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Marketing: Managing Profitable Customer Relationships

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Title: Marketing: Managing Profitable Customer Relationships


1
Marketing Managing Profitable Customer
Relationships
Chapter 1
2
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.

3
Examples of Product
4
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.

5
Marketing Philosophy
  • The Production Concept
  • The Product Concept
  • The Selling Concept
  • --------------------------------------------------
    ------
  • The Marketing Concept
  • The Customer Concept
  • The Societal Marketing Concept

6
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.

7
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)

8
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.

9
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.

10
Figure 1.3 Contrasts Between the Sales Concept
and the Marketing Concept
11
The Customer Concept
12
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 ?????.

13
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.

14
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.

15
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.

16
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)

17
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.

18
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

19
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.

20
Customer Relationship Groups
Profitability
21
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.

22
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.

23
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.

24
Satisfying Customer Complaints
  • Rate of complainant repurchase

Resolved Resolved quickly
Major complaints 34 52
Minor complaints 52 95
25
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.

26
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?
27
Prisoners Dilemma
Player 1 ? Player 2 Cooperate Fink
Cooperate 2, 2 3, -3
Fink -3, 3 -2, -2
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