Page 193 - DMGT205_SALES_MANAGEMENT

Unit 12: Customer Relationship Management

3. Long term focused Notes
4. High customer service
5. High customer commitment through loyalty
6. High customer contacts to identify customer needs and serve them better

12.3 Advantages of CRM over Mass Media Marketing

1. Reduce Advertising- Since CRM focuses on retention of customers rather than attraction
of new customers forms do not have advertise heavily and the strong loyalty built through
CRM will make the customer purchase the product with less advertising effort.
2. CRM let the firm identify the profitable customers and this will prevent the firm over
spending on unprofitable customers and under-spending on profitable customers
3. CRM will provide an competitive edge to the organization based on the service offered
rather than competing based on price.

12.4 Customer Relationship

It is important to keep and improve relationships with customers for the following reasons:
1. There are higher marketing costs associated with generating interest in new customers.
The costs involved in creating an informed new customer far outweigh those involved in
making the relationship necessary to continue exchanges between buyer and seller (Barnes
and Glynn,1992).
It has been estimated that the cost of attracting new customers can be as high as six times
that of retaining existing customers (Desatnick, 1987; Sellers, 1989; Congram,1991).
2. Close and long-term relationships with customers imply continuing exchange
opportunities with existing customers at a lower marketing cost per customer (Gronroos,
1990b). Reichheld and Sassier observe:

Across a wide range of business, the pattern is the same: the longer a company keeps a
customer, the more money it tends to make (Reichheld and Sasser 1990)'.
3. Viewing customer exchanges as a revenue stream, as opposed to a compendium of
isolated transactions, enables cross-selling of related services over time and premium
pricing for the customer's confidence in the business (Reichheld and Sasser, 1990; Congram
1991).
4. Strong customer relationships with a high degree of familiarity and communications on
both sides can generate more practical new product ideas from customers and contact
personnel (Kiess-Moser and Barnes, 1992).
5. Good relationships with customers can result in a good word-of-mouth from
successful exchanges and minimal bad word-of-mouth in the event of unsuccessful
exchanges. Service quality cracks can often be papered over where good relationships
have existed previously.

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