Chapter 18

Competitive Strategies: Attracting, Retaining, and Growing Customers

Discussion Connections

More than three decades ago, Peter Drucker observed that a company’s first task is “to create customers”. How to the following companies create customers:  Intel,    Delta Airlines, Your university or college, American Online

What is Relationship Marketing?

Relationship Marketing is the Process of Creating, Maintaining, and Enhancing Strong, Value Laden Relationships With Customers and Other Stakeholders.

Customer Relationship Marketing

Why the new emphasis on retaining and growing customers?

   Changing demographics, more sophisticated competitors, and overcapacity in many industries means fewer customers.

Costs five times as much to attract a new customer as to keep a current one satisfied.

Losing a customer means losing the entire stream of purchases over a lifetime of patronage - the customer lifetime value.

The Service Profit Chain Internal Quality Employee Satisfaction & Loyalty External Quality Growth & Profitability Customer Value & Satisfaction Customer Retention

• • • •

Loyalty Repeat Purchase Relationship Positive WOM

Adapted From: Heskett, J. L, Sasser, W. E. and Schlesinger, L. A. (1997).

The Service Profit Chain

. The Free Press: New York.

Customer Delivered Value (Fig. 18.1)

Customer Satisfaction

Expectations are Based on Customer’s Past Buying Experiences, the Opinions of Friends, & Marketer and Competitor Information and Promises.

Product Falls Short of Expectations Customer is Dissatisfied Product Matches Expectations Customer is Satisfied Product Exceeds Expectations Customer is Highly Satisfied or Delighted!

Customer Satisfaction

Today’s most successful companies are raising expectations – and delivering performance to match.

These companies embrace total customer satisfaction.

Firm that seeks total customer satisfaction doesn’t have to attempt maximum customer satisfaction.

Purpose of marketing is to generate customer value profitably – offer customer satisfaction without sacrificing profits.

Loyalty - Customer Satisfaction Percent of Customers That Intend to Return

By rating on customer satisfaction scale 1-5 5 = very satisfied , 4 = satisfied

90 80 70 60 50 40 30 20 10 0 Rating 1 2 3 4 5

Customer Loyalty and Retention

Highly satisfied (delighted) customers produce benefits:  They are less price sensitive,    They remain customers longer, They talk favorably about the company and products to others.

Tremendous difference between the loyalty of satisfied customers and completely satisfied customers.

Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty.

Building Lasting Customer Relationships

Financial Benefits i.e. Frequency Marketing Programs Social Benefits i.e. Learning Individual Customer’s Needs & Wants Structural Ties i.e. Supply Customers With Special Equipment Marketing Tools to Build Stronger Bonds With Consumers

Customer-Product Profitability Analysis (Fig. 18.3)

Customer Value-Delivery Network

Customer Retailer Producer Vendor Raw Material Supplier

Total Quality Marketing

Japan was the first country to award a national quality prize, the Deming prize.

Mid-1980’s, the U.S. established the Malcolm Baldridge National Quality Award.

Europe has developed the ISO 9000 which is an exacting set of quality standards.

Total quality has become a truly global concern.

Total Quality Marketing

Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Marketers play a major role in helping their companies define & deliver high quality products and services to target customers:  Must correctly identify the customers’ needs and requirements and communicate this to product designers,  Marketing must deliver each marketing activity to high quality standards.

Review of Concept Connections

Discuss customer value and satisfaction and how companies attract, retain, and grow profitable customers.

Explain the roles of the company value chain, value-delivery network, and total quality in delivery of customer value and satisfaction.

Explain the relationship between value, satisfaction, and loyalty.