MARKETING STRATEGY O.C. FERRELL • MICHAEL D. HARTLINE

1. MARKETING STRATEGYO.C. FERRELL • MICHAEL D. HARTLINE 5 Managing Customer Relationships

2. 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 Understanding Customer Behavior

3. The Consumer Buying Process Exhibit 5.1

4. Need: 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. Need Recognition

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

8. 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 Information Search(2 of 2)

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 theConsumer 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 BusinessBuying 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 AcquiringCustomers 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 Relationshipsin 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 CustomerRelationship Development Exhibit 5.4

21. “The Relationship People”

22. Developing Relationshipsin 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 theTotal 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 CustomerSatisfaction 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.