296 Part 3 Target Market Selection
CHAPTER 11
RELATIONSHIP MARKETING
AND CUSTOMER RELATIONSHIP MANAGEMENT (CRM)
CHAPTER OVERVIEW
Marketing revolves around relationships with customers and all the business processes involved in
satisfying them. One of the most influential trends in marketing today is the shift from transaction-based
marketing (which focuses on short-term or one-time exchanges) to customer-focused relationship
marketing (which focuses on long-term arrangements that build solid loyalty).
Relationship marketing has become one of the watchwords in 21st century because just identifying and
attracting new customers isn’t enough to thrive in today’s marketplace. To survive, mutually beneficial
relationships need to be built. Relationship marketing emphasizes cooperation rather than conflict
between all the parties involved. The chapter talks about this ongoing collaborative exchange, which
Changes in the 17th Edition
The chapter has been updated and revised in several ways. Several new features have been added:
• The Opening Vignette and Evolution of a Brand highlights how Publix Super Markets puts its
customers and employees first. Publix is not only one of the largest grocery firms in the country but
also the largest U.S. company of any kind that is employee owned. Every associate, from baggers to
cashiers to managers, has a vested interest in making sure customers are happy and keep coming
back to shop at the nearly 1,100 stores in the United States. The story of Publix’s success is
discussed in “Publix’s Culture Puts People First.”
• Solving an Ethical Controversy talks about BBH Labs who gave mobile wi-fi devices to 13
volunteers from a nearby homeless shelter and paid them on a daily basis. Though BBH’s intention
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 297
was to provide employment opportunities for the homeless, an ethical question was raised against
the exploitation of homeless people. The pros and cons of the issue are discussed in the feature
“Helping the Homeless.”
• Chapter Case 11.1 focuses on Disney, which is widely admired for its customer service. To share its
customer-service secrets, Disney created a consulting company called the Disney Institute. It has
helped a wide range of clients that faced customer dissatisfaction. The core of the Institute’s
• Collaborative Learning Exercises are provided in several areas involving relationship marketing
Building Buyer-Seller Relationships, Database Marketing, Buzz Marketing, and Retrieving Lost
Customers.
• Video Case 11.2 includes an overview of the video featuring “Pepe’s Pizzeria Serves Success One
Customer at a Time.” It highlights how Pepe’s is using relationship marketing to build its brand equity.
LECTURE OUTLINE
Opening Vignette and Evolution of a Brand—“Publix’s Culture Puts People First.” What are the
methods employed by Publix to ensure that all its customers and employee-owners are satisfied?
How can you connect the strategies used by Publix to relationship marketing?
Chapter Objective 1: Contrast transaction-based marketing with relationship marketing.
Key Terms: transactions-based marketing, relationship marketing
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1. Types of marketing
a. Transaction-based marketing: Focuses on creating short-term, one-time
exchanges involving limited communication
b. Relationship marketing: Focuses on developing and maintaining long-term,
cost-effective, high-value relationships with individual customers, suppliers,
employees, distributors, retailers, and other partners for mutual benefits
over time
i. It benefits the bottom line because it costs less to retain current
will grow
2. The shift from transaction-based marketing to relationship marketing
a. Since the Industrial Revolution:
i. Most manufacturers have run production-oriented operations and
focused on making products and then promoting them to
customers in the hope of selling enough to cover costs and earn
298 Part 3 Target Market Selection
from Conflict to
Integration.
related to it
within each of
these three
philosophies.
profits
ii. Emphasis was on the individual sales or transactions
iii. Communication and relationships were limited or nonexistent
iv. This has changed over time, and today many firms use an
alternative approach—relationship marketing
b. Characteristics of transaction-based marketing:
i. Buyer-seller exchanges are sporadic
ii. Communication is limited
c. Characteristics of relationship marketing:
higher sales and lower marketing costs
iv. Cooperation is emphasized, rather than conflict and ongoing
for added value from their marketing relationships
e. Overall, the advantages over the narrow transaction-based marketing is
that the broader relationship marketing:
i. Focuses on the long term rather than the short term
ii. Emphasizes retaining customers over making a sale
Assessment check question
1.1. What are the major differences between transaction-based marketing and relationship
marketing? Transaction-based marketing refers to buyer-seller exchanges involving limited
Chapter Objective 2: Explain the four basic elements of relationship marketing.
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 299
Key Terms: external customers, internal customers, internal marketing, employee satisfaction
Basic PowerPoint: 6
PowerPoint Expanded: 9-11
After 50
Note: Ask
students to
identify other
examples of
internal
customers in
1. Elements of relationship marketing
a. To build long-term customer relationships, marketers need to place and
retain customers at the center of their efforts
b. They build relationships using four basic elements:
2. Internal marketing
a. The concept of customer satisfaction is usually discussed in terms of
external customers—people or organizations who buy and use the firm’s
products
b. Firms concerned with relationship marketing must also address internal
customers—employees or departments whose success depends on the
work of other employees or departments
c. Internal marketing depends on managerial actions that enable all
employees to understand, accept, and fulfill their roles in implementing a
marketing strategy
i. Internal customer satisfaction helps attract, select, and retain
outstanding employees
in his or her company and the extent to which that loyalty—or lack
thereof—is communicated to external customers.
v. Employee satisfaction is critical to internal marketing because
unhappy employees seldom satisfy customers or send positive
messages about the firm
Assessment check questions
2.1. What are the four basic elements of relationship marketing? The four basic elements
2.2. Why is internal marketing important to a firm? Internal marketing enables all members
300 Part 3 Target Market Selection
of the organization to understand, accept, and fulfill their respective roles in implementing a
marketing strategy.
Chapter Objective 3: Identify the three levels of relationship marketing.
Key Terms: none
Basic PowerPoint: 7
PowerPoint Expanded: 12–15
Table 11.1
Three Levels
of Relationship
Marketing.
customized
are the
products? How
likely is it that
there will be a
1. The three levels of relationship marketing
a. Buyer-seller relationships function at a variety of levels
b. As relationships move from lower to higher levels, strength of commitment
and likelihood of continuation also grows
2. First level: Focus on price
a. Interactions are superficial and least likely to lead to a long-term
relationship
b. Relationship marketing efforts rely on pricing and other financial incentives
to encourage customers to enter into buying relationships with a seller
3. Second level: Social interactions
a. A social feature is introduced, leading to deeper and less superficial links
4. Third level: Interdependent partnership
Assessment check questions
3.1. Identify the three levels of the marketing relationship. The three levels of the
3.2. Which level is the most complicated? Why? The third level is most complex because
the strength of commitment between the parties grows.
Chapter Objective 4: Explain how firms can enhance customer satisfaction.
Key Terms: customer satisfaction
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PowerPoint Expanded: 16–18
1. Enhancing customer satisfaction
a. Marketers continually monitor customer satisfaction through various
methods
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 301
Choose one
step and think
of ways in
which a
creative
marketer can
meet this
ensure customer satisfaction
2. Understanding customer needs
a. Knowing what your customers need, want, and expect is a central concern
of building relationships
i. This information is a vital first step in setting up a system to
measure customer satisfaction
ii. Customer satisfaction is the extent to which customers are
b. Marketers often need to look beyond traditional performance measures to
keep in touch with customers and avoid service gaps
3. Obtaining customer feedback and ensuring satisfaction
a. In the second step, feedback can be obtained in a reactive or proactive
way
i. Marketers try to improve customer access by including toll-free
numbers or website addresses in their ads
ii. Reactive methods for collecting feedback are most common, such
as taking complaints
iii. Proactive methods are growing—such as tracking comments and
Assessment check questions
4.1. How is customer satisfaction measured? Marketers monitor customer satisfaction
4.2. Identify the ways marketers may obtain customer feedback. Marketers can include a
toll-free phone number or website address in their advertising; monitor social media and
blogs; and hire mystery shoppers to personally check on products.
302 Part 3 Target Market Selection
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PowerPoint Expanded: 19–27
customers,
have given
discounts and
offers. Ask
customer
retention
techniques
they came
1. Building buyer–seller relationships
a. Marketers of consumer goods and services have discovered that they
must do more than simply create products and then sell them
2. How marketers keep customers
a. Retaining customers is far more profitable than losing them
i. Customer churn—turnover in a company’s customer base—is an
ongoing concern for some industries, (especially banking and
telecom industries) and is often expensive
relationship building; and mobile banking
iii. The wireless telecom industry has explored the connection
between customer loyalty and apps and services— the more apps
each additional year of the relationship
b. Frequency marketing
i. Marketers use frequency marketing programs to keep top
customers by rewarding them with cash, rebates, merchandise, or
3. Database marketing
a. Database marketing refers to the use of information technology to analyze
data about customers and their transactions
b. The results lead to new advertising or promotions carefully targeted toward
certain groups
v. Reducing marketing and promotion costs
vi. Boosting sales volume per customer or targeted customer group
vii. Expanding loyalty programs
e. Sources of information to create marketing databases
i. Credit card applications
ii. Software registration
iii. Product warranties
f. Interactive television
i. Interactive television delivers even more valuable data—
information on real consumer behavior and attitudes toward
brands
ii. It collects valuable and detailed data on TV viewer behavior
iii. Marketers can talk directly to viewers most interested in their
products, and viewers can click on infomercials that interest them
g. Applications
i. New technologies like apps are becoming popular marketing tools
4. Customers as advocates
a. Grassroots marketing involves connecting directly with existing and
potential customers through nonmainstream channels
i. Strategies are unconventional, nontraditional, and extremely
flexible
304 Part 3 Target Market Selection
Assessment check questions
5.1. Describe two ways marketers keep customers. Marketers keep customers through
frequency marketing—frequent-buyer or -user marketing programs that reward customers
5.2. List three efforts that turn customers into advocates for products. Relationship
marketing efforts that turn customers from passive partners into advocates include
grassroots marketing, viral marketing, and buzz marketing.
Chapter Objective 6: Explain customer relationship management (CRM) and the role of technology in
building customer relationships.
Key Term: customer relationship management (CRM), customer win-back
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Expanded PowerPoint: 28–33
1. Customer relationship management
a. Emerging from relationship marketing is a more advanced version,
customer relationship management (CRM)—the combination of strategies
and technologies that empower relationship programs and reorient an
entire firm toward customer satisfaction
firm’s business
2. Benefits of CRM
a. CRM software systems can interpret the vast amount of data collected
using different technologies
b. These systems simplify complex business processes while keeping the
best interests of customers at heart
c. Selecting the type of software system is critical
i. The software may be used at two different levels—on-demand,
which is accessed via the Internet as a Web-based service, and
on–premises, which is installed on a company’s computer system
on-site
Career
Readiness—
Retention in
the Auto
Industry
3. Successful CRM systems share the following qualities:
a. They create partnerships with customers in ways that align with the
company’s mission and goals
4. Problems with CRM
a. CRM is not a magic wand; if no one can put the system to work, it is an
expensive mistake
b. Problems often result from failure to organize or reorganize people and
5. Retrieving lost customers
a. Customers quit buying a firm’s goods for a number of reasons
b. They might be bored, they might have moved away from the region, they
might not need the product anymore, or they might have tried—and
preferred—competing products
best systems and put in place a good recovery effort
Assessment check questions
6.1. Define customer relationship management. Customer relationship management is the
6.2. What are the two major types of CRM systems? The two major types of CRM systems
6.3. Describe two steps a firm can take to rejuvenate a lost relationship. Marketers can
rejuvenate a lost relationship by changing the product mix, if necessary, or changing some
of their processes.
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Chapter Objective 7: Describe the buyer–seller relationship in business-to-business marketing and
the four types of business partnerships.
Key Terms: business-to-business (B2B) marketing, partnerships, buyer partnerships, seller partnerships,
internal partnerships, lateral partnerships, cobranding, comarketing
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down the
criteria they
would have in
choosing a
business
partner.
Ask them to
compare it with
the list in the
text. Had they
missed out on
any important
criteria? Was it
a significant
criterion? If so,
1. Buyer–seller relationships in business-to-business markets
2. Business-to-business marketing
a. Business-to-business (B2B) marketing involves a firm’s purchase of goods
and services to support operations or production of other products
3. Partnerships
a. Partnerships refer to the affiliation of two or more companies that help
each other achieve common goals
b. Partnerships form the basis of relationship marketing
c. A variety of common goals motivate firms to form partnerships:
i. To protect or improve positions in existing markets
ii. To gain access to new domestic or international markets
iii. To quickly enter new markets
iv. To expand product lines
4. Choosing business partners
a. The first priority is to locate firms that can add value to the relationship
through:
i. Financial resources
ii. Contacts
iii. Extra manufacturing capacity
iv. Technical know-how
v. Distribution capabilities
b. Partnerships can be formed between companies which complement each
other, or with similar skills and resources and the desirability increases
with the value added
c. Organizations must share similar values and goals for a partnership to
5. Types of partnerships
a. Buyer partnerships
i. Buyer partnerships refer to those in which a firm purchases goods
and services from one or more providers
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 307
Note: Identify
some
examples of
cobranding in
services.
Some
examples are
AT&T
Universal
Master Card,
Pillsbury
Brownies with
Nestlé
ii. The buyer has a unique set of needs and requirements that
vendors must meet in order to establish a long-term relationship
iii. A supplier must be responsive to the buyer’s unique needs
b. Seller partnerships
i. Seller partnerships set up long-term exchanges of goods and
services in return for cash or other considerations
c. Internal partnerships
i. Internal partnerships refer to the relationship involving customers
within an organization
ii. The classic definition of the word “customer” as buyer is now more
carefully defined in terms of external customers
iii. But customers within a firm have their own needs
iv. Internal partnerships are the foundation of an organization’s ability
to meet its commitments to external entities
6. Cobranding and comarketing
a. Cobranding
i. Cobranding refers to cooperative arrangements in which two or
more businesses team up to closely link their names on a single
product
ii. Two strong brand names, perhaps owned by two different
companies, join to sell a product
b. Comarketing
Assessment check questions
7.1. What are the four key types of business marketing partnerships? The four key types of
business partnerships are buyer, seller, internal, and lateral.
7.2. Distinguish cobranding and comarketing. Cobranding joins two strong brand names—
perhaps owned by two different companies—to sell a product. In a comarketing effort, two
308 Part 3 Target Market Selection
Chapter Objective 8: Describe the six key elements used to evaluate relationship marketing
programs.
Key Terms: national account selling, electronic data interchange (EDI), quick-response merchandising, Web
services, vendor-managed inventory (VMI), collaborative planning, forecasting, and replenishment (CPFR),
supply chain, strategic alliances
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1. Improving buyer-seller relationships in business-to-business markets
a. Firms that know how to find and nurture partner relationships can increase
profits
2. National account selling
a. Some relationships are more important than others due to the large
investments at stake
i. Large manufacturers pay special attention to the needs of major
retailers
ii. Manufacturers use a technique called national account selling to
serve their largest, most profitable customers
iii. National account selling refers to the promotional effort in which a
dedicated sales team is assigned to a firm’s major customers to
provide sales and service
b. Advantages of national account selling:
3. Business-to-business databases
a. Business-to-business databases are essential in building relationships
4. Electronic data interchange and Web services
a. An electronic data interchange (EDI) involves computer-to-computer
exchanges of invoices, orders, and other business documents
i. It reduces costs and improves efficiency
ii. Most large retailers require vendors to use an EDI as a core
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 309
Note: Walmart
partnership
with P&G for
mutual benefit.
How do you
think it
benefited
Walmart? And
P&G?
Name the
operating
systems
e. Web services
i. Web services provide a way for firms to communicate even if they
do not use the same or compatible software, hardware, databases,
or network platforms
5. Vendor-managed inventory
a. Vendor-managed inventory (VMI) is an inventory management system in
which the seller—based on an existing agreement with the buyer—
determines how much of a product a buyer needs and automatically ships
new supplies to that buyer
6. Managing the supply chain
a. The supply chain—or value chain—is the entire sequence of suppliers that
contribute to the creation and delivery of a product
b. It affects both upstream relationships (those between the company and its
suppliers) and downstream relationships (those with the product’s end
users)
c. Benefits of effective supply chain management:
i. Increased innovation
7. Business-to-business alliances
a. Strategic alliances—partnerships established to create a competitive
advantage—are the ultimate expression of relationship marketing
b. They are more formal, long-term partnership arrangements
c. Size and location of partners are not important
d. They can involve businesses of all sizes, of all kinds, from many locations
g. Types of resources partners provide:
i. In either arrangement, partners agree in advance on the skills and
310 Part 3 Target Market Selection
aware of
horizontal and
vertical
alliances.
Students can
be asked to list
the reasons
example of
OPEC to
provide the
perspective of
cartels and
collusion.
iii. Alliance partners can contribute marketing skills, such as
innovation and product development; manufacturing skills,
including low-cost or flexible manufacturing; and planning and
research and development expertise
h. Types of strategic alliances
Assessment check questions
8.1. Name four technologies businesses can use to improve buyer-seller relationships in
B2B markets. The use of electronic data interchanges allows firms to reduce costs and
improve efficiency and competitiveness. Web services provide a way for companies to
communicate even if they are not running the same or compatible software, hardware,
8.2. What are the benefits of effective supply chain management? Managing the supply
chain provides increased innovation, decreased costs, conflict resolution, and improved
communications.
Chapter Objective 9: Describe the six techniques used to evaluate relationship marketing programs.
Key Term: lifetime value of a customer
PowerPoint Basic: 20
PowerPoint Expanded: 47
1. Evaluating customer relationship programs
a. Lifetime value of a customer refers to the revenues and intangible benefits,
such as referrals and customer feedback, a customer brings to the seller
over an average lifetime of their relationship, less the amount the company
must spend to acquire, market to, and service the customer
b. It is one of the most important measures of relationship marketing
programs
d. The “average lifetime” of a customer relationship depends on industry and
product characteristics
e. It can be calculated by multiplying what an “average” customer spends on
each purchase, times number of annual purchases, then subtract its
expenses related to that purchase
f. Another approach is to calculate the payback from a customer relationship,
meaning the length of time it takes to break even on customer acquisition
costs
2. Other techniques used to evaluate relationship programs include:
a. Reviewing customer comments and feedback on social media sites such
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 311
3. Often attracting the right buyers is just as important as treating them well
a. Companies, large and small, can implement technology to help measure
the value of customers and the return on investment from expenditures
developing customer relationships
Assessment check questions
9.1. Define lifetime value of a customer. In the lifetime value of a customer, the revenues
9.2. Why are customer complaints valuable in evaluating customer relationship programs?
Chapter Objective 10: Identify the two major types of sales forecasting methods
Key Term: sales forecast, qualitative forecasting, quantitative forecasting, jury of executive opinion, Delphi
technique, sales force composite, survey of buyer intentions, trend analysis, exponential smoothing
PowerPoint Basic: 21–22
PowerPoint Expanded: 48–49
Table 11.2
Benefits and
Limitations of
1. Sales forecasting
a. A sales forecast is an estimate of a firm’s revenue for a specified future
period
b. Forecasts play major roles in new-product decisions, production scheduling, f
and procurement, distribution, and human resource planning
c. An inaccurate forecast can lead to poor or incorrect decisions in these
areas
g. Types of sales forecasting methods:
i. Qualitative forecasting—techniques that rely on subjective data
that reports opinions rather than exact historical data
312 Part 3 Target Market Selection
Various
Forecasting
would be best
for a firm with
a limited
budget? For a
firm with a time
crunch? For a
firm willing to
pay for
detailed and
realistic
information?
ii. Quantitative forecasting—techniques that rely on statistical
computations (such as trend extensions based on past data,
2. Qualitative forecasting techniques
a. Planners use qualitative forecasting techniques when they want judgmental
or subjective indicators
b. They include jury of executive opinion, Delphi technique, sales force
composite, and survey of buyer intentions
c. Jury of executive opinion
i. The jury of executive opinion technique combines and averages
the outlooks of top executives from areas such as marketing,
finance, and production
ii. It is a quick and inexpensive method that often generates good
forecasts for sales and new-product development
iii. It works best for short-term forecasting
d. Delphi technique
i. The Delphi technique solicits opinions from several people, but
also gathers thoughts from experts outside the firm, such as
academic researchers
ii. It is most appropriately used to predict long-run issues, such as
technological breakthroughs, that could affect future sales and
e. Sales force composite
i. The sales force composite technique develops forecasts based
on the belief that organization members closest to the
marketplace offer the best insights concerning short-term future
sales
ii. These forecasts typically work from the bottom up
iii. Drawbacks: Forecasts are conservative because their numbers
ultimately determine sales quotas; they are based on a narrow
perspective or geographic territory
iv. This method works well only in combination with other
techniques
f. Survey of buyer intentions
i. A survey of buyer intentions gathers input through mail-in
questionnaires, online feedback, telephone polls, and personal