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MARKETING MANAGEMENT. Adapting marketing for the new economy and Creating Customer Value, Satisfaction, and Loyalty. Kotler Keller. Major drivers of the new economy. Digitization and connectivity Disintermediation and re-intermediation Online middlemen
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MARKETING MANAGEMENT Adapting marketing for the new economy and Creating Customer Value, Satisfaction, and Loyalty Kotler Keller
Major drivers of the new economy • Digitization and connectivity • Disintermediation and re-intermediation • Online middlemen • Customization and customerization • Individually differentiated products vs. personalized products and channels • Industry convergence • Blurring of boundaries • Disney, Kodak etc
E-commerce • E-commerce vs. e-business • Online transactions • Four major internet domains • B2C: • B2B:web procurement • Which is greater? Forrester and Gartner • C2C: information creation • Chat-rooms, blogs, IM,WOM vs. WOW • C2B: • Email suggestions and complaints
E-commerce • business-to-employee (B2E) • business-to-government (B2G) • government-to-business (G2B) • government-to-government (G2G) • government-to-citizen (G2C)
Customer value and satisfaction • Customer perceived value • Difference between the prospective customer’s evaluation of all benefits and all the costs of an offering and the perceived alternatives. • Total customer value • Perceived monetary value of the bundles of economic, functional and psychological benefits customers expect from a given market offering.
Determinants of Customer-Delivered Value Total customer value Product value Personal value Customer- delivered value Total customer cost Monetary cost Energy cost
Customer value and satisfaction • The real price of anything is the toil and trouble of acquiring it • Satisfaction: • Feeling of pleasure or displeasure resulting from comparing a product’s performance with the expectations.
Loyalty A deeply held commitment to re-buy or re-patronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior.
Measuring Satisfaction Periodic Surveys Customer Loss Rate Mystery Shoppers Monitor competitive performance
Countrywide received the #1 customer satisfaction rating from J.D. Power and Associates
Product and Service Quality Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
Customer Life Time Value • The present value of the stream of future profits expected over the customer’s lifetime purchases.
Estimating Lifetime Value • Annual customer revenue: $5,000 • Average number of loyal years: 2 • Company profit margin: 10% • Customer lifetime value: $1,000
Successful Relationships Customer Value Customer Retention Loyal customers C.V = benefit/costs Customer Satisfaction Performance vs. Expectations
Customer Profitability-Focused Marketing Heavy users, not price sensitive, try new products Tier 1: Platinum Tier 2: Gold Tier 3: Iron Tier 4: Lead Heavy users but price sensitive Spending volume implies no special treatment Cost the company and generate –ve WOM
Framework for CRM Identify prospects and customers Differentiate customers by needs and value to company Interact to improve knowledge Customize for each customer
CRM Strategies Reduce the rate of defection Terminate low-profit customers Focus more effort on high-profit customers
Mass Average customer Customer anonymity Standard product Mass production Mass distribution Mass advertising One-way message Economies of scale One-to-One Individual customer Customer profile Customized market offering Customized production Economies of scope Mass vs. One-to-One Marketing
Customer Retention • Acquisition of customers can cost 5 times more than retaining current customers. • The average company loses 10% of its customers each year. • A 5% reduction to the customer defection rate can increase profits by 25% to 85%. • The customer profit rate increases over the life of a retained customer.
The Customer-Development Process Suspects Prospects Disqualified First-time customers Repeat customers Clients Members Partners Ex-customers
Levels of investment in Customer Relationship Building Partnership: work contin. with large customers Proactive: regular contact with customer about product offerings Accountable: post-sale service and suggestions Reactive: sells and encourages feedback Basic: salesperson simply sells
Reducing Customer Defection • Define and measure retention rate. • Distinguish causes of customer attrition. • Estimate profit loss associated with loss of customers. • Assess cost to reduce defection rate. • Gather customer feedback.
Cost of Lost Customer • A company has 64k accounts • It lost 5% of its accounts this year due to poor service. Loss is 3,200 accts (.05* 64k) • Avg. lost acct means a $40k loss in revenue. Total loss in revenue is $128 million (3,200*40k) • If profit margin of company is 10% the total loss for 2009 is (.10*$128 m)=$12.8 million.
Total Quality Management TQM is an organization-wide approach to continuously improving the quality of all the organization’s processes, products, and services.
