Markets, Customers, & Satisfaction

1. Markets, Customers, & Satisfaction

2. Market Identification • Total group of potential buyers – where you get your customers • Who is the customer? • Business markets • Consumer markets • Direct vs indirect • Problem solving situation • Stages: need recognition=>set of potential solutions=>selection and procurement of solution • Complexity • Straight rebuy, modified rebuy, new buy • Routinized response, limited problem solving, extended problem solving • Roles: gatekeeper, initiator/user, influencer, decision maker, buyer

3. Developing Markets • Developed vs Undeveloped • The presence of primary demand vs selective demand • Advantages of developed? Undeveloped? • Disadvantages of developed? Undeveloped? • Diffusion levels in markets • Innovators, early adopters, early majority, late majority, laggards

4. Market Identification – levels of Need & satisfaction • Need satisfied by product benefits = satisfaction occurs at different levels • Generic level • Markets where needs are at the most general level • General product classes satisfy the need/ benefits delivered at the most basic general level • The need for transportation; food; greeting • Easy to overlook, difficult to analyze, yet can be critical • Product-type level • More detailed level of needs & more specific set of benefits sought • Group of products seen as satisfying need in a particular way • Various product types are the choice • Nested within generic need -e.g., after food, need is for snack, but is it for a hot or cold snack • Brand level • Most refined level of needs; most specific set of benefits at issue • Within closely defined product classes • Wants are for unique and specific features and forms

5. Markets & Market potential • Delineation – who is in your market; effective demand • Forecasts • Sales potential vs sales forecast • Role of forecast – proforma analysis; resource allocation; figuring breakeven; contracts with partners • Demand characteristics • Usage cycles • Repeat purchase • Stability • Technology churn/product churn • General duration (e.g., “fashion” implications)

6. Markets and Market Potential • Existing – current demand • Potential – Future demand • Mature markets (i.e., developed): existing = potential (i.e. limited future demand); firm growth? • Market development level = Current/Maximum potential • Indicates how much room is left for growth

7. Market identification: Segmentation • Breaking market into subcomponents based on some meaningful characteristic • Segments are alike within & different between • Maximize the ability to identify and describe markets • Each addressed with a different marketing program • Effective and efficient • allows more precision in defining markets • more precision in serving markets • helps understand and formulate value proposition and its delivery • allows optimization of resources -- focuses resources

8. Market identification: Targeting • Picking your spot(s) - select segment(s) where you will focus • Principle of selectivity and concentration • Avoids spreading resource too thin (dissipation of effects) • Involves concession -- giving up some segments • Four basic approaches • Concentrated marketing • Differentiated marketing • Incremental marketing • Full market coverage • A target of 1? • Selecting a segment to target • Ability to serve • Size and growth • Presence of competitors • Competitive threats • Buyer power • Cost structures/profit potential • Ethical considerations

9. Maintaining & Increasing Customer Satisfaction • Direct & multiplicative impact on profits • Satisfied customers buy more and buy more profitable products • Satisfied customers stay with you longer; you retain them – buy more over time • Satisfaction customers can be “developed” – you can expand business from the customer, get them to trade-up, buy more expensive products, wider array of your products. • Cost benefits - costs of retention substantially lower than cost of acquiring new customers • Positive word of mouth – satisfied customers say nice things about you and actually help you attract new future customers

10. Dissatisfaction • Resilience and durability in customer attachment to you? • How many disappointments, how extreme the negative disconfirmation before dissatisfaction brings consequences? • Attrition – fall off in customer buying • Defection – customers “vote with their feet,” they leave you maybe go to your competitor? • Further catastrophic effects – the shadow effects • Negative word of mouth – they say bad things about you and cause you to lose other customers or not gain new ones • Retaliation – more broad-based negative actions against you

11. Dissatisfaction – what to do? • Signal the firm’s responsiveness (strategically key) • Corrective action – when and where it is needed – what corrective programs should be – what elements of the marketing mix are involved • Which customers to retain & develop which to “ignore” • Cost trade-offs for retaining dissatisfied customers or increasing satisfaction

12. Satisfaction is worth it! • Benefits of satisfied customers underestimated • Press for productivity undermines customer satisfaction • Productivity issues must involve developing and maintaining satisfied customers • Satisfaction is productive • Formally and routinely measure and track customer satisfaction • Cost of unhappy customers underestimated • Dissatisfied customers exact a high price • Can track it and understand patterns or trends • Learning re dissatisfaction – critically important market knowledge

13. Customer economics • All customers are not created equally; not all are of equal economic value to you • Typical: Vast amount of profit from about a third, break even on a third, losses on a third • OR another depiction... Highly unprofitable Highly profitable Moderately profitable Moderately unprofitable

14. Customer economics • Customer loyalty good customer profitable customer • Issue: how to change this distribution so that more customers are more profitable • Cull out less desirable customers? • Increase investment in customer development to get a larger “share of wallet” • Decrease investment in low profit customers; decrease costs to improve profitability.

15. Customer Equity • The firm’s customers produce a revenue stream over time and it can contract or expand during this time • Customer equity = this total revenue stream less costs of acquisition and retention • Customer equity is the sum of the discounted lifetime values (CLV) of all the firm’s customers • Customer equity is said to be the basis of shareholder equity

16. Marketing Performance Metrics Related to Customer Economics and Customer Equity • Customer Retention (CR) & Customer Life Expectancy (CLE) – the more you can retain, the longer they will stay with you. • Customer Lifetime Value (CLV) – the net present value of the customer cash flow at a given retention rate. • Customer Loyalty (CLI) • Customer Satisfaction X • Customer Retention X • Customer Recommendation