Chap016 customer retention
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Transcript of Chap016 customer retention
McGraw-Hill/Irwin Copyright © 2009 by the McGraw-Hill Companies, Inc. All rights reserved.
Chapter 16
Customer Retention
and Maximization
THE NATURE OF A CUSTOMER Customer Relationships can be found at any level
Always-A-ShareCustomer
Lost-For-GoodCustomers
Lowest LevelRelationship
Highest LevelRelationship
THE KEY FACTOR:SWITCHING COSTS
The Direct and Indirect costs a buyer will haveto pay to go to another supplier
16-3
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 THE EXTREMES OF CUSTOMER NATURE
Exhibit 16-1
16-4
PAYOFFS TO SELLERS FROMLONG TERM CUSTOMER RELATIONSHIPS
• GROWS 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
• ADDITIONAL REVENUES POSSIBLE from customers’ referrals and joint sales calls with customers
16-5
1 32 54 6
Years in RelationshipExhibit 16-5
RELATIONSHIP BENEFITS TO SELLERS
0
500
400
300
200
100
Pro
fits
Referrals
Reducedcosts
Increased Purchases
Base profit
PricePremium
16-6
TWO REASONS COMPANIES STAYIN A BUSINESS RELATIONSHIP
REASON 1.THEY HAVE TO
No alternatives, binding actions
such as contracts, product ties
REASON 2.THEY WANT TO
Relationship is satisfying because of cooperation and
meeting financial objectives
16-7
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
16-8
SOURCES OFCOMPETITIVE ADVANTAGE
1. Superior performance
2. Quality products and support as defined by the customer
3. Distinctive and reliable service
TO BUILD CUSTOMER LOYALTY, DEVELOP A COMPETITIVE ADVANTAGE BY PROVIDING
16-9
Exhibit 16-8
RelationshipTermination
Costs
RelationshipBenefits
Shared Values
Communication
OpportunisticBehavior Uncertainty
FunctionalConflict
Cooperation
PropensityTo leave
Acquiescence
RelationshipCommitment
Trust
+
+
+
+
+
- -
-
+
+
+
+
THE IMPACT OF TRUST AND COMMITMENT ON BUSINESS RELATIONSHIPS
+
16-10
COMMUNICATING WITH CUSTOMERS
Telephone Confirm appointment
Answer a questionnaire about delivery
Fax Summarize yesterday’s meeting
FYI: an article in a trade magazine
E-mail Request the name of a former consultant
Give congratulations on a story in the press
Request easy-to-find data in a planning document
Business Letter
Formally introduce a new account representative
Summarize reasons for next quarter’s price increase
Thank you for the order
Face-to-face Negotiate production commitments
Resolve dispute about marketing effort
Exhibit 16-916-11
REQUIREMENTS FOR A USEFUL SURVEY:
1. CHOOSE MAIL OR TELEPHONE TO DO THE SURVEY
2. DETERMINE THE KIND OF INFORMATION YOU NEED
• Ascertain satisfaction with overall relationship• Measure specific aspects of the relationship• The unspoken concerns of customers• Determine what will get measured regarding
customer expectations (The TERRA model works well)
• Having meaningful and measurable ratings and scores
A TOOL FOR CUSTOMER RETENTION:CUSTOMER SATISFACTION SURVEYS
16-12
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
2
1
3
4
4-QUESTION SATISFACTION SURVEY
Exhibit 16-10
16-13
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?
16-14
SATISFACTION SURVEYS:GUIDELINES FOR USE
1. LOOK AT OVERALL SCORES
2. COMPARE SCORES TO PREVIOUS MEASURES, PREFERABLY OVER SEVERAL YEARS
3. ARE TRENDS UP, DOWN, STABLE?
4. HOW MANY FACETS OF SATISFACTION DO WE MEASURE?
5. HOW MANY ATTRIBUTES FOR EACH FACET SHOULD WE MEASURE
6. WHAT IS OUR RELATIONSHIP FACET PERFORMANCE SCORE (RFPscore )?
16-15
DETERMINING THE RFP SCORE
OVERALL SATISFACTION = fsales reps. report cards, warranty claims, product lit., tech support, etc.
OVERALL SATISFACTION =
3.2 + .82 (RFPwarranty)
+ .53 (RFPrep) + .06 (RFPlit )
+ .12 (RFPtech support) + e
THE REGRESSION COEFFICIENTS SHOW RELATIVE IMPORTANCE
OF EACH FACET. 0.82 FOR WARRANTY CLAIMS IS MOST
IMPORTANT FOR OVERALL SATISFACTION, FOLLOWED BY
SALES REP PERFORMANCE
16-16
STRONG STATISTICAL MODELOF CUSTOMER SATISFACTION
WarrantyService RFP Score
SatisfactionScore
Exhibit 16-12
16-17
WEAK STATISTICAL MODELOF CUSTOMER SATISFACTION
TechnicalSupport RFP Score
SatisfactionScore
Exhibit 16-13
16-18