Today we finished up talking about customer relationships. There can be two kinds of customer relationships: type and involvement. Relationship type ranges from communal to exchange based. A purely communal relationship is altruistic in that each person is focused on meeting the needs and wants of the other(s) in the relationship (parent and child). An exchange relationship is based on the giving of one thing in return for another (buyer-seller relationships). Relationship involvement is defined as the degree to which a relationship is relevant to the consumer – the extent to which it relates to consumer’s values, interests, or needs. It is a function of product characteristics as well as purchase situation and the consumer’s personal needs.
Firms want to build strong relationships with customers because a long-standing buyer-seller relationship might lead the customer to anticipate the positive feelings from remaining loyal to the seller, trust that the seller will provide good value, feel that the brand represents who they are, promote the seller to friends, family and acquaintances, and seek out and actively read the seller’s promotional material. The stages of a relationship are awareness, exploration and expansion (attraction, relationship norms, trust, power relations, satisfaction), commitment, and dissolution.
We also talked about pricing. There is an inverse relationship between price and quantity. As a product price decreases, demand will increases and vice versa. Other factors affect the economies of pricing, such as substitute offerings, income, market size, etc. Pricing strategies include cost plus (adding a fixed markup to the product cost), target profit growth, everyday low pricing, Hi-Lo pricing, etc. Dynamic pricing is one of the most significant contributions to the Internet. The Internet has enhanced dynamic pricing in two ways: decreased menu costs and interactivity. Auction types include English and Dutch auctions, first price sealed-bid auctions, etc. The pricing process includes setting the pricing goal, differentiating value relative to substitute products, strategically selecting target customer segment, strategically setting pricing/ competitor reaction, and selecting a pricing structure and price point.