Transcript Major Influences on Business Buying Behavior

Customer Behavior and Customer
Relationship Management
Who are we in business for?
Key Issues
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Different customer strategies
Consumer behavior
Business behavior
Customer retention (i.e., the focus of
customer relationship management, CRM)
Customer Strategies
1. Get more customers (market share)
– Acquire profitable ones
2. Keep customers longer
– Retain them
– Reduces costs of serving them
3. Grow current customers into bigger customers (share of
customer)
– Up-selling additional products for one problem
– Cross-selling other products for different problems
– Give them benefits for referrals
4. “Fire” unprofitable customers
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1-4 Frequently stated as an OBJECTIVE in the marketing
planning process
To fulfill customer objectives….
have to understand customers
What do customers expect?
• What are they?
• Do we meet them?
• Expectancy-Disconfirmation Model
• Applies to organizational and consumer
markets
Discuss
• 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.
Satisfaction Metrics
• Where Satisfaction = Expectations – Perceptions:
• Financial Performance
• Marketing Performance
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Customer Retention rates
Customer Attrition Rate
Customer Recovery Rate
Referrals
Viral marketing (what they say on the Internet)
Importance Performance Evaluations
How do consumers decide what to buy?
Key issues: Know who is involved and how to reach them at various
stages of the process.
2003 Prenticehall Kotler slides
What Influences Consumer Purchasing?
• External Influences
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Culture
Social class
Family
Peers
Situational Factors
• Internal Influences
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Economic Resources
Time
Cognitive Resources
Motivation and needs
Lifestyles
Expectations
Motivations and Needs
• Task motives
– Functional, get the job done
• Experiential motives
– Have fun while doing the activity
• Consider strategies used to create loyalty on the Internet
– Personalization
– Community building
• How effective would these be given the different consumer
motives above?
Model of Customer Participation
Antecedents
Consequences
Affective
Personalization
Brand Loyalty
Cognitive
Community
Behavioral
>Task vs. Experiential
Orientation
>Other Personal Factors
Holland and Baker 2001
Lifestyles
VALS 2
Classification
System
Based on the idea
that lifestyle
predicts
consumer
behaviors
2003 Prenticehall Kotler slide
Organizational Buying
• Compared to consumer markets, business
markets have:
– Fewer buyers
– Larger buyers
– Geographically concentrated buyers
– Closer relationships with suppliers/customers
Purchasing/Procurement Process
• Eight Buyphases of Industrial Buying
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Problem Recognition
General Need Description
Product Specification
Supplier Search
Proposal Solicitation
Supplier Selection
Order Routine-Specification
Performance Review
Key issues: Know who is involved and how to reach them at various
stages of the process.
Influences on Business Buyers
Figure 7-1:
Major
Influences
on Business
Buying
Behavior
2003 Prenticehall Kotler slide
Influences on Business Buyers
Plastics.com
offers buyers
and sellers of
plastics a
marketplace
plus news and
information
2003 Prenticehall Kotler slide
Recall the Characteristics of
Organizational Buying
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Fluctuating demand
Inelastic demand
Leasing
Professional purchasing
Multiple buying influences
Direct purchasing
Reciprocity
Derived demand
Multiple sales calls
Organizational Buying
• The Business Market Includes For-Profit
Companies and Two Specialized Groups:
– The institutional market
• Schools, hospitals, prisons, etc. with a “captive”
audience
• Cost and quality standards drive purchases
– The government market
• Bidding process awards contracts
Discussion
Your firm is interested in targeting the
government market.
How might this decision influence the marketing
mix?
How is selling to the government market
different from selling to other business
markets? How do needs differ?
Organizational Buying
Fedmarket
assists those
businesses
seeking to do
business with
the federal
government.
2003 Prenticehall Kotler slide
Customer Retention Focus
• Recognizes leaky bucket*
• Recognizes polygamous loyalty
• Directs marketing efforts to current customers
(relationships)
• Opposite of conquest marketing
– Always offering discounts to get new customers
Discuss
• Businesses commonly lose 15-20% of their
customers each year
• For what reasons do people defect?
Types of defectors
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Price
Product
Service
Market
Technological
Organizational
Snob
Benefits of C.R. from the Firm’s
Perspective
• Profits derived from sales
– Reducing defections by 5% can boost profits 2585%
• Profits from reduced operating costs
– It is 3-5 times cheaper to keep a customer than
recruit a new one
• Profits from referrals
– Positive effects of W.O.M.
Discuss
What is the 20/80/30 Rule? Why is it
important to remember this rule?
The 20-80-30 Rule
• 20% of your customers
• Generate 80% of your profit
• Half of your profit is lost serving the bottom
30% of your customer base
Benefits of C.R. from the Customer’s
Perspective
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Reduces risks
Social benefits
Contributes to a sense of well-being
Efficiencies in ordering
Sharing of information and transparency of
processes
Increasing Importance of Customer
Retention
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Markets are stagnant
Increase in competition
Rising costs of marketing
Changes within the channels of distribution
Customers have changed
Also consider….
• If a firm’s goal is 15% growth:
– At 95% retention – customer acquisition rate must
be 20%
– At 80% retention – customer acquisition rate must
be 35%
Defection Management Process
• Communicate to employees the importance of
retaining customers
• Train employees
• Monitor the service delivery process
• Tie employee incentives to defection rates
• Consider creating switching barriers
• Be there when needed most (e.g., State Farm)
Creating Strong Customer Bonds
Keys to Success
 Adding Financial
Benefits
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Frequency programs
Club memberships
Examples?
 Adding Structural Ties
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 Adding Social Benefits
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Personalize customer
relationships
Examples?
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Create long-term
contracts
Charge less for ongoing
purchases
Link product to long-term
service
Examples?
Creating Strong Customer Bonds
The U.S. Harley
Davidson site
promotes the
benefits of
joining H.O.G.
(Harley Owners
Group)
Prenticehall 2003 Kotler slide
Other Retention Programs
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Cause marketing
Data-base targeting/marketing
Aftermarketing
Service guarantees
Cause Marketing
Yoplait is Committed to Fighting Breast Cancer!
For more than ten years, Yoplait has been
committed to breast cancer and women’s wellness
programs:
•2003 marks the sixth anniversary of Save Lids to
Save Lives, its signature pink-lid promotion
•Yoplait has been the National Series Presenting
Sponsor of the Susan G. Komen Breast Cancer
Foundation’s Race for the Cure since 2001
•This year Yoplait has partnered with SELF
magazine and the Komen Foundation to create
“Yoplait 25 Champions in the fight against breast
cancer,” a search to uncover 25 ordinary people
doing extraordinary things in the fight against
breast cancer
http://www.yoplaitusa.com/breastcancer_commitment.aspx
Cause Marketing
When Target first opened, in 1962, it made a
strong commitment to support and empower
the communities its stores serve. Target
follows up that commitment by giving back
over $2 million each week to neighborhoods,
programs and schools across the country.
Target has store-based grant making that
supports projects promoting the arts,
education, and peace at home. Why?
Because there is no better place to see a
masterpiece than reflected in the eyes of a
child; there is no greater return on investment
than seeing a child excel; and because a
happy home encourages a child to dream and
achieve.
http://target.com/common/page.jhtml?content=target%5fcg%5findex
Database Targeting
• Learns your preferences and caters to those
preferences……
– CDNow.com
– Amazon.com
– Hilton
– Coldwater Creek
Aftermarketing
• Follow-up after the sale…
– Chevy Venture Warner Brothers Version
• DVD’s, “soccer” blanket, bag, toys for kids, gift
certificate to buy off of WarnerBrothers.com, service
coupons
– Piano
• Metronome
Service Guarantees
Time Warner Cable – New York Capital Region
•If you are not satisfied with our programming or service during your first
month of cable service, upon request we will disconnect your service
and promptly refund the monthly service fee.
•We will be on time for your installation appointment or your installation
is free.
•We will be on time for your service appointment or you will receive a
$20 credit on your next bill.
•We will correct any billing problem the first time you call or you will
receive a $20 credit on your next bill.
We will credit your account for major service interruptions in excess of four hours.
(New York state requires cable operators to issue service credits for outages of four
hours or more consistent with Section 590.65 of NYS Public Service Commission
Cable TV rules and regulations.)
Posted Nov. 5, 2002
http://www.twalbany.com/customercare/serviceguarantee.php
Retention Programs are Worthwhile
When:
 They neutralize the competition
 Broaden availability of service (increase
market share)
 Directly enhance value
 But NOT when
 It’s a “me-too”
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Reference: Dowling and Uncles
Customer Profitability Analysis
Prenticehall 2003 Kotler slide
Marketing Opportunity Analysis –
Customer Analysis
Existing Customer Segment(s)
- customer needs
- demographic/psychographic profile
- existing marketing strategies
- significant opportunities
- major threats
- company resource match
Potential Customer Segment(s)
- potential needs
- demographic/psychographic profile
- significant opportunities
- major threats
- company resource match
This is part of a potential outline for a marketing plan.