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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, checkout, 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 storewide discount, profits are low. Example Traditional Marketing Resources expended Loyal Deal seekers Example Customer Focused Marketing Loyal 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 7 Analyzing 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 8 Identifying Market Segments and Selecting Targets Overview- target marketing 1. 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, Climate Demographic - Age, life stage, gender, income, generation, social class Psychographic - Lifestyle or personality Behavioral - 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-YearOlds (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 dad 60% - share of college students who plan to move back home after graduation 1-in-4 – odds that a 21 yr old was raised by a single parent 70% - 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 old 43% - 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 Strategies Selective specialization: select a each segment is appealing m1 m2 of segments; m3 p1 p2 p3 Truck (p1); economy (p2); luxury (p3); Outdoor (m3); middle-income (m1); high income (m2) Market Targeting Strategies Product 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