Understanding Business Customers

1. Understanding Business Customers

2. How Do You Measure Customer Loyalty? • Recency of purchase • Frequency of purchase • Amount of purchase • Referrals

3. A Satisfied Customer is Loyal Apostle 100% Zone of Affection Loyalty Zone of Indifference 40% Zone of Defection Terrorist Extremely Dissatisfied Slightly Dissatisfied Extremely Satisfied Satisfaction

4. Marketing Information Systems • 80% have a formal system for contacting customers on a regular basis • 11% know the lifetime value of their customers • 10% have an early warning system • 90% claimed to have a system in place to determine why a customer left

5. Customer Has a Problem:4 Possible Outcomes • Customer complains and is satisfied with the response • Customer complains and is mollified, but not completely satisfied with the response • Customer complains and is not satisfied with the response • Customer does not complain and remains dissatisfied

6. Reasons People Do Not Complain • It is not worth the trouble • They do not know where or how to complain • They do not believe the company will do anything

7. Who They Complain To • 80% complain to sales representatives • 75% are satisfied • 25% are not satisfied • Of those dissatisfied • one in five complain to middle management • of these, 80% are satisfied • Of the 20% still dissatisfied, 50% will complain to top management

8. Complaining Aspects • Voice • who does the customer complain to? • High = mgmt; medium = sales rep; low = no one • Exit • customer stops patronizing the marketer • High = never again; medium = never again, if at all possible; low = continues shopping as usual

9. Complaining Aspects • Retaliation • customer takes deliberate action designed to damage the marketer or hurt future business • High = physically damaging or going out of one’s way to communicate negative info to other customers • Medium = creates minor inconveniences and only tells a few people about his/her problem • Low = no retaliation (other than bad feelings)

10. The Product’s Role in Complaints • Small-ticket Items • 96% of those with a problem do not complain • 63% do NOT buy again • Large-ticket Items • 27% of those with a problem do not complain • 41% do NOT buy again

11. Impact of Complaint Handling

12. Customers at Risk Formula Overall % Experiencing a Problem X % Specific Problem Frequency X % Customers Not Likely to Repurchase = % of Customers at Risk

13. Customers At Risk Example

14. Process of a Customer-at-Risk Strategy • Remember that getting customers to complain without solving the problems will just lose you more customers. • Step One: Contact the customer after the sale • don’t just rely on those who complain • thank the customer & then ask about any problems experienced • Then ask if they will/will not purchase again or offer a referral

15. Process of a Customer-at-Risk Strategy • Step Two: Quantify those at risk • Step Three: Concentrate resources on correcting those problems with the highest probabilities of defectors. • Step Four: Let the customers know what you have done to correct the problem(s)

16. Segmentation & Positioning

17. What is a Market Segment? • Group of present or potential customers • With some common characteristic • Which is relevant in explaining/predicting response • To a supplier’s marketing stimuli

18. Why We Segment • IDs opportunities for new product development. • Assists in development of effective marketing programs. • Improves allocation of limited marketing resources.

19. Market Segmentation • Identify distinct groups of buyers who might require separate products and/or marketing mixes. • Profile these buyers: • Who are they? • What do they want to buy? • How do they want to buy? • When do they want to buy? • Where do they want to buy?

20. Target Marketing Sellers • distinguish major market segments, • target 1 or more, and • develop products & • marketing programs tailored to each segment.

21. Levels of Market Segmentation Mass Marketing Seller engages in mass production, mass distribution, and mass promotion of one product for all buyers. • Creates largest potential market • Leads to lowest costs • Leads to lower prices or higher margins • Proliferation of advertising media and distribution channels make it difficult

22. Levels of Market Segmentation Multi-Segment Marketing Seller recognizes that buyers differ in their wants, purchasing power, geographic locations, buying attitudes & buying habits. Major segments are identified & products and marketing mixes developed for each. • Product offer & prices can be fine-tuned • Choice of Dist./Promo. channels easier

23. Levels of Market Segmentation Sequential Segmentation Businesses may lack sufficient resources to pursue several attractive market segments. • Tackle most attractive segment first. • Using profits earned from this segment, then target the next most attractive segment. • Runs the risk of allowing potential competitors into a market.

24. Levels of Market Segmentation Niche Marketing • Niche customers have a distinct and complete set of needs. • They will pay a price premium to have their special needs met. • The niche is not likely to attract very many competitors. • Should have sufficient size, profit, and growth potential.

25. Levels of Market Segmentation Local Marketing Marketing programs tailored to needs & wants of local customer groups. • Pronounced regional differences often exist in communities’ demographics and lifestyles. • Local marketing can drive up manufacturing & marketing costs by reducing economies of scale.

26. Levels of Market Segmentation Individual Marketing The ultimate level of segmentation. Each customer is a “segment of one.” Self-Marketing Form of individual marketing. Customer takes more responsibility in determining which products/brands to buy Much less reliance upon salespeople.

27. Useful Market Segments Are: • Measurable Size, purchasing power, & characteristics • Substantial Large & profitable enough to serve • Accessible Can reach w/ distribution & promotion channels • Differentiable Managerially-significant from other segments • Actionable Can effectively attract & serve segment

28. Needs-Based Market Segmentation • First, group customers with like needs, and • Then discover which demographics, lifestyle forces, and usage behaviors make them distinct from customers with different needs. • Primary Benefit • Segments are created around specific customer needs. • Primary Disadvantage • Do not know (initially) who these customers are.

29. Positioning • Designing an offering & image in order to occupy a meaningful & distinct competitive position in the target customers’ minds.

30. Positioning & Differentiation • The main focus of positioning is differentiation. • Differentiation involves designing a set of meaningful differences to distinguish the company’s offering from competitors’ offerings.

31. The 5 Differentiation Dimensions • Product • Services • Personnel • Channel • Image

32. Product Differentiation Variables • Features • Characteristics that supplement the product’s basic function. • Performance Quality • The level at which the product’s primary characteristics operate. • Conformance Quality • Degree to which all the produced units are identical and meet the promised target specifications

33. Product Differentiation Variables • Durability • Measure of the product’s expected operating life under natural and/or stressful conditions. • Reliability • Measure of the probability that a product will not malfunction or fail within a specified time period. • Repairability • Ease of fixing a product that malfunctions or fails • Style • Product’s looks and feel to the buyer

34. Services Differentiation Variables • Ordering Ease • how easy it is for the customer to place an order • Delivery • how well the product is delivered to the customer • Installation • work done to make the product operational in its planned location

35. Services Differentiation Variables • Customer Training • training the customer to properly & efficiently use the product • Customer Consulting • data, information, systems, & advising services offered to buyers (at a price or free) • Maintenance & Repair • helping customers keep purchased products in good working order

36. Personnel Differentiation Variables • Competence • Skill & knowledge • Courtesy • Friendly, respectful • Credibility • Trustworthy • Reliability • Accuracy & consistency • Responsiveness • Timeliness • Communication

37. Channel Differentiation Variables • Coverage • Expertise • Performance

38. Image Differentiation Variables • Symbols • Written & Audiovisual Media • Atmosphere • Events

39. A Difference is Worthwhile as a Differentiation Variable if it is: Important Distinctive Superior Communicable Preemptive Affordable Profitable

41. Misusing Perceptual Maps for Positioning • One common error is to create a map of where you would like your products to be positioned or where they are positioned in your perception of the market • Then treat the resulting map strategically as if it is a map of the actualperceptions of the customers in the market.

42. Once You Have All the Maps to Visualize the Market… • Consider what position the firm presently owns. • Decide what position that firm wants to own. • Decide who the firm must outflank to gain that position. • Consider if the firm has the necessary resources and is committed to achieving the objective. • Determine if the firm can create a marketing mix to achieve the desired position.