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Marketing Marketing ManagementManagement(Text book(Text book Chapter)Chapter)

MembersMembers

#04#04 Ms.Tanawan K.Ms.Tanawan K.

#08#08 Mr.Noppadol S.Mr.Noppadol S.

#10#10 Mr.Chonlakon B.Mr.Chonlakon B.

#11#11 Ms. Tippawan S.Ms. Tippawan S.

#13#13 Ms. Panpilas P.Ms. Panpilas P.

#18#18 Ms. Atchara N.Ms. Atchara N.

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Building Building Customer Customer SatisfactionSatisfaction, Value, and , Value, and Retention Retention

(Chapter 2)(Chapter 2)

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Author BiographyAuthor Biography

Philip KotlerPhilip Kotler

His book “Marketing Management” is referred His book “Marketing Management” is referred to as the Bible of Marketingto as the Bible of Marketing

He is the S. C. JohnsonHe is the S. C. Johnson & Son Professor of & Son Professor of International Marketing at the Kellogg School International Marketing at the Kellogg School of Management, Northwestern Universityof Management, Northwestern University

It is rated as the “Best Business School for the It is rated as the “Best Business School for the Teaching of Marketing”Teaching of Marketing”

He received Master’s Degree at The University He received Master’s Degree at The University of Chicago and PhD at MIT, both in economicsof Chicago and PhD at MIT, both in economics

He did post-doctoral work in mathematics at He did post-doctoral work in mathematics at Harvard UniversityHarvard University

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Why do companies need to get Why do companies need to get customer satisfaction?customer satisfaction?

Now companies are facing their Now companies are facing their toughest competition.toughest competition.

A lot of competitors emergences in the A lot of competitors emergences in the same industriessame industries

Today’s customers have variety of Today’s customers have variety of products and brand choicesproducts and brand choices

Believing that customers estimate Believing that customers estimate which offer will deliver the most valuewhich offer will deliver the most value

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Customer ValueCustomer Value

Customer delivered valueCustomer delivered value1.1. Total customer valueTotal customer value

the bundle of benefit that customers the bundle of benefit that customers expect from given product or expect from given product or service.service.

2.2. Total Customer costTotal Customer cost

the bundle of cost customers expect the bundle of cost customers expect to incur in evaluating, obtaining, to incur in evaluating, obtaining, using, and disposing.using, and disposing.

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Determinants of customer delivered Determinants of customer delivered valuevalue

Image value

Personnel value

Product value

TotalCustomer value

Psychic cost

Time cost

Monetary cost

TotalCustomer cost

Customer Delivered value

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Customer satisfactionCustomer satisfaction

Person’s feelings of pleasure or Person’s feelings of pleasure or disappointment resulting from comparing a disappointment resulting from comparing a product’s perceived performance in relation product’s perceived performance in relation to his or her expectationsto his or her expectations

Perf

orm

anc

eExpect

ati

on

Perf

orm

ance

Expect

ati

on

Perf

orm

ance

Expect

ati

on

Dissatisfied

Satisfied Highly satisfied

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Four methods to track customer Four methods to track customer satisfactionsatisfaction

1.1. Complaint and suggestion systemComplaint and suggestion systemEasy for its customers to deliver suggestions and complaints Easy for its customers to deliver suggestions and complaints such as suggestion form, hot lines, e-mailsuch as suggestion form, hot lines, e-mail

2.2. Customer satisfaction surveysCustomer satisfaction surveysAlthough customers are dissatisfied, less than 5 percent of Although customers are dissatisfied, less than 5 percent of dissatisfied customers will complaindissatisfied customers will complain

3.3. Ghost shoppingGhost shoppingHire persons to pose as potential buyers to report on strong and Hire persons to pose as potential buyers to report on strong and weak pointsweak points

4.4. Lost customerLost customerContact customers who have stopped buying or switched to Contact customers who have stopped buying or switched to another suppliers to learn why this happenedanother suppliers to learn why this happened

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The Nature of High Performance The Nature of High Performance BusinessBusiness

Set Strategies to satisfy key stakeholders…

… and aligning resources and organization.

… by improving critical business processes…

ResourcesResources OrganizationOrganization

StakeholdersStakeholders

ProcessProcess

Keys to Success High Performance Keys to Success High Performance BusinessBusiness

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Keys to Success Keys to Success High Performance BusinessHigh Performance Business

The companies must be defined their The companies must be defined their stakeholder and their needstakeholder and their need

In Traditional companies, pay attention In Traditional companies, pay attention to satisfy their stockholdersto satisfy their stockholders

High-Performance companies, take good High-Performance companies, take good care of ;care of ;

CustomersCustomers EmployeesEmployees SuppliersSuppliers DistributorDistributor

s s

StakeholdersStakeholders

ProcesProcesss

ResourceResourcess

OrganizationOrganization

StakeholdersStakeholders

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Keys to Success Keys to Success High Performance BusinessHigh Performance Business

Traditional : Traditional : work flow from work flow from Department to Department to DepartmentDepartment

High-Performance :High-Performance :use linking work use linking work processesprocesses

StakeholdersProcessProcess

ResourcesResources OrganizatioOrganizationn

ProcessProcess

Reengineering Reengineering work flowwork flow

Building cross-Building cross-functional teamfunctional team

Improvement of Improvement of core businesscore business

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Keys to Success Keys to Success High Performance BusinessHigh Performance BusinessResourcesResources

Traditional : Traditional : usually owned usually owned and controlled and controlled company’s company’s propertiesproperties

High-Performance :High-Performance :use use

““outsources outsources service”service” better quality better quality lower costlower cost

““core competence”core competence” competitive competitive

advantageadvantage being significantbeing significant

StakeholdersProcessProcess

ResourceResourcess

OrganizatioOrganizationn

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Keys to Success Keys to Success High Performance BusinessHigh Performance BusinessOrganizationOrganization & Organization Culture& Organization Culture Company’s organization consists ofCompany’s organization consists of its

structures, policies and “corporate culture” Corporate culture is “the shared experiences,

stories, beliefs, and norms that characterize an organization”

Encourage company organization to be “visionary company” or “comparison company”

Successful companies may need to adopt a new view to craft their strategy“High-performance companies are set up to deliver value and

satisfaction”

Stakeholders

ProcessProcess

OrganizatioOrganizationn

ResourcesResources

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Delivering customer value and Delivering customer value and satisfactionsatisfactionVALUE CHAINVALUE CHAIN It identifies nine activities that create value and cost in a It identifies nine activities that create value and cost in a

specific business.specific business.

The Five Primary Activities are:The Five Primary Activities are:

1.1. Inbound logistics Inbound logistics – bringing materials into the business– bringing materials into the business

2.2. OperationsOperations – converting them into final products – converting them into final products

3.3. Outbound logistics Outbound logistics – shipping out final products– shipping out final products

4.4. Marketing and sales Marketing and sales – marketing them– marketing them

5.5. ServiceService – servicing them – servicing them

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Delivering customer value and Delivering customer value and satisfactionsatisfactionVALUE CHAINVALUE CHAIN

The Four Support Activities are:The Four Support Activities are:

1.1. ProcurementProcurement

2.2. Technology developmentTechnology development

3.3. Human resource managementHuman resource management

4.4. Firm infrastructureFirm infrastructure

The firm task is to examine its cost and performance in each value-The firm task is to examine its cost and performance in each value-creating activity and to look for the ways to improve it.creating activity and to look for the ways to improve it.

The firm’s success depends on how well each department performs its The firm’s success depends on how well each department performs its work and how well the various activities are coordinated.work and how well the various activities are coordinated.

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Delivering customer value and Delivering customer value and satisfactionsatisfactionSUPPLY CHAIN or Value-Delivery NetworkSUPPLY CHAIN or Value-Delivery Network

Competition is between Competition is between networksnetworks, not companies. , not companies. The winner is the company with the better network.The winner is the company with the better network.

Delivery Custome

rsSuppliers

Distributors

Delivery

Order Order

Attracting and Retaining Attracting and Retaining CustomersCustomersATTRACTING CUSTOMERSATTRACTING CUSTOMERSCompanies have to spend considerable time and resources searching forCompanies have to spend considerable time and resources searching for

new customers in order to grow their profits and sales.new customers in order to grow their profits and sales.

Customers AcquisitionCustomers Acquisition Lead Generation Lead Generation – advertising, sending direct mail, – advertising, sending direct mail,

making phone callsmaking phone calls Lead QualificationLead Qualification – interviewing, checking on their – interviewing, checking on their

financial standingfinancial standing Account ConversionAccount Conversion – making presentations, answering – making presentations, answering

objections, negotiating final termsobjections, negotiating final terms

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Attracting and Retaining Attracting and Retaining CustomersCustomersCOMPUTING THE COST OF LOST CUSTOMERSCOMPUTING THE COST OF LOST CUSTOMERS The companies must pay attention to the rate that they lose The companies must pay attention to the rate that they lose

customers customers ((customer defection rate)customer defection rate). . 

There are There are fourfour steps in trying to reduce the defection rate: steps in trying to reduce the defection rate:

1.1. Define and measure its retention rate.Define and measure its retention rate.

2.2. Distinguish the causes of customer attrition and identify Distinguish the causes of customer attrition and identify those that can be managed better.those that can be managed better.

3.3. Estimate how much profit it loses when it loses customers.Estimate how much profit it loses when it loses customers.

4.4. Figure out how much it would cost to reduce the defection Figure out how much it would cost to reduce the defection rate.rate.

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Attracting and Retaining Attracting and Retaining CustomersCustomersTHE NEED FOR CUSTOMER RETENTIONTHE NEED FOR CUSTOMER RETENTION Building relationshipsBuilding relationships Caring for the customers afterwardCaring for the customers afterward The key to customer retention is The key to customer retention is customer satisfactioncustomer satisfaction.. The company should measure customer satisfaction The company should measure customer satisfaction

regularly.regularly. The company must listen and respond quickly to the The company must listen and respond quickly to the

complaints.complaints.

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Attracting and Retaining Attracting and Retaining CustomersCustomersTHE NEED FOR CUSTOMER RETENTIONTHE NEED FOR CUSTOMER RETENTION

The importance of satisfying and retaining current customersThe importance of satisfying and retaining current customers Acquiring new customers can cost five times more than Acquiring new customers can cost five times more than

the costs involved in satisfying and retaining customers.the costs involved in satisfying and retaining customers. The average company loses 10% of its customers each The average company loses 10% of its customers each

year.year. A 5% reduction in the customer defection rate can A 5% reduction in the customer defection rate can

increase profits by 25% to 85%.increase profits by 25% to 85%. The customer profit rate tends to increase over the life of The customer profit rate tends to increase over the life of

the retained customerthe retained customer

2020

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Relationship MarketingRelationship MarketingThe customer development processThe customer development process

Suspects

Disqualified Disqualified prospectsprospects

Partners

Prospects

Repeat customers

Advocates

Members

ClientsInteractive Interactive

or or ex-customersex-customers

First time customers

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Five different levels of Five different levels of investment in customer-investment in customer-relationship building:relationship building:

1.1. Basic marketingBasic marketing

2.2. Reactive marketingReactive marketing

3.3. Accountable marketingAccountable marketing

4.4. Proactive marketingProactive marketing

5.5. Partnership marketingPartnership marketing

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The likely level of relationship The likely level of relationship marketingmarketing

Many Many customers/ customers/ distributorsdistributors

AccountableAccountable ReactiveReactive Basic or Basic or ReactiveReactive

Medium Medium number of number of customers/customers/distributorsdistributors

ProactiveProactive AccountableAccountable ReactiveReactive

Few Few customers/ customers/ distributorsdistributors

PartnershipPartnership ProactiveProactive AccountableAccountable

High margin Medium margin Low margin

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Three value-building Three value-building approachesapproaches

Adding financial benefitsAdding financial benefits

- Frequency marketing programs - Frequency marketing programs (FMPs)(FMPs)

- Club membership program- Club membership program

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Three value-building approaches Three value-building approaches (con’t)(con’t)

Adding social benefitsAdding social benefits Social actions affecting buyer-seller relationshipSocial actions affecting buyer-seller relationship

Good thingsGood things Bad thingsBad thingsInitiative positive phone calls Initiative positive phone calls Make only callbacksMake only callbacksMake recommendationMake recommendation Make justificationMake justificationCandor in languageCandor in language Accommodative Accommodative

languagelanguageUse phoneUse phone Use correspondenceUse correspondenceShow appreciationShow appreciation Wait fir misunderstandingsWait fir misunderstandingsGet to problemsGet to problems Only respond to Only respond to

problemsproblemsRoutinize responsesRoutinize responses Fire drill and Fire drill and

emergency emergency responsivenessresponsiveness

Accept responsibilityAccept responsibility Shift blameShift blamePlan the futurePlan the future Rehash the pastRehash the past

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Adding structure tiesAdding structure ties- To supply customers with special To supply customers with special

equipment or computer linkages that equipment or computer linkages that help customers manage their order, help customers manage their order, payroll, inventory, and so onpayroll, inventory, and so on

- To provide proprietary software To provide proprietary software programs, marketing research, sale programs, marketing research, sale training, and sales leads to loyal training, and sales leads to loyal customerscustomers

Three value-building approaches Three value-building approaches (con’t)(con’t)

Customer Customer Profitability :Profitability :The Ultimate TestThe Ultimate Test

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Customer ProfitabilityCustomer Profitability

Marketing is the art of attracting and Marketing is the art of attracting and keeping profitable customers.keeping profitable customers.

A profitable customer A profitable customer isis a person or a person or company that over time yields a company that over time yields a revenue stream that exceeds by an revenue stream that exceeds by an acceptable amount the company’s acceptable amount the company’s cost stream of attracting, selling, and cost stream of attracting, selling, and servicing that customer.servicing that customer.

Customer ProfitabilityCustomer Profitability

In order to determine if a client is truly In order to determine if a client is truly profitable, many different factors must be profitable, many different factors must be taken into consideration, taken into consideration, including the including the cost of sales efforts efforts, commissions, commissions paid on the paid on the revenue generated by the customer, and the revenue generated by the customer, and the wageswages, , timetime, and equipment expended in , and equipment expended in maintaining maintaining customer service and support. and support.

It is possible for a profitable customer to It is possible for a profitable customer to become unprofitable over time, if the volume become unprofitable over time, if the volume of business is reduced and the client of business is reduced and the client demands more attention.demands more attention. 2929

The Ultimate TestThe Ultimate Test

The 80-20 rule (Pareto's Principle)The 80-20 rule (Pareto's Principle) Vilfredo Pareto created the mathematical Vilfredo Pareto created the mathematical

formula to describe the unequal distribution formula to describe the unequal distribution of wealth in his countryof wealth in his country

The 80% of income in Italy was received by The 80% of income in Italy was received by 20% of the Italian population.20% of the Italian population.

How to apply with marketing?How to apply with marketing? The top 20% of the customer may generate The top 20% of the customer may generate

as much as 80% of the company’s profits.as much as 80% of the company’s profits.3030

The Ultimate TestThe Ultimate Test

The 20-80-30 ruleThe 20-80-30 rule The 20 % of customers bring 80 % of the The 20 % of customers bring 80 % of the

revenue of which 30% is spent for revenue of which 30% is spent for maintaining the bottom line customers maintaining the bottom line customers (unprofitable customers).(unprofitable customers).

It is important to find out which customers It is important to find out which customers are the 20% best customers for the company, are the 20% best customers for the company, so that we can treat them differently in order so that we can treat them differently in order to acquire, upgrade and retain them.to acquire, upgrade and retain them.

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The 20-80-30 ruleThe 20-80-30 rule

Percentage Profit Income (THB)

100% 5 million

20% 4 million

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70% profit

30% non-profit

The Ultimate TestThe Ultimate Test

How to overcome 30% of non-profit?How to overcome 30% of non-profit?

There are 2 optionsThere are 2 options

(1). Increase the price of its less profitable(1). Increase the price of its less profitable

products or eliminate themproducts or eliminate them

(2). Try to sell its profit-making products to (2). Try to sell its profit-making products to the the

unprofitable customers.unprofitable customers.

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ImplementingImplementing Total Quality Total Quality ManagementManagement

Total quality management Total quality management (TQM)(TQM)

It is an organizational approach to It is an organizational approach to improve the quality of all improve the quality of all organization ‘s process, product, organization ‘s process, product, and service.and service.

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Marketing ManagersMarketing Managers

Formulate strategies and policies Formulate strategies and policies to help company win through to help company win through total quality excellence.total quality excellence.

Deliver marketing quality Deliver marketing quality alongside production quality.alongside production quality.

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MarketersMarketers Bear responsibility for identifying the Bear responsibility for identifying the

customers’ needs and requirement. customers’ needs and requirement. Communicate customer expectations properly Communicate customer expectations properly

to product designers.to product designers. Make sure the customers’ orders are filled Make sure the customers’ orders are filled

properly and on time.properly and on time. Check whether the customers have received Check whether the customers have received

proper technical assistance in the use of proper technical assistance in the use of product.product.

Stay in touch with the customers after the sale Stay in touch with the customers after the sale to make sure whether they are satisfied.to make sure whether they are satisfied.

Gather customer ideas for product and service Gather customer ideas for product and service improvement.improvement.