Measuring Return on Relationships with Customers

Measuring Return on Relationships with Customers

Minwir Al-Shammari (University of Bahrain, Bahrain)
Copyright: © 2009 |Pages: 20
DOI: 10.4018/978-1-60566-258-9.ch010
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Abstract

Effective development of customer products and/or services requires valid and up-to-date CK in order to target the right customer with the right offering at the right time and through the right channel. Increasing value-adding content of customer offerings is hoped to be reflected on major gains in cost, time, and quality of products and/or services. Doing good things for customers is doing good things good for business. This chapter addresses customer value reciprocity for business represented by durable and profitable customer relationship.
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Conceptual Foundations

The buyer-seller relationship has been likened to a marriage since it decreases uncertainty, allows a sharing of tasks, and provides and intimacy. However, like a marriage, it also increases personal responsibilities, requires care and nurturance and can end with a costly dissolution. To a larger (B2B) and smaller (B2C) degree, these same costs and benefits often apply, for example, the revenue-sharing alliance pioneered by Amazon.com where a seller pays a commission to an Internet partner on the basis of click-throughs, sales leads, or actual sales that originate from the partner’s site. These alliances require both parties to agree to investments of time and resources, such as technical capabilities, reporting system, and marketing (Mohammed et al., 2003). This section discusses the concept of customer ‘relationship’ and customer life cycle (CLC).

Customer Relationship

A relationship is a bond or connection between a firm and its customers. It may be strong, weak or nonexistent. It can be intellectual, emotional or both. Relationship can be intellectual, emotional or both. Intellectual: ‘I know I cannot get a better deal elsewhere’. Emotional: ‘I feel good when I am wearing my Nikes’ (Mohammed et al., 2003).

Two categories of relationships are observed: type and involvement. Relationship exists along a continuum of types ranging from communal to exchange based. A purely communal relationship is altruistic in that each person is focused on meeting the needs and wants of the other(s) in the relationship, e.g. parent and child. In contrast, an exchange relationship is based on the giving of one thing in return for another, e.g. buyer-seller relationships (Mills et al., 1994).

Relationship involvement is defined as the degree to which a relationship is relevant to the consumer, viz. the extent to which it relates to consumers’ values, interests, or needs. Involvement is a function not only of product characteristics, but also of the purchase situation and the consumer’s personal needs.

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