-oriented organizations
concentrate on making superior products and
improving them over time.
• The assumption is the customers will admire
well-made products and can evaluate product
quality and performance
• This concept may lead to marketing myopia
(intolerance, short-sightedness)
Module Code and Module Title Title of Slides
 Selling Concept

• Agressive selling and promotion

• Assumptions are;
– Consumers must be convinced of buying company
products
– Company is powerful in generating effective selling and
promotion to stimulate more buying
• This concept is mostly used by firms which have
overcapacity.
• The aim is “to sell what they make” rather than
“make what the market wants.”
• Short-term profits are more important (customer
dissatisfaction may occur)
Module Code and Module Title Title of Slides
 Marketing Concept

• Key to achieving organizational goals consists

of being more effective than competitors in
creating, delivering and communicating
customer value to target markets.

• 4 pillars of modern marketing :

1. Target market
2. Customer needs
3. Integrated marketing
4. Profitability through customer satisfaction

Module Code and Module Title Title of Slides

 Marketing and Sales Concepts Contrasted
Starting
point Focus Means Ends

Existing Selling and Profits through

Factory products promotion sales volume

(a) The selling concept

Customer Integrated Profits through

Market needs marketing customer
satisfaction

(b) The marketing concept

Module Code and Module Title Title of Slides
 Marketing Concept (cont.)

1) Target market ğhomogenous group of customers

to whom the company wishes to appeal
2) Customer needs
– Consumers may not be fully conscious of their needs
– It may not be easy to articulate these needs
– They may use words that require some interpretation
– Customer-oriented thinking ğto define customer needs from
the customer’s point of view
– Sales revenue ğ New customers + Repeat customers
– “Customer Retention” vs. “Customer Attraction”
– Customer satisfaction is a function of the product perceived
performance and buyer’s expectations

Module Code and Module Title Title of Slides

 Marketing Concept (cont.)

3) Integrated Marketing
1. Various marketing functions must work together for
customer satisfaction (coordination of 4Ps; marketing
mix elements)
• Marketing Mix ğ controllable variables the company puts
together to satisfy its target market(s).
Product: Product variety, quality, design, features, brand name,
packaging, sizes, services, warranties, returns
Price: List price, discounts, allowances, payment period, credit
terms
Promotion: Sales promotion, advertising, sales force, public
relations, direct marketing
Place: Channels, coverage, assortments, locations, inventory,
transport

Module Code and Module Title Title of Slides

 Marketing Concept (cont.)
Integrated Marketing (cont.)
2. Marketing must be well coordinated with other
departments in the company;
All departments have to work together to satisfy
customers’ needs and wants.

4) Profitability through customer satisfaction

– To achieve profits as a result of creating superior
customer value.

Module Code and Module Title Title of Slides

 Selling – Marketing...

“There will always be need for

some selling. But the aim of marketing is to
make selling superfluous. The aim of
marketing is to know and understand the
customer so well that the product or
service fits him and sells itself. Ideally,
marketing should result in a customer who
is ready to buy.”
Peter Drucker

Module Code and Module Title Title of Slides

 Modern Marketing Concept
Traditional Organization Chart

Top
Management

Middle Management

Front-line people

Customers

Module Code and Module Title Title of Slides

 Modern Marketing Concept
Customer-Oriented Organization Chart

Customers

Front-line people

Middle management

s
C

er
us

om
tom

Top

t
us
er

manage-

C
s

ment

Module Code and Module Title Title of Slides

 INTANGIBLES

Brand capital NEW

ECONOMY
Sales “push” focus Customer “pull” focus

Human capital
Production focus Customer focus

Working capital
High Low

OLD ECONOMY (WIP, finished goods) (direct delivery

to customers)
Physical capital

Module Code and Module Title Title of Slides

 Marketing Landscape

Challenges • Growth of the Internet

• Advances in
• Digital age telecommunications,
• Globalization information,
• Ethics and social transportation
– Customer research and
responsibility tracking
– Product development
• Not-for-profit
– Distribution
marketing – New advertising tools
• Marketing – 24/7 marketing through the
Internet
relationships
Module Code and Module Title Title of Slides
 Marketing Landscape

Challenges
• Geographical and
• Digital age cultural distances
• Globalization have shrunk
• Ethics and social – Greater market coverage
responsibility – More options for
purchasing and
• Not-for-profit manufacturing
marketing – Increased competition
from foreign competitors
• Marketing
relationships
Module Code and Module Title Title of Slides
 Marketing Landscape

Challenges
• Marketers need to
• Digital age
take great
• Globalization
responsibility for the
• Ethics and social impact of their
responsibility actions
• Not-for-profit
marketing
• Marketing
relationships
Module Code and Module Title Title of Slides
 Marketing Landscape

Challenges
• Many organizations
• Digital age are realizing the
• Globalization importance of
• Ethics and social strategic marketing
– Performing arts
responsibility
– Government agencies
• Not-for-profit – Colleges, universities
marketing – Hospitals
• Marketing
relationships
Module Code and Module Title Title of Slides
 Marketing Landscape

Challenges
• Profits through
• Digital age managing long-term
• Globalization customer equity
– Improve customer
• Ethics and social
knowledge
responsibility – Target profitable
• Not-for-profit customers
marketing – Keep profitable customers

• Marketing
relationships
Module Code and Module Title Title of Slides
 The Shift from Transaction-Based
Marketing to Relationship Marketing

• Transaction-based marketing
– Buyer and Seller exchanges characterized by
limited communications and little or no
ongoing relationship between the parties
• Relationship marketing
– Development and maintenance of long-term,
cost-effective relationships with individual
customers, suppliers, employees, and other
partners for mutual benefit

Module Code and Module Title Title of Slides 10-38

 Summary or teaching points

• What is relationship marketing

• Know the difference between the
transactional based marketing and
relationship based marketing

Module Code and Module Title Title of Slides ‹#›

 Question and answer session

Q&A

Module Code and Module Title Title of Slides ‹#›

 What we will cover next

• Chapter 2 Evolution of Relationships with

Customers and Strategic Customer
Experiences

Module Code and Module Title Title of Slides ‹#›

THANK YOU

The End