Profitable Long Term Customer Relationships

Once the company knows which customers are attractive or potentially attractive, the next step is to create customized solutions for the most attractive ones, to build barriers that prevent the customer from changing to another supplier ( switching barriers ). 

Both components can be used to generate barriers. However, most suppliers focus on the one-off switching cost (through, for example, joint warehousing or order fulfillment systems) because this is the traditional lever used to lock customers in. 

Examples from different industry segments show that moving from products to services is one way to build switching barriers (Fig. 13.3). Another option is to build a strong brand in the minds of the customers customers - as DuPont has done with Lycra, which itself has become a fashion item. But branding can only leverage - not replace - performance. 

Arguably, e-commerce will allow chemical marketers to offer information-based solutions and customization not only to a select number of estabhshed accounts but also to a much broader range of customers in profitable growing market segments at much lower cost. GE Plastics Color Express service, for example, al- 

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To be world class we have to know our customers and know what they want, remember we are building relationships not selling commodities. Without customers any organization, profit or non-profit will not survive. We also have to understand that for any commercial organization profit is necessary for survival. The level of customer service provided must be affordable and sustainable. Our final comment, the objective should be to build long-term relationships, not to be just making sales and short-term gains. 

Before we outline the techniques and models to be used, it is appropriate to consider a number of contemporary measurements that will help establish and confirm the business case. A critical doctrine of CRM is that it is substantially more efficient to maintain current customers than to acquire new ones. A measurement such as customer turnover rates, or what has been termed as churn, is often used to justify the substantial expenditures required for a CRM implementation. Emerging from this idea are new measurements, such as customer lifetime value and customer ROI, that attempt to relate the long-term value and profitability of a customer to the cost of maintaining the relationship. As the business case is constructed, other traditional measures should also be used. 

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