lecture 6 Flashcards
Key determinants of Gap 1
Lack of market segmentation (NUMBER ONE ISSUE)
(Assume preference homogeneity)
Focus on transactions rather than relationships
(we want to sell something, might have negative impact on customer. Focus on sales this year…)
Focus on new customers rather than existing customers (attraction instead of retention)
Relationship management
A business philosophy focusing on keeping and improving relationships with current customers to maximize their profitability across the customer life cycle.
Motivation of organization:
Longer relations spend more
Longer relations cost less: fixed + variable
Longer relations become ambassadors: word of mouth
Longer custoemr relationships -> longer employee relationships
Longer relations affect price sensitivity
Increase in value of shares
Motivation of customers:
Higher quality /”gets” : extras received
Lower purchase costs: rebates, price-cuts
Lower search costs : free up time
Lower psychological costs: less stress, needs known
Relationship management (customer lifetime value)
Duration relationship, amount spent, mouth to mouth communication
NOT retain customers to all costs
Target all customers (expensive or risky customers)
Cant focus on all customers, not all customers are king, but some are emperors (depends on money spent)
Why customers are more profitable over time
Base profit, Profit from increased purchases and higher balances, profit from reduced operating costs, profit from referrals, profit from price premium
How much profit a customer generates over time
usually increases throughout the years
loyalty
deeply held commitment to re-buy a preferred service consistently in the future, despite situational influences and marketing efforts having the potentia lto cause switching behavior
Three types of loyalty
cognitive loyalty: brand preference based on attributes (bad loyalty, switch with competitor better offer)
Affective (attitude) loyalty: Feel better than towards competitors (use Net promotor score) to measure
Conative loyalty: Repeat behavioral intentions,
Dick and basu about relative attitude matrix
Strong attitude strength and no attitudinal differentiation: Low relative attitude
Strong attitude strength and yes attitudinal differentiation: Highest relative attitude
weak attitude strength and no attitudinal differentiation: Lowest relative attitude
weak attitude strength and yes attitudinal differentiation: high relative attitude
FROM THIS
Relative attitude strong & repeat patronage: Real loyalty
Relative attitude strong & no repeat patronage: Latent loyalty
Relative attitude weak & repeat patronage: Spurious loyalty
Relative attitude weak and no repeat patronage: No loyalty
Net promoter score
One question on a scale from 0-10 to measure loyalty and the number one question you need to grow:
“how likely is it that you would recommend our company to a friend or colleague
Score 0-6 Detractor
Score 7-8 Passives
Score 9-10 Promoters
Practice vs academics (NPS)
Embraced by many companies such as philips, google and apple as the corporate metric due to its ease of asking only one question.
Academics found: NPS is an attitudinal measure of intention to recommend rather than actual behavior
Data loss through the use of three segments
Electronic word of mouth
WOM is important in consumers purchase decisions and as a result many companies have deflected traditional marketing approaches in favor of WOM:
Low costs
Interactivity
Speed
Lack of commercial bias
Higher sense of credibility
eWOM + advantages
Word of mouth marketing is a particularly prominent feature of hte internet
Advantages of eWOM:
Fast and convenient
Available for an indefinite period of time
Can reach far beyond the local community
This makes companies more dependent than ever on cultivating positive WOM and getting rid of negative WOM as this can ruin the company
Reichards classification NPS (valence)
Detractors (0-6) do not differ from each other but differ from customers that give a higher NPS (homogeneous)
Promoters (9-10) differ from the other groups of customers but are similar to each other (homogeneous)
Passives do not appear to be homogenous group. The 7 and 8 dont belong together, is also the largest group….
Stay or switch
if you are dissatisfied: value alternatives
if there are many check costs of switching
Implications (NPS research)
Only complete satisfaction guarantees loyalty (8910)
The effect of incomplete satisfaction on loyalty depends on
1) value of alternatives (service and market characteristics)
2) switch costs (relationship, service and market characteristics)
