Lecture 1 - Profitable Customer Relationships (II)_PDF

Lecture 1: Profitable Customer Relationships (II) Official (Closed) and Non-Sensitive In this lecture, we will cover … 1. Discuss the marketing management orientations that guide marketing strategy...

Lecture 1: Profitable Customer Relationships (II) Official (Closed) and Non-Sensitive In this lecture, we will cover … 1. Discuss the marketing management orientations that guide marketing strategy 2. Discuss customer relationship management 3. Discuss the approaches to building customer relationship Official (Closed) and Non-Sensitive In this lecture, we will cover … 1. Discuss the marketing management orientations that guide marketing strategy 2. Discuss customer relationship management 3. Discuss the approaches to building customer relationship Official (Closed) and Non-Sensitive Marketing Management Orientations 5 concepts which an organisation can adopt to design & carry out their marketing strategies 5)Societal Marketing Concept Outside-In Approach (From Customer Perspective, Needs & Wants Satisfaction) 4)Marketing Concept 3)Selling Concept Inside-Out Approach (Old School from the 30s. From Company’s Perspective - 2)Product Concept Assumptions) 1)Production Concept Official (Closed) and Non-Sensitive INSIDE-OUT APPROACH ❖Companies don’t do Consumer Research. They base it on the situation they see, what they know or think they know, what they think is right, and what they think is Best for their products and brand and do it. ❖The Concept of Needs & Wants Do Not Exist for the first 3 Orientations – From the 1920s to the 1950s ❖The companies can adopt this cos there was not much Competition or Choice in those days. Official (Closed) and Non-Sensitive Production Concept The key questions that a firm would ask before producing a product were: Can we produce the product? Can we produce enough of it? ASSUMPTION: Companies believe that Consumers will only favour products that are easily available everywhere, and highly affordable. Therefore, companies focus on 2 Things: (1) Improving production and distribution efficiency; & (2) Making Products Cheap Official (Closed) and Non-Sensitive Production Concept SITUATION 1 ❖Demand EXCEEDS Supply ❖Mgmt look for ways to  production SITUATION 2 ❖ Cost of Product is too high ❖ Improved productivity is needed to bring it  Official (Closed) and Non-Sensitive 2)Product Concept ASSUMPTION: Companies believe that Consumers only favour products that offer the most in quality, performance, and innovative features. Therefore, companies focus on making continuous product improvements, but ONLY FROM COMPANY’S PERSPECTIVE. NO Consumer Studies Done. What the Boss thinks is good, he’ll Improve on and produce those things. FORD MOTORS – Henry Ford’s Famous Words… EG of Product Concept. Official (Closed) and Non-Sensitive 3)Selling Concept ASSUMPTION: Companies believe that Consumers will not buy enough unless there are 2 Things: (1) Hard Selling (Focus on Cornering Customers to Buy) & (2) Sales Promotions like Discounts/Gifts etc. Therefore, companies focus on creating sales transactions rather than building relationships Official (Closed) and Non-Sensitive Selling Concept SITUATION 1 Traditionally associated with certain products (like Insurance / Time-Sharing Holiday Investments / Go Tour Gps where they bring you to buy Herbs or Jade or Beauty Products etc) Official (Closed) and Non-Sensitive Selling Concept SITUATION 2 When faced with overcapacity. Official (Closed) and Non-Sensitive OUTSIDE-IN APPROACH ❖Companies do Consumer Research. They base it What they have found out, the Likes & Dislikes and Needs & Wants of Customers before they Produce and Make the Product. ❖The Aim is to be able to SATISFY the Customers’ Needs and Wants and in so doing, make money from them. ❖Started from late 1950s onwards. Realised with More Brands and Competition, cannot keep doing the old ways. Official (Closed) and Non-Sensitive 4)Marketing Concept To achieve organisation goals, must focus on knowing the needs, and wants of target markets, and delivering desired satisfaction better than competitors. Official (Closed) and Non-Sensitive Societal Marketing Concept Company should also consider the society’s long run interests, in addition to considering consumers’ wants, and its own objectives. Official (Closed) and Non-Sensitive Example : Body Shop Official (Closed) and Non-Sensitive NOW… ❖In Today’s Context, Likely Companies are using a Combination of BOTH these Inside-Out and Outside-In Orientations in their business philosophies and strategies. ❖ Eg. Insurance still does Hard-Sell & Perks ( Selling Concept) but also seek to be customers’ friend now and also to understand their needs & wants and satisfy them through customisation (Marketing Concept). ❖ Eg. Shampoo brands seek to understand what customers need and want by producing different types of shampoos according to those needs & wants (Marketing Concept), but will also try to be as Productive and set Not too high costs and distribute widely as possible (Production Concept) Official (Closed) and Non-Sensitive In this lecture, we will cover … 1. Discuss the marketing management orientations that guide marketing strategy 2. Discuss customer relationship management 3. Discuss the approaches to building customer relationship Official (Closed) and Non-Sensitive Customer Relationship Management  Customer relationship management is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.  It deals with all aspects of acquiring, keeping, and growing customers. Official (Closed) and Non-Sensitive Customer Relationship Management  Keeping customers loyal makes good economic sense.  Customer lifetime value (CLV) is the value of the entire stream of purchases a customer makes over a lifetime of patronage.  Eg. 1 year a customer spends $1000 on company’s product, then if this customer stays 10 years, then company will make in this customer lifetime a value of $10,000.  Customer defections can be costly  Can lose that customer’s lifetime value  May cause other customers to defect Official (Closed) and Non-Sensitive Customer Equity  The aim of customer relationship management is to produce high customer equity.  Customer equity (CE) - Total combined customer lifetime values of all of the company’s current & potential customers. Customer equity increases when the loyalty of the firm’s profitable customers increases.  Eg. On average, if 1 customer lifetime value is $10,000; then if this company has 100 of such customers, the company’s Customer Equity will be $1 million.  It is thus MORE Profitable to have Loyal Customers as CE will Increase.  Better measure of a firm’s performance than current sales or market share, as customer equity suggests the company’s future performance. Official (Closed) and Non-Sensitive In this lecture, we will cover … 1. Discuss the marketing management orientations that guide marketing strategy 2. Discuss customer relationship management 3. Discuss the approaches to building customer relationship Official (Closed) and Non-Sensitive 3 Approaches to Profitable & Loyal Customer Relationships 1. Financial Benefits 2. Social Benefits 3. Structural Benefits Official (Closed) and Non-Sensitive Financial Benefits Frequency marketing programmes to reward customers who buys frequently or in large amounts. Eg Frequent Flyer Programmes of Airlines, that members get redeem for free air tickets or upgrade NTUC Linkpoint, members get rebates & redeem for gifts Redemption card of Coffee Bean & Tea Leaf Official (Closed) and Non-Sensitive Social Benefits ◼ Club Marketing programmes Eg. Members get special previews, unique gifts, special privileges Social Benefits Eg Swatch Club member get additional chance to buy limited edition watches ◼ Create a community Members nights – mingle with others with same interest, Social Benefits Opening & galas invited – meeting points/opportunities to meet new people Official (Closed) and Non-Sensitive Structural Benefits ◼ Supply customer with special equipment or computer links that help them in their daily activities. ◼ Or provide more ways for customer to use your services. Official (Closed) and Non-Sensitive Structural Benefits ◼ In Short – STICKINESS ◼ Eg. Facebook, Apple etc makes it so useful with so many apps or functions that you may find it a hassle to switch. ◼ Eg. Certain China Live Sites like Tao Bao Live have so many loyal followers. These followers keep going back for more fun and relevant info content, and in the process, gained so much information by interacting with the viewers, they somehow feel a ‘Need’ or ‘Obligated’ to support and buy stuff from them. Official (Closed) and Non-Sensitive Thank You