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Roebbeling, Katrin Irene: "Eventually, you will bond for life" - A study of the relationship
between Event Marketing and Customer Bonding
Hamburg: Diplomica GmbH, 2003
Zugl.: Universiteit Maastricht, Universität, Diplomarbeit, 2003
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Preface
This final thesis is the last step of my study International Business at the University of
Maastricht. The topic Event Marketing has become one of my favorite subjects, especially
connected with the thought that it could help in improving relationships with customers. In
my many internships I have come into close contact with event marketing and had my first
own experiences with planning events for customers myself. This is where my interest in this
subject was aroused and that is the reason why I chose for this as my topic for the final thesis.
I am very proud of this thesis which I regard as one of my masterpieces as I could dedicate all
my time to one of my favorite topics.
Now that I am finalizing the last thoughts and paragraphs of this thesis, I would like to
congratulate myself for finishing my study and I also would like to tell my parents that I
promised to finish my studies and herewith I am doing so. "Hope you are proud of me now!" I
would also like to thank my parents for not giving up hope and for staying with me all the
way. Thanks for keeping the faith! Also, I have to thank for the elaborate financial support,
hope you can spend all your money on yourself now. Thanks Mom, for sending me to the
University of Maastricht in the first place. I remember very well that it was your idea and you
convinced me that it was the right thing to do. I also owe very special thanks to my supervisor
Dr. G. Odekerken-Schröder for supporting me and giving me the right hints. Moreover, I
would like to thank Mrs. Wendler for taking over for Dr. Odekerken-Schröder.
I would also like to integrate in this special `thank you'-list Mr. Linssen for giving me an
elaborate interview. An additional thanks goes to my anonymous interviewee, who was
willing to sacrifice some of his spare time for answering my questions and comment my
findings. Finally, an anonymous thanks goes to everybody else who also believed in me.
Cologne, April 2002
Table of Contents
MANAGEMENT SUMMARY
1
1 INTRODUCTION 3
1.1 F
IELD OF
I
NTEREST
3
1.2 S
UBQUESTIONS
4
1.2.1 W
HAT IS CUSTOMER RELATIONSHIP MARKETING
? 4
1.2.2 W
HAT IS EVENT MARKETING
? 5
1.2.3 H
OW CAN SUCCESS OF EVENTS BE CONTROLLED
? 5
1.2.4 H
OW CAN EVENTS BE INTEGRATED IN A COMPANY
'
S
CRM
STRATEGY
? 5
1.3 C
ONTRIBUTION
5
1.3.1 T
HEORETICAL
C
ONTRIBUTION
6
1.3.2 P
RACTICAL
C
ONTRIBUTION
6
1.4 S
TRUCTURE OF THE RESEARCH
7
2 CUSTOMER RELATIONSHIP MARKETING
10
2.1 CRM
BY
D
EFINITION
11
2.2 T
HE
I
MPORTANCE OF
CRM 12
2.2.1 T
HE
M
ARKET
12
2.2.2 T
RUST
14
2.3 A
DVANTAGES OF
CRM 15
2.3.1 A
DVANTAGES FOR THE
C
OMPANY
15
2.3.2 A
DVANTAGES FOR THE
C
USTOMER
17
2.4 CRM
AS A NEW
M
ETHOD
19
2.5 H
OW TO FIND THE
`
RIGHT
' C
USTOMER FOR
CRM 21
2.6 S
TAGES OF
C
USTOMER
B
ONDING
22
2.6.1 A
WARENESS
23
2.6.2 I
DENTITY
B
ONDING
23
2.6.3 R
ELATIONSHIP
B
ONDING
23
2.6.4 C
OMMUNITY
B
ONDING
24
2.6.5 A
DVOCACY
B
ONDING
25
2.7 C
ONCLUSION
27
3 EVENT MARKETING
29
3.1 E
VENT
M
ARKETING BY
D
EFINITION
29
3.2 T
HE
I
MPORTANCE OF
E
VENT
M
ARKETING
31
3.3 W
HAT
T
YPES OF
E
VENTS DO EXIST
? 31
3.3.1 B
USINESS
-
ORIENTED
E
VENTS
32
3.3.2 L
EISURE
-
ORIENTED
E
VENTS
32
3.4 W
HAT ARE THE
A
DVANTAGES OF EACH OF THEM
? 33
3.4.1 B
USINESS
-
ORIENTED
E
VENTS SEEN BY
C
OMPANIES
33
3.4.2 B
USINESS
-
ORIENTED
E
VENTS SEEN BY
C
USTOMERS
35
3.4.3 L
EISURE
-
ORIENTED
E
VENTS SEEN BY
C
OMPANIES
35
3.4.4 L
EISURE
-
ORIENTED
E
VENTS SEEN BY
C
USTOMERS
36
3.5 C
ONCLUSION
36
4 EVENTS AND SUCCESS CONTROLS
38
4.1 I
NTRODUCTION
38
4.2 P
REMISE
C
ONTROL
39
4.2.1 P
REMISE
C
ONTROL AS A
F
RAMEWORK
39
4.2.2 S
ELECTION OF
E
VENT
39
4.2.3 M
ARKETING
C
OMPETENCE
41
4.2.4 C
OMMUNICATION
M
EANS
41
4.2.5 E
VENT
P
LANNING
41
4.2.6 T
HE
I
NVITATION
L
IST
43
4.2.7 P
LANNING OF
P
OST
P
ROCESSING
44
4.2.8 S
ETTING
A
IMS
44
4.3 P
ROCESS
C
ONTROL
45
4.4 R
ESULT
C
ONTROL
46
4.5 C
ONCLUSION
47
5 EVENT MARKETING AND CRM
49
5.1 E
VENTS AS A
P
ART OF THE
C
OMMUNICATION
M
IX
49
5.2 E
VENTS AS A
P
ART OF THE
M
ARKETING
S
TRATEGY
51
5.3 C
ONCLUSION
53
6 CONCLUSIONS AND MANAGEMENT IMPLICATIONS
55
6.1 P
ROBLEM
S
TATEMENT
55
6.2 W
HAT IS CUSTOMER RELATIONSHIP MARKETING
? 55
6.3 W
HAT IS EVENT MARKETING
? 56
6.4 H
OW CAN SUCCESS OF EVENTS BE CONTROLLED
? 56
6.5 H
OW CAN EVENTS BE INTEGRATED IN A COMPANY
'
S
CRM
STRATEGY
? 56
6.6 M
ANAGEMENT
I
MPLICATIONS
57
6.7 L
IMITATIONS
58
6.8 R
ECOMMENDATIONS FOR
F
UTURE
R
ESEARCH
59
6.9 R
EFLECTION
59
7 REFERENCE LIST
60
8 APPENDICES 65
A
PPENDIX
1 65
A
PPENDIX
2 65
A
PPENDIX
4 67
A
PPENDIX
5 67
A
PPENDIX
6 68
A
PPENDIX
7 74
A
PPENDIX
8 80
9 INTERVIEW RESULTS
82
9.1 I
NTERVIEW
M
R
. L
INSSEN
82
9.2 C
URRICULUM
V
ITAE OF
M
R
. L
INSSEN
86
9.3 I
NTERVIEW
M
R
. H.
87
9.4 I
NTERVIEW
M
R
. E
HRHARDT
90
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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- 1
Management Summary
Management Summary
Changing market conditions have made it tougher on companies to stay competitive. Long-
term customer bonding can provide a competitive advantage. Today's customers' wishes have
put forth the need for experience marketing though. This trend has to be taken into account
when planning on bonding with customers. One way to create a platform for experience is
event marketing. This final thesis focuses specifically on the use of events with regard to
customer relationship bonding. In this study, an answer will be provided to the following
problem statement:
Changing market conditions have made it tougher on companies to stay competitive. Long-
term customer bonding can provide a competitive advantage. Today's customers' wishes have
put forth the need for experience marketing though. This trend has to be taken into account
when planning on bonding with customers. One way to create a platform for experience is
event marketing. This final thesis focuses specifically on the use of events with regard to
customer relationship bonding. In this study, an answer will be provided to the following
problem statement:
What is the effect of fairs and other events on customer relationships in
business-to-business marketing?
Event marketing supports bonding by providing an opportunity for direct and personal contact
between a company and its customers. Furthermore, customers are offered the possibility to
experience a company and its products in a pleasurable surrounding. Events can either be
business- or leisure-oriented, depending on the overall character of the event. Events provide
a variety of advantages to both the company and its customer, ranging from cross-selling and
exchange of information to risk and cost reductions. Event marketing integrates in the modern
concept of customer relationship marketing by opening a constructive dialogue between the
customer and the company.
Event marketing supports bonding by providing an opportunity for direct and personal contact
between a company and its customers. Furthermore, customers are offered the possibility to
experience a company and its products in a pleasurable surrounding. Events can either be
business- or leisure-oriented, depending on the overall character of the event. Events provide
a variety of advantages to both the company and its customer, ranging from cross-selling and
exchange of information to risk and cost reductions. Event marketing integrates in the modern
concept of customer relationship marketing by opening a constructive dialogue between the
customer and the company.
Customer relationships are built on trust which can be established by creating a special bond
between a company and its customers. These bonds can exist on various levels and not all
customers are suited for long-term bonding. To insure that events support and do not hinder
these relationships its success should be controlled in different ways. These controls should be
applied before, during and after the event to avoid pitfalls, remove obstacles, and reach the set
aims.
Customer relationships are built on trust which can be established by creating a special bond
between a company and its customers. These bonds can exist on various levels and not all
customers are suited for long-term bonding. To insure that events support and do not hinder
these relationships its success should be controlled in different ways. These controls should be
applied before, during and after the event to avoid pitfalls, remove obstacles, and reach the set
aims.
Events are a powerful communication instrument due to their experience-oriented character
but have to be used accompanied by other marketing instruments such as classical marketing,
PR, sponsoring, etc. Events can also be used to achieve strategic aims such as enhancing the
image of the company and its products, product presentation and others. In order to go along
Events are a powerful communication instrument due to their experience-oriented character
but have to be used accompanied by other marketing instruments such as classical marketing,
PR, sponsoring, etc. Events can also be used to achieve strategic aims such as enhancing the
image of the company and its products, product presentation and others. In order to go along
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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- 2
with a company's corporate concept, events have to be integrated in the overall marketing
strategy though.
This study shows that the application of events as a mean to create customer relationships can
be effective when the following aspects are considered thoroughly:
· The selection of the right customer to bond with
· The integration of events in the communication mix
· The integration of events in the overall marketing strategy
· The integration of events in the concept of CRM
·
The careful control of the success of events
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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- 3
1 Introduction
Markets are changing everyday. In order for a company to stay competitive or even ahead of
its competitors, it has to be aware of those changes in markets. Firms that are able to do so are
market- driven, because they direct their actions as a reaction to the market changes. One of
those changes are the massive special offers which induce customers to change brands (Kotler
Bliemel, 1992). Conclusively, more and more companies are trying to bind their customers
in one way ore another. Therefore, companies ask themselves how they can accomplish this.
Developing long-term relationships with customers is one way to achieve this and it has
become more and more important in business-to-business marketing, often more important
than seeking new customers. These relationships start when business transactions become
more frequent between a firm and its customers and are slowly developing into strategic
integration within the firms networks; at this time the firms can regard the relationship as a
strategic asset (Johnston, 1999). The question arises why customers decide to bond for a
longer period of time instead of always looking for the best offer anew and do not take
advantage of the competition between different buyers and sellers to achieve lowest prices
and highest quality.
Before elaborating on the aspects mentioned above and their integration in the fields of event
marketing, the field of interest will be discussed in section 1.1. In section 1.2 the subquestions
of this thesis will be introduced going along with accompanying questions, followed by the
contribution of this thesis in section 1.3. Section 1.4 will finish this chapter with highlighting
the set-up of this study.
1.1 Field of Interest
One way companies use to develop long-term relationships is by participation on trade shows.
According to Herbig, O'Hara, Palumbo (1998), `trade shows accounted for over 22-25 per
cent of the typical US business market promotional budget (P. 425).' The number of attendees
on trade shows and the number of trade shows itself is expected to grow further in the 1990s
(Trade Show Bureau 1994). In Europe, trade shows are important social events and eight out
of ten regarding a total of 4,800 trade shows are held in Germany (Graphic Arts Monthly,
Sept. 1999). The trade show is also one of the most expensive marketing instruments and its
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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- 4
use should be carefully considered. New customer acquisition on trade shows is rather rare
but long-term relationships and image recognition can be valuable results of trade show
presence.
Others try to earn their customers' loyalty by inviting customers to events which do not show
a typical business character. The thought is to bind customers to a company's product by
providing emotional experience to them which they will connect to a certain product, brand,
or the company itself. Event marketing also provides a good possibility for casual
communication as well as for deepening business connections.
Both ways are options to equalize the reduced power of mass-marketing techniques induced
by `changing life-styles and an overwhelming explosion of commercialism' (Cross Smith,
1996). The trend goes from mass advertising to individualized mailing and telephone actions.
This justifies the use of trade shows and other events. Even though the importance of trade
shows is widely known, little research has been done on how effective the use of trade shows
in building long-term relationships really is. This also goes for the use of other events as a
mean to bind customers to a company. This is the purpose of this study. The study is aiming
at taking a closer look at how and to what extent the use of trade shows other events can
nurture business-to-business relationships. The study shows when trade shows and other
events should be used as its application is not always effective. The study also goes into the
pitfalls of trade show usage and its avoidance.
This research proposal will be framed more in detail for the research used in the next
paragraph.
1.2 Subquestions
To take a closer look at the problem statement mentioned above, the following questions will
be discussed in the next sections.
1.2.1 What is customer relationship marketing?
To answer this question, different points of view on customer relationship marketing will be
given. Further, an insight will be provided, reasoning why CRM is so important nowadays,
undermined by the changes in the market and factors that influence customer relationships.
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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Moreover, the advantages of customer relationship marketing will be discussed by taking a
look at both the side of the company and of the customer. Additionally, the concept of CRM
will be integrated in the development of marketing approaches, highlighting on the
differences to classical marketing strategies. This section will be concluded by giving reasons
for picking the right customer to bond with, along with different types of customer bonding.
1.2.2 What is event marketing?
This question will be discussed by first highlighting on some definitions of event marketing.
This will be followed by a short examination of the current market situation as a mean to
stress the necessity of event marketing as a current trend. Finally, different types of events
will be established and the advantages and disadvantages of each of them will be discussed by
taking into account both the side of the company as well as the customer's.
1.2.3 How can success of events be controlled?
As events are one of the most expensive marketing instruments, one should control their
success. In order to deal with this question, an insight will be given by introducing different
types of success controls. Furthermore, practical examples will be given to undermine the
findings, accompanied by recommendations.
1.2.4 How can events be integrated in a company's CRM strategy?
Events can only be successful when integrated in a company's whole CRM concept. This
subquestion will take a look at how events can be integrated in the communication mix and a
company's marketing strategy.
The subquestions listed above have the purpose of guiding through the thesis. Question 1 will
be dealt with in chapter 2, while question 2 and 3 will be found in chapters 3 and 4. Question
4 will be answered in chapter 5.
1.3 Contribution
The general problem statement will be stated in this section as a guideline for the conduction
of the research for this final thesis. Furthermore, the theoretical and the practical contribution
of the findings of this thesis will be presented in the following sections.
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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1.3.1 Theoretical Contribution
The shift from classical marketing methods to customer relationship marketing is rather new
and an ongoing process. Therefore, studies and literature to be found on this subject is limited.
Consequently, no distinction between hard products, soft products, or services will be made,
but a general look will be taken at the marketing of products. The overall view will be on
business-to-business marketing. As far as geographical limitations are concerned, the focus
will be on companies based in Germany, even though some of them are operating on an
international level which leads to findings that have to be seen in an international context. A
literature review will serve as a basis for this thesis. As an elaborate market research has not
been conducted specifically for this study, statistical material to undermine this study will be
taken from the AUMA (Ausstellungs- und Messe-Ausschuss der Deutschen Wirtschaft e.V.)
situated in Cologne (Germany) who issues a functions- and potential-analysis on fairs each
year. This study is an acknowledged source for findings with regard to companies exhibiting
on fairs or visiting them for business reasons in Germany and provides statistically relevant
numbers and findings. More information on this report can be found in Appendix 1.
1.3.2 Practical Contribution
The literature findings mentioned above will be undermined by a few interviews held. As this
study is a literature research, the interview results will be used to support the literature
findings and will consequently not be found in a separate section but integrated in the
following chapters. Furthermore, personal experiences as an employee of a catering event-
planning company, which planned the decoration and catering part of the `Deutscher
Fernsehpreis' in Cologne and other business parties such as the RTL Christmas Party, and
experiences as the fair coordinator of Q-go, a software company, will be built in the
succeeding study. The interview results and practical experiences can aid managers to plan
events efficiently and avoid mistakes. Furthermore, hints for improvement in the planning
process will be given accompanied by practical examples.
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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Event marketing provides a good opportunity for companies to get in touch with their
customers on a more interactive level. Consequently, the problem statement for this thesis is
as follows:
Event marketing provides a good opportunity for companies to get in touch with their
customers on a more interactive level. Consequently, the problem statement for this thesis is
as follows:
What is the effect of fairs and other events on customer
relationships in business-to-business marketing?
In the next section, the subquestions for this problem statement will be formulated.
In the next section, the subquestions for this problem statement will be formulated.
1.4 Structure of the research
1.4 Structure of the research
The next chapters will take a look at the problem statement and the subquestions presented
above by elaborating on literature findings undermined by the interview results found. The
following chapter will shed some light on the term customer relationship marketing by listing
some definitions, the importance and advantages of CRM with regard to the current market
situation, and the different types of bonding. The third chapter will discuss the term Event
Marketing with regard to definitions, different types and its advantages, and success controls.
The fourth chapter will present various types of success controls to insure and measure the
effectiveness of events. The fifth chapter will integrate the term event marketing in the
concept of customer relationship marketing
The next chapters will take a look at the problem statement and the subquestions presented
above by elaborating on literature findings undermined by the interview results found. The
following chapter will shed some light on the term customer relationship marketing by listing
some definitions, the importance and advantages of CRM with regard to the current market
situation, and the different types of bonding. The third chapter will discuss the term Event
Marketing with regard to definitions, different types and its advantages, and success controls.
The fourth chapter will present various types of success controls to insure and measure the
effectiveness of events. The fifth chapter will integrate the term event marketing in the
concept of customer relationship marketing
In figure 1.1, the set-up of this final thesis is shown.
In figure 1.1, the set-up of this final thesis is shown.
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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Figure 1.1: set-up of final thesis
Figure 1.1: set-up of final thesis
Reflection
Implications
Conclusion
Chapter 5
Recommendations
Limitations
Introduction
Chapter 1
Body
Chapter 4
Event Marketing and CRM
Chapter 3
Event Marketing
Chapter 2
Customer Relationship Marketing
The term customer relationship management still is a subject rather unexplored, even though
it is in everyone's mouth nowadays. With this final thesis, a deeper insight into the subject of
customer relationship management with regard to event marketing shall be given as an
incentive for further research on this topic.
The term customer relationship management still is a subject rather unexplored, even though
it is in everyone's mouth nowadays. With this final thesis, a deeper insight into the subject of
customer relationship management with regard to event marketing shall be given as an
incentive for further research on this topic.
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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As the problem statement, the frame and the set-up of this thesis have been stated, the
following chapter will elaborate on the term Customer Relationship Marketing.
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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2
Customer Relationship Marketing
2
Customer Relationship Marketing
Customer relationship marketing, or short CRM, is nowadays a much discussed topic.
Everyone, who has contact with customers, comes across the term CRM. The `management of
customer relationships' has become a key word and is regarded as the mainspring for future
growth by many companies (`Trends in der Boom Branche', 2001). Lasogga (2000) considers
the aim of CRM to be the achievement of long-term customer loyalty.
Customer relationship marketing, or short CRM, is nowadays a much discussed topic.
Everyone, who has contact with customers, comes across the term CRM. The `management of
customer relationships' has become a key word and is regarded as the mainspring for future
growth by many companies (`Trends in der Boom Branche', 2001). Lasogga (2000) considers
the aim of CRM to be the achievement of long-term customer loyalty.
Customer relationship marketing is not a new invention. It has been practiced over years and
many firms have used it successfully. But the main focus usually has laid on the improvement
of product and service quality and the avoidance of complaints and faults in the selling system
or distribution chain (Lasogga, 2000). This often resulted in the growing customer distance.
Lasogga (2000) regards the old marketing concept of the customer being treated as `the king'
("der Kunde ist König") as an inadequate marketing approach for today's market situation (p.
2). He reasons that kings cannot be invited or regarded as team players, they are hard to get
acquainted with and expect finished solutions without further questioning and development.
Therefore, a whole new and systematic evaluation of CRM by definition or `bonding', as
some call it, is in place.
Customer relationship marketing is not a new invention. It has been practiced over years and
many firms have used it successfully. But the main focus usually has laid on the improvement
of product and service quality and the avoidance of complaints and faults in the selling system
or distribution chain (Lasogga, 2000). This often resulted in the growing customer distance.
Lasogga (2000) regards the old marketing concept of the customer being treated as `the king'
("der Kunde ist König") as an inadequate marketing approach for today's market situation (p.
2). He reasons that kings cannot be invited or regarded as team players, they are hard to get
acquainted with and expect finished solutions without further questioning and development.
Therefore, a whole new and systematic evaluation of CRM by definition or `bonding', as
some call it, is in place.
In this chapter, the first subquestion will be answered, namely:
In this chapter, the first subquestion will be answered, namely:
What is customer relationship marketing?
This subquestion will be dealt with by taking a look at the following aspects:
This subquestion will be dealt with by taking a look at the following aspects:
· CRM by definition
· CRM by definition
· Why CRM?
· Why CRM?
· Advantages of CRM
· Advantages of CRM
· What is so new about CRM?
· What is so new about CRM?
· How to find the `right' customer for CRM
· How to find the `right' customer for CRM
· Stages of customer bonding
· Stages of customer bonding
In section 2.1 of this chapter, CRM will be explained with the help of definitions. Section 2.2
will introduce the changes in the market and consequently the need for CRM, while section
In section 2.1 of this chapter, CRM will be explained with the help of definitions. Section 2.2
will introduce the changes in the market and consequently the need for CRM, while section
EVENTually You will bond for life !!!
Katrin Irene Roebbeling
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2.3 will highlight on the advantages of CRM for both the customer and the company.
Additionally, current differences from traditional marketing strategies with regard to CRM
will be presented in section 2.4. Section 2.5 will provide hints on how to select customers for
bonding, while section 2.6 will explain the different stages of customer bonding. This chapter
will be finalized by a conclusion, found in section 2.7.
2.1 CRM by Definition
In order to take a closer look at customer relationship marketing one should first regard what
CRM is by definition. Evans Laskin (1994) define CRM as `a customer-centred approach
whereby a firm seeks long-term business relationships with prospective and existing
customers (p. 440).'
CRM can also called `customer bonding'. Cross Smith (1996) define customer bonding as
a `new system for initiating and sustaining lasting relationships with each customer or
prospect', which offers `a strategic framework for a new, more responsible, and customer-
focused kind of marketing (p. 1).' According to Grönroos (1994), the objective of customer
relationship marketing is `to establish, maintain and enhance relationships with customers.'
Looking at it from the customer's viewpoint, customer bonding is `the decision process that
goes into selecting the organizations he will buy his goods and services from or donate his
hard-earned money and time to (Cross Smith, 1996, p. 54).'
Customer relationship marketing is also referred to as `loyalty marketing', as most companies
use CRM as a strategy to bind their customers to their products by building loyalty. Duffy
(1998) defines loyalty marketing as `programs aimed at cultivating strong relationships with
their best customers (p. 435).' Loyalty marketing has become a popular term among
marketers, who are looking for ways to fight the decline in customer numbers.
The definition of CRM provided by Duffy (1998) constrains itself on the focus on `best
customers', which is a rather narrow view. Customer relationship marketing also should take
prospects into account as they are the basis for new long-term customers. Cross Smith call
CRM a `new system', neglecting the fact that CRM has been used for many years even when
under different forms. The definition of Evans Laskin (1994) integrates both prospective
and existing customers while stressing the fact that the approach should be customer-centred.
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Katrin Irene Roebbeling
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This definition is much more specific and highlights the main aspects of customer relationship
marketing. Therefore, the definition for CRM should be:
`a customer-centred approach whereby a firm seeks long-term business relationships with
prospective and existing customers.'
There are many terms for this type of marketing, Duffy (1998) additionally enumerates
`frequency marketing, one-to-one marketing, customer-centric marketing (p. 435).' But
regardless whether called CRM, loyalty marketing, customer bonding, or any other of the
numerous terms used, it remains one of the most important factors that enables companies to
acquire and keep customers in a rough, over-commercialized market environment. This is
necessary no matter whether one is trying to sell a product or a service, no matter whether the
products are sold in a single, local market or worldwide, whether it is done by multinational
giants or small family-owned businesses. The following section will give further insight on
why CRM has become so important nowadays.
2.2 The Importance of CRM
The following sections will take a closer look at the importance of CRM and at the changes in
the market situation that make CRM a necessary strategy to gain and keep customers.
2.2.1 The Market
Cross Smith (1996) name three important factors that create a new marketing landscape:
overwhelming clutter, explosion of products, and media disintegration. The following
paragraph will take a closer look at these factors.
The cluttering of advertising has become as major obstacle in reaching a customer. Customers
nowadays are overwhelmed by a mass of advertising each day, in the USA they range about
3,500 advertising messages a day (Cross Smith, 1996). Not only the frequency of
advertising has grown, but also the product pallet has expanded enormously. The actual
market offers products on such a differentiated basis, that they promise to be suited for each
and every possible purpose, no matter if necessary or not. Customers have a hard time
deciding which products suit their needs best. Media disintegration also presents an
interesting challenge for marketers. The invention of new communication channels such as
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Katrin Irene Roebbeling
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for example the internet provide new ways of addressing customers, but also add to the flood
of advertisement a customer is confronted with, which makes it hard for the customer to
differentiate. New shopping and advertising possibilities such as online-shops and advertising
e-mails compete with conventional methods such as newspapers and in-store advertising.
According to Duffy (1998), `the proliferation and fragmentation of media options' make the
reach and acquisition of new customers difficult (p. 435). Due to an overflow of advertising
messages customers have a hard time to be aware of each individual message they come
across.
for example the internet provide new ways of addressing customers, but also add to the flood
of advertisement a customer is confronted with, which makes it hard for the customer to
differentiate. New shopping and advertising possibilities such as online-shops and advertising
e-mails compete with conventional methods such as newspapers and in-store advertising.
According to Duffy (1998), `the proliferation and fragmentation of media options' make the
reach and acquisition of new customers difficult (p. 435). Due to an overflow of advertising
messages customers have a hard time to be aware of each individual message they come
across.
Another change in the market mentioned by Forsyth (2001, see also Figure 2.1) is the
invention of ATM machines, which have made money transactions between banks and
customers a lot easier but they also made financial institutions lose personal contacts with
their clients. Furthermore, an additional change named by Forsyth (2001) is the invention of
call centers, which are used by many firms nowadays. They have reduced costs in dealing
with customer problems and questions. The creation of various communication channels have
given customers the freedom and flexibility to deal with companies, though they `tend to
weaken the relationship between the company and the customer as they become increasingly
standardized and the interaction moves from being human-human to human-machine
(Forsyth, 2001).'
Another change in the market mentioned by Forsyth (2001, see also Figure 2.1) is the
invention of ATM machines, which have made money transactions between banks and
customers a lot easier but they also made financial institutions lose personal contacts with
their clients. Furthermore, an additional change named by Forsyth (2001) is the invention of
call centers, which are used by many firms nowadays. They have reduced costs in dealing
with customer problems and questions. The creation of various communication channels have
given customers the freedom and flexibility to deal with companies, though they `tend to
weaken the relationship between the company and the customer as they become increasingly
standardized and the interaction moves from being human-human to human-machine
(Forsyth, 2001).'
The ATM or "Hole-in-the-wall"
The Call Centre or "All our agents are engaged, we are
interested in your call, please hold on ".
The Voice Response Unit or "Press 1 to place an order, Press
2 to pay a bill, any other key to stay lost in the maze".
The mobile phone great for phone calls, but to access the
Internet ???
The World-wide web: Great to deliver customer service, so
easy to find competitors.
Figure 2.1: Changes in communication with customers, source: Lecture by Richard Forsyth, 2001,
slide 9.
Figure 2.1: Changes in communication with customers, source: Lecture by Richard Forsyth, 2001,
slide 9.
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Katrin Irene Roebbeling
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The aspects mentioned by Forsyth (2001) in Figure 2.1, show only parts of the changes in the
market. Furthermore, it can be said that the flooding of advertisement and products makes
customers undetermined and suspicious in their choices. In order to compete on the actual
market landscape, companies have to come up with a new type of strategy, that offers
additional benefits to the customer beyond product variety and quality: a lasting business
relationship. As competition has grown fiercer and new-customer acquisition has become
more and more difficult, the importance of gaining new customers on a long-term basis and
keeping already existing customers on the same basis has increased (GMK, 2001).
Lasogga (2000) adds more factors to this list, for example the change of a seller- to a buyer-
market. This change resulted in an increased bargaining power of customers but also in
consequence led to a growing distance between customers and companies. Another factor
leading to this distance is the increasing reliance on economies of scale and scope in company
with mass advertisement. All these factors often seem to be the most efficient way to market
products but neglect the fact that this mostly works with short-term relationships and hinder
the creation of long-term bonding, which have proven to be the most successful way to
market products on the long run. The following paragraph introduces an important factor in
achieving these long-term bonds.
2.2.2 Trust
When a customer buys a product, two aspects influence his decision, the satisfaction from the
buy, induced by the quality of the product or service, the quality of the buying transaction,
etc. and the trust built between the customer and his business partner. In business-to-business
marketing, trust is crucial, especially when both partners are aiming at developing long-term
relationships (Morgan Hunt, 1994, p. 25). Anderson Weitz (1989) define trust as `one
party's belief that its needs will be fulfilled in the future by actions undertaken by the other
party (p. 312).' According to Odekerken-Schröder, Birgelen, Lemmink, Ruyter, Wetzels
(2000), satisfaction `has to be fulfilled for building trust between partners' and to increase
`the intention to continue the relationship (p. 111).' Another factor going along with trust is
commitment. Commitment is defined as `an implicit or explicit pledge of the relationship
continuity between exchange partners (Dwyer, Schur Oh, 1987, p. 17)' or as Anderson,
Hakannson, Johanson (1994) puts it, `the extent to which parties grow together (p. 10).'
Commitment and trust build up the core of a functioning business relationship.
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Katrin Irene Roebbeling
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When looking at the current market situation, it becomes apparent that satisfaction alone with
a product cannot tie customers to a single company. As customers are overwhelmed by
product offerings and as advertising has become more and more complex and clustered,
companies have to offer their customers something in addition to quality (Cross Smith,
1996). According to Alwitt Prabhaker (1994), more and more consumers develop a dislike
against mass advertising. This is where trust and commitment come in: they are valuable
incentives to continue a business relationship. Grossman (1998) regards these relationships as
an opportunity to gain competitive advantage over the competition. And CRM is the best
strategy to develop these long-lasting relationships. In addition to competitive advantage, the
following section will enumerate further advantages of CRM.
When looking at the current market situation, it becomes apparent that satisfaction alone with
a product cannot tie customers to a single company. As customers are overwhelmed by
product offerings and as advertising has become more and more complex and clustered,
companies have to offer their customers something in addition to quality (Cross Smith,
1996). According to Alwitt Prabhaker (1994), more and more consumers develop a dislike
against mass advertising. This is where trust and commitment come in: they are valuable
incentives to continue a business relationship. Grossman (1998) regards these relationships as
an opportunity to gain competitive advantage over the competition. And CRM is the best
strategy to develop these long-lasting relationships. In addition to competitive advantage, the
following section will enumerate further advantages of CRM.
2.3 Advantages of CRM
2.3 Advantages of CRM
Now that it has been found out that customer relationship marketing is optimal for creating
long-term bonds with customers, a closer look should be taken at what the benefits for both
sides in committing to these relationships are. The following section will highlight on the
reasons for companies to look for long-term customers and offer them values different from
the competition in order to bind them to the company. Furthermore, section 2.3.2 investigate
on the incentives for customers to stick to one company instead of looking for other offerings
elsewhere.
Now that it has been found out that customer relationship marketing is optimal for creating
long-term bonds with customers, a closer look should be taken at what the benefits for both
sides in committing to these relationships are. The following section will highlight on the
reasons for companies to look for long-term customers and offer them values different from
the competition in order to bind them to the company. Furthermore, section 2.3.2 investigate
on the incentives for customers to stick to one company instead of looking for other offerings
elsewhere.
2.3.1 Advantages for the Company
2.3.1 Advantages for the Company
Risk Reduction by
Trust-Building
Risk Reduction by
Trust-Building
Advantages for the Company
Cross-selling
Reduction of
Costs
Free
Recommendation
Less Consultancy
Reference for the
Company
Shield against
Competition
Figure 2.2: Advantages for the Company; source: compilated from Engel, Blackwell, Miniard (1990),
Cross Smith, 1996
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Katrin Irene Roebbeling
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Cross-selling is one of the advantages of customer relationship marketing. A customer who
already knows the company, automatically comes in contact with products the company also
offers beside the ones he is already purchasing. As he is already informed about other
products, the customer will make use of the product palette of the company eventually, so that
extra advertising is unnecessary (Cross Smith, 1996).
A long-term customer, who is acquainted with the company he has purchased from for many
years knows the company, its products, its other service offerings, etc. Therefore, he needs
less advice, less information, and also less consultation. Conclusively, less time and attention
has to be spent on this particular customer which can result in major cost reductions in
customer care (Cross Smith, 1996).
As long-term customers usually are satisfied customers and as satisfied customers have the
tendency to spread the word to their business partners, free recommendation also can be an
advantage of customer relationship marketing. Engel, Blackwell, Miniard (1990) calls this
phenomenon `Word of Mouth' or `interpersonal communications', and regards it as a critical
factor especially in the adoption of new or unknown products. He also considers it an
important incentive when the choice between two products is `ambiguous' (p. 696). Studies
show, that potential customers, which come into contact with a company as a result of
recommendation, are more likely willing to buy and need less persuasion than customers that
come into contact with a product without a recommendation from a business partner (GMK,
2001). For the new customer, even less time has to be spent to convince him of the
advantages of buying from that company. This also results in a cost and time reduction with
regard to this new customer acquisition.
As mentioned before, another important factor is the competitive advantage that arises from
well-established bonds. Built-up relationships are a powerful barrier to the entry of
competitors (Ford, 1980, p. 352). Customers that enter a long-term relationship, hesitate to
switch to competitive products. This matter will be discussed further in section 2.6 on the
development of long-term bonding.
Loyalty programs are used as a mean to obtain other advantages. The strategy behind these
programs is to win long-term customers such as giving away coupons for products from a
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- , 2003, "Eventually, you will bond for life", Hamburg, Bedey Media GmbH, https://www.diplom.de/document/222552
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