Marketing Management Week 5
Marketing Management Week 5
Marketing Management Week 5
Some companies are noted for its customer-on-top business model, and customer
advocacy has been their strategy—and competitive advantage—all along. With the rise
of digital technologies, increasingly informed consumers expect companies to do more
than connect with them, more than satisfy them, and even more than delight them. They
expect companies to listen and respond to them.
Customer-Perceived Value
Consumers are better educated and better informed than ever, and they have the
tools to verify companies’ claims and seek out superior alternatives.
Total customer benefit -is the perceived monetary value of the bundle of
economic, functional, and psychological benefits customers expect from a given
market offering because of the product, service, people, and image.
Total customer cost- is the perceived bundle of costs customers expect to incur
in evaluating, obtaining, using, and disposing of the given market offering,
including monetary, time, energy, and psychological costs.
2. Applying Value Concept The buyer evaluates time, energy, and psychological costs
expended in product acquisition, usage, maintenance, ownership, and disposal together
with the monetary cost to form a total customer cost. The buyer will choose whichever
source delivers the highest perceived value before purchased an item. This is
sometimes applicable to long term used item that needs maintenance like tractor or
machines.
1. Identify the major attributes and benefits that customers value. Customers are asked
what attributes, benefits, and performance levels they look for in choosing a product and
vendors.
2. Assess the quantitative importance of the different attributes and benefits. Customers
are asked to rate the importance of different attributes and benefits.
3. Assess the company’s and competitors’ performances on the different customer
values against their rated importance. Customers describe where they see the
company’s and competitors’ performances on each attribute and benefit.
5. Monitor customer values over time. The company must periodically redo its studies of
customer values and competitors’ standings as the economy, technology, and product
features change.
At this point buyers operate under various constraints and occasionally make
choices that give more weight to their personal benefit than to the company’s benefit
like.
2. The buyer will retire before the company realizes the offer is more expensive to
operate.
Monitoring Satisfaction
Many companies are systematically measuring how well they treat customers,
identifying the factors shaping satisfaction, and changing operations and marketing as a
result. Wise firms measure customer satisfaction regularly because it is one key to
customer retention.
Satisfaction will also depend on product and service quality. What exactly is quality?
Various experts have defined it as “fitness for use,” “conformance to requirements,” and
“freedom from variation.” Quality is the totality of features and characteristics of a
product or service that bear on its ability to satisfy stated or implied needs.
• They make sure customers’ orders are filled correctly and on time.
• They check that customers have received proper instructions, training, and technical
assistance in the use of the product.
• They stay in touch with customers after the sale to ensure they are, and remain,
satisfied.
• They gather customer ideas for product and service improvements and convey them
to the appropriate departments.
Customer Profitability
- Customer Profitability Analysis -is best conducted with the tools of an accounting
technique called activity-based costing (ABC). ABC accounting tries to identify the real
costs associated with serving each customer—the costs of products and services based
on the resources they consume. The company estimates all revenue coming from the
customer, less all costs.
The case for maximizing long-term customer profitability is captured in the concept of
customer lifetime value. Customer lifetime value (CLV) describes the net present value
of the stream of future profits expected over the customer’s lifetime purchases.
Companies seeking to expand profits and sales must invest time and resources
searching for new customers. To generate leads, they advertise in media that will reach
new prospects, send direct mail and e-mails to possible new prospects, send their
salespeople to participate in trade shows where they might find new leads, purchase
names from list brokers, and so on.
1. Reducing Defection, it is not enough to attract new customers; the company must
also keep them and increase their business. Too many companies suffer from high
customer churn or defection. Adding customers here is like adding water to a leaking
bucket.
-Define and measure its retention rate. For a magazine, subscription renewal rate is a
good measure of retention. For a college, it could be first- to second-year retention rate
or class graduation rate.
-Distinguish the causes of customer attrition and identify those that can be managed
better. Not much can be done about customers who leave the region or go out of
business, but poor service, shoddy products, and high prices can all be addressed.
-Compare the lost customer’s lifetime value to the costs of reducing the defection rate.
As long as the cost to discourage defection is lower than the lost profit, spend the
money to try to retain the customer.
2. Retention Dynamics
Figure shows the main steps in attracting and retaining customers, imagined in
terms of a funnel, and some sample questions to measure customer progress through
the funnel. The marketing funnel identifies the percentage of the potential target market
at each stage in the decision process, from merely aware to highly loyal. Consumers
must move through each stage before becoming loyal customers. Some marketers
extend the funnel to include loyal customers who are brand advocates or even partners
with the firm.
Customer profitability analysis and the marketing funnel help marketers decide how
to manage groups of customers that vary in loyalty, profitability, risk, and other factors.
Customer profitability analysis and the marketing funnel help marketers decide how to
manage groups of customers that vary in loyalty, profitability, risk, and other factors.
• Increasing the longevity of the customer relationship. The more engaged with the
company, the more likely a customer is to stick around.
• Enhancing the growth potential of each customer through “share of wallet,” cross-
selling, and upselling. Sales from existing customers can be increased with new
offerings and opportunities.
Building Loyalty
Companies that want to form strong, tight connections to customers should heed some
specific considerations. One set of researchers sees retention-building activities as
adding financial benefits, social benefits, or structural ties.
1. Interact Closely with Customers Connecting customers, clients, patients, and others
directly with company employees is highly motivating and informative.
3. Create Institutional Ties The company may supply business customers with special
equipment or computer links that help them manage orders, payroll, and inventory.
Customers are less inclined to switch to another supplier when it means high capital
costs, high search costs, or the loss of loyal-customer discounts.
Brand Communities
1. Enhance the timeliness of information exchanged. Set appointed times for topic
discussion; give rewards for timely, helpful responses; increase access points to the
community.
2. Enhance the relevance of information posted. Keep the focus on topic; divide the
forum into categories; encourage users to preselect interests.
3. Extend the conversation. Make it easier for users to express themselves; don’t set
limits on length of responses; allow user evaluation of the relevance of posts.
Regardless of how hard companies may try, some customers inevitably become
inactive or drop out. The challenge is to reactivate them through win-back strategies.
Exit interviews and lost customer surveys can uncover sources of dissatisfaction and
help win back only those with strong profit potential.
1. Personalizing Marketing- Companies are using e-mail, Web sites, call centers,
databases, and database software to foster continuous contact between company and
customer. To adapt to customers’ increased desire for personalization, marketers have
embraced concepts such as permission marketing.