10 Customer Acquisition and Relationship ManagementDmitry .docx

10 Customer Acquisition and Relationship Management
Dmitry Kalinovsky/iStock/Thinkstock
Patronage by loyal customers yields 65 percent of a typical
business’ volume.
—American Management Association
Learning Objectives
After reading this chapter, you should be able to do the
following:
• Identify how organizational growth is best achieved by an
HCO, and state the effect of the product life cycle
on an organization’s revenues.
• Discuss several approaches that an HCO can use to attract
new customers, or patients.
• Delineate the premises upon which customer relationship
management is based.
• Explain the advantages of database marketing, and
identify ways for an organization to use a marketing
database.
• Provide examples of how an HCO can effectively manage
real and virtual customer interactions.

Section 10.1Organizational Growth
Introduction
This chapter focuses on how to attract and keep patients through
understanding and meeting
their needs. The long-term success of an HCO depends on its
ability to attract new patients
and turn them into loyal customers who not only return for
needed services, but recommend
the HCO’s services to others. This is especially important
because of the nature of the life cycle
for products and services, from their introduction to their
decline. Attracting new customers
and keeping existing ones involves interacting internally and
externally with patients, analyz-
ing data on current patients, and managing real and virtual
interactions with patients. Manag-
ing relationships with patients helps to ensure that patients stay
informed and feel connected
to the HCO through its internal and external customer
relationship efforts.
10.1 Organizational Growth
Most organizations have growth as a basic goal. Growth means
an increase in revenue and
a greater impact on the communities served. Growth also creates
opportunities for staff to
advance and take on new responsibilities. While many activities
can help an HCO grow, the
most important is the development of an effective marketing
plan to provide a consistent
platform for the organization’s visibility and to brand the HCO
as an attractive option for
medical services. The development of an effective marketing
plan was stressed in Chapter 8
as a basic marketing need for an HCO: that is, to inform new

and existing customers of the
organization’s services and to persuade them to continue using
or to try using these services.
Product/Service Life Cycles
Like people, products and services have a life cycle. The term
product life cycle refers to the
stages that a product or service goes through from the time it is
introduced until it is taken
off the market or “dies.” The stages of the product life cycle,
illustrated in Figure 10.1, usually
include the following descriptions:
• Introduction—The stage of researching, developing, and
launching the product or
service.
• Growth—The stage when revenues are increasing at a fast
rate.
• Maturity—The stage when revenues peak, and the rate of
growth slows down.
• Decline—The final stage of the life cycle, when revenues
start to decline.
For example, a pharmaceutical manufacturer introduces a new
cholesterol drug, and it is pro-
moted by sales reps and possibly promoted directly to
consumers during the product’s intro-
duction stage. As more and more physicians prescribe the drug,
sales grow at a fast pace, and
the drug enters the growth stage. As time passes, sales begin to
slow as the drug reaches the
maturity stage. Then, newer drugs are introduced, and sales of
the older drug start to decline.
In an attempt to maintain sales of the older product, the
manufacturer may decide to sell the

older product as an OTC drug, but at a much lower price than
when it was a prescription drug.
Of course, not all products reach the final stage and may instead
continue to stay at the matu-
rity stage for a long period of time. Regardless, attracting and
keeping new customers is critical
Section 10.1Organizational Growth
because of the nature of how products evolve from their
conception to extinction. When the
revenues produced by the product or service begin to decline, so
do profits. To boost or main-
tain revenues requires keeping existing customers, but also
attracting new ones.
Figure 10.1: Product/service life cycle
Some products stay in the maturity phase for a long time. Other
products move quickly through the cycle.
f10.01_MHA 626.ai
Introduction Growth Maturity Decline
Time
R
e
v
e
n
u

e
Source: Adapted from Product Life Cycle Stages at
http://productlifecyclestages.com/
Individual Adoption Stages
A critical element in attracting new customers is to understand
the stages that individual
consumers move through when adopting a new product as it
moves through the product life
cycle. These stages, shown in Table 10.1, are referred to as the
individual adoption stages.
Of course, promotional messages must be aligned with these
stages to carry the consumer
through them. In the introductory stage, promotional messages
must inform potential cus-
tomers of the offering. In the growth stage, promotional
messages must encourage potential
customers to use that specific offering, or product, rather than
competing products. At the
maturity stage of the product, customers are reminded of the
product to build repeat usage
and referrals. Thus, messages stressing the firm’s competitive
advantage must be developed
to answer consumers’ questions at a given stage in the
individual adoption process and to
reflect the nature of the product at a given time during its life
cycle.
http://productlifecyclestages.com/
Section 10.2Attracting New Customers
Table 10.1: Individual adoption stages and information needs

Stage in Individual Adoption Process Questions Consumers
Want Answered
1. Awareness: Consumer first learns of the product, ser-
vice, or organization.
Who are you?
What are you all about?
What do you do?
2. Interest: Consumer is stimulated to get more informa-
tion about the product or service.
Why would anyone use your services?
What benefits would they get?
3. Evaluation: Consumer considers whether to try the
product or service.
Why should I buy your organization’s
services?
4. Trial: Consumer tries the product or service. Will it really
deliver those claimed benefits?
Can I risk trying the service?
5. Adoption: Consumer decides to use the product or
service, becoming “your” customer or patient.
Did I make the right decision?
6. Repeat: Consumer may reevaluate his or her decision to
continue using the product or service.
Should I continue to use the same service
provider or are there better alternatives?

Consumers will be at various stages in their individual adoption
process of a product and will
have varying levels of knowledge and experience. Therefore, a
variety of promotional mes-
sages, conveying different types of information about the
product, service, or organization, is
usually necessary to communicate effectively to them. While
most consumers are concerned
about the benefits received from a product, some are interested
in the detailed information
that produces those benefits. Such detailed information should
be available to consumers
who request it.
Information from the marketing plan’s consumer analysis is
vital in making communications
decisions on promotional message content. The needs and
motives of consumers become the
center of such content decisions. If time and money permit,
promotional messages should be
tested before use, and measures indicative of consumer
responses to those promotional mes-
sages should be evaluated in the decision-making process to
finalize the message content.
10.2 Attracting New Customers
New customers, or patients, can be attracted to an HCO in
several different ways, some at
a relatively low cost. One source has identified four low-cost
approaches (Guerrero, 2013),
which follow:
1. Create an online presence with a website because people
search for information, and
sometimes ratings, online.

2. Use social media to create a profile of your business and to
get feedback. Using
social media increases visibility and presence, and shows
potential patients you are
up-to-date.
3. Increase community involvement, which is an age-old
technique, but it works. Clubs,
churches, speaking engagements, and so forth all increase name
recognition and
awareness.
Section 10.2Attracting New Customers
4. Make it easy for patients to contact you. This can be done by
creating a link on your
website for customer contact or by using text, tweets, and email.
Some hospitals have started using animated videos to attract
new patients. These videos can
be linked from your website, or emails can be sent to provide
links to videos on YouTube.
This allows potential and existing patients to view the videos at
their leisure and provides an
interesting interface, which can serve to present useful
information (PRWeb, 2012).
Another approach for increasing patients/revenues is to offer
additional services. Dr. Clint
Long of Long Eye Clinic in Sherman, Texas is a board-certified
ophthalmologist who has added
new services to his practice to attract new patients and increase
revenues from existing

patients. The clinic offers BOTOX® Cosmetic, a proven
prescription medicine that is injected
into muscles to temporarily improve the look of moderate-to-
severe frown lines between the
eyebrows in patients from age 18 to 65. The clinic also offers
CO2 laser treatment for skin
rejuvenation. This treatment can help diminish brown spots and
wrinkles while firming and
toning facial skin.
L O N G V I S I O N C E N T E R : D R . C L I N T L O N G
Long Vision Center in Sherman, Texas cares about your vision.
In fact we believe that it is
very precious, and Dr. Long is here to make sure you have
superior quality eye care. Here
at Long Vision Center, we provide general eye care, medical
eye care, surgical eye care,
laser eye care, as well as Botox Cosmetic, Laser Skin Re-
surfacing, and Lasik to patients in
Sherman, Texas and the surrounding North Texas area.
Dr. Clint Long, a State of Texas Board Certified Licensed
Ophthalmologist, performs gen-
eral eye examinations for eyeglasses and contact lenses,
examinations for cataract and
cataract surgery, lens implants, corneal surgery and transplants,
diagnosis and treatment
of dry eyes, laser vision correction & surgery such as LASIK,
diagnosis, medical, laser and
surgical treatment of glaucoma and provide eye examinations
and laser treatment for dia-
betic retinopathy and treatment for age related macular
degeneration.
Source: http://www.longvisioncenter.com/ Retrieved November
13, 2013(continued)

While Dr. Long’s initial interest was in helping patients with
skin issues around the eyes, he
soon learned that patients also wanted the treatments for other
areas of their face. His invest-
ment in additional training and certification in those procedures
has paid off through an
expanded customer base and increased revenues (Long Vision
Center, 2013).
Patient referrals are a cost-effective way of getting new
patients. However, patient referrals,
like other aspects of a marketing plan, must be managed. This
means evaluating the pro-
cess of new-patient referrals; that is, who is referring new
patients, how is this information
being obtained and kept, and how are new patients treated by
staff and made to feel welcome
and valued.
Many doctors will actually set up an appointment for a patient
with another doctor and have
the referred doctor’s office confirm the appointment. A record
of each of these referrals
http://www.longvisioncenter.com/html/4%7Eservices.html
http://www.longvisioncenter.com/
Section 10.3Customer Relationship Management

should be maintained and the referring doctor thanked for the
referral. A short note or call
can show appreciation and lead to more referrals.
The cross-selling of services within a clinic is a valuable tool
for referrals. Cross-selling means
referring patients to other doctors or services offered by the
clinic. It is important that each
doctor be aware of the services and qualifications of other
medical staff at the clinic and con-
tinually reminded of the need to cross-sell, because it works
both ways: I refer someone to
you, and you refer someone to me.
10.3 Customer Relationship Management
In addition to attracting new patients, HCOs must effectively
manage their existing custom-
ers to support long-term profitability. Customer relationship
management (CRM) further
analyzes a targeted segment by addressing each customer’s
potential for profitability. CRM is
based on the following four premises:
1. Customers are a key asset of the organization.
2. Customers vary in their preferences and behaviors and their
value to the
organization.
3. Understanding customer needs, preferences, and behavior can
improve a
customer’s value.
4. Relationships with customers must be managed.
While many companies have operated on the premise that the

best customers are loyal ones
and have focused on segmentation by frequency of purchase,
traditional loyalty programs
have neglected to analyze their profitability (Mason & Young,
2003). Instead of focusing on
loyalty alone, CRM goes one step further in finding ways to
measure the company’s “cost” to
maintain that customer relationship. Many companies now offer
software for CRM programs,
which, if implemented appropriately, can provide a competitive
edge for an organization
(Kotler, 2003). These software programs involve the use of
database marketing, which will be
discussed in the next section.
The All About Smiles dental practice in Durant, Oklahoma has
learned to use several
approaches to CRM. At All About Smiles, CRM begins with
new patients at the front desk,
where they are greeted by office staff and made to feel welcome
and appreciated. Everyone
else’s job is to ensure that customer appreciation continues
throughout the whole treatment
and payment process. The office layout is unusual for dental
practices. For example, the Egypt
room has murals of pyramids; the Jamaica room has scenes of
beaches and palm trees; and a
game room complete with PAC-MAN® entertains the younger
patients.
New patients are asked for their email addresses and mobile
phone numbers so they can
be sent reminders of their next appointment and also have an
opportunity to evaluate the
services through an online survey, which is sent to patients a
few days after their dental visit.

Email reminders are sent the day before the upcoming
appointment, and text messages are
sent the day of the appointment and two hours before the
appointment time. Patients can opt
out of both of these contact methods and request phone calls
instead, if they prefer that type
of reminder. The office manager reports that the texts sent on
the day of the appointment
have significantly reduced the number of no-shows.
Section 10.4Database Marketing
A L L A B O U T S M I L E S D E N T I S T R Y , D U R A
N T , O K L A H O M A
At All About Smiles Dentistry, we value our patient
relationships, making it our priority
to deliver gentle compassionate care that you deserve from a
dentist in Durant. We work
hard to make you feel at ease by providing exceptional patient
care in a relaxed, convenient
atmosphere. We strive to develop lifelong relationships with our
patients by combining the
latest dental technology with a professional and compassionate
staff. The result is a beau-
tiful, healthy smile that lasts a lifetime.
We also believe that patients should have sufficient information
to make educated deci-
sions about their oral health, treatment options and choice of
dentist in Durant. You’ll find
all of this important information on our website, including
directions to our Durant office,
service descriptions, patient forms, patient education resources
and more.

Not only are we a leading dentist in Durant, we are a full-
service practice providing for all
of your dental needs. Our services include:
• General Dentistry
• Teeth Whitening
• Crowns
• Preventive Care
• Periodontal Exams
• View a Complete List of our Dental Services
Should you ever need additional information about our practice,
we are always available to
answer your questions. Let us care for your entire family! We
look forward to meeting you.
Source: http://www.durantsmiles.com/ Retrieved November 13,
2013
10.4 Database Marketing
True database marketing creates customer intelligence that
contributes to the development
of profitable customer relationships. Database marketing is an
organizational process that
is customer research driven. The information base is dynamic
and evolving, preferably with
two-way dialog with the customer (Berry & Linoff, 2000). It is
a measure of the importance of
creating and maintaining a good database of market information
that Business Week devoted
the cover story of its September 5, 1994 issue to the subject of
database marketing, calling
it “one of the biggest changes in marketing since ‘new and
improved’” (Bloomberg Business-
week, 1994, para 5). Since that time, the concept of database

marketing, coupled with new
technologies, has grown to the point that a new generation of
marketing professionals has
been created. Basic information on age, gender, lifestyle,
occupation, and so forth can easily
be captured by HCOs through additions to the regular patient
forms filled out annually or by
new patients. This information must then be entered into a
software program by staff or an
outside marketing agency. The data can then be analyzed for
commonalities and trends.
http://www.durantsmiles.com/
Advantages of Database Marketing
The new generation of database marketing professionals offer
skills in four primary areas:
(a) secondary data acquisition, including analysis of the value
of lists; (b) database-build-
ing, including the understanding of computer hardware and
software; (c) target marketing,
including maximizing database record use; and (d) one-to-one
marketing, which involves
managing and refining the targeting process to customize
contacts for every customer (Kot-
ler, 2003). The popularity of database marketing is grounded in
the belief that marketing
planning begins by understanding the customer—his or her
buying and consumption pat-
terns, location, interest, and other aspects of buying behavior
discernible from databases—
and then formulating plans that attempt to weave the firm’s
product or service into the con-

sumer’s pattern of behavior. The basic idea behind the use of
databases is this: If that is what
the consumer is doing, how can we make consumers want to do
that more often and with our
product? This approach to satisfying customers adheres to the
belief that the best indicator
of future behavior is past behavior. Thus, if American Express®
sees its card frequently used
by a cardholder to purchase works of art, then it assumes an
advertisement for artworks in
that cardholder’s monthly bill will generate a better response
than it would with a cardholder
who uses the card for travel in the Caribbean (and receives
advertisements for travel specials
to that region). In fact, by monitoring card members’ shopping,
travel, and eating patterns,
plus the economic and weather patterns in which they live, the
database may trigger an ad
to be sent to someone who has traveled in the past to warmer
climates during a particularly
inclement winter month, in a calculated effort to strike while
the iron is hot.
If an HCO learns that more and more patients are accessing its
website before a visit, then
ensuring that the website is up-to-date, and that links to
departments and services are all
working, is an essential part of the use of data mining, which is
discussed in the next subsec-
tion. Patient forms can simply ask about visiting the website
and any additional information
patients would like to be able to access on the website. Patients
can also be asked whether
they want to receive email or text updates of changes to the
website.

Data Collection and Manipulation
The process of data collection and manipulation, which allows
such powerful tactical market-
ing actions to occur, consists of several steps:
1. Consumer action. The process begins with the consumer
taking some form of
action—they use a coupon, fill out a warranty card, make a
purchase, enter a sweep-
stakes, place a toll-free call to request information, fill out a
business reply card,
order from a catalog, and so forth. This behavior is combined
with other information
in public records to identify a broad profile of each consumer in
the database.
2. Digesting the data. Sophisticated statistical techniques are
used to merge data on
the consumer into a coherent, consolidated database. Other
software allows the
marketer to “drill down” into the data to reveal patterns of
behavior for classes of
customers.
3. Profiling the ideal customer. Neural networks that “learn”
from the data are used to
identify a model consumer, that is, the common characteristics
held by the high-
volume customer. This allows the marketer to find customers or
potential customers
who share those characteristics in common with the high-
volume customer.

4. Using the knowledge. This data can be used in many ways: to
determine who gets
which sales promotions, to develop attributes for new products
or services with a
targeted list of customers for new-product introduction
announcements, to tailor ad
messages and target them by customer groups, and so forth.
5. Sharing data with channel members. For consumer package-
goods marketers, it is
possible to merge the manufacturer’s database (described in
item 2 of this num-
bered list) with an individual store’s scanner data to help plan
local promotional
mailings, fine-tune shelf displays, and design store layouts
(Berry, 1994).
Modern technology has made it possible for marketers to do
extensive searches through a
large database, essentially mining the data. Data mining is the
process of sorting through the
data to find hidden patterns, potential trends, and correlations
between customers or within
a single customer’s data. Data mining is predominantly
accomplished through mathemati-
cal and statistical processes and is typically done using software
developed for this purpose
(Mason & Young, 2003). However, great care must be used in
healthcare-related data mining
because of the privacy concerns of patients and the need to
safeguard access to patients’
medical information.
While modern technology, including neural network software
and parallel processor hard-

ware, makes the use of such database marketing possible, it is
old-fashioned objectives that
drive the interest in databases. Marketers seek to know their
customers so well that they
can anticipate their needs and provide them with desired
products and services before the
customers themselves know what they want. This is relationship
marketing, which is now at
its most efficient evolutionary stage. Computer technology
allows the marketer to acquire
knowledge of the purchasing habits of millions of individual
customers and to weave relation-
ships with them by anticipating their needs and informing them
of need-satisfying products
specifically suited to their situation. By successfully weaving
these relationships, the mar-
keter makes it inconvenient or costly for the customer to switch
to a competitor.
Using the Data
To some degree, the marketing plans of companies actively
engaged in database marketing
are driven by the desire to maximize the use of their databases
and the technology that allows
the manipulation of those databases. In other words, the ability
to use the database in certain
ways means that those uses will become the implementation of
the marketing plan (that is,
the marketing plan conforms to fit the technology available).
This is not necessarily an inap-
propriate or backward approach to marketing, as long as
marketers do not lose sight of this
fact: The ultimate goal of any technology usage or marketing
plan objective is to identify how
an organization can gain a competitive advantage in satisfying
customer needs and wants.

Jackson and Wang (1994) have identified 15 ways to use a
marketing database. These uses of
a marketing database are described in depth in their book and
are listed as follows to illus-
trate the spectrum of possibilities for the use of databases in
data-based marketing planning:
1. Identify your best customers.
2. Develop new customers.
3. Deliver a message consistent with product usage.
4. Reinforce consumer purchase decisions.
Section 10.5Managing Real and Virtual Customer Interactions
5. Cross-sell and complementary sell products.
6. Apply three-tiered communications.
7. Improve delivery of sales promotion.
8. Refine the marketing process.
9. Increase the effectiveness of distribution channel marketing.
10. Maintain equity.
11. Establish a management resource.
12. Take advantage of stealth communications.
13. Conduct customer, product, and marketing research.
14. Personalize customer service.
15. Provide program synergy and integration.
10.5 Managing Real and Virtual Customer Interactions
Patients develop a service script in each healthcare setting. A
service script is the expected
sequence of events and outcomes for that particular setting.
When the actual experience
departs from the script, the patient may be uncomfortable

(Solomon, 2013). For example,
a dental patient may expect a visit to the dentist to include
reading out-of-date magazines
in the waiting room, experiencing pain while a cavity is filled,
and hearing the high-pitched
sound of the drill. This may not be perceived as a pleasant
experience, but it is, traditionally,
the patient’s expectation.
A problem now faced by many HCOs is that patients gather
information from social media
outlets before contacting a healthcare provider (Kane, Fichman,
Gallaugher, & Glaser, 2009).
The information gleaned from the Internet and social media
sites determines, at least in part,
the patient’s service script. A new dental patient can search the
Internet or interact with
friends on a site such as Facebook to find a dentist who has a
big-screen TV in the waiting
room, guarantees little or no pain, and uses a quieter laser drill.
This information dramati-
cally alters the patient’s expectations of the dental appointment.
Several popular healthcare
social media sites are listed in Table 10.2.
Table 10.2: Healthcare social media sites
Website Purpose
PatientsLikeMe.com
DailyStrength.org
Allows patients to share real-world health experiences to
help themselves and other patients.
angieslist.com

healthgrades.com
RateMDs.com
All of these allow patients to rate healthcare providers.
CaringBridge.org Helps people who have significant health
problems
connect with friends and family, making the experience
easier.
Sermo.com Exclusively for MDs and DOs to post observations
and
questions about puzzling cases.
The following subsections will discuss the use of social media
by patients, the management
of online community relations, gaps in expected and delivered
service, and service recovery.
Section 10.5Managing Real and Virtual Customer Interactions
Social Media in Healthcare
Sixty million people in the United States read or contribute to
blogs, wikis, and/or social
networks about healthcare (Kane et al., 2009). Often, social
media is the first place patients
search for information concerning specific illnesses or
recommended healthcare providers.
This use of social media provides opportunities as well as
possible pitfalls for HCOs and indi-
vidual healthcare providers.
The opportunities offered by social media include the ability for
the HCO to communicate its

mission, vision, and products or services as well as health
education. HCOs also can use social
media to advertise and post patient testimonials. Finally, social
media can be used to manage
customer experiences by helping to create realistic service
scripts.
The biggest challenge for any organization involved in social
media is the ability to control
the conversation (Forbes Insights, 2013). Threats to a firm’s
reputation may be internal or
external. Internally, a disgruntled employee may post
information damaging to an organiza-
tion, such as protected health information about a patient. Even
an act of kindness may be
damaging to an organization. For example, a nurse may post a
request on Facebook for her
friends and family to keep a particular hospitalized patient in
their thoughts and prayers.
Depending on the amount of information revealed by the post,
patient confidentiality may
have been breached.
Controlling the external conversation is more difficult. Online
communities spontaneously
appear, often with different contributors taking the lead. …

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