Download Lessons from Chapter 12

Lessons from Chapter 12
Developing and implementing the marketing program:
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must be looked at holistically to avoid getting caught up in the details.
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has one key purpose: to develop and maintain long-term customer relationships.
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is often not enough to guarantee success in today’s rapidly changing economy.
The "right" marketing strategy:
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is not necessarily about creating a large number of customer transactions in order
to maximize market share.
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is one that attracts and retains customers over the long term.
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considers customers’ needs, wants, and expectations to ensure customer
satisfaction and customer retention.
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develops long-term customer relationships to insulate the firm against competitive
inroads and the rapid pace of environmental change.
Customer relationship management (CRM):
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requires that firms look beyond current transactions to examine the long-term
potential of a customer.
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is based on creating mutually beneficial relationships where each party provides
value to the other party.
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is a business philosophy aimed at defining and increasing customer value in ways
that motivate customers to remain loyal to the firm.
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at its core is about retaining the right customers.
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involves a number of stakeholders in addition to customers including employees,
supply chain partners, and external stakeholders such as government agencies,
nonprofits, and facilitating firms.
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shifts the firm's marketing emphasis from "acquiring customers" to "maintaining
clients."
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involves the creation of relationship capital—the ability to build and maintain
relationships with customers, suppliers, and partners based on trust, commitment,
cooperation, and interdependence.
CRM in consumer markets:
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is a long-term process with the goal of moving consumers through a series of
stages ranging from simple awareness, through levels of increasing relationship
intensity, to the point where consumers become true advocates for the firm and its
products.
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attempts to go beyond the creation of satisfied and loyal customers to create true
believers and sponsors for the company.
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is usually based on strategies that increase share of customer rather than market
share.
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abandons old notions of acquiring new customers and increasing transactions to
focus more on fully serving the needs of current customers.
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is based on the precept that all customers have different needs; therefore, not all
customers have equal value to the firm.
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involves estimating the worth of individual customers to express their lifetime
value (LTV) to the firm. Some customers are simply too expensive to keep given
the low level of profits that they generate.
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involves not only strategies to retain top-tier customers but also finding ways to
encourage second-tier customers to be even better customers.
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involves the use of four types of relationship strategies: financial incentives,
social bonding, enhanced customization, and structural bonding.
CRM in business markets:
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also involves moving buyers through a sequence of stages, where each stage
represents an increasing level of relationship intensity.
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is based more on creating structural bonds with customers or supply-chain
partners.
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creates win-win scenarios where both parties build relationship capital; one firm
maintains a loyal and committed customer, and the other maintains a loyal and
committed supplier.
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is typically more involving, more complex, and much riskier due to the nature of
business buying, the presence of long-term contractual obligations, and the sheer
dollars involved in many business purchases.
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leads to many changes in the way that companies conduct business, including a
change in buyers' and sellers' roles; as well as increases in sole sourcing, global
sourcing, team-based buying decisions, and productivity through better
integration of operations.
As one of the keys to customer relationship management, quality:
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is a relative term that refers to the degree of superiority of a firm's goods or
services.
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is a double-edged sword: Good quality can successfully generate first-time
transactions, but poor quality guarantees that repeat purchases will not occur.
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is not an automatic guarantee of success—it is a necessary but insufficient
condition of customer relationship management.
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is affected by every element in the marketing program. However, the firm’s
product and branding strategies are of utmost importance.
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depends heavily on the form utility offered by the core product. In service
offerings, the core product is typically based on a combination of people,
processes, and physical evidence.
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is often taken for granted in the core product because customers expect the core
product to be of high quality, or at least at a level necessary to meet their needs.
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is critical in supplemental products that add value to the core product. In most
cases, these supplemental products, not the core product, are responsible for
product differentiation.
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is often found in the symbolic and experiential attributes of a product.
Characteristics such as image, prestige, or brand have immense power in
differentiating product offerings.
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is hard to maintain with regularity because: (1) customers have very high
expectations about quality, (2) most products today compete in mature markets,
and (3) many businesses compete in markets with very little real differentiation
among product offerings.
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is difficult to continuously improve over time. Delivering superior quality
involves understanding customers' expectations, translating expectations into
quality standards, upholding quality standards, and avoiding the tendency to
overpromise.
As one of the keys to customer relationship management, value:
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is critical to maintaining long-term customer relationships because it allows for
the necessary balance among the five types of utility and the elements of the
marketing program.
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is a useful guiding principle of marketing strategy because it takes into account
every marketing program element and can be used to consider explicitly customer
perceptions of the marketing program in the strategy development process.
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is defined as a customer’s subjective evaluation of benefits relative to costs to
determine the worth of a firm’s product offering relative to other product
offerings.
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breaks down into customer benefits (for example, core product quality,
supplemental product quality, and experiential quality) and customer costs
(monetary and nonmonetary costs).
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can vary across different situations or times depending on a customer’s
expectations and needs.
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depends on much more than the selling price of a product. Value perceptions are
also affected by transaction costs (taxes, fees, and other charges), life-cycle costs
(maintenance, repairs, and consumables), and nonmonetary costs (time, effort,
risk, and opportunity costs).
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can be altered by changing one or more parts of the marketing program. If a
change lowers overall value, the firm should consider modifying other marketing
program elements to offset this decrease.
Customer expectations:
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are at the core of customer satisfaction.
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can be described as ideal (essentially perfect performance), normative (“should
be” or “ought to be” performance), experience-based (based on past experiences),
or minimum tolerable (lowest acceptable performance).
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can be examined strategically by considering the zone of tolerance between
desired performance expectations and adequate performance expectations. The
zone of tolerance represents the degree to which customers recognize and are
willing to accept variability in performance.
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as measured against the zone of tolerance can lead to three outcomes:
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customer delight – Actual performance exceeds desired expectations

customer satisfaction – Actual performance falls within the zone of tolerance
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customer dissatisfaction – Actual performance falls below adequate
expectations
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are typically not unrealistic. Customers are looking for the basics of
performance—things that the firm is supposed to do or has promised to do.
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can be increased over time if the firm is not mindful of its initiatives aimed at
delighting customers on a continuous basis.
Customer satisfaction:
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is defined as the degree to which a product meets or exceeds the customer's
expectations about that product.
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is typically judged by customers within the context of the total experience, not
just with respect to quality and value. Customer satisfaction can also include any
number of factors that have nothing to do with quality or value.
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is the key to customer retention. Fully satisfied customers are:
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more likely to become loyal customers, even advocates for the firm;
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less likely to explore alternative suppliers;
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less price sensitive;
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less likely to switch to competitors;
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more likely to spread good word-of-mouth about the firm and its products.
creates some interesting challenges for marketers. Some of the steps that
marketers can take to manage customer satisfaction include:
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understand what can go wrong;
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focus on controllable issues;
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manage customer expectations;
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offer satisfaction guarantees;
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make it easy for customers to complain;
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create relationship programs;
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make customer satisfaction measurement an ongoing priority.
can be measured using simple rating scales to directly measure performance
across various factors in the marketing program.
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can be tracked diagnostically by measuring both expectations and performance at
the same time.
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is now tracked using a number of new metrics based on actual customer behavior,
including lifetime value of a customer; average order value; customer
acquisition/retention costs; customer conversion, retention, attrition, and recovery
rates; referrals; and viral marketing.