Understanding Business Customers

5-2 How Do You Measure Customer Loyalty? Recency of purchase Frequency of purchase Amount of purchase Referrals

5-3 A Satisfied Customer is Loyal 100% 40% Loyalty Satisfaction Extremely Dissatisfied Slightly Dissatisfied Extremely Satisfied Zone of Defection Zone of Indifference Terrorist Apostle Zone of Affection

5-4 Marketing Information Systems 80% have a formal system for contacting customers on a regular basis 11% know the lifetime value of their customers 10% have an early warning system 90% claimed to have a system in place to determine why a customer left

5-5 Customer Has a Problem: 4 Possible Outcomes  Customer complains and is satisfied with the response  Customer complains and is mollified, but not completely satisfied with the response  Customer complains and is not satisfied with the response  Customer does not complain and remains dissatisfied

5-6 Reasons People Do Not Complain It is not worth the trouble They do not know where or how to complain They do not believe the company will do anything

5-7 Who They Complain To 80% complain to sales representatives 75% are satisfied 25% are not satisfied Of those dissatisfied one in five complain to middle management of these, 80% are satisfied Of the 20% still dissatisfied, 50% will complain to top management

5-8 Complaining Aspects Voice who does the customer complain to? High = mgmt; medium = sales rep; low = no one Exit customer stops patronizing the marketer High = never again; medium = never again, if at all possible; low = continues shopping as usual

5-9 Complaining Aspects Retaliation customer takes deliberate action designed to damage the marketer or hurt future business High = physically damaging or going out of one’s way to communicate negative info to other customers Medium = creates minor inconveniences and only tells a few people about his/her problem Low = no retaliation (other than bad feelings)

5-10 The Product’s Role in Complaints Small-ticket Items 96% of those with a problem do not complain 63% do NOT buy again Large-ticket Items 27% of those with a problem do not complain 41% do NOT buy again

5-11 Impact of Complaint Handling

5-12 Customers at Risk Formula Overall % Experiencing a Problem X % Specific Problem Frequency X % Customers Not Likely to Repurchase = % of Customers at Risk

5-13 Customers At Risk Example

5-14 Process of a Customer-at-Risk Strategy Remember that getting customers to complain without solving the problems will just lose you more customers. Step One: Contact the customer after the sale don’t just rely on those who complain thank the customer & then ask about any problems experienced Then ask if they will/will not purchase again or offer a referral

5-15 Process of a Customer-at-Risk Strategy Step Two: Quantify those at risk Step Three: Concentrate resources on correcting those problems with the highest probabilities of defectors. Step Four: Let the customers know what you have done to correct the problem(s)

Segmentation & Positioning

5-17 What is a Market Segment? Group of present or potential customers With some common characteristic Which is relevant in explaining/predicting response To a supplier’s marketing stimuli

5-18 Why We Segment 1.IDs opportunities for new product development. 2.Assists in development of effective marketing programs. 3.Improves allocation of limited marketing resources.

5-19 Market Segmentation Identify distinct groups of buyers who might require separate products and/or marketing mixes. Profile these buyers:  Who are they?  What do they want to buy?  How do they want to buy?  When do they want to buy?  Where do they want to buy?

5-20 Target Marketing Sellers distinguish major market segments, target 1 or more, and develop products & marketing programs tailored to each segment.

5-21 Levels of Market Segmentation Mass Marketing Seller engages in mass production, mass distribution, and mass promotion of one product for all buyers. Creates largest potential market Leads to lowest costs Leads to lower prices or higher margins Proliferation of advertising media and distribution channels make it difficult

5-22 Levels of Market Segmentation Multi-Segment Marketing Seller recognizes that buyers differ in their wants, purchasing power, geographic locations, buying attitudes & buying habits. Major segments are identified & products and marketing mixes developed for each. Product offer & prices can be fine-tuned Choice of Dist./Promo. channels easier

5-23 Levels of Market Segmentation Sequential Segmentation Businesses may lack sufficient resources to pursue several attractive market segments. Tackle most attractive segment first. Using profits earned from this segment, then target the next most attractive segment. Runs the risk of allowing potential competitors into a market.

5-24 Levels of Market Segmentation Niche Marketing Niche customers have a distinct and complete set of needs. They will pay a price premium to have their special needs met. The niche is not likely to attract very many competitors. Should have sufficient size, profit, and growth potential.

5-25 Levels of Market Segmentation Local Marketing Marketing programs tailored to needs & wants of local customer groups. Pronounced regional differences often exist in communities’ demographics and lifestyles. Local marketing can drive up manufacturing & marketing costs by reducing economies of scale.

5-26 Levels of Market Segmentation Individual Marketing The ultimate level of segmentation. Each customer is a “segment of one.”Self-Marketing Form of individual marketing. Customer takes more responsibility in determining which products/brands to buy Much less reliance upon salespeople.

5-27 Useful Market Segments Are: MeasurableMeasurable Size, purchasing power, & characteristics SubstantialSubstantial Large & profitable enough to serve AccessibleAccessible Can reach w/ distribution & promotion channels DifferentiableDifferentiable Managerially-significant from other segments ActionableActionable Can effectively attract & serve segment

5-28 Needs-Based Market Segmentation First, group customers with like needs, and Then discover which demographics, lifestyle forces, and usage behaviors make them distinct from customers with different needs. Primary Benefit Segments are created around specific customer needs. Primary Disadvantage Do not know (initially) who these customers are.

5-29Positioning Designing an offering & image in order to occupy a meaningful & distinct competitive position in the target customers’ minds.Designing an offering & image in order to occupy a meaningful & distinct competitive position in the target customers’ minds.

5-30 Positioning & Differentiation The main focus of positioning is differentiation.The main focus of positioning is differentiation. Differentiation involves designing a set of meaningful differences to distinguish the company’s offering from competitors’ offerings.Differentiation involves designing a set of meaningful differences to distinguish the company’s offering from competitors’ offerings.

5-31 The 5 Differentiation Dimensions ProductProduct ServicesServices PersonnelPersonnel ChannelChannel ImageImage

5-32 Product Differentiation Variables FeaturesFeatures Characteristics that supplement the product’s basic function.Characteristics that supplement the product’s basic function. Performance QualityPerformance Quality The level at which the product’s primary characteristics operate.The level at which the product’s primary characteristics operate. Conformance QualityConformance Quality Degree to which all the produced units are identical and meet the promised target specificationsDegree to which all the produced units are identical and meet the promised target specifications

5-33 Product Differentiation Variables DurabilityDurability Measure of the product’s expected operating life under natural and/or stressful conditions.Measure of the product’s expected operating life under natural and/or stressful conditions. ReliabilityReliability Measure of the probability that a product will not malfunction or fail within a specified time period.Measure of the probability that a product will not malfunction or fail within a specified time period. RepairabilityRepairability Ease of fixing a product that malfunctions or failsEase of fixing a product that malfunctions or fails StyleStyle Product’s looks and feel to the buyerProduct’s looks and feel to the buyer

5-34 Services Differentiation Variables Ordering EaseOrdering Ease how easy it is for the customer to place an orderhow easy it is for the customer to place an order DeliveryDelivery how well the product is delivered to the customerhow well the product is delivered to the customer InstallationInstallation work done to make the product operational in its planned locationwork done to make the product operational in its planned location

5-35 Services Differentiation Variables Customer TrainingCustomer Training training the customer to properly & efficiently use the producttraining the customer to properly & efficiently use the product Customer ConsultingCustomer Consulting data, information, systems, & advising services offered to buyers (at a price or free)data, information, systems, & advising services offered to buyers (at a price or free) Maintenance & RepairMaintenance & Repair helping customers keep purchased products in good working orderhelping customers keep purchased products in good working order

5-36 Personnel Differentiation Variables CompetenceCompetence Skill & knowledgeSkill & knowledge CourtesyCourtesy Friendly, respectfulFriendly, respectful CredibilityCredibility TrustworthyTrustworthy ReliabilityReliability Accuracy & consistencyAccuracy & consistency ResponsivenessResponsiveness TimelinessTimeliness CommunicationCommunication

5-37 Channel Differentiation Variables CoverageCoverage ExpertiseExpertise PerformancePerformance

5-38 Image Differentiation Variables SymbolsSymbols Written & Audiovisual MediaWritten & Audiovisual Media AtmosphereAtmosphere EventsEvents

5-39 A Difference is Worthwhile as a Differentiation Variable if it is: ImportantDistinctiveSuperiorCommunicablePreemptiveAffordableProfitable

5-40

5-41 Misusing Perceptual Maps for Positioning One common error is to create a map of where you would like your products to be positioned or where they are positioned in your perception of the market Then treat the resulting map strategically as if it is a map of the actual perceptions of the customers in the market.

5-42 Once You Have All the Maps to Visualize the Market… presently 1.Consider what position the firm presently owns. wants 2.Decide what position that firm wants to own. who 3.Decide who the firm must outflank to gain that position. necessary resources 4.Consider if the firm has the necessary resources and is committed to achieving the objective. marketing mix 5.Determine if the firm can create a marketing mix to achieve the desired position.