1.4 Managing Customer Relationships and Capturing Customer Value Flashcards

1
Q

The first three steps in the marketing process—understanding the marketplace and customer needs, designing a customer value-driven marketing strategy, and constructing a marketing program—all lead up to the fourth and most important step…

What is it?

A

Engaging customers and managing profitable customer relationships.

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2
Q

Definition of Customer Relationship Management

A

Customer relationship management: The overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.

It deals with all aspects of acquiring, engaging, and growing customers.

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3
Q

Customers often face a bewildering array of products and services from which to choose.

How do they decide?

A

A customer buys from the firm that offers the highest customer-perceived value

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4
Q

Definition of Customer-percieved value?

A

Customer-perceived value: The customer’s evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers.

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5
Q

What do customers act on when judging the value of a product or service?

A

Importantly, customers often do not judge values and costs “accurately” or “objectively.”

They act on perceived value.

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6
Q

Definition of Customer Satisfaction

A

Customer satisfaction: The extent to which a product’s perceived performance matches a buyer’s expectations.

If the product’s performance falls short of expectations, the customer is dissatisfied.

If performance matches expectations, the customer is satisfied.

If performance exceeds expectations, the customer is highly satisfied or delighted.

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7
Q

What do outstanding marketing companies go out of their way to do?

A

Outstanding marketing companies go out of their way to keep important customers satisfied.

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8
Q

How can a company properly aim to delight customers?

A

Companies aim to delight customers by promising only what they can deliver and then delivering more than they promise.

For companies interested in delighting customers, exceptional value and service become part of the overall company culture.

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9
Q

What are the benifits of a Delighted customer?

A

Delighted customers not only make repeat purchases but also become willing brand advocates and “customer evangelists” who spread the word about their good experiences to others.

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10
Q

What is the proper balance a customer-centerd firm must seek out?

A

Although a customer-centred firm seeks to deliver high customer satisfaction relative to competitors, it does not attempt to maximize customer satisfaction.

A company can always increase customer satisfaction by lowering its prices or increasing its services.

But this may result in lower profits. Thus, the purpose of marketing is to generate customer value profitably.

This requires a very delicate balance: The marketer must continue to generate more customer value and satisfaction but not “give away the house.”

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11
Q

What are the two extreems of a customer relationship?

A

At one extreme, a company with many low-margin customers may seek to develop basic relationships with them.

At the other extreme, in markets with few customers and high margins, sellers want to create full partnerships with key customers.

In between these two extremes, other levels of customer relationships are appropriate.

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12
Q

Example of a basic customer relationship

A

P&G’s Tide detergent does not phone or call on all of its consumers to get to know them personally. Instead, Tide creates engagement and relationships through product experiences, brand-building advertising, websites, and social media.

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13
Q

Example of a full partnership customer relationship

A

P&G sales representatives work closely with Walmart, Sobeys, and other large retailers that sell Tide.

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14
Q

Examples of marketing tools to develop stronger bonds with customers.

A
  • Many companies offer frequency marketing programs that reward customers who buy frequently or in large amounts.
  • Airlines offer frequent-flier programs, hotels give room upgrades to frequent guests
  • Supermarkets give patronage discounts to “very important customers.”
  • Loyalty rewards program.

Such programs can enhance and strengthen a customer’s brand experience.

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15
Q

Examples of Significant changes that are occurring in the nature of customer–brand relationships.

A

Digital technologies—the internet and the surge in online, mobile, and social media—have profoundly changed the ways that people on the planet relate to one another.

In turn, these events have had a huge impact on how companies and brands connect with customers and how customers connect with and influence each other’s brand behaviours.

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16
Q

What is the difference between how “Yesterdays” companes and todays companies market?

A

Yesterday’s companies focused mostly on mass marketing to broad segments of customers at arm’s length.

By contrast, today’s companies use online, mobile, and social media to refine their targeting and to engage customers more deeply and interactively.

The old marketing involved marketing brands to consumers.

The new marketing is customer-engagement marketing

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17
Q

Definition of Customer-engagement marketing.

A

Customer-engagement marketing: Making the brand a meaningful part of consumers’ conversations and lives by fostering direct and continuous customer involvement in shaping brand conversations, experiences, and community.

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18
Q

What is the goal of customer-engagement marketing

A

Its goal is to make the brand a meaningful part of consumers’ conversations and lives.

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19
Q

How has the internet and social media changed the landscape of marketing?

A

The burgeoning internet and social media have given a huge boost to customer-engagement marketing. Today’s consumers are better informed, more connected, and more empowered than ever before.

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20
Q

How has the internet and social media changed the control and information that consumers have about products and services?

A

Newly empowered consumers have more information about brands, and they have a wealth of digital platforms for airing and sharing their brand views with others.

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21
Q

How must marketers change their thinking in the face of the internet and social media?

A

Thus, marketers are now embracing not only customer relationship management but also customer-managed relationships, in which customers connect with companies and with each other to help forge and share their own brand experiences.

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22
Q

What is Brand Advocacy?

A

Beyond building brand loyalty and purchasing, marketers want to create brand advocacy, by which satisfied customers initiate favourable interactions with others about a brand.

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23
Q

What does greater consumer empowerment mean for companies?

A

Greater consumer empowerment means that companies can no longer rely on marketing by intrusion.

Instead, they must practise marketing by attraction—creating market offerings and messages that engage consumers rather than interrupt them.

Hence, most marketers now combine their mass-media marketing efforts with a rich mix of online, mobile, and social media marketing that promotes brand-consumer engagement, brand conversations, and brand advocacy among customers.

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24
Q

Examples of Skilled use of social media that can get consumers involved with a brand, talking about it, and advocating it to others

A

Companies post their latest ads and videos on social media sites, hoping they’ll go viral.

They maintain an extensive presence on Facebook, Instagram, Twitter, Snapchat, YouTube, Google+, and other social media to start conversations with and between customers, address customer service issues, research customer reactions, and drive traffic to relevant articles, web and mobile marketing sites, contests, videos, and other brand activities.

They launch their own blogs, mobile apps, brand microsites, and consumer-generated review systems, all with the aim of engaging customers on a more personal, interactive level.

25
Q

What is the key to engagement marketing?

A

The key to engagement marketing is to find ways to enter targeted consumers’ conversations with engaging and relevant brand messages.

Simply posting a humorous video, creating a social media page, or hosting a blog isn’t enough.

Successful engagement marketing means making relevant and genuine contributions to targeted consumers’ lives and interactions.

26
Q

Definition of Consumer-generated marketing

A

Consumer-generated marketing: Brand exchanges created by consumers themselves—both invited and uninvited—by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers.

This might happen through uninvited consumer-to-consumer exchanges in blogs, social media, and other digital forums.

But increasingly, companies themselves are inviting consumers to play a more active role in shaping products and brand content.

27
Q

Examples of Consumer-Generated Marketing

A

Some companies ask consumers for new product and service ideas.

Other companies invite consumers to play a role in shaping ads and social media content.

28
Q

The cons of Consumer-generated marketing

A

Harnessing consumer-generated content can be a time-consuming and costly process, and companies may find it difficult to mine even a little gold from all the content submitted.

Because consumers have so much control over social media content, inviting their input can sometimes backfire.

29
Q

What must brands embrace and master to not be left behind?

A

Brands must embrace this increased consumer empowerment and master the digital and social media relationship tools or risk being left behind.

30
Q

When it comes to creating customer value and building strong customer relationships, today’s marketers know that they can’t go it alone.

What else must they do?

A

They must work closely with a variety of marketing partners. In addition to being good at customer relationship management, marketers must also be good at partner relationship management.

31
Q

Definition of Partner Relationship Management.

A

Partner relationship management:

Working closely with partners in other company departments and outside the company to jointly bring greater value to customers.

32
Q

Traditionally, marketers have been charged with understanding customers and representing customer needs to different company departments.

How has this changed?

A

In today’s more connected world, every functional area in the organization can interact with customers.

The new thinking is that—no matter what your job is in a company—you must understand marketing and be customer focused.

Rather than letting each department go its own way, firms must link all departments in the cause of creating customer value.

33
Q

Who else must Marketers partner with?

A

Marketers must also partner with suppliers, channel partners, and others outside the company. Marketing channels consist of:

Distributors

Retailers

Others who connect the company to its buyers.

34
Q

What does “The Supply Chain” describe and what is it’s importance?

A

The supply chain describes a longer channel, stretching from raw materials to components to final products that are carried to final buyers.

Through supply chain management, companies today are strengthening their connections with partners all along the supply chain.

They know that their fortunes rest on how well their entire supply chain performs against competitors’ supply chains.

35
Q

The first four steps in the marketing process outlined in Figure 1.1 involve engaging customers and building customer relationships by creating and delivering superior customer value.

What is the final step?

A

The final step involves capturing value in return in the form of sales, market share, and profits.

36
Q

What are the outcomes of creating customer value

A

Customer loyalty and retention
Share of market
Share of customer
Customer equity

37
Q

What are the benifits of keeping customers loyal?

A

Keeping customers loyal makes good economic sense. Loyal customers spend more and stay around longer. Research also shows that it’s five times cheaper to keep an old customer than acquire a new one.

38
Q

What are the consiquences of customer defection?

A

Customer defections can be costly. Losing a customer means losing more than a single sale. It means losing the entire stream of purchases that the customer would make over a lifetime of patronage.

39
Q

Definition of Customer lifetime value

A

Customer lifetime value: The value of the entire stream of purchases a customer makes over a lifetime of patronage.

40
Q

What does Customer delight create?

A

Customer delight creates an emotional relationship with a brand, not just a rational preference. And that relationship keeps customers coming back.

41
Q

Beyond simply retaining good customers to capture customer lifetime value, what can good customer relationship mangement create?

A

Beyond simply retaining good customers to capture customer lifetime value, good customer relationship management can help marketers increase their share of customer

42
Q

Definition of Share of Customer

A

Share of customer: The portion of the customer’s purchasing that a company gets in its product categories.

Thus, banks want to increase “share of wallet.” Supermarkets and restaurants want to get more “share of stomach.” Car companies want to increase “share of garage,” and airlines want greater “share of travel.”

43
Q

How can companies increase their share of customer?

A

To increase share of customer, firms can offer greater variety to current customers. Or they can create programs to cross-sell and up-sell to market more products and services to existing customers.

44
Q

Where does the value of a company come from?

A

The value of a company comes from the value of its current and future customers.

45
Q

What must Customer relationship managment aspire to do in the long term

A

Customer relationship management takes a long-term view. Companies want to not only create profitable customers but also “own” them for life, earn a greater share of their purchases, and capture their customer lifetime value.

46
Q

What is the ultimate aim of customer relationship management?

A

The ultimate aim of customer relationship management is to produce high customer equity.

47
Q

Definition of Customer Equity

A

Customer equity: The total combined customer lifetime values of all of the company’s customers.

As such, it’s a measure of the future value of the company’s customer base.

48
Q

How does customer loyalty effect its customer equity?

A

The more loyal the firm’s profitable customers, the higher its customer equity.

49
Q

Why may customer equity be a better measurment of a firms proformance then sales or market share?

A

Customer equity may be a better measure of a firm’s performance than current sales or market share. Whereas sales and market share reflect the past, customer equity suggests the future.

50
Q

How can a company classift customers according to?

A

The company can classify customers according to their potential profitability and manage its relationships with them accordingly.

51
Q

Customer relationship groups (Figure)

A
52
Q

What are “Strangers” and what relationship strategy should be used for them?

A

Strangers show low potential profitability and little projected loyalty. There is little fit between the company’s offerings and their needs.

The relationship management strategy for these customers is simple: Don’t invest anything in them; make money on every transaction.

53
Q

What are “Butterflys” and what relationship strategy should be used with them?

A

Butterflies are potentially profitable but not loyal. There is a good fit between the company’s offerings and their needs. However, like real butterflies, we can enjoy them for only a short while and then they’re gone.

Efforts to convert butterflies into loyal customers are rarely successful. Instead, the company should enjoy the butterflies for the moment. It should create satisfying and profitable transactions with them, capturing as much of their business as possible in the short time during which they buy from the company. Then it should move on and cease investing in them until the next time around.

54
Q

Example of a “Butterfly”

A

An example is stock market investors who trade shares often and in large amounts but who enjoy hunting out the best deals without building a regular relationship with any single brokerage company.

55
Q

What are “True Believers” and what relationship strategy should be used with them?

A

True friends are both profitable and loyal. There is a strong fit between their needs and the company’s offerings.

The firm wants to make continuous relationship investments to delight these customers and engage, nurture, retain, and grow them.

It wants to turn true friends into true believers, who come back regularly and tell others about their good experiences with the company.

56
Q

What are “Barnacles” and what relationship strategy should be used with them?

A

Barnacles are highly loyal but not very profitable.

There is a limited fit between their needs and the company’s offerings.

Like barnacles on the hull of a ship, they create drag. Barnacles are perhaps the most problematic customers.

The company might be able to improve their profitability by selling them more, raising their fees, or reducing service to them. However, if they cannot be made profitable, they should be “fired.”

57
Q

Example of a “Barnacle”

A

An example is smaller bank customers who bank regularly but do not generate enough returns to cover the costs of maintaining their accounts.

58
Q

Example of a strategy used against “Barnacles”

A

For example, Best Buy offers an attractive returns policy but has found that a small segment of customers abuses this policy. So it uses an outside firm, Retail Equation, to track and score individual customer returns behaviour.

The system is designed to identify the 1 percent of shoppers whose behaviour suggests returns fraud or abuse. A shopper who exceeds a certain score is informed that future returns will be denied, even if it means losing the customer.

“You could do things that are inside the posted rules, but if you are violating the intent of the rules, like every item you’re purchasing you’re using and then returning, then at a certain point you become not a profitable customer for [Best Buy],” says a Retail Equation executive.