CHAPTER 16

Customer Retention and Maximization

Chapter 16 - Customer Retention and Maximization

THE CUSTOMER RELATIONSHIP CONTINUUM

Always-A-ShareCustomer

Lost-For-GoodCustomers

SWITCHING COSTS

The Direct and Indirect costs a buyer will haveto pay to go to another supplier

Chapter 16 - Customer Retention and Maximization

LOST-FOR-GOOD ALWAYS-A-SHARE

Customers are tied to a system. Switching costs may include:

• Specific investments• Cancellation penalties• Setup costs for a new supplier• Retraining• Finding/Evaluating a new supplier

Customers can allocatetheir purchases toseveral vendors . Aperiod of no purchasescan be followed by anumber of purchases.Doesn’t want to rely on a single vendor.Suppliers are largelyinterchangeable

DEFINING CUSTOMER NATURE

Chapter 16 - Customer Retention and Maximization

PAYOFFS FROM LONG-TERM RELATIONSHIPS Grow additional business opportunities for new

products or increased purchases

Premium prices result from giving first-rate service and product quality

Reduced selling costs from tighter coordination of production and logistics (efficiencies)

Additional revenues possible from customers’ referrals and joint sales calls with customers

Chapter 16 - Customer Retention and Maximization

WHY COMPANIES STAY IN A RELATIONSHIP

THEY HAVE TO – No alternative, binding actions such as contracts, product ties

THEY WANT TO – Relationship is satisfying because of cooperation and meeting financial objectives

Chapter 16 - Customer Retention and Maximization

TIES THAT BUILD RELATIONSHIPS SUPERIOR PERFORMANCE at a good price

(value)

SOCIAL RELATIONSHIPS created by frequent interaction

TECHNICAL DEPENDENCIES brought about by reliance on a supplier’s products or support

FORMAL AGREEMENTS involving investments or contracts

Chapter 16 - Customer Retention and Maximization

RelationshipTermination

Costs

RelationshipBenefits

Shared Values

Communication

OpportunisticBehavior Uncertainty

FunctionalConflict

Cooperation

PropensityTo leave

Acquiescence

RelationshipCommitment

Trust

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TRUST AND COMMITMENT IN BUSINESS

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Chapter 16 - Customer Retention and Maximization

Process 5

(etc.)

Attribute 1

Attribute 2

Attribute 3

Suggest

change for improvement

Process 4

(Technical Support)

Attribute 1

Attribute 2

Attribute 3

Suggest

change for improvement

Process 3

(Service manuals

Attribute 1

Attribute 2

Attribute 3

Suggest

change for improvement

Process 2

(Parts reps)

Attribute 1

Attribute 2

Attribute 3

Suggest

change for improvement

Process 1

(Parts handling)

Attribute 1

Attribute 2

Attribute 3

Suggest

change for improvement

Loyalty questions• Willingness to recommend• Repurchase intentions

General overallSatisfaction question

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CUSTOMER SATISFACTION SURVEY

Chapter 16 - Customer Retention and Maximization

MEASURING SATISFACTIONAFTER THE SURVEYS

MANAGEMENT QUESTIONS

1. What do the surveys tell us?

2. How do we use the information we have?

3. How reliable is the information?

Chapter 16 - Customer Retention and Maximization

STRENGTHENING GOOD RELATIONSHIPS Develop and strive for shared goals

(SUPRAGOALS)

Anticipate customer needs

LAGNIAPPE (lan – yapp) – giving without obligation (sending birthday cards to clients)