three Core strategy PART Chapter 8: Relationship marketing Chapter 9: Segmentation and positioning Chapter 10: Competitive strategy three PART

Video Case: Acme Whistles (1) How does a manufacturer of relatively low-tech products, such as whistles, compete effectively against numerous low-cost, copycat competitors? Principles of Marketing 5e, © Pearson Education 2008

Video Case: Acme Whistles (1) Principles of Marketing 5e, © Pearson Education 2008

Video Case: Acme Whistles (2) How might the marketing mix vary for products developed for consumer and industrial customers? How can the Internet help a small business reach global markets? Principles of Marketing 5e, © Pearson Education 2008

Video Case: Acme Whistles (2) Principles of Marketing 5e, © Pearson Education 2008

Relationship marketing CHAPTER eight Relationship marketing

Previewing concepts (1) Define customer value and discuss its importance in creating and measuring customer satisfaction Discuss the concepts of value chains and value delivery systems and explain how companies go about producing and delivering customer value Principles of Marketing 5e, © Pearson Education 2008

Previewing concepts (2) Define quality and explain the role of total quality marketing in building profitable customer relationships Explain the importance of retaining current customers as well as attracting new ones Understand the role and operation of customer relationship management Principles of Marketing 5e, © Pearson Education 2008

Prelude case: The most important part of a car is the distributor Principles of Marketing 5e, © Pearson Education 2008

Satisfying customer needs A customer-centred company is one that focuses on customer developments in designing its marketing strategies and on delivering superior value to its target customers. Principles of Marketing 5e, © Pearson Education 2008

Figure 8.1 Customer delivered value Principles of Marketing 5e, © Pearson Education 2008

Upon what does customer satisfaction depend? Customer satisfaction depends upon the product’s performance relative to a buyer’s expectations. Principles of Marketing 5e, © Pearson Education 2008

How do buyers form expectations? Past buying experiences Opinions of friends and associates Marketer and competitor information and promises Principles of Marketing 5e, © Pearson Education 2008

The role of customer delight Customer delight creates an emotional affinity for a product or service beyond just a rational preference and this creates high customer loyalty Principles of Marketing 5e, © Pearson Education 2008

Methods of tracking customer satisfaction Complaint and suggestion systems Customer satisfaction surveys Ghost shopping Lost customer analysis Principles of Marketing 5e, © Pearson Education 2008

The value chain The value chain is the main tool for identifying ways to create more customer value It breaks a firm into nine value-creating activities to understand the behaviour of costs in the specific business and potential sources of competitive differentiation Principles of Marketing 5e, © Pearson Education 2008

Figure 8.2 Generic value chain Principles of Marketing 5e, © Pearson Education 2008

Core business processes Product development process Inventory management process Order-to-payment process Customer service process Principles of Marketing 5e, © Pearson Education 2008

What is the customer value delivery system? A customer value delivery system is a system made up of the value chains of the company and its suppliers, distributors, and ultimately customers, who work together to deliver value to customers. Principles of Marketing 5e, © Pearson Education 2008

Figure 8.3 Relative quality boosts rate of return Principles of Marketing 5e, © Pearson Education 2008

What is total quality management? Total quality management refers to programmes designed to constantly improve the quality of products, services and marketing processes. Principles of Marketing 5e, © Pearson Education 2008

Figure 8.4 The European Foundation for Quality Management’s model of business excellence Principles of Marketing 5e, © Pearson Education 2008

How can we make customers more profitable? Maximise customer lifetime value Improve customer retention By reducing customer defections by only 5%, companies can improve profits by anywhere from 25-100% Principles of Marketing 5e, © Pearson Education 2008

What is relationship marketing? Relationship marketing involves creating, maintaining and enhancing strong relationships with customers and other stakeholders. Principles of Marketing 5e, © Pearson Education 2008

Relationship levels Basic Reactive Accountable Proactive Partnership Principles of Marketing 5e, © Pearson Education 2008

Figure 8.5 Relationship levels as a function of profit margin and number of customers Principles of Marketing 5e, © Pearson Education 2008

Customer value-building approaches Financial benefits Social benefits Structural ties Principles of Marketing 5e, © Pearson Education 2008

Steps in establishing a relationship-marketing programme Identify the key customers meriting relationship management Assign a skilled relationship manager to each key customer Develop a clear job description for relationship managers Have each relationship manager develop annual and long-range customer relationship plans Appoint an overall manager to supervise the relationship managers Principles of Marketing 5e, © Pearson Education 2008

Selective relationship management Relating with more carefully selected customers Relating for the long term Relating directly Principles of Marketing 5e, © Pearson Education 2008

What is customer relationship management? Customer relationship management involves managing detailed information about individual customers and carefully manage customer touch points. Principles of Marketing 5e, © Pearson Education 2008

Touch points Customer purchases Sales force contacts Service and support calls Website visits Satisfaction surveys Credit/payment interactions Market research studies Other contacts between customer and company Principles of Marketing 5e, © Pearson Education 2008

Ping’s CRM initiative Ping relies on a data warehouse with customer- specific data about every golf club it has manufactured for the past 15 years Principles of Marketing 5e, © Pearson Education 2008

Figure 8.6 Comparing customer relationship revenues with relationship costs Principles of Marketing 5e, © Pearson Education 2008

Figure 8.7 The 8 Cs competitive domain Principles of Marketing 5e, © Pearson Education 2008

Discussing the concepts (1) Describe a situation in which you became a ‘lost customer’. Did you drop the purchase because of poor product quality or both? What should the firm do to ‘recapture’ lost customers? How might total quality be managed for the following products? Packaged foods Restaurant meal Public utility Family holiday University education Principles of Marketing 5e, © Pearson Education 2008

Discussing the concepts (2) Recall a purchase experience in which the sales assistant or some other representative of an organisation went beyond the normal effort to produce the utmost in service quality. What impact did the noticeable effort have on the purchase outcome? Principles of Marketing 5e, © Pearson Education 2008

Discussing the concepts (3) How does the meaning of service quality differ between items bought online, through a call center or at a traditional retail store? Principles of Marketing 5e, © Pearson Education 2008