Marketing: Managing Profitable Customer Relationships SWH SWH
Marketing: Managing Profitable Customer Relationships
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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 product’s 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 organization’s 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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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 organization’s 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 consumer’s and society’s well-being.
Examples: Body Shop; HSBC; Johnson & Johnson’s 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 &
Hammer’s baking soda → deodorizer; school.
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Demand States and Marketing Tasks Marketing managers are responsible for
demand management. Irregular Demand → Synchro marketing, e.g. ice
cream; museum. Full Demand → Maintain Marketing Overfull Demand → 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 company’s 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
Projected loyalty
High
Low
Long-term customers
Short-term customers
Good fit between company’s offerings and customer’s needs; high
profit potential
Limited fit between company’s offerings and customer’s needs; low
profit potential
Little fit between company’s offerings and customer’s
needs; lowest profit potential
Good fit between company’s offerings and
customer’s needs; highest profit potential
Strangers
Butterflies True Friends
Barnacles
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Share of Customer The portion of the customer’s 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 product’s perceived
performance matches a buyer’s 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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In 1981, American Airlines first introduced the AADVANTAGE frequent-flier program. When other airlines copied this strategy, did they engage in unethical behavior?
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