Partner Relationship Management - marketing 4

Partner Relationship Management

Partners Inside the Company: Today’s marketers know they must work closely with others inside and outside the company to jointly bring more value to customers. Today, firms are linking all departments in the cause of creating customer value. Rather than assigning only sales and marketing people to customers, they are forming cross-functional customer teams.

Marketing Partners Outside the Firm: Marketing channels consist of distributors, retailers, and others who connect the company to its buyers. The supply chain describes a longer channel, stretching from raw materials to components to final products that are carried to final buyers. Through supply chain management, many companies today are strengthening their connections with partners all along the supply chain.

CAPTURING VALUE FROM CUSTOMERS

The first four steps in the marketing process involve building customer relationships. The final step involves capturing value in return. By creating superior customer value, the firm creates highly satisfied customers who stay loyal and buy more.

Creating Customer Loyalty and Retention

The aim of customer relationship management (CRM) is to create not just customer satisfaction, but customer delight. This means that companies must aim high in building customer relationships. Customer delight creates an emotional relationship with a product or service, not just a rational preference. Companies are realizing that losing a customer means losing more than a single sale. It means losing customer lifetime value.

Growing Share of Customer
Share of customer is defined as the share the company gets of customers purchasing in their product categories. (Thus, banks want to increase “share of wallet.”)
Building Customer Equity: Companies want not only to create profitable customers, but to “own” them for life, capture their customer lifetime value, and earn a greater share of their purchases.

What Is Customer Equity?

Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers. Clearly, the more loyal the firm’s profitable customers, the higher the firm’s customer equity. Customer equity may be a better measure of a firm’s performance than current sales or market share.

Building the Right Relationships with the Right Customers
Not all customers, not even all-loyal customers, are good investments. Customers can be classified into one of four relationship groups, according to their profitability and projected loyalty. “Strangers” show low potential profitability and little projected loyalty. The relationship management strategy for these customers is simple: Don’t invest anything in them. “Butterflies” are potentially profitable but not loyal. The company should use promotional blitzes to attract them, create satisfying and profitable transactions with them, and then cease investing in them until the next time around. “True friends” are both profitable and loyal. There is a strong fit between their needs and the company’s offerings. The firm wants to make continuous relationship investments to delight these customers and retain and grow them. “Barnacles” are highly loyal but not very profitable. There is a limited fit between their needs and the company’s offerings.
Important point: Different types of customer require different relationship management strategies. The goal is to build the right relationships with the right customers.