1. MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE5
Managing Customer
Relationships

2. Understanding Customer Behavior
The Consumer Buying Process:
Depicts the possible range of activities that may occur in making purchase decisions
Involves considering which product to buy AND considering where to buy it
Choice of a suitable merchant may take precedence over the choice of a specific product

3. The Consumer Buying Process
Exhibit 5.1

4. Need Recognition Need: Want: Demand:
Occurs when the consumer’s current level of satisfaction does not equal their desired level of satisfaction.
Want:
A consumer’s desire for a specific product that will satisfy the need.
Demand:
When the want for a specific product is backed up by the customer’s ability and willingness to pay for the product.

5. Targeting Consumer Wants - Sportiness

6. Discussion Question
Many people criticize marketing as being manipulative based on the argument that marketing activities create needs where none previously existed. Marketers that are often implicated include the makers of SUVs, tobacco products, diet programs, exercise equipment, and luxury products. Also, any marketer that targets children or the elderly is often seen as manipulative. Are consumers being manipulated into believing that they need certain products, or are marketers creating products that fulfill previously unmet needs? Explain.

7. Information Search (1 of 2)
Marketing stimuli can stimulate a desire for information:
Passive Information Search
Active Information Search
Sources of information:
Internal Sources
Personal Sources
External Sources

8. Information Search (2 of 2)
Time, effort and expense dedicated to information search depends on:
Degree of risk involved in the purchase
Financial risk
Social risk
Emotional risk
Personal risk
Amount of expertise with the product category
Actual cost of the search
Evoked set:
A narrowed down set of alternatives that the customer is considering

9. Evaluation of Alternatives
Customers evaluate products as bundles of attributes
Brand attributes
Product features
Aesthetic attributes
Price
Customers place different levels of importance on attributes
Important considerations in the evaluation stage:
Products must be in the evoked set
Consumers’ choice criteria must be understood
Marketing programs must be designed to influence consumers’ opinions about product or brand image

10. Purchase Decision
Purchase intention and the act of buying are distinct concepts
Potential intervening factors between intention and buying (car example):
Unforeseen circumstances
Angered by the salesperson or sales manager
Unable to obtain financing
Customer changes mind
Key issues in the purchase decision stage:
Product availability
Possession utility

11. Postpurchase Evaluation
Four possible outcomes in the postpurchase stage:
(1) Delight
(2) Satisfaction
(3) Dissatisfaction
(4) Cognitive Dissonance
Cognitive dissonance is more likely to occur when:
Dollar value of the purchase increases
Opportunity cost of rejected alternatives is high
Purchase decision is very involving or emotional
Firm’s ability to manage dissatisfaction and cognitive dissonance is:
A key to creating customer satisfaction
A major influence on word-of-mouth communication

12. Factors Affecting the Consumer Buying Process
Decision-Making Complexity
High/Low Complexity
Individual Differences
Demographics, perceptions, motives, interests, attitudes, opinions, lifestyles, etc.
Social Influences
Culture, subculture, social class, reference groups, opinion leaders, etc.
Situational Influences

13. Common Situational Influences
Exhibit 5.2

14. Understanding Business Buying Behavior
Four types of Business Markets:
Producer markets (a.k.a. commercial markets)
Reseller markets
Government markets
Institutional markets
Unique Characteristics of Business Markets
The Buying Center
Hard and Soft Costs
Reciprocity
Mutual Dependence

15. The Business Buying Process
(1) Problem Recognition
(2) Develop Product Specifications
(3) Vendor Identification and Qualification
(4) Solicitation of Proposals or Bids
(5) Vendor Selection
(6) Order Processing
(7) Vendor Performance Review

16. Managing Customer Relationships
Customer Relationship Management (CRM):
“A holistic process of identifying, attracting, differentiating, and retaining customers.”
CRM Stakeholders:
Employees
Supply Chain Partners
Lateral Partners
Customers

17. Strategic Shift from Acquiring Customers to Maintaining Clients
Exhibit 5.3

18. Discussion Question
One of the common uses of CRM in consumer markets is to rank customers on profitability or lifetime value measures. Highly profitable customers get special attention, while unprofitable customers get poor service or often “fired.” What are the ethical and social issues involved in these practices? Could CRM be misused? How and why?

19. Developing Relationships in Consumer Markets
Increase share of customer rather than market share
Serve current customers rather than focus on acquiring new customers
The 80/20 Rule:
20% of the customers provide 80% of the profit

20. Stages of Customer Relationship Development
Exhibit 5.4

21. “The Relationship People”

22. Developing Relationships in Business Markets
Relationships must be built on win-win strategies
Changes in business relationships:
A change in buyers’ and sellers’ roles
An increase in sole sourcing
An increase in global sourcing
An increase in team-based buying decisions
An increase in productivity through better integration

23. Quality and Value: (1 of 2) The Keys to Developing Customer Relationships
Understanding the Role of Quality
The core product is not enough
Supplemental products are critical
Delivering Superior Quality (four issues)
Understand customers’ expectations, needs, and wants
Translate customer research into specifications for quality
Deliver on specifications
Promise only what can be delivered

24. Components of the Total Product Offering
Exhibit 5.5

25. Marketing Strategy in Action
This Mercedes ad illustrates the power of the Mercedes brand in making its products instant classics.
What other name brands can you think of that exude quality? What separates these firms from other companies making similar products?

26. Quality and Value: (2 of 2) The Keys to Developing Customer Relationships
Understanding the Role of Value
A simple formula for value:
A more useful formula for value:
Core Product, Supplemental Product, and Experiential Quality
Monetary and Nonmonetary Costs
Competing on Value

27. Customer Satisfaction: Retaining Customers Over the Long Term
Satisfaction vs. Quality vs. Value
Expectations
Customer Satisfaction and Customer Retention
Understand what can go wrong
Focus on controllable issues
Manage customer expectations
Offer satisfaction guarantees
Make it easy for customers to complain
Create loyalty programs
Make customer satisfaction measurement an ongoing priority

28. Examples of Customer Satisfaction Guarantees
Exhibit 5.7

29. Customer Satisfaction Metrics
Lifetime Value of a Customer (LTV)
Average Order Value (AOV)
Customer Acquisition/Retention Costs
Customer Conversion Rate
Customer Retention Rate
Customer Attrition Rate
Customer Recovery Rate
Referrals
Viral Marketing

30. Discussion Question
Why do you think many firms do such a poor job of understanding the needs, wants, and expectations of their customers? Do they buy into the “better mousetrap” philosophy and believe that quality is the only necessary requirement of maintaining customer relationships? Explain.