Lesson 2 (10 hours)

Customer Relationship: Customer Service

Relationship Marketing

Performance Standard:

The learner shall be able to:

Develop a program for customer service.

Learning Competencies:

The learners:

1. Define Relationship Marketing

2. Explain the value of customer
3. Identify and describe relationship development strategies
4. Illustrate successful customer service strategy in the business enterprise
Introduction:

Relationship Marketing involves long term, value- added relationships developed over
time with customer and suppliers. Strategic alliance and partnerships among manufacturers,
retailers and suppliers, often benefit everyone. It is also the development, growth, and
maintenance of cost effective, high value relationships with them and is based on promises:
promises of low price, high quality, prompt delivery, and the promise of superior service-within
the organization, between the organizations supply chain, and between buyer and the seller-
determines whether a relationship will grow. A firm is responsible for ensuring it keeps or
exceeds the agreements it makes, with the ultimate goal of achieving customer satisfaction.

Value of Customer

Markets from perspective of marketing managers, are set of actual or potential buyers
who have a willingness and the means to purchase and demand products. The target market who
have the access to the marketed products, are qualified to purchase them, and exhibit a
sufficiently high degree of buying power and interest in the products to justify marketing
programs designed to attract them.
 There are various interpretations of what is meant by customer value. The term may mean
low price, receiving what is desired, receiving quality for what is paid, or receiving something in
return for what is given (Zeithaml, 1988). The definition of customer value widely cited and
encompasses most interpretations of customer value. Woodruff defines customer value as: a
customer perceived preference for and evaluation of those products attributes, attribute
performances, and consequences arising from use that facilitates (or block) achieving the
customers goals and purposes in use situations.

The definition above suggests that there are two aspects to customer value: desired value
and perceived value. Desired value refers to what customers desire in product or service.
Perceived value is the benefit that a customer believes he or she received from a product after it
was purchased.

Customer value can be examined at different levels. At a low level, customer value can be
viewed as the attributes of a product that a customer perceives to receive value from. At a higher
level, customer value can be viewed as the emotional payoff and achievement of a goal or desire.
When customers derive value from a product, they derive value from the attributes of the product
as well as from the attribute performance and the consequence of achieving desired goals from
the use of the product (Woodruff, 1997).

5 steps to customer value:

Step 1: Understand what drives value for your customers

Talk to them, survey them, and watch their actions and reactions. In short, capture data to
understand what is important to your customers and what opportunities you have to help them.

Step 2: Understand your value proposition

The value customers receive is equal to the benefits of a product or service minus its costs. What
value does your product or service create for them? What does it cost them-in terms of price plus
any ancillary cost of ownership or usage (e.g., how much of their time do they have to devotee to
buying or using your product or service?)

Step 3: Identify the customers and segments where are you can create more value relative
to competitors
Different customers will have varying perceptions of your value relative to your competitors,
based on geographic proximity, for examples, or a product attribute that one segment may find
particularly attractive.

Step 4: Create a win-win price

Set a price that makes it clear that customers are receiving value but also maximizes your
take. Satisfied customers that perceive a lot of value in your offering are usually willing to pay
more, while unsatisfied customers will leave, even at a low price. Using cost-plus pricing (i.e.,
pricing at some fixed multiple of product costs) often results in giving away margin
unnecessarily to some customers while losing incremental profits from others.

Step 5: Focus investment on your most valuable customers

Disproportionally allocate your sales force, marketing dollars, and R&D investments toward the
customers and segments that you can best serve and will provide the greatest value in return.
Also, allocate your growth capital toward new products and solutions that serve your best
customer or can attract more customers that are similar to your best customers.

Your customers are the lifeblood of your business. They are the source of current profits
and the foundation of future growth. These steps will help you find more ways to grow your
business by better serving your best customers.1

Relationship Marketing

Relationship marketing is a facet of customer relationship management (CRM) that focuses on

customer loyalty and long-term customer engagement rather than shorter-term goals like
customer acquisition and individual sales.2

Customer Relationship Management

CRM is the combination of strategies and technologies that empowers relationship

programs, reorienting the entire organization to a concentrated and focus on satisfying customer
relationships and to integrate all stakeholders into a companys products design and
development, manufacturing, marketing, sales, and customer service process. CRM represents a
shift in thinking for everyone involved with a firm-from CEO down through and encompassing
all other key stakeholders, including suppliers, dealers, and other partners. All recognize that
solid customer relations are fostered by similarly strong relationships with other major
stakeholders.
Customer Service

It is the provision of service to customers before, during and after a purchase. The
perception of success of such interactions is dependent on employees who can adjust
themselves to the personality of the guest. Customer service is also often referred to when
describing the culture of the organization.

BUILDING CUSTOMER VALUE AND SATISFACTION

Consumers are more educated and informed than ever, and they have the tools to verify
companies claims and seek out superior alternatives. How then do they ultimately make
choices? Customers tend to be value-maximizers, within the bounds of search costs and limited
knowledge, mobility, and income. They estimate which offer will deliver the most perceived
value and act on it. Whether the offer lives up to expectation affects customer satisfaction and the
probability that the customer will purchase the product again. Customer Perceived Value
Customer perceived value(CPV) is the difference between the prospective customers evaluation
of all the benefits and all the costs of an offering and the perceived alternatives ( see Figure 7.).
Total customer value is the perceived monetary value of the bundle of economic, functional and
psychological benefits customers expect from a given market offering because of the products,
services, personnel and image involved. Total customer cost that customers expect to incur in
evaluating, obtaining, using, and disposing of the given market offering, including monetary,
time, energy, and psychic costs.

Fig. 7

Good Customer Service

The organization should always prioritize its customer by putting them first on the list, it
is the outmost business of the organization and should respond in all of its aspects. In attaining
customer satisfaction the business should always have a process on how to deliver their product
or services very efficiently and consistent service to its customer. This will enable them to have
loyal customers and an increase on the patronage of your product or services by word of mouth.
With this in mind the company is already building a good mutual relationship to its customer by
always meeting their standard or expectations and earning their trust.