1 Chapter 18 Competitive Strategies: Attracting, Retaining, and Growing Customers

2 What is Relationship Marketing? Relationship Marketing is the Process of Creating, Maintaining, and Enhancing Strong, Value- Laden Relationships With Customers and Other Stakeholders.

3 Customer Relationship Marketing Why the new emphasis on retaining and growing customers? Changing demographics, more sophisticated competitors, and overcapacity in many industries means fewer customers. Costs five times as much to attract a new customer as to keep a current one satisfied. Losing a customer means losing the entire stream of purchases over a lifetime of patronage - the customer lifetime value.

4 Customer Delivered Value (Fig. 18.1)

5 Customer Satisfaction Expectations are Based on Customer’s Past Buying Experiences, the Opinions of Friends, & Marketer and Competitor Information and Promises. Product Falls Short of Expectations Customer is Dissatisfied Product Matches Expectations Customer is Satisfied Product Exceeds Expectations Customer is Highly Satisfied or Delighted!

6 Customer Satisfaction Today’s most successful companies are raising expectations – and delivering performance to match. These companies embrace total customer satisfaction. Firm that seeks total customer satisfaction doesn’t have to attempt maximum customer satisfaction. Purpose of marketing is to generate customer value profitably – offer customer satisfaction without sacrificing profits.

7 Customer Loyalty and Retention Highly satisfied (delighted) customers produce benefits: They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others. Tremendous difference between the loyalty of satisfied customers and completely satisfied customers. Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty.

8 Financial Benefits i.e. Frequency Marketing Programs Financial Benefits i.e. Frequency Marketing Programs Social Benefits i.e. Learning Individual Customer’s Needs & Wants Social Benefits i.e. Learning Individual Customer’s Needs & Wants Structural Ties i.e. Supply Customers With Special Equipment Structural Ties i.e. Supply Customers With Special Equipment Marketing Tools to Build Stronger Bonds With Consumers Building Lasting Customer Relationships

9 Customer-Product Profitability Analysis (Fig. 18.3)

10 Discussion Connections More than three decades ago, Peter Drucker observed that a company’s first task is “to create customers”. How to the following companies create customers: Intel, Delta Airlines, Your university or college, American Online

11 Customer Retailer Producer Vendor Raw Material Supplier Customer Value-Delivery Network Order Delivery

12 Total Quality Marketing Japan was the first country to award a national quality prize, the Deming prize. Mid-1980’s, the U.S. established the Malcolm Baldridge National Quality Award. Europe has developed the ISO 9000 which is an exacting set of quality standards. Total quality has become a truly global concern.

13 Total Quality Marketing Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Marketers play a major role in helping their companies define & deliver high quality products and services to target customers: Must correctly identify the customers’ needs and requirements and communicate this to product designers, Marketing must deliver each marketing activity to high quality standards.

14 Steps in Analyzing Competitors (Fig. 18.4) Identifying the company’s competitors Assessing competitor’s objectives, strategies, strengths and weaknesses, and reaction patterns Selecting which competitors to attack or avoid

15 Overall Cost Leadership Overall Cost Leadership Differentiation Focus Middle of the Road Middle of the Road Basic Competitive Strategies

16 Competitive Strategies: Value Disciplines Operational Excellence Customer Intimacy Product Leadership Companies Gain Leadership Positions by Delivering Superior Value to their Customers Through These Strategies:

17 Competitive Marketing Strategies Firms Competing in a Given Target Market Differ in their Objectives and Resources so May Choose the Following Forms:

18 Firm With the Largest Market Share Firm With the Largest Market Share Expand the Total Market Expand the Total Market Protecting Market Share Protecting Market Share Expanding Market Share Expanding Market Share Competitive Marketing Strategies Runner-Up Firms that Fight to Increase Market Share Runner-Up Firms that Fight to Increase Market Share Attack the Market Leader Attack the Market Leader Avoid the Market Leader Avoid the Market Leader Acquire Smaller Firms Acquire Smaller Firms Attack Other Firms Attack Other Firms

19 Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Follow Closely Follow Closely Follow at a Distance Follow at a Distance Competitive Marketing Strategies Firms that Serve Small Segments Not Pursued by Other Firms Firms that Serve Small Segments Not Pursued by Other Firms End-User Specialist End-User Specialist Customer-Size Specialist Customer-Size Specialist Service Specialist Service Specialist Quality- Price Specialist Quality- Price Specialist Geographic Market Specialist Geographic Market Specialist

20 Balancing Customer and Competitor Orientations Customer-Centered Competition -centered Product Orientation Competitor Orientation Customer Orientation Market Orientation Yes No YesNo

21 Review of Concept Connections Discuss customer value and satisfaction and how companies attract, retain, and grow profitable customers. Explain the roles of the company value chain, value- delivery network, and total quality in delivery of customer value and satisfaction. Discuss the need to understand competitors as well as customers through competitor analysis. Explain the fundamentals of competitive marketing strategies based on creating value for customers. Illustrate the need for balancing customer and competitor orientations in becoming a truly market- centered organization.