bmgt 411 chapter_4
DESCRIPTION
bmgt 411 marketing management fall 2014 chris lovettTRANSCRIPT
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BMGT 411Chapter 4: Creating Long Term Loyalty Relationships
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Moving to Customer Centric Marketing
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Apple
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Kohl’s
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Walmart
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Zappos.com
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Building Customer Value and Satisfaction
• Customer perceived value (CPV)—the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives.
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Determinants of Customer Perceived Value (CPV)
• Total customer value
• Product value
• Services value
• Personnel value
• Image value
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• Total customer cost
• Monetary cost
• Time cost
• Energy cost
• Psychic cost
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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
• What product are you loyal to?
• Why?
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New Balance 990
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Satisfaction
• A person’s feelings of pleasure or disappointment that result from comparing a product’s perceived performance (or outcome) to expectations.
• What products or services exceed your expectations?
• What would you do if a product or service did not meet your expectations?
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Wegmans
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Product and Service Quality
• Quality (or grade) is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.
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Marketers’ Roles in Delivering Quality
• Correctly identifying customers’ needs and requirements
• Communicate customer expectations properly to product designers
• Be sure orders are filled correctly and on time
• Provide customers with proper instructions, training, and technical assistance
• Stay in touch with customers after the sale
• Gather customer ideas for improvements and convey them to the appropriate departments
• Who do you feel is managing quality performance good today?
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@comcastcares
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Customer Profitability
• A profitable customer is one that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream for attracting, selling, and servicing that customer.
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Goal is to Maintain Profitable Customers Shift Low Profit Customers Into Higher Profit Products Over Time
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Customer Profitability Analysis (CPA)
• Best conducted with an accounting technique called Activity-Based Costing (ABC).
• Estimate all revenue coming from the customer, less all costs that go into serving that customer.
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Customer Lifetime Value (CLV)
• Describes the net present value of the stream of future profits expected over the customer’s lifetime purchases.
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CLV Equations
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CLV Importance
• Example: Grocery Store
• Average Yearly Spend: $5,200 (a)
• Average LifeSpan: 30 Years (t)
• Using the simple equation, what is the average Customer Life Time Value of a Grocery Store Customer?
• CLV = (a x t)
• 15,000 Customers in this segment
• Segment CLV = $2,340,000,000
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Cultivating Customer Relationships
• Customer relationship management (CRM) is the process of carefully managing detailed information about individual customers and all customer “touch points” to maximize customer loyalty.
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CRM Best Practices
• Identify Prospects and Customers: Don’t go after everyone. Build and mine a customer database with information from all channels and customer touch points
• Differentiate customers in terms of (1) their needs and (2) their value to the company: Defend aggressively your most valuable customers, while trying to grow relationships with less profitable customers
• Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships
• Customize products, services, and marketing messages to each customer
• Who do you feel is doing this well for you?
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Traditional Marketing Funnel
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Traditional Marketing Funnel
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Customer Database and Database Marketing
• Customer database—an organized collection of comprehensive information about individual customers or prospects that is current, accessible, and actionable for marketing purposes.
• Database marketing—the process of building, maintaining, and using customer databases and other databases to make contact, facilitate transactions, and build customer relationships.
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Data Warehouse and Datamining
• Data warehouse—organized data where marketers can capture, query, and analyze it to draw inferences about an individual customer’s needs and responses.
• Datamining—statisticians extract useful information about individuals, trends, and segments from the mass of data.
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Database Uses
• Identify the best prospects
• Match a specific offer with a specific customer as a way to sell, cross-sell, and up-sell
• Deepen customer loyalty by remembering preferences and offering relevant incentives and information
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Downside of Database Marketing and CRM
• Large investment
• Difficulty in getting everyone to be customer oriented
• Not all customers want an ongoing relationship
• Assumptions behind CRM may not always hold true
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AthleteTrax
• What kind of ideas do you have to increase long term loyalty?
• How should AthleteTrax use the CLV equation?