Topic

By Richard Wanjohi

1) Developing Relationships in
a) Consumer Markets
b) Business Markets
2) Quality and Value the keys to
developing customer relationships
3) Customer satisfaction and retention
4) Customer satisfaction metrics



Quote
Definitions
What are Business Relationships?
According to businessdictionary.com its an
association between individuals or companies entered
into for commercial purposes and sometimes
formalized with legal contracts or agreements.

Freedictionary.com a formal contractual relationship
established to provide for regular banking or brokerage
or business sources.
Types of Business Relationships:
David Nour in his book Relationship Economics
classifies them as;
1. Personal relationships/ Discretionary may not
be relevant to the respective individuals or
organisations profession;
2. Functional relationships those with a customer
or client;
3. Strategic relationships extend beyond the
horizon of ones business


Importance of Business Rships
1. Business Strategy and Leadership - Thus leadership
should create appropriate an environment and support
those engaged in execution.

2. Risk Management- the more risk they can manage the
greater their competitive advantage. Risk maybe financial,
performance, safety and external events whether natural
or social and political.

3. Value creation - the value chain seeks to engage all
parties to assess and address these impacts to mutual
benefit. Relationships are important to identify and
translate them into value





Importance of Business Rships
4. Knowledge management - The more we trust the more we
share and the greater the potential to benefit. Knowledge
maybe power but if not shared it has very limited value.
Understand what you can and what should not be shared and
make this visible.

5. Outsourcing- The desire to exploit the potential of non-core
activities through outsourcing must be tempered with a robust
process that embraces the need to consider the importance
of relationships involved.

6. Supply chain vulnerability - 50-80% of operational cost is
channelled through the supply chain. There is the cost
reduction and rationalisation of the supply base and the rush
to exploit benefits of low cost markets.





Importance of Business Rships
7. Mergers and acquisitions- quickest not easiest way to grow
a company. Risky considering the investment and
rationalisation cost. A KPMG report -85% of mergers &
acquisitions across the world are failures
8. Partnerships, Alliances, Consortiums and Joint Ventures -
the more robust ,relationships the greater potential to growth
of business and benefit from delivering value
9. International relationships - those who operate in global
markets are aware of challenges thrown up by cultural
differences, national, regional or frequently corporate
10. People, Behaviours and Trust - managed, targeted,
measured, incentivised and rewarded has influence on how
they interface with others either internally or externally





Developing Relationships in
Consumer Markets
It considers the customer needs, wants and expectations
developing long-term relationships.
Previously, consumer markets were assumed to be
purely transactional based with minimal emphasis on
building relationships with customers
There was more focus on the short term.
Marketing is not just about manufacturing and selling
products; its more concerned with building and
preserving long-lasting relationships with customers.
A hybrid of both transactional as well as relational
emphasizes the importance of mutually beneficial
relationships with consumers that can serve the interests
of both parties.
Importance of Building Long-lasting
Relationships with Customers:
Profitability consumer markets are very
competitive and with increased sales comes profits
Goodwill results in word-of-mouth promotions and
lower costs associated with attracting new customers.
Brand loyalty favoured treatment thus brand loyal
customer.
Product differentiation and competitive
advantage include consumers in the planning
process and gives the chance for company to tailor
their products accordingly. Ask for suggestions from
customers




Relationship Stages:
1) Awareness
2) Initial Purchase
3) Repeat Customer
4) Client
5) Community
6) Advocacy





Developing Relationships in Business
Markets
It involves moving buyers through increasing
levels of relationship intensity.
It is based more on creating structural bonds.
It is more involving and complex than CRM in
consumer markets
Types of Business Markets include;
Producer markets/ Commercial markets
Reseller markets
Government markets
Institutional markets




The changes in business relationships are
captured as follows;
Change in Buyers and Sellers Roles - Shift
from competitive negotiation to collaboration;
Increase in Sole Sourcing - Creates solutions at
lower costs
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





Quality and Value Keys to Developing
Customer Relationships
Quality is a relative term that
refers to the degree of
superiority of a firms 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

Value is the subjective
evaluation of benefits
versus costs to determine
the worth of a firms product
offering relative to other
product offerings
Perceived Value =
Customer Benefits/
Customer Costs


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.

Keys to improving Quality:
Understand customers expectations
Translate expectations into quality standards
Uphold quality standards
Dont overpromise





Customer Satisfaction: The Key to
Customer Retention
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 Measurement
1. Lifetime Value of a Customer (LTV) -is a prediction of the net
profit attributed to the entire future relationship with a customer
2. Average Order Value (AOV) - describes how to
calculate average order value of an e-commerce website and how it is
useful in predicting revenue
3. Customer Acquisition/Retention Costs - percentage at which a
company reports growth in costs. It takes into account existing
customers and newly acquired customers.
4. Customer Conversion Rate
5. Customer Retention Rate - percentage of customers that a
company is able to retain over an extended period of time-typically
over one year.
6. Customer Attrition Rate - divide the number of customer lost by
the total number of customers at the start of the period
7. Customer Recovery Rate -
8. Referrals
9. Social Communication