Chapter-2-RM of Services vs Consumer Market

8/7/2019 Chapter-2-RM of Services vs Consumer Market

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2. Relationship Marting of Services Vs. Consumer Markets

Introduction:

The marketing practices are centurys old, but systematic marketing concept as a distinct discipline has

been evolved in the beginning of 20th century. Customer are main decider of business this concept isgetting ultimate importance from this century. The motive of any business was profit maximizationthrough volume of business according to Selling Concept, but in later years of 20th century, the motive of

business has been shifted toward profit maximization through customer satisfaction. In todayscompetitive world each and every company has to face cutthroat competition with other competitors for afoothold in ever slippery market. That is why mere customer satisfaction is not assuring loyalty towardsany brand. As prospects are having many choices and they are more price sensitive now, companies needto do something additional to make its customers retail. Previously companies used to offer differentiated

products and services to retain their customers. But in todays world imitation of new features and offersare very common and that is why product and service differentiation are tough. So, not only creation of new customers but also retention of old customers is very vital step for profit maximization.

The emphasis on relationship is now a key to successful business and the traditional concept of makingsales is being replaced by making long time win win relationship with customers. It is emerging as thecore marketing activity for business operating in fiercely competitive environments. On average, businessspends six times more to acquire customers than they do to keep them Therefore most of the firms arenow paying more attention to their relationships with existing customers to retain them and increase their share of customers purchases.

Relationship Marketing of Services:

Relationship marketing in services can be defined as process of attracting, maintaining, and in multiservice organizations, enhancing customer relationship

The underlying concept is that to keep the loyal customer retained within the company and to honour their long term performance.

Shani and Chalsani viewed relationship marketing as an integrated effort to identify, maintain and buildup a network with individual customers and to continuously strengthen the network for mutual benefits of

both the sides, through interactive, individualized and value added contracts over a long period of time.

Intensifying competition and technological developments made businesses look for ways to reduce costand improve their effectiveness. The practice of relationship marketing has the potential to improvemarketing productivity through marketing efficiencies and effectiveness

The benefits of relationship marketing come through lower costs of retention and increased profits due tolonger defection rates

The developing economies now calculate on service industries. There is a shift to service economy fromindustrial economy. In this labour intensive sector relationship plays an important role. The major serviceorganizations like banks, hospitals, hotels, IT and telecoms requires regular interaction of marketers andcustomers, so that the bond and understanding between both will become strong.


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According to market Line Associates, the top 20% of typical bank customers produce as much as 150%of overall profit, while the bottom 20% drain about 50% from banks bottom line and the revenues fromthe rest just meeting their expenses.

Strategies for practicing relationship marketing

There may be five strategies recommended for practicing relationship marketing.

1. Developing a core service around which to build a customer relationship2. Customizing relationship to the individual customer 3. Augmenting the core service with extra benefits4. Pricing service to encourage customer loyalty5. Marketing to employees so that they will perform well for customers

Development of relationship orientation of marketing in post industrial era is the rebirth of directmarketing between producers and consumers. Several environmental and organizational developmentfactors are responsible for their rebirth. Development in information technology, data warehousing, data

mining have made it possible for firms to maintain a one to one relationship with their customers.

Service firms are always been relationship oriented. The nature of service business is relationship based.A service is a process or performance where the customer is involved, sometimes for a long period of time, sometime only for a short time, and sometime on regular basis. There is always a direct contact

between a customer and the service firms. This contact makes it possible to create a relationship betweenservice provider and customer. In growing service businesses, the customer was turned from arelationship partner into market share statistics.

There are certain important issues for understanding customers and maintain a long term mutually trustedrelationship with them. These issues are as follows

1. CRM initiatives undertaken by firms2. Development of those programs3. Identifying important (key) customers4. Measurement of effectiveness

CRM initiatives

IT and Telecom, Banking, Hotel, Hospital sectors are adopting various CRM initiatives. In case of It andtelecom the customer care centres are the initial receiver of customer complaints and processed that for the other levels of management for solution. In case of Banking, Hotels and Hospital sectors the feed back opportunity is one of the forms of getting customer satisfaction and dissatisfaction level. In customer centric marketing, marketers assess each customer individually to determine whether to serve that

customer directly or indirectly. Also customer centric marketers determine whether to create an offeringthat customizes the product or service of the marketing mix or standardize the offering.

Process

Information from customers is collected systematically over a period of time. This can be done throughregular surveys and during customer interaction noting down the important points. This information has


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to be combined with the organizations experiences with customers to build rich customer profiles, buying behaviours, preferences and usage patterns.

Identifying Key Customers

When it comes to combining customer information with experiences, service firms seem to beeconomizing. Most of them seem to be doing it for selected customers. Hotels do it for their regular guests specially those who have enrolled for their membership schemes. Financial service providersselectively do it for their high net worth individuals who typically use multiple offerings of the service

provider.

Measurement of Effectiveness

Most service firms rely on periodic surveys to understand their customers expectations and alsounderstand and anticipate the behaviour of customers. Many service firms have indicated that they work with their customers as a team to ensure that their expectations are to exceeded. Research has constantlyindicated that one of the major reasons for poor quality service is the gap between perception of managersabout the customer expectations and customers real or actual expectations (Parasuraman, Zeithaml &Berry, 1985). Roger and Dorf (1999) have recommended a four stage process of Identification,Differentiation, Interaction, and Customization for implementing one to one relationship with customers.After analyzing the information and findings company must go for implementing those key elements andagain they need to follow up the result.

Relationship Marketing of Consumer Products:

Retailing and consumer products go hand in hand, and of particular interest to consumer productmarketers are the relationships that exist between the firm and retailers. Growing retail power isa relatively recent phenomenon, whether it be automobile megadealers, consumer electronicsoutlets, grocery supermarket chains, home furnishing depots, or toy warehouses. It also has thepotential to change the balance of power and the nature of the relationships between consumer

goods companies and retailers.

During the 1990s, in areas as diverse as Western Europe, North America, a small number of supermarket chains began to dominate their respective markets. In doing this they werebecoming increasingly competent and sophisticated in the development of their marketingstrategies including own branding. This is leading to retailers becoming dominant in theirrelationships with what they term their suppliers

Retailers are also seeking to build long-term cooperative partnerships as opposed toadversarial relationships with their suppliers. In order to ensure continuous supply, programmebuying on a global scale is now the norm for many leading retail groups. To ensure transparencyof suppliers' trading terms, retailers expect to probe their suppliers' cost structures and are likelyto suggest ways of reducing costs, and then ask for the savings to be passed on to them.Retailers expect to be kept regularly informed, and are often involved in all stages of qualityassurance and therefore impose standards at every stage from when the particular produce isplanted to when it is placed onto supermarket shelves. They may want direct involvement withtheir suppliers' R&D activities, and they may ask for exclusive rights to new products when itsuits their purpose.

In effect, some retail groups now have the capability to impose what may be termed theirsystemic power over their suppliers, where systemic power is defined as the power that oneparty has to effect the whole system of the other Systemic power can be seen as either coerciveor cooperative in nature. In practice it is likely to be a combination of the two. The belief in the


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strategic importance of systemic power is consistent with the argument that effective supplychain management, and in particular the logistics component is essential to the success of anorganization. That is, they reduce while still benefiting both parties.

To ensure systemic relationships actually work, retailers now reach back into their suppliers'research and development, production and processing, logistics and distribution, merchandising,and marketing and servicing processes and systems, in order to ensure their compatibility andcompliance. A key to this integration is the sharing of data and the modeling. This provides bothpartners with learning loops' that aid in progressively lowering costs throughout the valuesystem.. Those suppliers, who can thus meet their major retailer customer's systemicrequirements, by regarding expertise in IT as part of their core, are also likely to achievepreferred-supplier status. As a result, consumer-goods companies now need to focus increasingattention on capabilities to do with category, account, and trade promotion management

While consumer-goods manufacturers are redeveloping their relationships with major retailers,they are also building closer relationships with their end-consumers. Information technologies areat the forefront of this building process as well. For example, packaged goods companies aresetting up home pages and cooperating with retailers through Internet home shopping. In thiscase the manufacturers are developing closer relationships with the retailers, so that they canparticipate in the one-to-one dialogue that is taking place via the Internet.

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Chapter-2-RM of Services vs Consumer Market