Chapter Sixteen Customer Retention and Maximization
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Transcript of Chapter Sixteen Customer Retention and Maximization
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Copyright © 2006 The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin
Chapter Sixteen
Customer Retentionand Maximization
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THE CUSTOMER RELATIONSHIP CONTINUUMCustomer 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
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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
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PAYOFFS 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
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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
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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
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SOURCES OF COMPETITIVE 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
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RelationshipTermination
Costs
RelationshipBenefits
Shared Values
Communication
OpportunisticBehavior Uncertainty
FunctionalConflict
Cooperation
PropensityTo leave
Acquiescence
RelationshipCommitment
Trust
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THE IMPACT OF TRUST AND COMMITMENT ON BUSINESS RELATIONSHIPS
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A TOOL FOR CUSTOMER RETENTION:CUSTOMER SATISFACTION SURVEYS
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
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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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4-QUESTION SATISFACTION SURVEY
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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?
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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)?
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DETERMINING THE RFP SCORE
OVERALL SATISFACTION = f(sales 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
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STRONG STATISTICAL MODELOF CUSTOMER SATISFACTION
WarrantyService RFP Score
SatisfactionScore
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WEAK STATISTICAL MODELOF CUSTOMER SATISFACTION
TechnicalSupport RFP Score
SatisfactionScore