1- How are customer expectations related to customer satisfaction? How does cust
ID: 356098 • Letter: 1
Question
1- How are customer expectations related to customer satisfaction? How does customer satisfaction fit into overall CRM?
2-What are the different “types” of loyalty that may be considered relevant for the organization? How would organizations selling low involvement products engender high loyalty? Explain.
3- What is Customer Portfolio Management (CPM) with respect to CRM? What are the main considerations and methods for implementing CPM in CRM?
4. What are the main approaches used for customer retention and development? How do customer experience and customer engagement fit into customer retention and development? Explain.
5- Which types of organizational structure are more compatible with CRM? Explain. How does organizational culture impact on CRM?
Explanation / Answer
1. Customer expectations are dynamic and may often change based on certain factors. If the expectations are not met by the customer service, the customer tends to be dissatisfied and they may switch over to a competitor. Customer satisfaction is related to customer service as quality of services is how the customer perceives a product or a service. It is thus imperative of any company or a business to retain its existing customers through cultivation of customer loyalty. Thus,
Customer Expectations + Service Quality = Customer Satisfaction
Customer Service is the interaction between a customer, who could be a prospective customer or a current regular customer, and a company through certain channels such as phone or email usually to resolve an issue or a query of the customer in a time bound manner.
CRM or Customer Relationship Management can be defined as the strategic process implemented by a company to improve customer retention, reduce churn and increase profitability. This reduces the need to focus on new business for revenue growth. Through CRM, the company can now resolve customer issues in a time bound manner, making its customers satisfied, and also take in constructive feedback given by its customers to improve its products and services further, give discounts and promotion etc increasing customer satisfaction.
2. Customer Loyalty is an event when people choose to buy one particular product or brand over an extended period of time. They dont switch over to another provider or vendor of that product or service.
a. Behavioral Loyalty: A form of customer loyalty that manifests in repetitive buying behavior of a particular brand, without any liking or personal preference for the brand.For example, two people A and B can be considered behaviorally loyal as they purchase the same brand of soft drink off supermarket shelves since long time.
b. Affect or Attitudinal Loyalty: A form of customer loyalty where a person purchases a particular product or a brand because of his liking or preference. For example, A and B purchase the same brand of soft drink from a supermarket, but only B is 'loyal' to this brand but A is not; since B liked this brand, since he had given positive feedback to his circle that resulted in a greater buying from his circle.
c. Situational Specific Loyalty: A form of customer loyalty that is situation specific: moderated by other factors such as economic circumstances, on shelf svailability, low price etc). It is possible that a bran loyal customer could switch loyalty if the costs of switching over are lesser i.e. better promotion and availability of another brand. For example, a loyal customer of Minute Maid Orange drink can switch over to Tropicana Orange if the promotions are better.
Low involvement products can be defined as those products that are inexpensive and pose low risk to the buyer that buys them. Low involvement products can engender high customer loyalty. Let us suppose we went to a market and brought toothpaste, a low involvement product of a particular brand. Unlike a car, a customer will not show high involvement in buying a toothpaste of a particular brand. The toothpaste company that manufactures this brand can engender high loyalty in the customer is through repeated purchases. The ways in which it can trigger repeated buying from its customers is through brand promotion by understanding customers likes and preferences and incorporating them in their product(making toothpaste unique), strong marketing tactics, lower prices, constant on shelf availability etc. These factors can lead to repeated purchases from customers thus engendering high loyalty.
3. Customer Portfolio Management or CPM is a strategic approach used for deploying CRM that helps a company to focus on identifying and preserving valuable customers by classifying them into groups based on certain metrics like profitability etc and finding ways to use resources better to develop existing customers.
4. There are four types of retention strategies according to Berry and Parasuraman:
a. Financial Bonds: At first level, the customer is mainly bonded or tied to the firm by use of financial incentives like low prices for greater purchase volume or lower prices for regular or long time customers. For example, an airline may offer frequent flier programs with financial incentives and rewards for those who have been long time customers of their airline. But it may only provide short term profits or gains to the airline instead of long term since there could be other airlines offering the same program also. But coupled with a good customer experience such as good and prompt customer services, priority check in etc, the airline can experience long term benefits.
b. Social Bonds: At level 2, the strategy bonds the customers through more than financial incentives. Here, a long term relationship is built through social and interpersonal along with financial bonds. Here customers are viewed as clients rather than as mere customers. The firm tries to understand the needs and wants of the client and designs the service or product accordingly. Loyalty can be fostered by positive encounters during the service which may cause a psychological reluctance for the customer to shift loyalties.
c. Customization Bonds: At level 3, strategies involve usage of both financial and social strategies encompassed within a customized strategy. Mass customization is the use of flexible processes and organizational structures to customize products according to the needs and want of the customer. Loyalty can be fostered by designing or customizing products by understanding them thoroughly that the customer may even not need to ask sometimes. This is called knowledge based loyalty, which is about proactive understanding of the customers needs.
d. Structural Bonds: Level 4 strategies involve providing services to the client that are designed into the service delivery system. Providing services to the client that are technology based and often serve to make the customer more productive. e.g. cancellation alerts and itinerary scheduling for airline travelling or alert on arrival for a bus or train.
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