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Soiree PWo kotier fofer on Marketing ptw VKjrk tlie Fre* Pubs. 139«'. » 21-22

95% if die: customer feels that (he complaint was resolved quickly. Customers who hare complained to an organisation and had their complaints satisfactorily resolved tell Jin average of five people about tlie good treatment they received,1"

Dell Computer Corp. quickly yanked its corporate PC lech support out of India and placed it in a domestic call center when lis 11, S-based customers complained about the quality ot help they received: rigid." by-1 he-book" technicians who wasted their time wading through lilies they had already tried, problems with pour phone connections, and strongly accented English that was hard to understand,58

More companies now rccognize ihe importance of satisfying and retaining Customers. Satisfied customers constitute the company's customer mlationshlp capital, lithe company were to be sold, the acquiring company wot rid hava to pay not only for the plant and equipment and the brand name, hut also for the delivered customer iirtse. the number ¡md value of the customers who would do business with the new firm. Here are some interesting facts that bear On customer retention:5®

1. Acquiring new customers eatt cost five times mote than the costs involved itt satisfying ami retaining current uusi outers. It requires a great ileal of effort to induce sat is fieri customers m switch away from their current suppliers.

2. flu: average cOftipiny loses to percent of iis customers each yeitr.

ji. A 5 percent reduction in the customer defection rate can increase profits by "JT> percent to 85 percent, depending on the industry. 4. The customer profit rate tends to increase over the life of the retained customer.

Figure 5.4 shows the main steps in the process of attracting and keeping etisiorners. The starting point is everyone who might conceivably buy the product or service (jHipectili Prom these the company determines the most likely prosfiects, which it hopes to convert into first'timc customers, and tPien imo fepcar customers. and die it into clients—people to whom the company gives very special and knowledgeable treatment. The next challenge is io turn clients into lytemIters by signing a membership program that oilers benefits toetis-tamers who join, and then into advocates, customers who enthusiastically recommend die company and its products and sewices to others. The ultimate challenge is to turn advocates Into partners.

Markets can he characterized by their king-term buying tlvnatnics and how easily and often customers can enter and leav e.1'"

i. Feriiumeni capture markets. Once a customer, always a customer (e g,, nursing homes, trust funds, and medical care). Z. Simple retention markets, Customers can permanently tie lost after each period (e.g., telecom, cable, financial services, other services, subscriptions). '.i. Customer migration markets. Customers cam leave and come back .e.g., catalogs, eon sumer products, retail, and airlines).

CREATING CUSTOMER VALUE, SATISFACTION. AMD LOYALTY CHAPTER 5 IS?

Some customers inevitably become Inactive fir drop otn. The challenge is to reactivate dissatisfied customers t h rough win-back strategies- His often easier to re-at tract qx-cUitomers (because lite cornpacty knows their names atld histories) than to find new ones. The key is to analyse the causes of customer defection through exit Interviews and lost-ctistotner surveys. The aim is to win hack nnly those customers who have strong pro fit potential.

Building Loyalty

How much should a company invest in building loyalty so that the costs do notCKCCcd the gains? U'e need to distinguish live different levels of investment in customer relationship hui Id ing;

1, Husk marketing. The salesperson simply sells the product.

2, Reactive marketing- The salesperson sells the product and encourages the customer to call if he or she has questions, Comments, or complaints.

3, Aoanmtahte marketing. The salesperson phones the customer to check whether the prod u el i s meet i ti g expectat Ions. The salespe rso n a I so asks the customer for a n y prod uct Or Service improvement suggestions and any specific disappointments.

I. Proactive, marketing* The salesperson contacts the customer from time to time with suggestions about improved product uses or new products. 5, Partnership marketing. The company works continuously with ils large customers to help improve their performance. (General Electric, for example, has stationed engineers at large utilities to help them produce more power.}

Most companies practice only basic marketing when their markets contain many customers and their unit profit margins are small, Whirlpool is not to phone each washing machine buyer to express appreciation. Ii may set up a customer hot line. In markets with few customers and high profit margins, most sellers will move toward partnership mar-keiing, liocing, for example, works closely with American Airlines to design airplanes thai fully satisfy American's requirements. As lrigure 5,5 shows, the likely level of relationship marketing depends on the number of customers and the profit nuirgiu level.

An increasingly essential ingredient for the best relationship marketing today is the right technology. Table 5.2 highlights five imperatives of CRM and tvliere technology fits in. Plastics could not larget its e-mail effectively to different customers if ii were not for advances in database software. Dell Computer Could not customize computer ordering for its global corporate customers without advances In Web technology. Companies are using e-mail, Web sites, call centers, databases, and database software to fnster continuous contact between company and customer. Ilere is how one company used technology to build customer value;

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