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Managing Customer Relationships: A Strategic Framework Chapter 2 The Thinking behind Customer Relationships Course Title Instructor Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers 1 Chapter 2 Preview Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Benefits of being customer-centric What characterizes a business relationship? One view on relationships (J.E. Britton) Types of business relationships Relationship development process Relationship building blocks Another view on relationships (J.G. Barnes) Four levels of business relationships The five Es of customer relationships Customer loyalty and loyalty programs 2 Why Do Companies Work at Being Customer-Centric?

Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Customers are scarce Customers are the sole source of the company’s revenue Customers create value in two ways: 1. Current profit (short-term) 2. Customer equity (long-term), or likelihood to remain a customer and recommend company to others. 3 What Characterizes a Relationship? Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Mutual Interactive Iterative Provides ongoing benefit to both parties Requires a change in behavior for both parties Unique Requires – and produces – trust 4 Continued Roles for Mass Media and Branding Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Communicate to nonusers who have not yet raised their hands Build image and brand identity Establish a brand position with nonusers to help users make a statement about their own image 5 One View on Customer Relationships (Britton) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Two types of business relationships: Discrete Relational Transactional Collaborative Transactional Traveler buying fuel with cash Collaborative Traveler buying same brand of fuel with affinity card Transpires over time 6 Relationship Development Process (Britton) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Awareness: Knowledge of each other Exploration: Search and trial Expansion: Increase in relationship benefits and interdependence Commitment: Indicated by inputs, consistency, and durability Dissolution: Value of the relationship no longer worthwhile Enhancing agents: communication, cooperation, and conflict resolution 7 Relationship Building Blocks (Britton) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Two primary relationship building blocks: 1. Trust Benefits of trust: cooperation, commitment, relationship duration, and quality Main contributors to trust: shared values, interdependence, quality communication, and non-opportunistic behavior 2. Commitment Types of commitment: calculative (negatively correlated to trust) and affective (positively correlated to trust) Main contributor to commitment: trust 8 Relationship Building Blocks (Britton, cont.) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Other relationship building blocks: Satisfaction Positive relationship between customer satisfaction and loyalty More complex relationship between customer satisfaction and duration of relationship Customer weigh prior satisfying experiences more heavily than new experiences - thus early mishaps have greater weight than later mishaps Customers weigh negative experiences more heavily than positive ones – thus companies should emphasize preventing negative encounters Uncertainty and Dependence Uncertainty increases dependence Relationships based on uncertainty and/or dependence tend to be less stable 9 Relationship Building Blocks (Britton, cont.) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Other relationship building blocks (cont.) Fairness Distributive Procedural - higher effect on trust Symmetry Symmetric relationships are more stable than asymmetric ones Trust and commitment can develop in asymmetric relationships if vulnerable party is treated fairly and with respect 10 Another View on Customer Relationships (Barnes) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Four levels of relationship: 1. Intimate 2. Face-to-face 3. Distant 4. No-contact 11 Emotional loyalty vs. functional loyalty (Barnes) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers To contrast with Britton’s perspective, Barnes posits that “retention is not a relationship— that a customer relationship is only present when the customer has emotional loyalty, not just functional (behavioral) loyalty Thus relationships are inherently based on feelings and emotions 12 The Five Es of Customer Relationships (Barnes) Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers 1. Environment 2. Expectations 3. Emotions 4. Experience 5. Engagement 13 Customer Loyalty Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Two definitions of customer loyalty: 1. Attitudinal loyalty: loyalty is in the customer’s state of mind 2. Behavioral loyalty: relies on customer’s actual conduct Both definitions are important to measure: Attitudinal loyalty without behavioral loyalty has no financial benefit for a firm, but behavioral loyalty with attitudinal loyalty is unsustainable (p. 66). 14 Best Practices for Loyalty Programs Managing Customer Relationships: A Strategic Framework, Second Edition Don Peppers and Martha Rogers Never waste an opportunity to gain insight about a customer An effective program offers modularity, enabling participants to mix and match aspects according to preferences Consumers value openness – they want a program that works with other programs A loyalty program should be managed around customers, not products Above all else: simplicity 15 Table APoplular AHelpful AHonest ALazy AUnhappy AIrresponsible ASumOfPositive ASumOfNegative APercentofNegative BPopular BHelpful BHonest BLazy BUnhappy BIrresponsible BSumOfPositive BSumOfNegative BPercentOfNegative FACE VALUE & FIRST IMPRESSIONS RESULTS Data was analyzed using SPSS-PC version 22. A paired samples test was conducted to test whether the composite means of Alpha Betas and Beta Omicrons differ from one another. The results of the analysis indicated that the difference in the estimation of the participants’ negative statements was not significant among Alpha Deltas and Beta Omicrons, t (139) = 1.45, p = .148, r ( = . This finding supports the hypothesis that_________. DISCUSSION The hypothesis that the researchers tested provided significant insight on the expected results. The data collected in the above case studies was subjected to scientific analysis as a means of identifying the details that were present. The most common method used was the SPSS data analysis procedure since it had proved useful in previous researches. The data analysis procedures were conducted in testing whether the The first measure of interest was the estimates participants made for the percent of negative statements about Alphas and Betas. A paired samples t-test was appropriate to test whether the composite means differed from one another. The actual percent of negative statements was found to be thirty-one percent for both groups (twenty-six Alphas with eighteen positive & eight negative acts, and thirteen Betas with nine positive & four negative acts). The results of the paired t-test showed that the Alpha group was moderately higher in terms of negative statements than their Beta Omicron counterparts.

Paper For Above instruction

Managing customer relationships is a critical component of modern marketing strategies, emphasizing the strategic importance of fostering long-term, mutually beneficial interactions with customers. This paper explores the foundational concepts of customer relationship management (CRM) within a strategic framework, focusing on the theoretical perspectives, development processes, and implementation practices that underpin effective customer relationship initiatives.

At the core of CRM is the recognition that customers are scarce resources and the primary sources of revenue. Companies that prioritize customer-centric approaches aim to build loyalty and enhance customer equity by delivering ongoing value. Customer relationships are characterized by mutuality, interactivity, and iteration, demanding ongoing engagement that benefits both parties. Trust and commitment emerge as fundamental building blocks, with trust fostering cooperation and shared values, while commitment—particularly affective—strengthens relational bonds. Satisfaction, another crucial element, influences loyalty, yet its relationship with the duration of the relationship is complex, often affected by prior experiences and perceived fairness.

Two influential perspectives offer insights into relationship dynamics. J.E. Britton delineates the relationship development process into stages: awareness, exploration, expansion, commitment, and dissolution. Each stage involves specific behaviors and interactions that deepen or terminate the relationship. Britton emphasizes the importance of communication, cooperation, and conflict resolution as enhancing agents throughout this process. Conversely, J.G. Barnes highlights that true customer loyalty hinges on emotional attachment rather than mere behavioral retention, positioning emotional loyalty as the defining characteristic of a genuine relationship. Barnes introduces the Five Es—Environment, Expectations, Emotions, Experience, and Engagement—to describe how emotional factors influence relationship strength.

Further insights are provided by exploring different levels and types of relationships. Barnes identifies four levels: intimate, face-to-face, distant, and no contact, suggesting that the depth of the relationship and emotional involvement increase in tandem. Britton's view delineates between transactional and collaborative relationships, with transactional relationships characterized by discrete, time-bound exchanges, and collaborative ones evolving over time into mutually dependent partnerships.

Customer loyalty is central to CRM success. It can be attitudinal—focused on the customer's mental commitment—and behavioral, based on actual purchasing actions. While attitudinal loyalty indicates favorable perceptions, behavioral loyalty translates these attitudes into ongoing purchase behaviors. Implementing effective loyalty programs requires simplicity, openness, and modularity, enabling customization and integration with other programs. Such programs should aim to gather meaningful insights about customers and foster a sense of mutual engagement.

Practical application of these principles involves leveraging mass media and branding to communicate with nonusers and reinforce brand identity—building a positive image that attracts potential customers and supports ongoing loyalty. An overall strategy rooted in trust, fairness, and emotional engagement ensures stable, long-term relationships capable of adapting to changing customer needs and expectations.

Tools such as statistical analysis—using software like SPSS—are integral for evaluating relationship indicators, testing hypotheses, and refining CRM strategies based on empirical data. Understanding the nuances of customer perceptions, loyalty metrics, and relationship stages supports the development of tailored, effective approaches that enhance customer lifetime value.

References

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  • What Works in Customer Loyalty Programs? (2020). Harvard Business Review. Retrieved from https://hbr.org/2020/02/what-works-in-customer-loyalty-programs

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