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Customer Behavior and Customer Relationship Management

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					Customer Behavior and
Customer Relationship
Management


 Who are we in business for?
Key Issues
 Different customer strategies
 Consumer behavior
 Business behavior
 Customer retention (i.e., the focus of
  customer relationship management, CRM)
Customer Strategies
1. Get more customers (market share)
    Acquire profitable ones
2. Keep customers longer
    Retain them
    Reduces costs of serving them
3. Grow current customers into bigger customers
   (share of customer)
      Up-selling additional products for one problem
      Cross-selling other products for different problems
      Give them benefits for referrals
4. “Fire” unprofitable customers

 1-4 Frequently stated as an OBJECTIVE in the
   marketing planning process
To fulfill customer
objectives….


 have to understand customers
What do customers expect?
 What are they?
 Do we meet them?


 Expectancy-Disconfirmation Model


 Applies to organizational and consumer
  markets
Discuss
 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.
Satisfaction Metrics
 Where Satisfaction = Expectations – Perceptions:


 Financial Performance
 Marketing Performance
   Customer Retention rates
   Customer Attrition Rate
   Customer Recovery Rate
   Referrals
   Viral marketing (what they say on the Internet)
   Importance Performance Evaluations
How do consumers decide what to
buy?




      Key issues: Know who is involved and how to reach them at various
      stages of the process.


2003 Prenticehall Kotler slides
What Influences Consumer
Purchasing?
 External Influences       Internal Influences
    Culture                   Economic Resources
    Social class              Time
    Family                    Cognitive Resources
    Peers                     Motivation and needs
    Situational Factors       Lifestyles
                               Expectations
Motivations and Needs
 Task motives
    Functional, get the job done

 Experiential motives
    Have fun while doing the activity


 Consider strategies used to create loyalty on the
  Internet
      Personalization
      Community building
 How effective would these be given the different
  consumer motives above?
   Model of Customer Participation
Antecedents                                          Consequences

                                                             Affective
Personalization

                          Brand Loyalty                      Cognitive
  Community
                                                            Behavioral

>Task vs. Experiential
   Orientation
>Other Personal Factors                   Holland and Baker 2001
    Lifestyles

    VALS 2
    Classification
    System


    Based on the idea
    that lifestyle
    predicts
    consumer
    behaviors




2003 Prenticehall Kotler slide
Organizational Buying
 Compared to consumer markets, business
 markets have:
     Fewer buyers
     Larger buyers
     Geographically concentrated buyers
     Closer relationships with suppliers/customers
   Purchasing/Procurement Process
    Eight Buyphases of Industrial Buying
       1.   Problem Recognition
       2.   General Need Description
       3.   Product Specification
       4.   Supplier Search
       5.   Proposal Solicitation
       6.   Supplier Selection
       7.   Order Routine-Specification
       8.   Performance Review
Key issues: Know who is involved and how to reach them at various
stages of the process.
Influences on Business Buyers

                                  Figure 7-1:
                                  Major
                                  Influences
                                  on Business
                                  Buying
                                  Behavior




 2003 Prenticehall Kotler slide
  Influences on Business Buyers

Plastics.com
offers buyers
and sellers of
plastics a
marketplace
plus news and
information




  2003 Prenticehall Kotler slide
Recall the Characteristics of
Organizational Buying
   Fluctuating demand
   Inelastic demand
   Leasing
   Professional purchasing
   Multiple buying influences
   Direct purchasing
   Reciprocity
   Derived demand
   Multiple sales calls
Organizational Buying
 The Business Market Includes For-Profit
  Companies and Two Specialized Groups:
     The institutional market
          Schools, hospitals, prisons, etc. with a “captive”
           audience
          Cost and quality standards drive purchases
     The government market
          Bidding process awards contracts
Discussion
Your firm is interested in targeting the
  government market.

How might this decision influence the marketing
 mix?

How is selling to the government market
 different from selling to other business
 markets? How do needs differ?
    Organizational Buying

Fedmarket
assists those
businesses
seeking to do
business with
the federal
government.




2003 Prenticehall Kotler slide
Customer Retention Focus
 Recognizes leaky bucket*
 Recognizes polygamous loyalty
 Directs marketing efforts to current customers
  (relationships)
 Opposite of conquest marketing
     Always offering discounts to get new
      customers
Discuss
 Businesses commonly lose 15-20% of their
  customers each year

 For what reasons do people defect?
Types of defectors
 Price
 Product
 Service
 Market
 Technological
 Organizational
 Snob
Benefits of C.R. from the Firm’s
Perspective
 Profits derived from sales
      Reducing defections by 5% can boost profits
       25-85%
 Profits from reduced operating costs
      It is 3-5 times cheaper to keep a customer
       than recruit a new one
 Profits from referrals
      Positive effects of W.O.M.
Discuss
 What is the 20/80/30 Rule? Why is it
  important to remember this rule?
The 20-80-30 Rule
 20% of your customers
 Generate 80% of your profit
 Half of your profit is lost serving the
  bottom 30% of your customer base
Benefits of C.R. from the Customer’s
Perspective
 Reduces risks
 Social benefits
 Contributes to a sense of well-being
 Efficiencies in ordering
 Sharing of information and transparency of
  processes
Increasing Importance of Customer
Retention
 Markets are stagnant
 Increase in competition
 Rising costs of marketing
 Changes within the channels of distribution
 Customers have changed
Also consider….
 If a firm’s goal is 15% growth:
      At 95% retention – customer acquisition rate
       must be 20%

      At 80% retention – customer acquisition rate
       must be 35%
Defection Management Process
 Communicate to employees the importance
  of retaining customers
 Train employees
 Monitor the service delivery process
 Tie employee incentives to defection rates
 Consider creating switching barriers
 Be there when needed most (e.g., State
  Farm)
Creating Strong Customer Bonds

              Keys to Success
 Adding Financial             Adding Structural Ties
  Benefits                          Create long-term
      Frequency programs            contracts
      Club memberships             Charge less for ongoing
      Examples?                     purchases
                                    Link product to long-term
                                     service
 Adding Social Benefits            Examples?
      Personalize customer
       relationships
      Examples?
  Creating Strong Customer Bonds

The U.S. Harley
Davidson site
promotes the
benefits of
joining H.O.G.
(Harley Owners
Group)




  Prenticehall 2003 Kotler slide
Other Retention Programs
 Cause marketing
 Data-base targeting/marketing
 Aftermarketing
 Service guarantees
Cause Marketing


                                     Yoplait is Committed to Fighting Breast Cancer!

                                     For more than ten years, Yoplait has been
                                     committed to breast cancer and women’s wellness
                                     programs:


                                     •2003 marks the sixth anniversary of Save Lids to
                                     Save Lives, its signature pink-lid promotion
                                     •Yoplait has been the National Series Presenting
                                     Sponsor of the Susan G. Komen Breast Cancer
                                     Foundation’s Race for the Cure since 2001
                                     •This year Yoplait has partnered with SELF
                                     magazine and the Komen Foundation to create
                                     “Yoplait 25 Champions in the fight against breast
                                     cancer,” a search to uncover 25 ordinary people
                                     doing extraordinary things in the fight against
                                     breast cancer




http://www.yoplaitusa.com/breastcancer_commitment.aspx
   Cause Marketing
                                                                  When Target first opened, in 1962, it made a
                                                                  strong commitment to support and empower
                                                                  the communities its stores serve. Target
                                                                  follows up that commitment by giving back
                                                                  over $2 million each week to neighborhoods,
                                                                  programs and schools across the country.

                                                                  Target has store-based grant making that
                                                                  supports projects promoting the arts,
                                                                  education, and peace at home. Why?
                                                                  Because there is no better place to see a
                                                                  masterpiece than reflected in the eyes of a
                                                                  child; there is no greater return on investment
                                                                  than seeing a child excel; and because a
                                                                  happy home encourages a child to dream and
                                                                  achieve.
http://target.com/common/page.jhtml?content=target%5fcg%5findex
Database Targeting
 Learns your preferences and caters to those
  preferences……

     CDNow.com
     Amazon.com
     Hilton
     Coldwater Creek
Aftermarketing
 Follow-up after the sale…
     Chevy Venture Warner Brothers Version
          DVD’s, “soccer” blanket, bag, toys for kids, gift
           certificate to buy off of WarnerBrothers.com,
           service coupons
     Piano
          Metronome
Service Guarantees

Time Warner Cable – New York Capital Region
•If you are not satisfied with our programming or service during your first
month of cable service, upon request we will disconnect your service
and promptly refund the monthly service fee.
•We will be on time for your installation appointment or your installation
is free.
•We will be on time for your service appointment or you will receive a
$20 credit on your next bill.
•We will correct any billing problem the first time you call or you will
receive a $20 credit on your next bill.


                               We will credit your account for major service interruptions in excess of four hours.
                               (New York state requires cable operators to issue service credits for outages of four
                               hours or more consistent with Section 590.65 of NYS Public Service Commission
                               Cable TV rules and regulations.)


                               Posted Nov. 5, 2002

 http://www.twalbany.com/customercare/serviceguarantee.php
Retention Programs are Worthwhile
When:
 They neutralize the competition
 Broaden availability of service (increase
  market share)
 Directly enhance value

 But NOT when
   It’s a “me-too”



                                      Reference: Dowling and Uncles
Customer Profitability Analysis




Prenticehall 2003 Kotler slide
Marketing Opportunity Analysis –
Customer Analysis
Existing Customer Segment(s)
     - customer needs
     - demographic/psychographic profile
     - existing marketing strategies
     - significant opportunities
     - major threats
     - company resource match
Potential Customer Segment(s)
     - potential needs
     - demographic/psychographic profile
     - significant opportunities
     - major threats
     - company resource match
This is part of a potential outline for a marketing plan.

				
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