Managing Customer Relationships

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MARKETING STRATEGYO.C. FERRELL MICHAEL D.
HARTLINE
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Managing Customer Relationships
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Understanding Customer Behavior

• The Consumer Buying Process
• Depicts the possible range of activities that may
  occur in making purchase decisions
• Involves considering which product to buy AND
  considering where to buy it
• Choice of a suitable merchant may take precedence
  over the choice of a specific product

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The Consumer Buying Process
Exhibit 5.1
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Need Recognition

• Need
• Occurs when the consumers current level of
  satisfaction does not equal their desired level
  of satisfaction.
• Want
• A consumers desire for a specific product that
  will satisfy the need.
• Demand
• When the want for a specific product is backed up
  by the customers ability and willingness to pay
  for the product.

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Information Search (1 of 2)

• Marketing stimuli can stimulate a desire for
  information
• Passive Information Search
• Active Information Search
• Sources of information
• Internal Sources
• Personal Sources
• External Sources

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Information Search (2 of 2)

• Time, effort and expense dedicated to information
  search depends on
• Degree of risk involved in the purchase
• Financial risk
• Social risk
• Emotional risk
• Personal risk
• Amount of expertise with the product category
• Actual cost of the search
• Evoked set
• A narrowed down set of alternatives that the
  customer is considering

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Evaluation of Alternatives

• Customers evaluate products as bundles of
  attributes
• Brand attributes
• Product features
• Aesthetic attributes
• Price
• Customers place different levels of importance on
  attributes
• Important considerations in the evaluation stage
• Products must be in the evoked set
• Consumers choice criteria must be understood
• Marketing programs must be designed to influence
  consumers opinions about product or brand image

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Purchase Decision

• Purchase intention and the act of buying are
  distinct concepts
• Potential intervening factors between intention
  and buying (car example)
• Unforeseen circumstances
• Angered by the salesperson or sales manager
• Unable to obtain financing
• Customer changes mind
• Key issues in the purchase decision stage
• Product availability
• Possession utility

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Postpurchase Evaluation

• Four possible outcomes in the postpurchase stage
• (1) Delight
• (2) Satisfaction
• (3) Dissatisfaction
• (4) Cognitive Dissonance
• Cognitive dissonance is more likely to occur
  when
• Dollar value of the purchase increases
• Opportunity cost of rejected alternatives is high
• Purchase decision is very involving or emotional
• Firms ability to manage dissatisfaction and
  cognitive dissonance is
• A key to creating customer satisfaction
• A major influence on word-of-mouth communication

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Factors Affecting theConsumer Buying Process

• Decision-Making Complexity
• High/Low Complexity
• Individual Differences
• Demographics, perceptions, motives, interests,
  attitudes, opinions, lifestyles, etc.
• Social Influences
• Culture, subculture, social class, reference
  groups, opinion leaders, etc.
• Situational Influences

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Common Situational Influences
Exhibit 5.2
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Understanding BusinessBuying Behavior

• Four types of Business Markets
• Producer markets (a.k.a. commercial markets)
• Reseller markets
• Government markets
• Institutional markets
• Unique Characteristics of Business Markets
• The Buying Center
• Hard and Soft Costs
• Reciprocity
• Mutual Dependence

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The Business Buying Process

• (1) Problem Recognition
• (2) Develop Product Specifications
• (3) Vendor Identification and Qualification
• (4) Solicitation of Proposals or Bids
• (5) Vendor Selection
• (6) Order Processing
• (7) Vendor Performance Review

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Managing Customer Relationships

• Customer Relationship Management (CRM)
• A holistic process of identifying, attracting,
  differentiating, and retaining customers.
• CRM Stakeholders
• Employees
• Supply Chain Partners
• Lateral Partners
• Customers

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Strategic Shift from AcquiringCustomers to
Maintaining Clients
Exhibit 5.3
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Developing Relationshipsin Consumer Markets

• Increase share of customer rather than market
  share
• Serve current customers rather than focus on
  acquiring new customers
• The 80/20 Rule
• 20 of the customers provide 80 of the profit

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Stages of CustomerRelationship Development
Exhibit 5.4
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Developing Relationshipsin Business Markets

• Relationships must be built on win-win strategies
• Changes in business relationships
• A change in buyers and sellers roles
• An increase in sole sourcing
• An increase in global sourcing
• An increase in team-based buying decisions
• An increase in productivity through better
  integration

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Quality and Value (1 of 2)The Keys to
Developing Customer Relationships

• Understanding the Role of Quality
• The core product is not enough
• Supplemental products are critical
• Delivering Superior Quality (four issues)
• Understand customers expectations, needs, and
  wants
• Translate customer research into specifications
  for quality
• Deliver on specifications
• Promise only what can be delivered

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Components of theTotal Product Offering
Exhibit 5.5
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Quality and Value (2 of 2)The Keys to
Developing Customer Relationships

• Understanding the Role of Value
• A simple formula for value

• A more useful formula for value

• Core Product, Supplemental Product, and
  Experiential Quality
• Monetary and Nonmonetary Costs
• Competing on Value

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Customer SatisfactionRetaining Customers Over
the Long Term

• Satisfaction vs. Quality vs. Value
• Expectations
• Customer Satisfaction and Customer Retention
• Understand what can go wrong
• Focus on controllable issues
• Manage customer expectations
• Offer satisfaction guarantees
• Make it easy for customers to complain
• Create loyalty programs
• Make customer satisfaction measurement an ongoing
  priority

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Examples of CustomerSatisfaction Guarantees
Exhibit 5.7
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Customer Satisfaction Metrics

• Lifetime Value of a Customer (LTV)
• Average Order Value (AOV)
• Customer Acquisition/Retention Costs
• Customer Conversion Rate
• Customer Retention Rate
• Customer Attrition Rate
• Customer Recovery Rate
• Referrals
• Viral Marketing