Chapter 5: Building customer relationships

Question 1

Discuss how the development of relationships within a services context evolves over time ! What are the major benefits of relationships both from a firm and customers´ perspective ?

Answer 1

Relationship marketing aims to make the customer a partner of the firm in order to optimize the co-creation process. In order to do this we follow the following steps:
1. Customer as strangers = we aim to acquire new customers
2. Customers as acquaintances = once customers are acquired, they are acquaintances. We then need to satisfy them.
3. Customers as friends = once we’ve satisfied customers, they become friends of the company, which is an important antecedent of loyalty. We then have to aim at retaining them.
4. Customers as partners = once customers are retained and loyal to us, we need to enhance the service in order to keep them loyal. In this phase, the customer will engage more with the firm, do WoM, help other customers, …
Benefits for customers:
- Confidence benefits = if a customer returns to a providers and they repeatedly satisfy the customer, then customers are more confident in the provider and anxiety is reduced.
- Social benefits = the more a customer goes to a certain provider, the more familiar he gets with it. This will make the customer feel a social support of other users.  Personal aspects are important
- Special treatment benefits = customers can often partake in loyalty programs where they can gain certain special benefits that others won’t be able to get.
Benefits for company:
- Economic benefits = loyal customers spend more and generate more revenue. They are also a source of regular revenue.
- Behavioral benefits = loyal customers engage in WoM, help/monitor other customers (= co-creation), …
- Human resource management benefits = loyal customers create an easier work environment for employees, which makes them more satisfied and thus increases employee retention.

Question 2

When building relationships with customers, different types of “bonds” are important ! Explain what type of “bonds” exist ?

Answer 2

The company can develop several different types of bonds with their customers in order to build stronger relationships. There are 4 main types of bonds that the company can develop:

1. Financial bonds = create a bond by providing a financial advantage in the form of volume or frequency rewards, providing stable prices, bundling and cross selling services, …
2. Social bonds = all forms in which a customer can benefit from a strong relationship with the company. For example: free goods, discounts, … They can also build strong social relationships with employees or with each other through online platforms.
3. Customization bonds = by listening to the customer, the company can build stronger relationships with the customer by providing a customized offering. In order to do this successfully, the company will have to anticipate customer needs and innovate their processes.
4. Structural bonds = any form in which the company and its customer can benefit from joining forces. This usually takes place in the B2B setting, where process might be integrated, companies might do joint investments, …

Question 3

What are the drivers for good relationships and high loyalty?

Answer 3

• Core service provision = If there is a strong core service in place, the company will build a stronger relationship with its customers through satisfaction of their needs.
• Switching barriers = There are several barriers that prevent a customer from switching providers. These barriers are either caused by customer inertia, or by barriers erected by the company itself.
• Relationship bonds = the company can develop several different types of bonds with their customers in order to build stronger relationships. These bonds consist of financial bonds, social bonds, customization bonds, and structural bonds.