Introduction to Customer Relationship Management

Introduction to Marketing

• Marketing is the process of creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.
• The survival of an organization hinges on the effectiveness of its marketing.
• There must be a top-line for a bottom line to exist in any business, meaning sales volume before profit can exist.
• A business's primary function is to generate an economic return.

Customer and Business

• Drucker's view: creating a customer is the sole valid definition of business.
• Drucker suggests two core functions: Marketing and Innovation.
• Importantly: The customer is the lifeblood of a business, directly driving its existence and employment opportunities.
• A customer is the most important visitor to a company premises.
• Their needs must be met
• The company should not be viewed solely as a products producer, but should prioritize providing customer value.

What is Marketing?

• Marketing is not just telling and selling. It is focused on satisfying customer needs.
• This is the key process that companies use to create value for consumers, and establish robust customer relationships.
• The aim of marketing is to make selling unimportant; the product should sell itself by meeting customer needs.

What is Marketed?

• Goods, Services, Events, Experiences, Places, People, Properties, Organizations, Information, and Ideas.

A marketer

• A marketer is someone trying to establish a response - be it attention, purchase, or donation - from another person/institution (a 'prospect').

Marketing: What is offered for sale

• What is offered for sale is determined by the buyer (consumer), and not by the seller (business).
• The product's features should be a direct consequence of marketing efforts; meeting customer needs, and not just producing a product for the sake of production.

Beginning and End

• An industry starts with consumer needs, not just production.
• The industry's trajectory is driven backwards; from meeting the customer need, to producing a product.
• Producing goods should not be the industry's objective, but rather satisfying customer needs.
• Businesses are customer-creating and customer-satisfying organisms.

A Simple Model of Marketing Process

• Understanding the market place, needs, and wants.
• Designing an effective strategy.
• Building strong client relationships (with profit and customer delight as objectives).
• Capturing value from customers. (profits and customer equity are the result)

Needs, Wants, and Demand

• Needs are basic human requirements. (food, clothing, safety); social needs are also important (affection, belonging).
• Wants: Needs become wants when they are directed to specific objects.
• Wants are influenced/shaped by culture and individual personality, and described in terms of objects that will satisfy needs.
• Demands: Wants backed by buying power.

Market Offering

• A combination of products, services, information and experiences offered to a market.
• The aim is to satisfy needs and wants.

Design a Customer-Driven Marketing Strategy

• What customer will we serve (identify target market)?
• Select the customers we can serve well.
• How can we serve them best? (value proposition)
• How do we differentiate and position for that target market? (ex: "ultimate driving machine" for BMW; "touching is believing" for iPhone)

Value Proposition

• A brand's value proposition is the set of benefits or values the company promises to deliver to customers to meet needs.
• Value perceived by the consumer based on the benefits and cost of a product.

Satisfaction

• Customer Satisfaction: product's perceived performance aligns with the consumer's expectations (delight, satisfaction, disappointment)

Preparing an Integrated Marketing Program and Plan

• Marketing mix is a set of tools used to implement a marketing strategy.
• The 4 P's of marketing mix are: Product, Price, Place (distribution), Promotion

Building Customer Relationships

• Customer relationship management is building relationships characterized by delivering superior value and satisfaction.

Capturing Value from Customers

• Key outcomes include customer loyalty; market share; customer share; customer equity.

Customer Equity

• The total combined customer lifetime values of all the company's current and potential customers.

Philosophy/Concepts Guiding Marketing Strategy

• Production concept
• Product concept
• Selling concept
• Marketing concept
• Holistic marketing concept

The Production Concept

• Consumers prefer widely available and inexpensive products.
• Focus on high production efficiency, low costs, and mass distribution.
• Examples: Haier, Legend (Lenovo group owner).

The Product Concept

• Consumers are attracted to products with high quality, performance, or innovative features.
• Examples of a fallacy: the "better mousetrap" fallacy

The Selling Concept

• Businesses must aggressively sell their products and attempt to drive sales.
• Examples: Unsought goods, Overcapacity.

The Marketing Concept

• Key to achieving goals is being more effective than competitors.
• A customer-centric and sense-and-respond philosophy.
• Focus is on meeting the customer's needs with the right products.
• Differentiation and positioning.

Selling vs. Marketing

• Selling focuses on the seller's needs (converting product into cash). Marketing prioritizes the buyer's needs (satisfying customers).

Holistic Marketing

• Integrated marketing across all departments (e.g. marketing, senior management, other business departments).
• Internal marketing to motivate employees to provide exceptional customer service.
• Relationship marketing: establishing lasting relationships with customers, employees, marketing partners, and stakeholders.
• Performance marketing: focusing on achieving profitable growth.

Relationship Marketing

• Customers, Employees, Marketing Partners, Financial Community.

Integrated Marketing

• Marketing activities and programs create, communicate, and deliver value such that "the whole is greater than the sum of its parts."

Internal Marketing

• Hiring, training, and motivating employees to provide superior customer service is crucial.
• Marketing succeeds when all divisions work together to achieve customer goals.

Performance Marketing

• The concept of a triple bottom line (People, Planet, Profits).

Marketing Mix Components (4 Ps)

• Product variety, Quality, Design, Features, Brand name, Packaging, Sizes, Services, Warranties, Returns.
• Price (list price, discounts, allowances, payment period, credit terms).
• Promotion (sales promotion, advertising, sales force, public relations, direct marketing).
• Place (channels, coverage, assortments, locations, inventory, transport).

Analyzing the Marketing Environment

• Studying actors and forces, to affect marketing management's ability to build and maintain relationships.

Consumer Behavior

• The study of how individuals, groups, and organizations select, buy, use, and dispose of goods, services, ideas, and experiences to satisfy their needs and wants. (influenced by cultural, social, and personal factors).

The Buying Decision Process

• Problem recognition
• Information search
• Evaluation of alternatives
• Purchase decision
• Post-purchase behavior

Problem Recognition

• The buyer recognizes a problem/need triggered by internal/external stimuli.

Information Search

• Heightened attention and active information search.
• Personal, commercial, public, and experiental sources.

Sets Involved in Decision Making

• Total Set, Awareness Set, Consideration Set, Choice Set, Decision.

Evaluation of Alternatives

• Consumers evaluate products.
• Expectancy-value model: combining brand beliefs to prioritize importance.

Competitive Strategies

• Redesign the product; reposition the brand; alter beliefs (repositioning), alter competitor beliefs (competitive depositioning), change importance weights, call attention to neglected attributes.

Purchase Decision

• Decisions on factors such as dealer, time, quantity, payment method, attitudes of others, and anticipated situational factors.
• Perceived risk: including functional, physical, social, financial, and psychological risks.

Post-purchase Behavior

• Consumer behaviors that reinforce the choice.
• Post-purchase satisfaction, post-purchase actions (buy again, exit, voice), and post-purchase product use and disposal.

Segmentation and Targeting

• Market segmentation is the process of dividing large heterogeneous groups of customers into homogeneous subgroups or segments of customers with similar needs and preferences.
• A market segment consists of a group of customers who share similar needs or wants.

Benefits of Segmentation

• Organizational/business advantages: identifying unfulfilled/underserved customer segments; creating better products/services; more targeted promotions, increased customer satisfaction, and sustainable profit growth.
• Customer advantages: customized products/services; tailored offerings; relevant offers; and personalized experiences.

Bases of Segmentation

• Geographic
• Demographic
• Socio-economic
• Psychographic
• Behavioral

Geographic Segmentation

• Nation, region, city, urban/rural, climate; region (South, North, East, West); City class, metros; rural/semi-urban area population.

Demographic Segmentation

• Age and lifecycle, Gender, Income, Occupation, Education, Religion, Generation.

Socio-Economic Classification (ISEC)

• Classify households in India.
• Variables include: chief wage earner's occupation, education of the highest-educated male and female adults.

Psychographic Segmentation

• Dividing buyers based on lifestyle and personality traits (culture-oriented, sports-oriented, outdoor-oriented; authoritarian, ambitious, compulsive).

Behavioral Segmentation

• Dividing buyers based on responses to a product (occasions; benefits sought; usage rate; loyalty status; attitude toward product).

Criteria for Effective Segmentation

• Measurable and identifiable.
• Accessible.
• Substantial.
• Differentiable.

Targeting

• Evaluating the attractiveness of a segment.
• Selecting one or more segments to pursue.
• Designing programs to serve them.
• Improving the organization's chances of maximizing long-term profitability in those segments.

Factors influencing segment selection

• Company resources
• Segment characteristics
• Segment size and growth potential
• Competitive position in the chosen segment
• Company goals.

Ethical and Privacy Issues

• Public reactions and privacy/ethical concerns should be considered.

Niche

• A narrowly defined customer group that seeks a distinctive mix of benefits within a segment.
• Relatively small but significant profit and growth potential.
• Not likely to attract many competitors.

Possible Levels of Segmentation

• Mass Market; Full Market Coverage; Multiple Segments; Single Segments; and Individual as Segments, Customization.

Brand Positioning

• Positioning starts with the product, but positioning is what you do to the mind of the prospect; what the prospect should think about your product relative to competitors.

What is Positioning?

• Differentiating your brand/product/service in the mind of the prospect/consumer.
• Designing an offering and image to occupy a distinctive place in the target market.
• A positioning statement describes how you want customers to think about your brand/product relative to competitors.
• Goal is to locate the brand in consumer minds.

Decisions in Positioning

• Defining the competitive frame of reference (which other brands a brand competes with).
• Identifying competitors (who are your competitors). Analyze Competitors (What are their strengths and weaknesses).
• Industry vs. market approach to competition (understanding categories and overlapping needs)
• Identify Points-of-Difference, and Points-of-Parity.

Brand Mantras

• Short articulation (3-5 words) of the brand's essence.
• Communicate what the brand is and isn't.
• Used to ensure all employees and partners understand the brand. Examples: Nike's "Authentic athletic performance," McDonald's "Food, folks, and fun."

Product Strategy

• What is a product? (anything offered to a market to satisfy a want or need).
• Five levels of products; a hierarchy moving from core benefit, expected product, basic product, augmented product to potential product.
• Product Classifications (based on durability, tangibility, and use: Nondurable goods, Durable goods, Services).
• Product Classifications (based on shopping habits: Convenience products, Shopping products, Specialty products, Unsought products).

Product Differentiation

• Product form, Features, Performance quality, Conformance quality, Durability, Reliability, Repairability, Style, Design.

Services Differentiation

• Ordering ease, Delivery, Installation, Customer training, Maintenance and repair, Returns.

Product Life Cycle (PLC)

• Introductory Stage, Growth Stage, Maturity Stage, Decline Stage.

Product Mix

• A product mix is the set of all products and items that a particular seller offers for sale.
• Product mix dimensions: width, length, depth, consistency.

Product Line Length

• Product line stretching (down-market, up-market, two-way).
• Line filling – adding more items to the current line.

Packaging

• All activities involved in designing and producing the container for a product.
• Objectives include identifying the brand, conveying descriptive/persuasive information, facilitating transportation/protection, and aiding consumption.

Labeling

• Simple tags or complex graphics; carry information or brand name; identify product/brand, grade product, and describe the product.

Warranties

• Formal statements of expected product performance by manufacturers.
• Legally enforceable.
• Reduce buyer's perceived risk, and suggest high quality.

Marketing Channels (Distribution Channels)

• Interdependent organizations involved in making a product or service available for consumption.
• Importance includes value delivery, sustainable competitive advantage, reducing distribution costs, and affecting other marketing decisions.

Flows in Marketing Channels

• Physical, Information, Ownership Title / ownership, Promotion (communication); Payment (financial), Ordering, Negotiation, Financing, and Risk.

Channel Structure

• The group to which a set of distribution tasks has been allocated; the manager's allocation decision.
• Specialization and division of labor and contact efficiency.

Channels and Marketing Decisions

• Push vs. pull strategies.
• Number of intermediaries (exclusive distribution, selective distribution, intensive distribution).

Channel Power

• Coercive, Reward, Legitimate, Expert, and Referent power.

Using Power

• Power must be exercised deliberately to influence member behavior.
• Effectiveness varies by situation.
• Use affects cooperation, conflict, satisfaction among members.
• Coercive power can reduce stability and viability.

Channel Conflict

• Conflict occurs when actions of one channel member prevent another member from achieving a goal.
• Types include: horizontal, vertical, and multichannel conflicts.

Pricing

• Price is more than just a number; it comes in many forms; it performs many functions (rent, tuition, fees, fares, rates, tolls, honorariums, bribes).

Common Pricing Mistakes

• Determine cost and take traditional industry margins; don't just focus on product cost.
• Fail to revise price in response to market shifts.
• Set price independently from other aspects of marketing mix.
• Fail to vary price by product/item, segment, or channels/occasion

Understanding Pricing

• Small companies: bosses set prices; large companies: division or product line managers.
• Pricing objectives (survival, maximum current profit, maximum market share, maximum market skimming, product-quality leadership).

Survival

• A short-term objective (cover costs, start-ups).

Maximum Current Profit

• Objective: maximize current profits, assess demand/cost; choose the price that gives maximum profit.

Maximum Market Share

• Market penetration pricing; higher volume leads to lower unit costs, higher profits; set lowest price for price-sensitive markets.

Maximum Market Skimming

• Start high, slowly reduce prices.

Product-Quality Leadership Pricing

• Aim to be a leader in product quality.
• Prices positioned for quality, taste, and/or status. Pricing is still accessible

Pricing Methods

• Markup pricing, Target-return pricing, Perceived-value pricing, Going-rate pricing, and Auction-type pricing.

Markup Pricing

• Add standard markup to cost, simpler than assessing demand (more practical in the short term), potentially less nuanced, fairer to both buyers and sellers but neglects demand realities.

Target-Return Pricing

• Firm sets target rate of return on investment.

Perceived-Value Pricing

• Price based on consumer's perceived value (performance quality, warranty, customer support, reputation).

Auction-Type Pricing

• English, Dutch, and Sealed-Bid auctions.

Value Pricing

• Charge a fairly low price, high quality (e.g.,IKEA, Southwest airlines)

Every Day Low Pricing (EDLP)

• Constant low prices with no price promotions.
• Eliminates price uncertainty (e.g., Walmart)

Promotional Pricing

• Loss leader pricing (supermarkets using well-known brands, temporary discounts, e.g., special deals at time of Diwali.)
• Special event and low-interest financing

Time pricing, & Location pricing

• Prices vary based on time or location.

This quiz explores key concepts of customer relationship management (CRM). It covers definitions such as customer perceived value and customer equity, as well as the marketing mix and consumer preferences. Test your understanding of these fundamental marketing principles.