Small Business Management 13e

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Transcript Small Business Management 13e

Customer Relationships: The Key Ingredient

Looking Ahead

After studying this chapter, you should be able to:

Define customer relationship management (CRM) and explain its importance to a small firm.

Discuss the significance of providing extraordinary customer service.

Illustrate how technology, such as the Internet, can improve customer relationships.

Describe the techniques for creating a customer profile.

Looking Ahead (cont’d.)

Explain how consumers are decision makers and why this is important to understanding customer relationships.

Describe certain psychological influences on consumer behavior.

Describe certain sociological influences on consumer behavior.

What is Customer Relationship Management?

• Customer Relationship Management (CRM) –A marketing strategy of maximizing shareholder value through winning, growing, and keeping the right customers • Focus of CRM –Customers rather than products –Changes in processes, systems, and culture –All channels and media involved in the marketing effort, from the Internet to field sales Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –4

Sources of the Next Sale

Exhibit 13.1

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The Importance of CRM to the Small Firm

• Economic benefits of maintaining relationships with current customers: –Acquisition costs for new customers are huge.

–Long-time customers spend more money than new ones.

–Happy customers refer their friends and colleagues.

–Order-processing costs are higher for new customers.

–Old customers will pay more for products.

Exhibit 13.2

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Creating Transactional Relationships through Extraordinary Service

• Transactional Relationship –An association between a business and a customer that relates to a purchase or a business deal • Beliefs about Exceptional Customer Service –Superior customer service creates customer satisfaction.

–Customer satisfaction produces customer loyalty.

–Small firms possess greater potential for providing superior customer service than do large firms.

Components of Customer Satisfaction

• Key Elements of Customer Satisfaction: –Basic benefits of the product or service • The elements customers expect all competitors to deliver –General support services, such as customer assistance –A recovery process for counteracting customers’ bad experiences –Extraordinary services that excel in meeting customers’ preferences and make the product or service seem customized Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –9

Extraordinary Service: Customer Loyalty

• Ways to Provide Extraordinary Service: –

Naming names

(personalized attention), valued 10 times more on the “worthy of loyalty” scale –

Custom care

in giving the customers what they want on an individual basis –

Keeping in touch

to let customers know that you’re taking time to think about them; they don’t forget it –

“Boo-boo research”

—taking the time to reach out to lost customers to learn why they went elsewhere and let them know that you want them back Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –10

Exhibit 13.4

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Handling Customer Complaints

• Advantages of Small Firms in Dealing with Customer Complaints –Deal directly with issues as they arise –Easier to give customers attention and respect –Employees are more empowered to resolve complaints • Learning about Customer Service Concerns –Direct personal observation –Feedback forms from customers –Monitoring customer service communications Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –12

Using Technology to Support Customer Relationship Management

Telephone Contacts Online Shopping CRM Software Customer Relations

Customer Support

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Building Customer Profiles for a CRM Program

• Categories of Customer Profile Information –Transactions • Purchase history (price paid, SKU, delivery date) –Customer contacts • Sales calls and service requests (customer- and company initiated contacts) –Descriptive information • Background information for segmentation and data analysis –Responses to marketing stimuli • Information on customer responses to direct marketing, sales contacts, and/or any other direct contact Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –14

Simplified Model of Consumer Behavior

Stage 1 Stage 2 Stage 3

Stage 4 Exhibit 13.5

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Stage 1: Problem Recognition

• Problem Recognition –Occurs when a consumer realizes that her or his current state of affairs differs significantly from some ideal state.

–A consumer must recognize a problem before purchase behavior can begin.

–An entrepreneur must understand the problem recognition stage in order to decide on the appropriate marketing strategy to use to influence or to react to problem recognition by consumers.

Stage 2: Information Search and Evaluation

• Evaluative Criteria –The features or characteristics of a product or service that customers use to compare brands • Evoked Set –A group of brands that a consumer is both aware of and willing to consider as a solution to a purchase problem Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –17

Stage 3: Purchase Decision

• Factors Affecting the Purchase Decision: –Brands in the evoked set • Brand advertising –Purchase setting: store or non-store outlet • Store, catalogs, TV shopping channels, the Internet –Intention to purchase: planned or spontaneous • Store layout, sales personnel, and point-of-purchase displays • Ease of use of Web site Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –18

Stage 4: Post-Purchase Evaluation

• Cognitive Dissonance –The anxiety that occurs when a customer has second thoughts immediately following a purchase –Can lead to customer complaints –Can reduced by: • Reassurance by salespersons • Guarantees and trial periods • Customer follow-ups • Confirming information from other users Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –19

Exhibit 13.6

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Understanding Psychological Influences on Customers

• Needs –Are the starting point for all behavior.

• Categories of needs: physiological, social, psychological, and spiritual –Are seldom completely or permanently satisfied (e.g., daily newspaper).

–Function together (e.g., the desire for status clothing).

–Consumers may purchase the same product to satisfy different needs (e.g., Internet access).

Understanding Psychological Influences on Customers (cont’d.)

• Perceptions –The individual processes that give meaning to the stimuli confronting consumers • Whatever is perceived depends on the characteristics of both the stimulus and the perceiver.

• Perceptual Categorization –The process of grouping similar things so as to manage huge quantities of incoming stimuli • Creates a barrier (i.e., brand loyalty) to competing brands Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –22

Understanding Psychological Influences on Customers (cont’d.)

• Motivations –Goal-directed forces that organize and give direction to the tension caused by unsatisfied needs • Analysis of consumer behavior variables is the key to determining which unique motivations the consumer will internalize as an impetus to purchase a good or service.

• Attitudes –An enduring opinion based on knowledge, feeling, and behavioral tendency • Can discourage or foster behavioral tendencies to purchase a product Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –23

Understanding Sociological Influences on Customers (cont’d.)

Culture Social Classes Opinion Leaders

Consumers

Reference Groups

Consumer Behavior Model

• Sociological Factors –Culture • Behavioral pattern and values that characterize a group of consumers in a target market –Social class • Societal divisions that have different levels of social prestige –Reference groups • Groups that an individual allows to influence his or her behavior –Opinion leader • A group leader who plays a key communications role Copyright © 2006 Thomson Business & Professional Publishing. All rights reserved. 13 –25

Key Terms

customer relationship management (CRM) transactional relationship customer profile evaluative criteria evoked set cognitive dissonance needs perception perceptual categorization motivations attitude culture social classes reference groups opinion leader

Small Business Management 13e

Transcript Small Business Management 13e

Customer Relationships: The Key Ingredient

Looking Ahead

After studying this chapter, you should be able to:

Looking Ahead (cont’d.)

What is Customer Relationship Management?

Sources of the Next Sale

The Importance of CRM to the Small Firm

Creating Transactional Relationships through Extraordinary Service

Components of Customer Satisfaction

Extraordinary Service: Customer Loyalty

Handling Customer Complaints

Using Technology to Support Customer Relationship Management

Building Customer Profiles for a CRM Program

Stage 1: Problem Recognition

Stage 2: Information Search and Evaluation

Stage 3: Purchase Decision

Stage 4: Post-Purchase Evaluation

Understanding Psychological Influences on Customers

Understanding Psychological Influences on Customers (cont’d.)

Understanding Psychological Influences on Customers (cont’d.)

Understanding Sociological Influences on Customers (cont’d.)

Consumers

Consumer Behavior Model

Key Terms

Directory