1Erdal Nebol PART 3 CUSTOMER ACCOMMODATION & MARKET DISTRIBUTION

2Erdal Nebol 3-1 Customers 1. Direct Customers (End Users): Buy to use or consume 1.1. Individual Customers (consumers) 1.1. Individual Customers (consumers) Buy to satisfy their own needs and requirements Buy to satisfy their own needs and requirements 1.2. Organizational End Users: 1.2. Organizational End Users: Buy to make product or services Buy to make product or services 2. Intermediary Customers (Traders): Buy to resale Direct customers are target customers Direct customers are target customers Intermediary customers are business partners Intermediary customers are business partners

3Erdal Nebol 3-2 Historical Stages of Business Philosophies 1. Production period (focused on producing) 2. Sales period (focused on selling) 3. Marketing period (focused on customers) 4. ???

4Erdal Nebol 3-3 Customer Focused Marketing 1. Customers’ needs and requirements are more basic than products and services 2. Different customers have different needs and requirements 3. Products and services are meaningful only if they are available and positioned in customer’s perspectives 4. Volume is secondary to profit

5Erdal Nebol 3-4 Transactional vs Relationship Marketing Transctional Marketing focus on obtaining successful exchanges to increase revenue or profit. Relationship Marketing focuses on development of long-term relationship with key supply chain partners (end users, intermediary customers and suppliers)

6Erdal Nebol 3-5 Supply Chain Service Outputs 1. Spatial convenience: Brings the products closer to the customers 2. Lot size: Breaks the larger quantities of production into smaller customer quantities 3. Waiting Time: Keeps the previously made product until the time of customers’ requests 4. Product variety and assortment

7Erdal Nebol 3-6 Customer Service Levels 1 Customer Service (Basic level) Meeting customer’s requirements Meeting customer’s requirements 2. Customer Satisfaction Meeting or exceeding customer’s expectations Meeting or exceeding customer’s expectations 3. Customer Success Meeting customer’s real needs Meeting customer’s real needs

8Erdal Nebol 3-7 Customer Service Meeting customer’s requirements with 7 rights Right product Right product Right quantity Right quantity Right time Right time Right place Right place Right condition Right condition Right information Right information Right price (invoice) Right price (invoice)

9Erdal Nebol 3-8 Developing Service Strategy 1. Availability - Stock-out frequency - Stock-out frequency - Fill rate - Fill rate - Order shipped complete - Order shipped complete 2. Operational performance - Speed - Speed - Consistency Service Mix - Consistency Service Mix - Flexibility - Flexibility - Malfunction recovery - Malfunction recovery 3. Service reliability Degree of performing 7 rights Degree of performing 7 rights

10Erdal Nebol 3-9 Setting Performance Targets 1.Be close to 100%, if not, 2.Exceed industry standards, if not, 3.Exceed competitord, if not,

11Erdal Nebol 3-10 The Perfect Order Delivering the desired assortment and quality of products to correct locations on time, damage-free and correctly invoiced. The ultimate in logistics service is to do everything right and to do it right the first time. 2 methods to achieve; TQM TQM Six- Sigma (0.97 x 0.97 x 0.97 x 0.97 = 88.5 %) Six- Sigma (0.97 x 0.97 x 0.97 x 0.97 = 88.5 %)

12Erdal Nebol 3-11 Typical Failures Wrong quantities (over or short) Wrong items Late or early delivery Missing or wrong information Wrong transportation mode Wrong destination Incorrect documentation Damaged items Incorrect loading or sequencing of shipment Incorrect payment processing

13Erdal Nebol 3-12 Customer Sstisfaction Meeting or exceeding customer’s expectations Profiles of Expectations: 1. Reliability : Performing as promised by the supplier 2. Responsiveness: Providing prompt service 3. Access: Ease of contact to the supplier 4. Communication: Proactively keeping the customer informed 5. Creditability: If the communication from supplier is believable 6. Security: Feeling of risk in doing business with the supplier 7. Competency: Knowledge and ability of the supplier 8. Tangibles: Expectations regarding to the physical appearance 9. Knowing the customer

14Erdal Nebol 3-13 Satisfaction & Quality Model Word of Mouth Communications Requirements Actual Performance Management Perceptions of Expectations Performance Standards Past Experience Expectations Perceived Performance External Communications SELLER CUSTOMER GAP 6 GAP 5 GAP 4 GAP 3 GAP 2 GAP 1

15Erdal Nebol 3-14 Customer Satisfaction Very Satisfied Satisfied Very SatisfiedSatisfied Dissatisfied LO HI MEDHI LO MED Expectation Performance

16Erdal Nebol 3-15 Why Customer Satisfaction Is Not Sufficient 1. It focuses on customer’s expectations, Not their real needs 2. Considerable research suggest that satisfied customers still are likely to defect 3. There is a tendency by companies to treat all customers as being equal and identical

17Erdal Nebol 3-16 Customer Success Meeting customer’s real needs Our Customer’s Customer Our Customer Us How can we help our customers win? This is not our problem (WRONG) We’ll do whatever they tell us they want

18Erdal Nebol 3-17 Achieving Customer Success  Not all customers have the same requirements  Understand your customers’ real requirements (needs)  Know your customers’ processes  How can your capabilities enhance customers’ performance?  New performance standards

19Erdal Nebol 3-18 Choosing Customer Accommodation Strategy Product Category Customer Category W X Y Z A Success Success Satisfaction Basic A Success Success Satisfaction Basic B Success Satisfaction Satisfaction Basic B Success Satisfaction Satisfaction Basic C Satisfaction Basic Basic Basic C Satisfaction Basic Basic Basic D Basic Basic Basic Basic D Basic Basic Basic Basic

20Erdal Nebol 3-19 Market Distribution Functions Group Function Performers Exchange Buying - Selling Traders Logistics Transportation Carriers Storage Warehouses Facilitation Financing Banks Standardization Standards Inst. Risk Insurances Market Information Agents

21Erdal Nebol 3-20 Manufacturer Consumer/ End user Retailer/ Dealer Wholesaler/ Distributor DirectIndirect Agents/ Brokers Typical Channel Structure

22Erdal Nebol 3-21 Channel Mapping A channel map is a picture of current channels used to reach all end user segments. Completing a channel map requires: 1. identification of all end user segments served. 2. isolating the paths used to reach each segment. 3. specifying the functions/processes performed in each path. 4. specifying how the functions/processes are performed by the firm and external organizations. 5. specifying the economics at each stage in each path (volumes, revenues, margins, discounts, costs)

23Erdal Nebol 3-22 Classification Of Channel Relationships Dependency Single Transaction ConventionalAdministered Partnerships and Alliances Contractual Joint Venture