Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 313
3. Quantitative forecasting techniques
a. Quantitative techniques attempt to eliminate the subjectiveness of the
qualitative methods; include methods like test markets, trend analysis, and
exponential smoothing
b. Test markets
i. Test markets gauge and assess consumer response to a new
product under actual marketplace conditions
ii. Different prices, alternative promotion strategies, and other
c. Trend analysis
i. Trend analysis develops sales forecasts by analyzing the
historical relationship between sales and time
ii. It implicitly assumes that the collective causes of past sales will
continue to exert similar influences in the future
iii. When historical data is available, trend analysis can be completed
quickly and inexpensively
d. Exponential smoothing
i. Exponential smoothing is a sophisticated version of trend analysis,
4. Strategic implication of marketing in the 21st Century
a. A focus on relationship marketing helps companies create better ways to
communicate with customers and partners, and develop long-term
relationships
b. This focus challenges managers to develop strategies that closely integrate
Assessment check questions
10.1. Describe the jury of executive opinion. The jury of executive opinion combines and
314 Part 3 Target Market Selection
averages the outlooks of top executives from areas such as marketing, finance, production,
and purchasing.
10.2. What is the Delphi technique? The Delphi technique solicits opinions from several
ANSWERS AND TEACHING NOTES TO CHAPTER EXERCISES
Chapter 11 Assurance of Learning Review
1. Describe the benefits of relationship marketing. How does database technology help firms build
relationships with customers?
Answer: Relationship marketing helps a firm develop and maintain long-term, cost-effective relationships
with individual customers, suppliers, employees, and other partners for mutual benefit and increased
sales. Database marketing uses information technology to analyze data about customers and their
2. What types of factors might the firm monitor in its relationships?
Answer: Marketers continually monitor customer satisfaction to measure and improve the ways in which
they meet customer needs and build relationships. Three factors involved in this process include:
understanding customer needs, getting customer feedback, and setting up ongoing programs to ensure
3. What is an affinity marketing program?
Answer: An affinity marketing program solicits involvement by individuals who share common interests
4. Distinguish among grassroots marketing, viral marketing, and buzz marketing.
Answer: Grassroots marketing connects directly with existing and potential customers through flexible
and nonmainstream channels, using unconventional or nontraditional strategies. Viral marketing allows
5. Describe at least four qualities of a successful CRM system.
Answer: Successful CRM programs have many qualities that lead to their success. Students should be
able to name at least four from the following list: They create partnerships with customers in ways that
6. Describe each of the four types of business partnerships.
Answer: Buyer partnerships refer to those in which a firm purchases goods and services from one or
7. Why is it important for a firm to manage the relationships along its supply chain?
Answer: The supply chain—or value chain—is the sequence of suppliers that contribute to the creation
and delivery of a product. Its management is important because it affects both upstream relationships
8. What is the most important factor in a strategic alliance?
Answer: Strategic alliances—partnerships established to create a competitive advantage—are formal and
long-term arrangements, the ultimate expression of relationship marketing. Their size is not important.
9. Explain how a firm goes about evaluating the lifetime value of a customer.
Answer: Lifetime value of a customer refers to the revenues and intangible benefits that a customer
brings a seller over an average lifetime, minus the amount the company must spend to acquire and serve
10. Contrast qualitative and quantitative sales forecasting methods.
Answer: Qualitative forecasts refer to subjective techniques that are based on opinions rather than on
exact historical data. They include the jury of executive opinion, the Delphi technique, the sales force
Projects and Teamwork Exercises
1. Answer: Have teams explain why they chose the company they did from the given categories. Start a
discussion about their plans to attract customers at the first level of the relationship marketing continuum,
which is price, and how they planned to move them to the next level, with social interactions. Some ideas
to get you started:
a. dog-grooming service—begin by attracting customers through price discounts, coupons for pet foods,
or reduced rates on weekdays; add social interaction by conducting health check-ups for dogs by trained
vets
2. Answer: Have students share the business they selected, its industry, and the nature of the goods or
services it sells. Have them explain how they designed a frequency marketing program as well as a
grassroots, viral, or buzz marketing campaign. Remind them that frequency marketing programs keep
customers by rewarding them with cash, rebates, merchandise, or premiums, often through rewards
318 Part 3 Target Market Selection
3. Answer: How did students decide to use the hotel chain’s database and its information on guests that
includes demographics, number of visits, and room preferences? What types of relationship marketing
programs did they create? Have them list the other types of databases they thought of that might identify
potential customers and personalize its communications with them. What other issues came up as they
did this assignment, involving security and privacy? Start a discussion about using personal information
4. Answer: Discuss the local businesses that students chose, and the information they found out about
their customer base, marketing strategies, and internal functions. How would a customer relationship
management focus help the enterprise’s competitive position? What elements would they specifically
develop within this business to encourage such relationships? Are customers willing to engage in a long–
term relationship with such local stores?
5. Answer: This should be a fun exercise, since students are concentrating on a company that “makes
great stuff.” First have them discuss the item they liked and were drawn to—why is it so attractive?
Remind them to be specific about the product’s features, price, or competitive advantages. Was it the first
thing that came to mind, or did they have to weigh a number of items and choose one? Now ask them
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 319
Critical-Thinking Exercises
1. Suppose you were asked to be a marketing consultant for a restaurant specializing in a regional
cuisine such as Tex-Mex, Cuban dishes, or New England clambake. The owner is concerned about
employee satisfaction. When you visit the restaurant, what clues would you look for to determine
employee satisfaction? What questions might you ask employees?
Answer: Start by asking students why employee satisfaction is an important component of relationship
marketing. If they’ve worked before, what did they like about their job (and employer) and what didn’t they
2. What types of social interaction might be appropriate—and effective—for a local hair salon to engage
in with its customers?
3. What steps might a clothing store take to win back its lost customers?
4. Explain why a large firm such as General Mills might use national account selling to strengthen its
relationship with a major supermarket chain.
5. Why is it important for a company to calculate the lifetime value of a customer?
Answer: This exercise is straightforward. Students should understand the concept of lifetime value of a
customer, how it’s calculated, and why it is a popular way of evaluating the effectiveness of a relationship
marketing program. They can also state the consequences of not using the concept, while defending
their answer.
Ethics Exercise
Suppose you work for a firm that sells home appliances such as refrigerators, microwaves, and washers
and dryers. Your company has been slowly losing customers, but no one seems to know why. Employee
morale is sliding as well. You believe the company is run by honest, dedicated owners who want to
please their customers. One day, you overhear an employee quietly advising a potential customer to
shop at another store. You realize that your firm’s biggest problem may be lack of employee
satisfaction—which is leading to external customer loss.
1. Would you approach the employee to discuss the problem?
2. Would you ask the employee why he or she is turning customers away?
3. What steps do you think your employer could take to turn the situation around?
1. Cobranding. Use a search engine such as Google or Bing to find three examples of cobranding
similar to the Delta Skymiles credit card from American Express.
http://www.delta.com/skymiles/about_skymiles/benefits_at_glance/dl_amex_credit_card/index.jsp
2. CRM software. ACT! is a type of customer relationship management software. Visit the website
shown here and prepare a brief report about ACT! software and how it can improve marketing
relationships.
http://www.act.com
3. Rewards programs. Virtually all hotels and airlines have customer loyalty rewards programs. Go to
the websites listed here to learn more about the rewards programs offered by United Airlines and Hilton
hotels. Prepare a brief report comparing the two programs.
http://www.united.com/web/en-us/content/mileageplus/default.aspx
http://hhonors3.hilton.com/en/index.html
Case 11.1 Teaching Customer Service at the Disney Institute—Questions for Critical Thinking
1. The Disney Institute says clients can’t “take Disney and just plug it in.” In what ways can companies
best adapt Disney’s advice to their own customer service situations?
2. Do you agree that keeping employees happy is important for sustaining a customer satisfaction
orientation? Why or why not?
Answer: Employee satisfaction is a critical objective of internal marketing. A firm’s top management must
realize that employees cannot satisfy customers when they themselves are unhappy. These employees
Video Case 11.2 Pepe’s Pizzeria Serves Success One Customer at a Time—Questions for Critical
Thinking
1. How does Pepe’s Pizzeria use price and social interactions to build relationships with its customers?
Answer: While some businesses use price as a way to attract first-time customers, price is actually
integral to Pepe’s core values. Refusing to raise prices because customers may be facing hard times—
2. How does Pepe’s Pizzeria ensure customer satisfaction?
Answer: Pepe’s ensures customer satisfaction by serving the highest quality food at affordable prices and
Part 3 Video Case: Scooping Up Consumer Insight—Questions for Critical Thinking
1.Using the VALS framework, how would you segment the average viewer of Food Network
programming?
Answer: All students likely will place Food Network viewers in the Innovators category, with high
2. Using social media, what steps might Food Network take to expand its viewership to include more
teens? Viewers from different ethnic groups?
Answer: Food Network could use Twitter, YouTube, Tumblr, and other social media outlets to reach and
engage more teens with younger celebrity chefs; recipes for party food and snacks that appeal to that
3. What types of secondary data could be helpful to Food Network marketing researchers? How could
they put this data to use?
Answer: Federal government data (such as those available from the U.S. Census Bureau) along with
state or local data (demographics, car registrations, school populations, real estate sales, number of
4. Through social media, how do Food Network viewers become advocates for the network?
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COLLABORATIVE LEARNING EXERCISES
Building Buyer-Seller Relationships
Purpose:
To trigger student thinking about how to build customer relationships by adding value to goods
and services
Background:
In an increasingly competitive business environment, successful marketers build relationships
with their customers through innovative ways by adding value to their products. The result can
Relationship to Text:
Building Buyer–Seller Relationships
Estimated Class Time:
About 15 minutes
Preparation/Materials:
None needed
Exercise*:
Ask your students to share examples of businesses they know that offer added value (above and
beyond their competitors). Encourage them to consider both small and large businesses, such as
local buy-ten–get-one–free programs and national airline frequent flyer programs.
Encourage them to be creative. Some natural history museums, for example, add value to the
museum experience by offering youth groups the opportunity to camp overnight in the museum
under the dinosaur bones (for a hefty fee, of course!).
After ten minutes, call time and ask each group to share their favorite concept. You’ll likely get an
entertaining mix of wacky and terrific ideas.
Questions for Reflection:
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 325
*This exercise was adapted from the text
Database Marketing
Purpose:
To highlight opportunities to collect information for database marketing.
Background:
Clearly, database information is crucial for relationship marketing; however, growing numbers of
consumers in our fast-paced society are unwilling to spend time providing information for
marketers. This exercise is designed to help students explore how they can use limited consumer
patience to collect high quality information.
Relationship to Text:
Database Marketing
Estimated Class Time:
About 15 minutes
Preparation/Materials:
None needed
Exercise:
Brainstorm as a class on opportunities for businesses to collect information from their customers.
Examples might include questions at the cash register (e.g. “What is your zip code?”), questions
on a mail-in warranty card, and questions on website registrations. Once you have a solid list,
After about ten minutes request that a volunteer from each of five groups write their questions on
the board. Then ask the class to contribute any additional questions that are significantly different
from those already on the board. The overlap among the questions is usually huge.
Follow-up discussion: How would they use each piece of information? Would it be better to collect
different information at each opportunity? Why or why not?
Questions for Reflection:
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Buzz Marketing
Purpose:
To help students know how customers can be turned to advocates
Background:
Buzz marketing gathers volunteers to try products and then relies on them to talk about their
experiences with friends and colleagues. Accelerating communication, especially through social
media, can help amplify the marketing messages.
Relationship to Text:
Buzz Marketing
Estimated Class Time:
About 15 minutes
Preparation/Materials:
None required
Exercise:
Ask the students to list the ways firms can make its customers act as advocates and actively
spread the marketing messages. Students should be able to list grassroots, viral, and buzz
Chapter 11 Relationship Marketing and Customer Relationship Management (CRM) 327
Retrieving Lost Customers
Purpose:
To highlight the importance of retrieving lost customers
Background:
Winning back lost customers is not a glamorous function, but it can be deeply satisfying. More
importantly, retrieving lost or disgruntled customers can make a dramatic, positive difference in
terms of profitability. This exercise is designed to help students explore ways to win back
customers.
Relationship to Text:
Retrieving Lost Customers
Estimated Class Time:
About 10 minutes
Preparation/Materials:
Recruit two vocal, articulate volunteers before you do this exercise. Give one the customer
information and the other the cable system information, and spend a few moments helping them
understand their roles. Make copies of both parts for the rest of the class.
Exercise:
Ask your two volunteers to wait outside, and announce to the rest of the class that this will be a
role-playing exercise on retrieving lost customers at a cable system. Distribute the information
below to the class, and read each part aloud.
Cable Customer: You have just called the cable system to disconnect your service. You have
been unhappy with the cable system for months. The customer service reps are typically sullen
When your class understands both positions, spend a few moments brainstorming about how the
customer retrieval specialist can succeed. Then, call in your volunteers, and begin the role-play!
328 Part 3 Target Market Selection
Whether the customer retrieval specialist succeeds or fails, the discussion is usually rich. Ask
your students what went well, and what could have gone better. Underscore the importance of
listening to your customers before they defect.