Transcript Chapter 12

marketing strategy
O. C. Ferrell
Michael D. Hartline
Developing and
Maintaining LongTerm Customer
Relationships
C H A P T E R
The “Right” Marketing Strategy
• Is not about creating a large number of transactions
• Is one that attracts and retains customers over the longterm
• Considers customer needs, wants, and expectations
• Develops long-term relationships
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Customer Relationship
Management (CRM)
• Defined as a business philosophy aimed at defining and
increasing customer value in ways that motivate
customers to remain loyal.
• About retaining the “right” customers
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CRM Involves:
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Customers
Employees
Supply Chain Partners
External Stakeholders
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Strategic Shift from Acquiring
Customers to Maintaining Clients
Exhibit 12.1
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Developing Relationships
in Consumer Markets
• A long-term process
• Goal is to move consumers through levels of increasing
relationship intensity
• Attempts to create true believers and sponsors of the
company
• Recognizes that not all customers have equal value to the
firm
• Involves determining the lifetime value (LTV) of
customers
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Discussion Question
• A common use of customer relationship
management (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 are often “fired.” What are
the ethical and social issues involved in these
practices? Could CRM be misused? How and
why?
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Stages of Customer
Relationship Development
Exhibit 12.2
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Strategies for Enhancing and
Maintaining Customer Relationships
• Financial Incentives
– Using financial incentives to increase customer loyalty
• Social Bonding
– Using social and psychological bonds to maintain a clientele
• Enhanced Customization
– Using intimate customer knowledge to provide one-to-one solutions or mass
customization
• Structural Bonding
– Creating customized product offerings that create a unique delivery system
for each client
From Exhibit 12.3
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Developing Relationships
in Business Markets
• Like CRM in consumer markets, involves moving
buyers through increasing levels of relationship intensity
• Based more on creating structural bonds
• Creates win-win scenarios
• Is more involving and complex than CRM in consumer
markets
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Recent Changes
in Business Relationships
• A change in buyers’ and sellers’ roles
• An increase in sole sourcing
• An increase in team-based buying decisions
• An increase in productivity through better integration
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Understanding the Role of Quality
• The degree of superiority of a firm’s goods or services
• The Core Product
– Satisfies the basic customer need
– Core product in services (people, processes, and physical
evidence)
• Supplemental Products
– Add value to the core product
• Symbolic and Experiential Attributes
– Usually based on image, prestige, or brand
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Components of the
Total Product Offering
Exhibit 12.4
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Delivering Superior Quality
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Understand Customers’ Expectations
Translate Expectations into Quality Standards
Uphold Quality Standards
Don’t Overpromise
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Marketing Strategy in Action
• In the face of high quality competition from Japanese
automobile manufacturers, Ford adopted a strategy focused on
quality.
• Has that strategy been successful in convincing you of the
quality of Ford’s products? How would you compare Ford in
quality to Toyota or Honda?
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Understanding the Role of Value
• A simple formula for value:
• A more useful formula for value:
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Connections Between Value
and the Marketing Program
Exhibit 12.5
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Customer Satisfaction:
The Key to Customer Retention
• Understanding Customer Expectations
– Ranges of Customer Expectations
– The Zone of Tolerance
• Customer Delight
• Customer Satisfaction
• Customer Dissatisfaction
– Managing Customer Expectations
• Satisfaction vs. Quality vs. Value
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Range of Customer Expectations
Exhibit 12.6
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The Zone of Tolerance
Exhibit 12.7
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Discussion Question
• Of the two types of customer expectations,
adequate performance expectations fluctuate the
most. Describe situations that might cause
adequate expectations to increase, thereby
narrowing the width of the zone of tolerance.
What might a firm do in these situations to
achieve its satisfaction targets?
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Customer Satisfaction
and Customer Retention
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Understand what can go wrong
Focus on controllable issues
Manage customer expectations
Offer satisfaction guarantees
Make it easy for customers to complain
Create relationship programs
Make customer satisfaction measurement an ongoing
priority
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Examples of Satisfaction Guarantees
Exhibit 12.8
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Customer Satisfaction
Measurement
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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
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Measuring Expectations and Performance
(Hypothetical Health Club)
Exhibit 12.9
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Discussion Question
• Given the commoditized nature of many markets
today, does customer relationship management –
and its associated focus on quality, value, and
satisfaction – make sense? If price is the only
true means of differentiation in a commoditized
market, why should a firm care about quality?
Explain.
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Internal Efficiency vs. Customer Service
• Northwest Airlines has damaged its relationships with
customers through shortsighted attempts to reduce
costs (e.g., cutting magazines, pillows, pretzels, etc.).
• What strategic moves can NWA make to fight off
low-cost carriers?
Beyond the Pages 12.2
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