CHAPTER 4: CUSTOMER RELATIONSHIP MANAGEMENT STRATEGIES FOR BUSINESS MARKETS

CUSTOMER RELATIONSHIP MANAGEMENT- This is a process in which a business or other organization

administers its interactions with customers, typically using data analysis to study large amounts of
information. Customer relationship management (CRM) refers to the principles, practices, and
guidelines that an organization follows when interacting with its customers. Customer relationship
management (CRM) is not just the application of technology but is a strategy to learn more about
customers' needs and behaviors in order to develop stronger relationships with them. As such it is more
of a business philosophy than a technical solution to assist in dealing with customers effectively and
efficiently. Nevertheless, successful CRM relies on the use of technology.

Customer relationship management (CRM) helps businesses to gain insight into the behavior of their
customers and modify their business operations to ensure that customers are served in the best
possible way. In essence, CRM helps a business recognize the value of its customers and capitalize on
improved customer relations. The better you understand your customers, the more responsive you can
be to their needs.

CRM can be achieved by:

 finding out about your customers' purchasing habits, opinions, and preferences
 profiling individuals and groups to market more effectively and increase sales
 changing the way you operate to improve customer service and marketing

To develop responsive and profitable customer strategies, special attention must be given to five
areas: (1) acquiring the right customers, (2) crafting the right value proposition, (3) instituting the best
processes, (4) motivating employees, and (5) learning to retain customers.

A. Acquiring the Right Customers- Customer relationship management directs attention to two
critical assets of the business-to-business firm: its stock of current and potential customer
relationships and its collective knowledge of how to select, initiate, develop, and maintain
profitable relationships with these customers. Customer portfolio management, then, is the
process of creating value across a firm’s customer relationships—from transactional to
collaborative—with an emphasis on balancing the customer’s desired level of relationship
against the profitability of doing so.
B. Crafting the Right Value Proposition- A value proposition is a statement that conveys what a
brand does and how it differs from competitors. A value proposition represents the products,
services, ideas, and solutions that a business marketer offers to advance the performance goals
of the customer organization. A value proposition may include points of parity (certain value
elements are the same as the next-best option) and points of difference (the value elements
that make the supplier’s offering either superior or inferior to the next-best alternative).
C. Instituting the Best Processes- The sales force assumes a central relationship-management role
in the business market. Technical service and customer service personnel also assume
implementation roles that are important and visible in buying organizations. Successful
relationship strategies are shaped by an effective organization and deployment of the personal
selling effort and close coordination with supporting units, such as logistics and technical
service. Some firms divide the sales organization into units that each serve a distinct relationship
category such as transactional accounts or partnership accounts. Through a careful screening
process, promising transaction accounts are periodically upgraded to partnerships.
 D. Motivating Employees- Employee loyalty is earned by investing heavily in training and
development, providing challenging career paths to facilitate professional development, and
aligning employee incentives to performance measures.
E. Learning to Retain Customers- Established customers often buy more products and services
from a trusted supplier and, as they do, the cost of serving them declines. The firm learns how
to serve them more efficiently and also spots opportunities for expanding the relationship. Thus,
the profit from that customer tends to increase over the life of the relationship.

RELATIONSHIP MARKETING
Relationship Marketing is a strategy of Customer Relationship Management (CRM) that
emphasizes customer retention, satisfaction, and lifetime customer value. Its purpose is to market to
current customers versus new customer acquisition through sales and advertising.
Relationship marketing is a facet of customer relationship management (CRM) that focuses on
customer loyalty and long-term customer engagement rather than shorter-term goals like customer
acquisition and individual sales. The goal of relationship marketing (or customer relationship marketing)
is to create strong, even emotional, customer connections to a brand that can lead to ongoing business,
free word-of-mouth promotion, and information from customers that can generate leads.
Relationship marketing centers on all activities directed toward establishing, developing, and
maintaining successful exchanges with customers and other constituents. Nurturing and managing
customer relationships have emerged as an important strategic priority in most firms. Why? First, loyal
customers are far more profitable than customers who are price sensitive and perceive few differences
among alternative offerings. Second, a firm that is successful in developing strong relationships with
customers secures important and durable advantages that are hard for competitors to understand,
copy, or displace.
Relationship marketing stands in contrast to the more traditional transactional marketing
approach, which focuses on increasing the number of individual sales. In the transactional model, the
return on customer acquisition cost may be insufficient. A customer may be convinced to select that
brand one time, but without a strong relationship marketing strategy, the customer may not come back
to that brand in the future. While organizations combine elements of both relationship and transactional
marketing, customer relationship marketing is starting to play a more important role for many
companies.

Importance Of Relationship Marketing

Acquiring new customers can be challenging and costly. Relationship marketing helps retain
customers over the long term, which results in customer loyalty rather than customers purchasing once
or infrequently. Relationship marketing is important for its ability to stay in close contact with
customers. By understanding how customers use a brand’s products and services and observing
additional unmet needs, brands can create new features and offerings to meet those needs, further
strengthening the relationship.

Benefits Of Relationship Marketing

 Higher customer lifetime value (CLV). Relationship marketing creates loyal customers, which
leads to repeat purchases and a higher CLV. In addition, loyal customers are likely to become
brand advocates or ambassadors, recommending products and services to friends, family, and
business associates.
 Reduction in marketing and advertising spending. Spending on marketing and advertising to
acquire new customers can be expensive. Relationship marketing causes customers to do the
 marketing for a brand, in what’s called buzz marketing. Customers tell others about a brand’s
products and services, which can drive sales. Brands with exceptional relationship marketing
programs spend little to no money on marketing or advertising.
 Stronger organizational alignment around the customer. Organizations that emphasize
relationship marketing have a stronger organizational alignment around an exceptional
customer experience. The teams work together to create satisfied and happy customers over
the long term.

Different Types of Relationship Marketing

Marketing efforts have changed drastically in the past few decades. Now, in order to build
relationships, the entire process happens in stages, each with a higher level of commitment. There are
different levels of relationship marketing that include:

1. Basic Marketing. This is the traditional form of relationship marketing in which a brand works to
entice the customer to buy. The focus is on the product or service being sold and how great it is.
This is a form of direct selling with no follow-up after purchase and no further communication or
feedback requested. This style reels people in with a simple message, price, or promotion. It’s a
sale for the sake of making money, and nothing more.
2. Reactive Marketing. At this level of commitment, a brand actively seeks feedback from
customers. Whether it is a compliment on social media, complaint, suggestion, customer
engagement, or product idea, a business is open to it with a reactive marketing approach. There
is some effort to build a relationship with the customer when the situation or opportunity arises.
This is not a typical digital marketing technique. It is inbound marketing focused on purchase
reactions.
3. Accountable Marketing. This level of relationship marketing is about promising and delivering. It
continues the buyer’s journey after purchase and puts a spotlight on customer retention rates
and strategies. This involves checking with customers after they purchase and offering related
products as they arise. Loyalty programs and rewards programs are also incentive strategies
used in accountable marketing. Like a friend calling to see if you need anything, accountable
marketing is about having confidence in what you offer and actively providing solutions to
problems—sometimes before people know they have them. This is also the time to ask for
customer feedback and take the appropriate actions accordingly.
4. Proactive Marketing. This is a form of relationship marketing where a brand keeps consistent
tabs on its customers to build effective relationships. It’s not a one-off sale or a temporary
interaction. The strategy is very personal. It pays close attention to what people want and uses
customer data to understand purchasing behavior. A lot of companies choose email marketing
as a way to perform proactive marketing. The data is then used to produce more engaging
marketing campaigns. The accumulation of consumer information allows a business to relate to
a multitude of situations in an authentic way.
5. Partnership Marketing. This is a form of relationship marketing with a high level of
collaboration. Two businesses work together in a mutually beneficial and promotional
relationship towards a common goal. It could be for a specific campaign, product, or set amount
of time. It enables both companies to increase brand awareness and improve sales. Partnership
marketing is a great strategy for small businesses, startups, and e-commerce companies. One
form of partnership marketing is known as affiliate marketing. This individual/entity is
responsible for promoting products and engaging potential customers. Affiliates have a large
 target market they cater to, and will receive one-time or recurring commission payments for
every sale. A business typically finds affiliates through a platform known as an affiliate network.
It helps a company open up new sales channels and build a database of potential leads.

MANAGING BUYER-SELLER RELATIONSHIP

Establishing a good relationship between the buyer and seller is the most difficult task in the
concept of business marketing theory. Making the seller fulfill all your demands and getting the
maximum number of buyers is the toughest job both of them have to encounter. There are various
dimensions in understanding the relationship between buyer and seller. Some of the dimensions are
given below for a better understanding of the concept: –
 The basic relationship-building block between both of them is based on the interactions of the
sales representative with the buyers
 What is the perception of the buyer towards the sales person which is based on the company’s
reputation
 The behavior of the sales personnel with the buyer depends on the needs of the company, the
personal needs of the employees, and the social needs.

TYPES OF BUYER-SELLER RELATIONSHIP

A. Transactional or distant / Relationship
 It is a one-time interaction between the buyer and the seller
 This type of relationship occurs when there are a large number of suppliers available.
 When the supply market is constant
 There is no complexity in the purchase decision
 This method is preferred by the sellers when they feel that the buyers have low
potential.
 The sellers focus on the low price of the product and also aim at timely delivery.
B. Value-Added or continuing/ Relationship
 This type of relationship occurs when there are medium sales and the potential of the
buyer is also medium
 This type of relationship aims at fulfilling the needs of the buyers more than that of the
competitors, that is, providing them with the maximum value.
 The main objective of the seller in this type of relationship is to get the maximum share
of the market.
C. Collaborative or Partnership Exchange Relationship
 The basic foundation in this type of relationship is the commitment and trust between
the buyer and the supplier.
 The major objective in this is to maintain a long-term mutually beneficial relationship.
 Buyers prefer this type of relationship mostly where there is less choice in the selection
of suppliers.
 Few buyers prefer this when there is much complexity involved in the purchase decision.
 Sellers prefer this type of relationship when they feel that the potential of the buying
firms is high, therefore for the firms to be successful the buyer-seller relationship is the
most important activity.