Building and maintaining customer relationships
This lesson will consider the internal and external customer, how marketing is used to build and nurture customer relationships, and will begin to build your knowledge on the customer loyalty.
So let’s begin by looking at external customers and internal customers. For the purposes of an introduction to marketing, the more generic terms for the different types and characteristics of people with which an organisation develops relationships would include: customers, users, connected stakeholders, and other stakeholders. We will now look at how we differentiate between the internal and external customer.
Internal customers are those colleagues and departments within your own organisation. Again in the previous module we looked at internal functions and how marketing can be used internally for the flow of internal services and communication. Sometimes you are the customer and sometimes you are the service provider. We considered how marketing connected internally with how marketing interacts with research and development, production/operations/logistics, human resources, IT and customer service. There are of course many other internal parts of the business.
External customers are more likely to be customers, users, and stakeholders. As we said in previous lessons in this module, customers are those that exchange money for goods and services and consumers are those that actually use the product (and as we said they may or may not be the same person). So a user is the same as a consumer. According to Blythe (2011), stakeholders are people who are impacted by corporate activities. An obvious stakeholder might be a shareholder since they have voting rights at annual general meetings. A less obvious stakeholder would be the person that owns the land next to your factory, or the family that is supported by the father that works in your warehouse. So stakeholders would include ‘publics’ such as shareholders, customers, staff and the local community. A connected stakeholder is one with the direct association with your business, and this would be a supplier or a shareholder. Obviously other stakeholders would not have the same strength of connection, for example in the case of the local community.
Example – Starbucks Coffee
We going to look at Starbucks coffee as an example of a company that has both internal and external customers, and we should be able to apply some of the terminology that we introduced above. The internal customers will be the people that work within the business of Starbucks. The internal customers will be everyone from the Board of Directors of the company, to the supervisors and team members that serve coffee at the customer interface. So information and communication will flow from the board of directors to the people on the ground, and data and feedback from customers can flow from the people in the coffee shops back to the internal customers in the marketing department. External customers and consumers will be the everyday public that come in to the coffee shop and buy coffee for themselves and their friends. Of course the user will be the consumer of the product, whether that is the purchaser or not. The connected stakeholder would be the coffee suppliers from around the world, and the pension schemes that own shares in the business. Other stakeholders will include other businesses which are based around the Starbucks stores, as well as those impacted by the environment around coffee plantations (which is something that Starbucks is very keen to deal with since it has an ethical purchasing policy).
Marketing and Customer Relationships
Marketing today is very much focused upon business relationships, especially in the B2B markets. Historically companies would manufacture products that would be promoted to customers. However as markets have become more competitive, marketing companies seek to attract customer by building strong relationships so that customers are ‘retained’ i.e. you keep hold of your customers. This is the basis for relationship marketing, which we consider here as marketing and the customer relationship.
Think about the value-added, high quality airlines, such as Emirates. Companies such as these are specialists in building the customer relationship and it is obvious that they add value at each customer contact point. You are treated to high levels of customer service from the moment that you check-in, during your flight and even when you have finished using their service. For example, airlines have air miles promotions and upgrades which keep the customer flying with the company and ‘retains’ them as a customer.
The key to relationship marketing is the long-term customer relationship. So if you recall your introduction to marketing definitions, this is at opposite ends of the scale to be production or product orientation which is the basis for modern marketing. As a rule of thumb, relationship marketing tends to be practised well in the airline industry and in the travel industry. However branding is another way of maintaining the customer relationship, as is innovation and design. Nike and Apple may not deliver the same amount of face-to-face relationship building, but they do have very loyal long-term customers. Try to think of other examples of businesses that practice strong relationship marketing.
The marketing concept, customer focus and relationship marketing.
At this point in our studies we can now identify a path which connects the marketing concept, customer focus and relationship marketing. The marketing concept centres all organisational activities upon the customer (which is our customer focus) and if we think in terms of the long-term we have now added relationship marketing. Marketing focuses everything on our customer and their recruitment, their retention into the long-term, and finally marketing aims to extend products and services to the same customers from other product categories. So historically marketers would ‘acquire’ or recruit customers whereas today we acquire customers and then we ‘retain’ them.
There are a couple of theoretical tools that we can use here. So in this next section we are going to take a look at the Pareto principle and the loyalty ladder, which both help us to understand how we move from customer acquisition to customer retention and the implications for marketing.