Chapter 03 - Customer Relationship ManagementChapter 3: Customer Relationship ManagementStudy Questions1. Explain the differences between transactional and relationship marketing. How do these differences lead to increasing emphasis on logistical performance in supply chain management?Transactional marketing is generally focused towards short-term interaction with customers. Traditional marketing strategies followed this approach wherein exchanges/transactions are carried out with customers in order to increase their revenues and profits. Relationship marketing focuses on the long-term relations with the key supply chain partners such as the consumers, intermediate customers and suppliers. This strategy aims to develop and retain long term preference and loyalty because it has been realized in many industries that it is more important to obtain greater share of the purchases made by the existing customers than to attract new customers. This approach tries to identify the individual customers in order to satisfy their unique needs in the most cost-efficient and effective way. This requires a greater emphasis on logistical performance of the entire supply chain. 2. Why are the four primary service outputs of spatial convenience, lot size, waiting time, and product variety important to logistics management? Provide examples of competing firms that differ in the level of each service output provided to customers.Since every customer has different requirements regarding service outputs, spatial convenience, lot size, waiting or delivery time, and product variety represent the four generic outputs to accommodate customer requirements.Spatial convenience measures the amount of shopping time and effort that needs to be out by the customer. Higher convenience is offered by making the product available in more number of places. As an example some household furniture manufacturers offer their products through department store, mass merchandisers and other independent department stores whereas Ethan Allen offers its products only at its own retail stores.Lot size refers to the number of units that can be purchased in each transaction. A customer who wishes to buy larger quantity of items for example 12 or 24 rolls of paper towels to get a lower unit price can get it from Sams Club and Costco. However they can buy single rolls from grocery or convenient stores. The basic tradeoff in such purchases is between the unit price and the storage or maintenance cost of such volumes.Waiting time is the amount if time a customer has to wait between ordering and receiving products. The lower the waiting time, the higher is the level of service. Buying products from retail or grocery stores has no waiting time however if someone wants to order from a catalog or via the Internet, he has to wait for the product. Although higher waiting time is associated with inconvenience, customers are rewarded in the form of lower prices.Product variety refers to the different assortments or variety offered to the consumers and end-users. Supermarkets offer a large variety of items, whereas the warehouse stores offer a much less variety. And convenience stores offer even lesser variety.3. Using the ten categories of customer expectations in Table 3-2, develop your own examples of how customers might evaluate performance of a supplier.Reliability refers to performance of all activities by the supplier. If FedEx promises overnight delivery and fails to do that, then it will be considered unreliable, even if it is done faster than any other provider. Customers can judge reliability in terms of all aspects of basic service platform.Responsiveness refers to the customers expectation of the ability and willingness to provide timely service. If WalMart experiences a stockout of certain product, its suppliers responsiveness will be measured by the time it takes for replenishment.Access measures the ease of contact and approachability of the supplier. For example the ease of obtaining information about the status of a pending order will measure accessibility.Communication means to proactively keeping the customer informed. If the supplier expects a shortage of raw material that can affect delivery in the future, an advance notice to the customer will not only help to explore alternative but also builds a stronger partnership. Credibility refers to the customers expectation that the communication from the suppliers will be believable and honest. The real essence of this measure is the completeness of the information. Security refers to the customers feeling of risk in doing business with a supplier. For example a customer bases its production schedule in anticipation of delivery. If the supply is delayed the customer faces the risk of changing its plans. Another aspect of security concerns the confidentiality of business dealings. For example, Solectron undertakes the manufacturing for competitors like Nortel a