Marketing: Managing Profitable Customer Relationships

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Marketing Managing Profitable Customer
Relationships
Chapter 1
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Market Product

• A market is the set of actual and potential
  buyers of a product. These buyers share a
  particular need or want that can be satisfied
  through exchange relationships.
• Product (Marketing Offer) physical product,
  service, information, experience, person, place,
  organization, and ideas.

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Examples of Product
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Definition of Marketing

• Marketing is the process of planning and
  executing the conceptions, pricing, promotion and
  distribution of ideas, goods, and services to
  create exchanges that satisfy individual and
  organizational goals. (AMA)
• Marketing is meeting needs profitably.

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Marketing Philosophy

• The Production Concept
• The Product Concept
• The Selling Concept
• --------------------------------------------------
  ------
• The Marketing Concept
• The Customer Concept
• The Societal Marketing Concept

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The Production Concept

• Consumers will prefer products that are widely
  available and inexpensive.
• Focus achieving high production efficiency, low
  costs, and mass distribution.
• It is useful when (1) the demand for a product
  exceeds the supply (2) the products cost is too
  high.
• Examples Standard Raw Materials and Components,
  CD, LCD.

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The Product Concept

• Consumers will favor those products that offer
  the most quality, performance, or innovative
  features.
• Focus making superior products and improving
  them over time.
• Examples Digital Camera, CPU.
• Better Mousetrap Fallacy
• Marketing Myopia. (Theodoes Levitt, 1965)

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The Selling Concept

• Consumers and businesses, if left alone, will
  ordinarily not buy enough of organizations
  products.
• Focus undertake an aggressive selling and
  promotion effort.
• Examples unsought goods encyclopedias, funeral
  plots, foundations.

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The Marketing Concept

• The key to achieving its organizational goals
  consists of the company being more effective than
  competitors in creating, delivering, and
  communicating superior customer value to its
  chosen target markets.
• Slogans ???????, ????, ???????, We do it all for
  you (Toyota).
• Four pillars target market, customer needs,
  integrated marketing and profitability.

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Figure 1.3 Contrasts Between the Sales Concept
and the Marketing Concept
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The Customer Concept
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The Societal Marketing Concept

• The organizations task is to determine the
  needs, wants, and interests of target markets and
  to deliver the desired satisfactions more
  effectively and efficiently than competitors in a
  way that preserves or enhances the consumers and
  societys well-being.
• Examples Body Shop HSBC Johnson Johnsons
  Tylenol ?????.

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Needs, Wants and Demands

• Needs (??) the basic human requirements.
• Physical food, clothing, shelter, safety
• Social belonging, affection
• Individual learning, knowledge, self-expression
• Wants (??) when needs are directed to specific
  objects that might satisfy the need.
• Demands (??) wants for specific products backed
  by an ability to pay.

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Demand States and Marketing Tasks

• Marketing managers are responsible for demand
  management.
• Negative Demand ? Counter Marketing, e.g.
  insurance.
• No Demand ? Stimulus, e.g. encyclopedias.
• Latent Demand ? Developing, e.g. iPod ??????
  ??????.
• Declining Demand ? Remarketing, e.g. Arm
  Hammers baking soda ? deodorizer school.

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Demand States and Marketing Tasks

• Marketing managers are responsible for demand
  management.
• Irregular Demand ? Synchromarketing (????), e.g.
  ice cream museum.
• Full Demand ? Maintain Marketing
• Overfull Demand ? Demarketing (???), e.g. Mister
  Donut ??????.
• Unwholesome Demand ? Social Marketing, e.g.
  cigarettes drunk-driving.

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Customer Relationship Management (CRM)

• The overall process of building and maintaining
  profitable customer relationships by delivering
  superior customer value and satisfaction.
• On average, it costs 5 to 10 times as much to
  attract a new customer as it does to keep a
  current customer satisfied. (Sears 12 times)

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Customer Perceived Value

• The difference between total customer value and
  total customer cost.
• Value chain, e.g. Wal-Mart.
• Value-delivery network, e.g. Honda.

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Customer Lifetime Value and Equity

• Customer lifetime value the value of the entire
  stream of purchases that the customer would make
  over a lifetime of patronage.
• Lexus 600,000 Taco Bell 12,000 Supermarket
  50,000.
• Customer equity the total combined customer
  lifetime values of all of the companys
  customers.
• Cadillac vs. BMW

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Selective Relationship Management

• Weed out losing customers and target winning ones
  for pampering.
• Examples Citibank First Chicago Bank Fidelity
  Investment.
• Risk future profits are hard to predict.

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Customer Relationship Groups
Profitability
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Share of Customer

• The portion of the customers purchasing in its
  product categories that a company gets.
• Methods to increase share of customer
• Offer greater variety to current consumers
• Train employees to cross-sell and up-sell in
  order to market more products and services to
  existing customers.
• Amazon books, music, videos, gifts, toys,
  consumer electronics, office products, and so on.

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Customer Satisfaction

• The extent to which a products perceived
  performance matches a buyers expectation.
• Smart companies aim to delight customers by
  promising only what they can deliver, then
  delivering more than they promise.
• Examples Lexus Southwest Airlines Seasons
  Hotels Nordstrom department store.

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Satisfying Customer Complaints

• Rate of dissatisfaction 25 rate of complaint
  in dissatisfaction 5.
• 50 of complaints report a satisfactory problem
  resolution.
• Examples Williams-Sonoma Enterprise Rent-A-Car.
• On average, satisfied ?3 people, and dissatisfied
  ? 11 people.

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Satisfying Customer Complaints

• Rate of complainant repurchase

Resolved Resolved quickly
Major complaints 34 52
Minor complaints 52 95
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Customer Relationship Levels and Tools

• Level of relationship basiclt reactive (e.g.
  PG)ltaccountableltproactiveltpartnership (e.g.
  Boeing).
• Tools
• Add financial benefits, ex. frequent-flier
  program.
• Add social benefits, ex. club marketing program.
• Add structural ties, ex. McKesson FedEx.

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Discussion Question
In 1981, American Airlines first introduced the
AADVANTAGE frequent-flier program. When other
airlines copied this strategy, did they engage in
the prisoners dilemma?
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Prisoners Dilemma
Player 1 ? Player 2 Cooperate Fink
Cooperate 2, 2 3, -3
Fink -3, 3 -2, -2