Relationship Marketing and the Concept of Customer Value

Abstract

Relationship Marketing and the concept of Customer Value consists of two parts: the link between CRM and Database Marketing and the importance of Customer Value, and the Satisfaction-Loyalty-Profit Chain. Whereas past research and traditional mass-marketing identified the general needs of particular segments, recent research has shown that the rapid growth of technology has helped to gather a wealth of data on individual customers. This development has allowed firms to tailor their products and services on an individual basis, and thereby adapting business strategies into a customer-centric philosophy rather than a product-centric one. Specifically, this chapter answers the following questions: (a) When does it pay to go after customer loyalty?, (b) How to link customer loyalty to customer profitability?, and (c) How are satisfaction, loyalty and profitability related? Additionally, this chapter shows that using a customer-value based approach to CRM results in generating more profit. Finally, using empirical studies this chapter shows that is not always linear and symmetric, and varies across industries and customer segments.