IMPACTS OF CUSTOMER RELATIONSHIP MARKETING TO MARKETING PERFORMANCE

I.               Abstract:

Nowadays Customer Relationship Marketing (CRM) has become an interesting term for companies in competitive markets. In this study, we consider the CRM as a strategy and try to understand: (1) What is CRM and especially in the context of transactional marketing, (2) How CRM creates marketing outcomes to deliver business objectives, (3) How to evaluate performance of CRM that related to activities of the companies. Finally, based on these studies we analysis activities of Apple & Samsung in mobile device field which present for 2 strategies are: CRM and transaction and different outcomes are created.

Key words: customer relationship marketing, customer loyalty

II.              Introduction:

1.     Definition of CRM:

According to Bateson (1995) relationship marketing is the union of customer services, quality and marketing. It emphasizes the importance of customer retention, establishing long-term relationships with customers, customer services, deliver commitment to the customers, increase levels of customer contact, and a concern for quality that transcends departmental boundaries and is the responsibility of everyone throughout the organization.

In short, CRM is about retaining customers by creating, maintaining and enhancing relationships with customers or the core of this strategy is customer-orientation.

The main objective of CRM is to get to know the customer as well as possible so as to help a company delivery better, more appropriate and higher added value to the customer. A strong relationship with customers is the key to their satisfaction, especially if this connection is established by recognizing customers’ needs. Moreover, CRM strategy is an integrated marketing approach with a very clear objective is customer loyalty so it helps in gaining competitive advantage business.

2.     CRM and Transactional Marketing

Transactional marketing and relationship marketing are two approaches of marketing strategy and the main difference between is: Transaction is mainly focuses on the single sale formula, pushing the sales through mass marketing and promotions of the product. Orientation on product features, rather planning for the longer run of the product in the market; it is based on the short time scale, with little emphasis on customer satisfaction. Transactional marketing focuses on maximizing the profit of the company by recruiting more and more customers to purchase the firm’s product rather than developing a relationship with the buyer. (M. W. Vilcox, T. O. Mohan, 2007, Pg 53)

The transactional approach is based on the 4P’s:

• Product — Creating a product that meets consumer needs.
• Pricing — Establishing a product price that will be profitable while still attractive to consumers.
• Placement — Establishing an efficient distribution chain for the product.
• Promotion — Creating a visible profile for the product that makes it appealing to customers.

Therefore, CRM can ideally be described as: a shift in focus from transactional marketing to relationship marketing; a shift from marketing activities which emphasize customer acquisition to marketing activities which emphasize customer retention as well as acquisition (Payne, 2009); a shift in focus from treating customers simply as an audience to treating them as key assets of the company.

3.     Strengths of CRM

CRM is rooted in the idea that it is efficiency to retain an existing customer than to recruit a new one. CRM provides the customer with valued products and striving for the customers’ satisfaction, that gives the organization a competitive advantage. The cost incurred attracting new customer is much more than building long term relationships in term of marketing cost. When customers are truly loyal to a company, their relationship changes from a simple exchange of product for money to a long-term commitment, despite price increases and/or occasional errors. Moreover, effect of word of mouth (WOM) is much stronger than any other form of advertisement or promotion, so it is also possible that satisfied and loyal customers could be influencers for the brand. The biggest threat any businesses have is that customers could switch to its competitors but if an organization follows a relationship strategy their customers are less likely to switch to the competitors that will also create barriers for the competitors to enter into the market.

4.     Customer Loyalty

Because customer satisfaction will lead to customer loyalty and this is the most important objective of CRM, therefore this term should be focused and tried to evaluate. Research on customer loyalty has been receiving a lot of opinions. However, for this study, we propose 3 criterions to be considered:

Customer Retention:

Customer retention refers to actions that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship.

Brand Index (Brand Equity – Brand value – Brand Reputation)

Some past studies tend to identify brand equity as a multidimensional construct consisting of brand loyalty, brand awareness, brand knowledge, customer satisfaction, perceived equity, brand associations, and other proprietary assets ([Aaker, 1996],[Blackston, 1995],[Cobb-Walgren et al., 1995] and [Na, 1995]). Among these dimension, Travis, Deryl (2000) consider customer loyalty as “The ultimate objective and meaning of brand equity”.

Besides, we also consider about Brand Value and Brand Reputation which show how strong the brand is and how it influent to customer. Those indexes are both measures that estimate what a brand is worth with customers.

Word of mouth (WOM):

Word-of-mouth (WOM) has been understood in two ways, as an input into consumer decision-making and outcome of the purchase process. Positive WOM communication is a direct outcome of customer loyalty (Srinivasan et al. (2002). Other studies have also concluded in their respective studies that customers are more likely to engage in positive word of mouth (Hagel and Armstrong (1997) and Dick and Basu (1994).

III. How relationship marketing impacts to marketing strategy – Samsung and Apple Case

In term of limited time, in this paper, we are focusing on smartphone – table industry and currently; both Apple and Samsung are market’s leaders now.

1.  About Apple

Apple Inc. was founded by Steven Paul Jobs, Steve Wozniak and Ronald Gerald Wayne on April 1, 1976 and is headquartered in Cupertino, CA. The company designs, manufactures and markets personal computers and related personal computing, and mobile communication devices. The company’s products and services include Macintosh computers, iPhone, iPad, iPod, Apple TV, Xserve, a portfolio of consumer and professional software applications, peripherals and iOS operating systems, third-party digital content and applications through the iTunes Store and a variety of accessory, service and support offerings.It sells its products worldwide through its retail stores, online stores, and direct sales force and third-party cellular network carriers, wholesalers, retailers, and value-added resellers to the consumer, small and mid-sized business, education, enterprise, government and creative markets.

2. About Samsung

Samsung is a multinational corporation headquartered in Samsung Town, Seoul, South Korea. Founded in 1969, Samsung Electronics has grown into a global in- formation technology leader, managing more than 200 subsidiaries around the world. The company’s offerings include home appliances such as TVs, monitors, printers, refrigerators, and washing machines as well as key mobile telecommunications products like smart- phones and tablet PCs.

Leading the Global Market with Cutting-edge Technology & Quality Products Samsung Electronics sold more than 406 million mobile phones in 2012, securing a position as the global market leader with an overall share of 23.4%. Samsung aims to create a new future that positively impacts the entire global community.

3. Apple and Samsung: Marketing performance

Launched on June 29 2007, the first IPhone with biggest screen, hidden keyboard and especially touching screen, Apple has been a pioneer in providing customers a very unique product that customers want at the initial time when customers did not have much concept of the smartphone. As reported by The NewYork Time, an Iphone is extending steadily beyond the computer into the broader realm of consumer electronics and digitally connected lifestyles and in the longer-term, the device probably will instigate a process of innovation and diversification. At the beginning, Apple aimed to create an “I-lifestyle” for their customers through premium products based on iOS platform. Up to now, Apple focuses on developing and maintaining customer relationship and increasing customer commitment in order to retain the customer’s loyalty. In this paper I would like to suggest 2 main reasons lead to the success of Apple to increase the customer loyalty are: satisfying customers want by product quality and build long-term relationship through customer experience.

Satisfying customer’s want by focusing on quality

In the article “How Steve Jobs Made the iPad Succeed When All Other Tablets Failed” Fred Vogelstein (2013) mentioned about strategies of Apple and Google and how they compete in the market. He clearly stated “If Google was going try to win the mobile-platform war on breadth; Job was going to win it on depth”. Google strategy is focus on the quantity, which mean the more device run android the better. Google cooperates with other mobile phone manufactures such as Samsung, HTC and Sony in order to install the Android platform on those devices. On the other hand, Apple doesn’t focus on the number of the devices on the market, Jonathan Ive once said “for apple it’s quality not quantity”. According to New FixYa report IPhone is considered 3 times more reliability compare to Samsung. The main reason comes from the application approval process of Apple and Android. Android strategy is to get users installed as much as device possible so this process is much easier. According to John Mitchell there is no need to get approval by the Marketplace, once the developer clicks submit button the application will be uploaded on the store. On the other hand, to publish an application on Appstore, developers must follow guideline of Apple. In addition the application must be tested and approved individually by Apple. By ensuring the consistency and quality check of all applications upload to Appstore, Apple is able to provide to customer the quality product with stability, be free of malware (Sophos). Other manufactures usually develop the product base on the market research to know what customer want, then providing a product can satisfy it. In contrast Apple not only relies on focus group but also the internal team. Steve Jobs asks his engineer who creates the product have to want it themselves – Tim Bajarin (2012). And the end of the day, they bring the satisfaction to their customers.

Chart 1: Satisfaction Rating Based Upon Mobile Operating System

Chart 2: Mobile Operating System Preferences (Google Android/RIM/Apple iOS)

Other technology company‘s project goal is based around the technology first, which mean that they will provide to the consumer a device that their technology can make at the time. Meanwhile Steve Jobs knew that in order to satisfy customer’s wants, he must go beyond the customer’s need that the reason Apple introduces the first IPhone with touch screen can be used with finger. Before Ipad was released, people wrote an email, browse Internet to enjoy photographs, video and books on their computer. They need a device that can perform those entire tasks well but Steve provided a device also perform those task perfectly with ultra-portable. With the “Beyond the need” vision apple has created the product that satisfy the customer want.

Building long-term relationship through value customer experiences

The second reason is that Apple retains long-term relationship with their customers by customer’s experience. Steve Jobs once said “how does somebody know what they want if they haven’t seen it”.  The book “The Apple Experience: Secrets to Building Insanely Great Customer Loyalty” written by Carmine Gallo (2012) mention the reason of Apple’s customer loyalty is come from “enrich live” vision when customers being at Apple store. Apple doesn’t want to make customer to buy the product, unless they understand and love that product. This is the reason why Apple store is built as a place that customer can come and experience the products.

The Apple store employees’ primary goal is to make sure every customer has a magical and memorable experience, whether or not they make a purchase Carmine Gallo (2012). Apple employees need to advise customers how the apple product can bring more benefit and enrich their live. Not only enrich customer live through “don’t sell stuff” concept, Apple also empowering customers. During the time at Apple store, the customers will be encouraged to touch and experience products by themselves. The objective is to unleash their inner genius, because Steve Jobs believes that every Apple consumer has creative spirit, and Apple responsibility is to provide tools for them to change out the world.

When the customer join One to one program, they will be trained by Creatives personally in order to edit and use Apple devices and actually do the task with in the control experience. Apple likes to say that people come to shop but they return to learn.

“Apple store is fun” – Apple creates a place that customers feel so welcome and comfortable that they can freely to express themselves. People come to the store not only for the product, but also for what they love, Michael a famous dancer at Apple store, said. Michael thinks that Apple store is a cool place that he can come to enjoy products and dance while customers in store look at him. The most interesting things is Apple employees don’t stop him and sometime they also join to the show. Up to now, there are about 255,000 videos dancing at Apple Store uploaded to Youtube.

About the store, last but not least, Apple has owned retail stores. Apple had been very careful about how people buy their products and experience Apple product. Since Apple owns their own retail experiences they get a chance to create direct conversations with their potential. This helps Apple to find out exactly current needs of their customers, more important, forecast future need and how their products can help them to solve current and future problems.

Unlike Apple, Samsung approaches their customers by innovative product with a broad range of smartphones in different shapes, sizes and operating systems. By developing the S Pen to launch the Air Command features like Action Memo, which gives you the ability to jot down a name and number and instantly turn it into a new contact, this application brings more easy for customers who are Asian can write down the note by their languages.  Or Screen Write that lets you draws directly on the screen to add a note to a map or highlight a passage in an email… Additional, Android platform which allows application’s developer to put their application on that will bring to users more convenience.

Samsung has been carrying out many marketing strategies to increasing its sales volume.  Therefore Samsung has developed a lot of products targeting many different customer segments, different income levels to make sure that their customer easily to find out the product which can be fixed their needs.

Samsung has a wide coverage from Samsung shop, online websites, mobile center, electronics shopping center to other mobile phones retail stores, bring more convenience to customer. Samsung brand shop is where its product showcases. Customers can be consulted and guided on Samsung products about functions and how to use. These locations can also support customer in setting up and updating software; repairing customer’s products.

In term of pricing strategy, by building customer experience, Apple makes them feel I-products have been tailored for themselves. Once set up, it will look like a custom iPhone app developed exclusively for your business. Apple’s customers know the added value of Apple brand so they are willing to pay for a premium product, which brings them to a premium and asserting themself lifestyle. Apple has set a higher product price and the company does not give any promotion, especially on Back Friday in US and recently, Red Friday in some Asian countries.

In the other hand, Samsung often offers consumers a very attractive price. With similar product’s functions, Samsung product’s price is always lower from 10-15% compare with Apple. Samsung has used its internal resources and applied into their production system, this will help to cut down the production cost and bringing more choice for consumers. Decreasing cost is another strategy of Samsung in offering to customers. This term applied for both consumers and distributors which catch customer attention and action, therefor it will help to increase sales volume.

Table 1: A comparison between Samsung Galaxy Note 3 vs Iphone 5S on product’s feature and price:

Samsung has offered customer with attractive pricing strategies and a rank of product’s choice, however, Apple’s product is always what customers waiting.

Chart 3: First Weekend IPhone Sales

The other chart also shows unit sold between Apple’s products and Samsung’s products. Apple products are always receiving a higher sales volume than Samsung (by Raymond James, businessinsider.com).

Chart 4: Samsung Galaxy vs iPhone Sales by Model (MMS)

Apple has done a good job which create highest customer loyalty by making them satisfied even Apple has only one product – IPhone and in general, a bit higher price compared with Samsung.

Regarding communication, Samsung’s strategy are attracting customer by introducing its product features; guiding consumers how to use product better. Besides, they also have other campaigns, which focus on promotion, cooperating with networking providers, distributors to reduce the cost or buy phone and get its accessories. Samsung has invested a lot of money in creating advertising’s visual and TVC, which can show the interesting of customer towards Samsung products. According to Kantar Media data cited by the Wall Street Journal, it spent $401 million, which beat Apple‘s $333 million in advertising on print, online, television, and billboards in the U.S.

Chart 5: US Mobile phone Ad Spending 2011 – 2012

In the other hand, with customer – oriented marketing strategy, it’s not difficult to realize that Apple applies consistently this strategy on communication. Apple always communicates in the language of audience: It makes no sense to talk about things like megabytes, gigahertz, and processing power to customers. Take a look at any Apple product page and you’ll find that though they do discuss product specifications and technical information, it’s hidden behind the benefits that their audience is truly after. Instead of display resolution, you’ll see phrases like “edge to edge glass,” “retina display,” and “LED backlighting.” You also see the same things on media such as TVC, Print ad … Apple tells the most interesting story by the simplest way.

Table 2: A comparison between Samsung Galaxy Note vs Apple on communication (Print Ad, Website, TVC):

Moreover, they focus on expanding the experience through communication channel. And experience will be a core to create WOM. AdMob’s January data illustrates the power of word-of-mouth marketing for Apple. 91% interviewees recommend Iphone for their friends and colleagues. Chart 7 shows that word-of-mouth came in third follow by TV and Social Media when Apple released IPhone5, this really says something about the Apple brand ambassadors. One interesting of TV channel is beside 7 minute video Apple posted to their YouTube channel, Apple did not run any other advertisements on television or otherwise, this show effective earn-media campaign and attraction of brand as well.

Chart 6: People recommend their mobile device to a friend or colleague

Chart 7: Information Source of IPhone 5 release of audience

In addition, the Net Promoter Score, Apple began measuring this score in 2007 when there were 163 stores. The NPS score was 58%. Today, with well over 350 stores, Apple’s NPS score tops 70% and some of the best stores rank above 90 percent, a remarkable achievement and show successful of Apple in creating customer advocates. Because customer loyalty can manifest itself in multiple ways, for example as increased customer lifetime value – retention, it can be the positive message that an individual customer shares via word of mouth.

Apple is in the experience business – they enhance your life with information and entertainment and empower you at work. Apple is the ultimate lifestyle brand with a strong emotional connection between company and customer. Every year when Apple introduces a new iPhone or iPad, throngs of faithful fans start forming lines outside Apple stores. This isn’t about the product. This is about the brand. Apple’s brand is so powerful, so attractive, and so compelling, that people want to attach themselves to it, or attach the brand to them. They want to be identified with Apple, and what Apple represents: good taste; sophisticated design; stylist image; premium feeling… And that is what emotions are all about.

There are thousands of Apple unboxing’s on Youtube, each from different users from across the globe or Apple store dance clip that we mentioned above, this is the way consumers is encouraged and inspired to share their experiences.

It’s not about how many the marketing angles; it’s about the way that people tell that angle. Whenever see Steve Jobs product-release presentation and you’ll watch as he tells you why every other product in the market pales in comparison to what he created. This is also the way to deliver more clearly about Apple communication strategy which is focus on customer experience and motivation. Steve Jobs is considered as the spirit of Apple and inspiration icon of thousand people all over the world. His story, his image, his performance, therefore also are the other way Apple connect to people, inspire them, give them motivation and base on that create a long-term relationship with them.

The impact of the CRM strategy to Apple is the saving the cost but higher customers loyalty. According to Zach Epstein (2013) Samsung spend four times more than apple on advertising in 2012 which cause the increase on the sale volume of Samsung. Meanwhile Interbrand mentioned Apple has highest brand value 98,316 $mil compare to Samsung 39,610 $mil.

Chart 7: Brand Value of Apple vs Technology Sector

Chart 8: Top 10 Brand Value – 5 years Snapshot – Interbrand

Chart 9: Brand Reputation of Apple 2012

Brand Reputation: Measuring 6 dimensions (Those factors are: Social Responsibility, Emotional Appeal, Financial Performance, Products & Services, Vision & Leadership, and Workplace Environment) that comprise reputation and influence consumer behavior.

Beside that Chuck Jones (2013) said that the retention rate of Apple is higher than Samsung at 42% for Apple and 38% for Samsung. This retention rate indicates loyalty of customers. Regarding to brand reputation index, Apple emerged with the highest overall score (85.6) in 2011 and 85.62 in 2012.
The American Customer Satisfaction Index (ACSI) data on mobile phone satisfaction 2013 show Apple (iPhone) comes out on top, as it does in the JD Power surveys. ACSI asked 10 questions on the overall phone experience that looked at how customers view functions including ease of making and receiving calls, battery life, OS and software, design, audio and video quality, and navigation of menus and settings. The result of JD Power was performed between February and August 2013 and measures customer satisfaction in four factors: performance (33%); physical design (23%); features (22%); and ease of operation (22%).

Table 10: ACSI Score of Cellular Telephones – Source: The American Customer Satisfaction Index

Chart 11: JD Power customer satisfaction survey – 2013

We can conclude that by applying the customer relationship strategy your business, will get successes to increase the customer commitment to the brand because their strategy is mainly focus to satisfy the customer want and build long term relationship with them. That is the main factor to build the customers loyalty. A clear and right segment can help you define exactly who is your customer, what is their insight during their cycle life. Therefore, the role of customer segmentation is important. However, in fact, transactional marketing strategy has own role. End of the day, you should define clearly business current status and long term objectives, decision of marketing strategy will be depend on that.

Prepared by Lan Anh, Tan Quang, Ngoc Thang

MMCoM8, Solvay Brussels School

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