Introduction to Customer Relationship Management

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Questions and Answers

What is the primary focus of customer relationship management?

Maximizing product availability

Reducing marketing expenses

Building and maintaining profitable customer relationships (correct)

Minimizing customer costs

Which concept suggests that consumers prefer products that are widely available and inexpensive?

The holistic marketing concept

The production concept (correct)

The marketing concept

The selling concept

What defines customer perceived value?

The customer’s evaluation of benefits versus costs (correct)

The average cost of a product

The loyalty of a customer to a brand

The total revenue generated from a customer

What is customer equity?

The total combined customer lifetime values of all current and potential customers Signup and view all the answers

Which of the following is NOT part of the marketing mix?

Profit Signup and view all the answers

What is the primary focus of an industry according to the provided content?

Satisfying customer needs Signup and view all the answers

How are wants defined in the context of the content?

Specific objects that satisfy needs Signup and view all the answers

What does a market offering consist of?

A combination of products, services, information, or experiences Signup and view all the answers

What is meant by 'demands' in marketing terms?

Wants that are backed by buying power Signup and view all the answers

In designing a customer-driven marketing strategy, what should the first question address?

What customers will we serve? Signup and view all the answers

What is the purpose of a value proposition?

To promise certain benefits to consumers Signup and view all the answers

According to Levitt's perspective, corporations should be viewed as which of the following?

Customer-nurturing entities Signup and view all the answers

What is market segmentation primarily focused on?

Dividing customers into similar subgroups Signup and view all the answers

What element is crucial for creating a profitable customer relationship?

Tailored customer engagement strategies Signup and view all the answers

Which of the following is NOT a benefit of segmentation for organizations?

Increased revenue from broad marketing Signup and view all the answers

Which basis for segmentation is considered geographic?

Urban or rural classifications Signup and view all the answers

What is involved in the targeting stage of the STP process?

Assessing the attractiveness of segments Signup and view all the answers

What is a direct benefit of segmentation for customers?

Personalized experiences and relevant offers Signup and view all the answers

What is the primary focus of the marketing concept?

To create superior customer value for target markets Signup and view all the answers

What does the selling concept primarily address?

Overcoming barriers to purchase through aggressive selling Signup and view all the answers

Which of the following best illustrates the 'better-mousetrap' fallacy?

Assuming higher quality always leads to increased sales Signup and view all the answers

What aspect does holistic marketing include?

Considering relationships with various stakeholders Signup and view all the answers

What is the main goal of integrated marketing?

To deliver a consistent message to customers through various channels Signup and view all the answers

What does internal marketing aim to achieve?

Aligning and motivating employees to serve customers effectively Signup and view all the answers

What is highlighted by the triple bottom line approach?

A balance between financial success, social equity, and environmental stewardship Signup and view all the answers

What defines performance marketing?

Measuring the effectiveness of marketing efforts based on results Signup and view all the answers

What is the primary focus of marketing according to the provided content?

Satisfying customer needs and building relationships Signup and view all the answers

According to Drucker, what is the fundamental definition of business?

To create a customer Signup and view all the answers

Which of the following is NOT considered part of what can be marketed?

Robots Signup and view all the answers

What primarily influences the marketing management's ability to build and maintain successful relationships with target customers?

Marketing environment Signup and view all the answers

What is the relationship between a business and its customers as described in the content?

Businesses are ultimately dependent on customers Signup and view all the answers

Which demographic factor is NOT mentioned as affecting marketing strategies?

Technological advancements Signup and view all the answers

How does the text define marketing in relation to selling?

The aim of marketing is to make selling unnecessary Signup and view all the answers

What does the economic environment primarily consist of?

Factors affecting purchasing power and spending Signup and view all the answers

What is stated to be the first function of management within an organization?

Economic performance Signup and view all the answers

Which aspect of the natural environment is becoming more crucial for marketers due to sustainability concerns?

Natural resources Signup and view all the answers

What do Drucker’s views imply about the role of customers in business?

Customers create the demand for products Signup and view all the answers

What ideally begins the process of an industry according to the content?

Customer needs Signup and view all the answers

What role does the political environment play in marketing?

It establishes laws and regulations affecting marketing practices. Signup and view all the answers

In the context of market trends, what change occurred in the two-wheeler market in 1999-2000?

Transition from scooters to motorcycles Signup and view all the answers

How does the cultural environment affect consumer preferences?

By shaping basic values and behaviors Signup and view all the answers

Which technological shift is highlighted as an example of the changes in the technological environment?

Shift from floppy disks to discs Signup and view all the answers

Study Notes

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.

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.

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Description

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.