Creating Customer Value, Satisfaction, and Loyalty (Chap. 5)

Customer Perceived Value =

Total Customer Value – Total Customer Cost

______ – product, services, personnel, image

______ – monetary, time, energy, psychic

What is the cost of holiday shopping?

Applying Value Concepts

Providing the Most Perceived Value for the Customer

Increasing the following ratio:

Applying Value Concepts

Product, services, personnel, and image value (benefits)

Monetary, time, energy, and psychic costs

Application:

Increase total customer value or decrease total customer cost

Compare with competitor’s offering

Customer Satisfaction (p. 145)

A highly satisfied customer:

● stays loyal longer,

● buys more as the company introduces new products and upgrades existing products,

● talks favorably about the company and its products,

● pays less attention to competing brands,

is less sensitive to price,

● costs less to serve than new customers

Customer Satisfaction (p. 145)

Measuring Satisfaction:

Customer satisfaction surveys

Customer loss rate – why?

Mystery shoppers

“Would you recommend this product or service to a friend?”

Maximizing Customer Value

A profitable customer: over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer (p. 149)

For unprofitable customers:

Maximizing Customer Value

Customer Relationship Management (CRM) – managing detailed information about individual customers and carefully managing all customer “touch points” to maximize customer loyalty (p. 152)

Hotel touch points: reservations, check-in, check-out, room service, laundry service, restaurants

Example

Traditional Marketing

Loyal Customers (20%) account for 80% of sales. A majority of customers are deal seekers(50%) and they account 5% of your sales. Therefore, when retailer offers store-wide discount, profits are low.

Example

Traditional Marketing Resources expended

Loyal

Deal

seekers

Example

Customer Focused MarketingLoyal Customers (20%) account for 80% of sales. A majority

of customers are deal seekers (50%). They account for 5% of your sales. Therefore, when retailer focus on loyal customers, profits are high.

Free turkey offered for those that spend 500.00 or more the previous two months before Thanksgiving. Number of customers spending 500.00 or more increases by 25%. Profits are up. Customer loyalty is higher. __________________________________________

Example

Customer Focused Marketing Resources expended

Loyal

Deal

seekers

Customer Relationship Management

Summary (p. 153-154)• Identify your prospects and customers.• Differentiate customers in terms of (1) their needs

and (2) their value to your company.• Making low-profit customers more profitable or

terminating them.• Focusing disproportionate effort on high value

customers.

Etc.

Analyzing Consumer Markets (Chap. 6)

What influences consumer behavior or why do we buy the things we buy?

Culture: the fundamental determinant of a person’s wants and behavior.

Subculture: nationalities, religions, racial groups, and geographic regions.

Social Classes: relatively homogeneous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests, and behavior

Analyzing Consumer Markets (Chap. 6)

What influences consumer behavior or why do we buy the things we buy?

Culture: the fundamental determinant of a person’s wants and behavior.

Subculture: nationalities, religions, racial groups, and geographic regions.

Social Classes: relatively homogeneous and enduring divisions in a society, which are hierarchically ordered and whose members share similar values, interests, and behavior

Consumer Behavior

Why do we buy the things we buy?

Cultural factors

Social factors - reference groups

Personal factors - age, lifestyle

Psychological factors - beliefs, attitudes

Chapter 7Analyzing Business Markets

A business seller (supplier) is seeking ways to improve relations with the business customer. What will this entail?

Overview

Know your customer

Company Company

Characteristics of Business Markets (p 210-212)

• Professional purchasing: business goods purchased by trained agents who follow their organization’s purchasing policies

• Several Buying Influences• Derived Demand• Etc.

Offering service to business buyers

Business Buying Situations

Straight rebuy – routine re-ordering; just-in-time inventory is practiced. EX:

Modified rebuy – consider alternatives before buying; routine purchase has changed. EX: Modify product specifications, prices, delivery requirements, etc

New Task Purchase – large investments; extensive information search; formal decision process. EX:

Business Buying Situations

Implications: • Build reliability and trust• Exceed competition – why should they buy from you?

What do your customers ? • Understand influences and process by which organizations

buy their products. How are decisions made?• Corporate credibility – extent to which customers believe

that a firm can design and deliver products and services that satisfy their needs and wants (p. 228)

Chapter 8Identifying Market Segments and Selecting

TargetsOverview- target marketing1. Identify and profile distinct groups of buyers

who differ in their needs and preferences ________________________________

2. Select one or more market segments to enter______________________________

3. For each target segment, establish and communicate the distinctive benefit(s) of the company’s market offering ________________

Overview

Effective Segmentation (p. 262)

Measurable: Size, purchasing power, profiles of segments can be measured.

Substantial: Segments must be large or profitable enough to serve.

Accessible: Segments can be effectively reached and served.

Differentiable: Segments must respond differently to different marketing mix elements & actions.

Actionable: Must be able to attract and serve segments

Effective Segmentation

Substantial/Differentiable

1. How people are in this market?

2. How frequently will they purchase?

3. What market share can we expect?

4. What is the ?

5. How satisfied are current customers with current offerings?

Effective Segmentation

Accessible/Actionable

1. Can this segment be reached with current distribution channels?

2. Can we establish new channels efficiently, if needed?

3. What promotion media does this segment read, listen to, or watch?

4. Can we afford to promote to this segment and is there a media to reach them?

Segment Marketing

Market segment: large, identifiable group within a market with similar wants, purchasing power, geographical location, buying attitudes, or buying habits

- low cost

- transportation

- luxury; driving experience

Niche Marketing

Niche marketing:

Niche: a more narrowly defined group seeking a distinctive mix of benefits; has size, profits, and growth potential

Distinct set of needs

Willing to pay premium

Local Marketing and Customerization

Local marketing: Needs and wants of local customer groups (e.g., neighborhood)

Customerization: Combination of operationally driven mass customization with customized marketing in a way that empowers consumers to design the product and service offering of their choice

Bases for Segmenting Consumer Markets

Geographic - Region, City or Metro; Size, Density, ClimateDemographic - Age, life stage, gender, income, generation,

social classPsychographic - Lifestyle or personalityBehavioral - occasions, benefits, uses, attitudes

Rationale: a single product can seldom meet the needs and desires of all consumers. Consumers are too numerous and diverse in their buying requirements

Marketing Memo: Cheat Sheet for 21-Year-Olds (p. 253)

In 2003, 4.1 million Americans turned 21, here are some facts you need to know about them

41% - share of 21 yr olds who currently live with mom and/or dad60% - share of college students who plan to move back home after graduation1-in-4 – odds that a 21 yr old was raised by a single parent70% - share of 21 year olds who have a full or part time job$2,241,141 – amount the average 21 yr old will spend between now and the end of

his life$3,000 – credit card debt of the average 21 year old43% - share of 21 year olds who have a tattoo or body piercing

Source: John Fetto, “Twenty-One, and Counting…” American Demographics (Sept 2003): 48.

Challenge of Segmentation

• Segmentation ignores the whole customer profile, which becomes clear only with individual profiling

EX: __________________________________

• Segments change continually• Need for continuous research

Market Targeting Strategies

Various segments: decide how many and which ones to target

• What makes the segments attractive?

• Consider company resources and objectives

- able or unable to offer superior value

- company objectives

Market Targeting Strategies (p. 262-263)

Single segment concentration: focus on ____ segment m1 m2 m3

p = product offering p1

m = market segment p2

p3

Porsche (p2) – for sports car market (m1)

Market Targeting StrategiesSelective specialization: select a of segments;

each segment is appealingm1 m2 m3

p1

p2

p3

Truck (p1); economy (p2); luxury (p3);

Outdoor (m3); middle-income (m1); high income (m2)

Market Targeting StrategiesProduct specialization: specialize in making a certain product

for _______________ segments

m1 m2 m3

p1

p2

p3

Microscopes (p2)

Universities (m1); company labs (m2); hospitals (m3)

Market Targeting Strategies

Market specialization: serve many needs of a particular customer group

m1 m2 m3

p1

p2

p3

Microscope (p1); test tubes (p2); chemicals (p3)

Universities (m1)

Market Targeting Strategies

Full market coverage: serve ___ customer groups with ____ the products they might need

Undifferentiated:

Ignore segment differences

Differentiated:

Different offerings

for different segments

Market Segmentation Issues

Increased segmentation allows company to meet needs of more customers; increased profitability

Increased segmentation increases costs

Tradeoff: Will increased segmentation ___________ for added costs?

Costs (p. 264) – product modification, manufacturing, administrative, inventory, promotion