1) The document discusses relationship marketing and management, highlighting common mistakes made such as failing to understand customers as individuals, treating all relationships the same, and not playing by the appropriate relationship rules for different types of relationships. 2) It provides an example of a customer, Brenda, and her relationship with the grocery delivery service Peapod, which violates the norms of their friendship-type relationship by eliminating an important service option without communication. 3) Relationship management is complex as different types of relationships (e.g. basic exchange, friendship, partnership) require different approaches, and mismanaging a relationship can damage it over the long-term. Understanding the customer's perspective and context is key.

1. 10/24/2012
Brands Matter
Getting Inside the “R” in
Percent preferring brand in Blind versus Named Test for Household Product :
Customer Relationship
Management Named Blind
Brand K 37%
Professor Susan Fournier 49%
Tendency Day Brand L 63%
51%
Stockholm, Sweden
October 25, 2012
Source: “What is a brand?,” The King Papers, Stephen King, JWT, London 1998
The Economics of Brand
Brand Finance
Value of $1,000 invested
Brand equity shifts the demand curve Strong Portfolio of strong
Brands brand companies
Price p Total
Demand for product when branded
Market produced a monthly
return 0.57% above
$4,525 the market average
$3,195 and at significantly
Demand for product when unbranded
s lower risk (beta = 0.85)
SOURCE: Thomas Madden, Frank Fehle, and Susan Fournier (2006), “Brands Matter: An
Empirical Investigation of the Creation of Shareholder Value through Brands,” Journal of the
Quantity (share) Academy of Marketing Science, 34(2), 224-235
Source: “Combining economic and image analysis for breakthrough brand management,”
Eric L. Almquist, Ian H. Turvill, and Kenneth J. Roberts, The Journal of Brand Management, March 1998
The Economics of Relationships
The Science of Relationships
Customer Value
Maximized CLV Curve CLVi = lifetime value of customer i xi,m,l = number of contacts to
CMi,y = predicted contribution margin customer i in channel
from customer i in purchase m in year l
occasion y, measured in dollars frequencyi = predicted purchase
Traditional CLV Curve r = discount rate for money frequency for customer i
ci,m,l = unit marketing cost for n = number of years to forecast
Time customer i in channel m in year l Ti = predicted number of purchases
by customer i in planning period
Acquisition Retention Attrition
Source: Rajkumar Venkatesan and V. Kumar, “A Customer Lifetime Value Framework for Customer Selection and Resource Allocation Strategy,” Journal of
Marketing, Volume 68, October 2004, pages 108.
1

2. 10/24/2012
The Customer Pyramid Mistake #1: Leaving the people out
of the relationship
Most
Profitable
Customers
Platinum
You cant’ know the relationship
Gold
if you don’t know the people
Iron
and the role the brand plays in their lives
Least Lead
Profitable
Customers
Source: Valerie A. Zeithaml, Roland T. Rust, and Katherine N. Lemon, “The Customer Pyramid: Creating and Serving Profitable
Customers,” California Management Review, Volume 43, Number 4, Summer 2001, page 125.
Relationship Management in the
Information Technology (IT) Era Context Shapes the Relationship
Information: the disintegration and reduction of the
complex into small, manageable bites
Meaning: the assembly of bites into larger, more complex
wholes. The large sense made out of many small units.
 Information and meaning work at cross purposes
 In the search for meaning, context is everything
 In the search for information, context is noise
Without context you can’t understand the individual,
and a relationship cannot be started or maintained
Meet Brenda: A Gold Peapod
Online Grocery Customer Understand Brenda
Care for others that need it
Most Care about others
Profitable Take Responsibility
Customers Make Sacrifices
GOLD LEVEL CUSTOMER:
Life
Do the Right Thing
Average Purchase $124.03 Themes
11.2 day interpurchase cycle
Mid-life Mom
9.7 day cycle past 2 months
Identity Projects Working professional
Gold Deep, broad basket
and Tasks College Student
Consolidated loyalty
No complaints
Few customer service calls Balance competing roles
Advocacy selling Address family problems
……Uses “pick-up” option Daily Concerns “Keep things moving
on the homefront”
Least “Get things done”
Profitable
Customers
2

3. 10/24/2012
Without any prior warning,
Peapod eliminates the less-
profitable option to pick-up
groceries at the store in Brenda’s We are not relating with “consumers.”
area. Brenda learns this at 2a.m. We are relating with people.
“I was desperate, like a
drowning woman. I called
customer service. They People aren’t here to have brand
just said matter-of-factly, relationships.
“yes, I see that location They are here to live their lives.
change.” Were they
serious? Were they
listening? Did they Optimized systems put brand
understand what I was relationships in perspective as
saying? Didn’t they see facilitators not ends in themselves.
what this meant?”
Mistake #2: Treating all relationships
the same
Marriage
re·la·tion·ship [ri-ley-shuhn-ship] A socially-supported contract to stay
together despite circumstances, foreseen
Noun
and unforeseen
1. one of several forms of association
characterizing the interdependency Core Dimensions
between people or things Commitment
Loyalty and fidelity
Love and passion
Brand
Friendship Relationship Space
Voluntary interdependence between parties Marriage on-the-rocks
Love-hate relationship
intended to facilitate socio-emotional goals Villain / Stalker/ Marriage
Victim Prey Dealer/Addict Abusive marriage partners
Enemy Master/Slave Guru/disciple
Close siblings
Core Dimensions Annoying Secret affair Teacher/student
acquaintance Ex-friends Caregiver/Patient Old friends Best friends
Intimacy (and vulnerability) Star-Groupie Colleagues
Buddy
Former friend
Fling
Reciprocity Complete strangers Teammates
One-night-stand Next-door neighbors
Casual acquaintance
Fleeting acquaintance Online friend
Source: GfK/Fournier collaborative research project on brand relationship metaphors
3

4. 10/24/2012
Brands
A B C D E
Brand Relationship Profiles Strangers 2% 4% 3% 6% 14%
Fleeting acquaintance 15% 21% 17% 20% 18%
Close Admired Partner
Love-Hate Relationship (28%) One night stand 14% 17% 16% 18% 17%
Stalker
Dealer Buddies 25% 26% 20% 19% 13%
Deceiver
Divorced Couple Marriage Partner
Annoying Acquaintance Enemy
Life-long best friend 32% 23% 26% 22% 22%
Close Sibling
Soured/Break-Up(20%) Guru
Soured friendship 5% 5% 10% 8% 6%
Secret Affair Teacher Best Friend
Ex-friend
Old Friend Annoying enemy 7% 4% 9% 8% 12%
Exciting
Former Friend Teammate
Flings(12%) Colleague
41% Star
Fling
24% Complete Stranger Next-door Neighbor
Old-Time Friendship Brand relationship insights
17% 15% 15% (10%)
One-night Stand
14% C: Solid base of friends, but many are negative and soured
Fleeting Acquaintance
Stranger (21%)
Casual Acquaintance
Online Friend
D: Superficial bonds; Fewer “close” relationships
E: Polarizing brand: more strangers, many enemies, fewer buddies
Mistake #3: Failing to Play
by the Rules
Every brand has a portfolio of
relationships
Different ways of relating require
different ways of managing
Optimized relationship management
systems acknowledge diversity in
relationship types
Relationship
Contracts
Back to Brenda: Basic Exchange Brenda T3: Friendship Template
Guiding norm Provide good service at a fair price Guiding norm Always be there for each other
Basic Exchange
Key operative Meet expectations Key operative Make each other happy
Friendship
relationship Get the job done relationship Open, honest, two-way communication
rules Be reliable, dependable rules
Don’t betray the friendship
I am not supposed to have to think
about this Relationship purpose Assistance, emotional support,
Intimacy
Relationship purpose Relief from hassles, solve problems
Brand personality Friendly, nice, caring, responsive
Brand personality Warm, subservient
Perceived Easy-going, helpful
Perceived Respectful Customer Role
Customer Role Paying customer
4

5. 10/24/2012
Everything is great … until Peapod does Robert’s Business Partner
what no good friend would ever do
Template
Peapod
Peapod eliminates the pick-up Guiding norm We will work together to achieve our
violates friendship
option common goal
rules
Business Partner
Key operative Calculate rewards over longer-term
relationship Take the other’s perspective
What it meant to Brenda: rules Provide help, feedback
Brenda’s
“Where are they now? I felt betrayed.” response
Relationship purpose Provide resources at good value
“Turns out they did not know me at all.” Brand personality Formal/impersonal, competent
“Couldn't they tell me that because of this and that, we feel we can't Perceived Advisor, instrumentally
do this anymore? We should have talked.” Customer Role important to brand
Termination
“No, I can’t forgive them. They should have known better.”
Unfortunately, Peapod does not Peapod signals a pure exchange
reciprocate Robert’s signals
Peapod’s “They sent a questionnaire to all who use them and it
“I made recommendations, figuring that if it was my wasn't some of the questions that I would have
actions expected - it seemed to me more leaning toward if we
business I’d be interested. I basically got no response,
Silence signal gave you little stamps, would you come in?”
so I didn’t know if they were sort of saying, ‘we don’t
care, don’t bother me’ or what” exchange “They sent me a coupon for the troubles instead of
finding out and fixing what was wrong.”
No effort to “I looked all over Peapod, and there was no sign of “(You mentioned you had given them recommendations;
resolve eggnog (…) They didn’t make any effort to see why Robert’s which of those changes would be the most important?)
long-term don’t we have it; what’s wrong with our system. That template Actually, at this point, I’m not sure what they even were”
issues does not seem to be taking place.” shifts to a “It’s just not giving me as much as I’d like to get out of
pure it.”
exchange “So fine I’ll take an order every two or three weeks and
“You like to think of yourself as offering valuable advice, get my fresh stuff locally now.”
and reality is you’re just one of thousands of people
telling them how to run it” 27
Relationship Mis-Management
“Relationship Marketing
is powerful in theory, but
Wrong signals troubled in practice
Lost signals because marketers do not
fundamentally understand
Conflicting signals what relationships with
Every actions affects customers are all about or
the relationship how they are built and
maintained.”
You have to know
the operative rules
5