Fluent Essays

·  Read Chapters Three and Four in the textbook and watch the lectures for this module. ·  Respond to this assignment with a single-spaced, typed document. Most well-thought out responses require at least one full page. Module 2 Assignment:   1.  Evaluate this statement: Large customers tend to be either the most or least profitable in the customer base of a business-to-business firm.  2.  Why is the cost of serving a long-standing customer far less than the cost of acquiring a new customer? 3.  Sara Lee Corporation derives more than $1.5 billion of sales each year from the institutional market (for example, hospitals, schools, and restaurants). Explain how a firm such as Sara Lee or General Mills might apply the concept of market segmentation to the institutional market. In other words, how would you segment the institutional market if you were Sara Lee? 0 Chapter 4 Segmenting the Business Market and Estimating Segment Demand © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 12e The benefits of and requirements for segmenting the business market The potential bases for segmenting the business market A procedure for evaluating and selecting market segments The role of market segmentation in the development of business marketing strategy Chapter Outline 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. A process for estimating demand in each market segment Specific techniques to effectively develop a forecast of demand Chapter Outline (continued) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Selecting a well-defined group of potentially profitable customers Developing a distinctive value proposition that meets these customers’ needs better than their competitors Focusing marketing resources on acquiring, developing, and retaining profitable customers Key to Successful High-Growth Companies © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Commercial enterprises, institutions, and government Each sector has many segments Each segment has unique needs and requires a unique marketing strategy Business Sectors 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Group of present or potential customers with some common characteristic which is relevant in explaining their response to a supplier’s marketing stimuli Characteristics and needs of each segment define the direction and focus of the marketing program Segmentation involves identifying groups of customers that are large and unique enough to justify a separate marketing strategy Market Segment © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Measurability Accessibility Substantiality Responsiveness Criteria for Evaluating the Desirability of Potential Market Segments © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Attunes marketer to unique needs of customer segments Focuses product development efforts Develops profitable pricing strategies Selects appropriate distribution channels Provides valuable guidelines to allocate marketing resources Market Segmentation Benefits © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Figure 4.1 - Classifying Commercial Enterprises © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Macrosegmentation Centers on the characteristics of the buying organization and the buying situation Microsegmentation Focuses on the characteristics of decision-making units within each macrosegment Requires a higher degree of market knowledge Classifications for Commercial Markets © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Identify meaningful macrosegments Divide the macrosegments into microsegments Two-Stage Approach to Business Market Segmentation © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Useful to partition the market by size of potential buying organization Usage rate - Buyers are classified on a continuum ranging from nonuser to heavy user Structure of the procurement function influences the degree of buyer specialization, criteria emphasized, and composition of the buying center Macrolevel Bases 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Centralized buyers - Stress on long-term supply availability and the development of a healthy supplier complex Decentralized buyers - Tend to emphasize short-term cost efficiency Centralized and Decentralized Buyers © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Specific industrial good can be used in different applications and, as a result, market can be divided by specific use applications NAICS system and related information sources are valuable for this purpose Product/Service Application 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Product’s economic value to the user relative to a specific alternative in a particular application Frequently varies by customer application Value in Use 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Buying organizations are classified as new-task, straight rebuy, or modified rebuy organizations Marketing strategy is defined by one of the following Position of the firm in the procurement decision process Firm’s location on the buying situation continuum Purchasing Situation 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 16 Table 4.1 - Selected Macrolevel Bases of Segmentation Variables Illustrative Breakdowns Characteristics of Buying Organizations Size (the scale of operations of the organization) Small, medium, large; based on sales or number of employees Geographical location USA, Asia Pacific, Europe, Middle East, and Africa Usage rate Nonuser, light user, moderate user, heavy user Structure of procurement Centralized, decentralized © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Table 4.1 - Selected Macrolevel Bases of Segmentation (continued) Variables Illustrative Breakdowns Product/Service Application NAICS category Varies by product or service End market served Varies by product or service Value in use High, low Characteristics of Purchasing Situation Type of buying situation New task, modified rebuy, straight rebuy Stage in purchase decision process Early stages, late stages © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Table 4.2 - Selected Microlevel Bases of Segmentation Variables Illustrative Breakdowns Key criteria Quality, delivery, supplier reputation Purchasing strategies Single source … multiple sources Structure of decision-making unit Major decision participants (for example, purchasing manager and plant manager) Importance of purchase High importance … low importance Organizational innovativeness Innovator … follower © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Table 4.2 - Selected Microlevel Bases of Segmentation (continued) Variables Illustrative Breakdowns Personal characteristics Demographics Age, educational background Decision style Normative, conservative, mixed mode Risk Risk taker, risk avoider Confidence High … low Job responsibility Purchasing, production, engineering © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Key Criteria 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Product quality Prompt and reliable delivery Technical support Price Supply continuity Supplier profiles Programmed buyers: Neither price or service sensitive Relationship buyers: Value partnerships and are not price sensitive Transactional buyers: Price is important but considerations are made to service, depending upon importance of product Bargain hunters: Price sensitive but always relative to importance of product Types of Buyers 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Customer Segments 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Innovation-focused customers Committed to being the first in the market with new products and technologies Customers in fast-growing markets Constantly under pressure from competitors in fast-growth markets Customers in highly competitive markets Have mature products in highly competitive markets Microsegments can be classified according to their purchasing strategies Some buyers have several suppliers and give each a healthy volume of business Some buyers need an assured supply, giving most of their business to a few suppliers Purchasing Strategies 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Importance of purchase Appropriate when product is applied in various ways by various customers Organizational innovativeness Some organizations innovate more and thus are more willing to purchase new industrial products Other Microsegments 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Personal characteristics Research is needed on segmentation based on individual characteristics to explore its potential New products When new products are introduced, marketers may need to approach new influencers versus traditional buyers Other Microsegments (continued) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Approach that treats an individual account as a market Ensures that marketing and sales are fully focused on a target client’s most important business issues Work collaboratively to create value propositions Account-Based Marketing (ABM) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Estimating demand within selected markets is vital to marketing management Forecasting demand represents probable sales and takes into account: Potential business Level and type of marketing effort demanded Estimating Demand 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Sales forecasts are critical to a smooth operation throughout the supply chain Timely forecasts allow supply chain members to effectively coordinate their efforts and share in the benefits Supply Chain Links 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Used to: Distribute inventory within the supply chain Manage stock at each level Schedule resources at all levels Provide material, components, and service to a manufacturer Accurate forecasts go hand-in-hand with good business practices throughout the supply chain Sales Forecast Data 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Qualitative techniques - Called management judgment or subjective techniques Rely on informed judgment and rating schemes Include the executive judgment method, the sales force composite method, and the Delphi method Quantitative techniques - Called systematic or objective forecasting Offers time series and regression or causal methodologies Methods of Forecasting Demand © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Combines and averages top executives’ estimates of future sales Easy to apply and understand Limitations Does not systematically analyze cause-and-effect relationships New executives may have difficulty making reasonable forecasts as there is no established formula for deriving estimates Qualitative Method: Executive Judgment © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Difficult to asses the accuracy of the method Produces accurate forecasts when: They are made frequently and repetitively Environment is stable Linkage between decision, action, and feedback is short Qualitative Method: Executive Judgment (continued) © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Sales force knows their customers, markets, and competition, and they can estimate the sales volume effectively Sales force’s involvement in forecasting process helps them understand how the forecast is derived and boosts their incentives to achieve desired sales levels Composite forecast is attained by combining the sales estimates from all salespeople Qualitative Method: Sales Force Composite 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Benefits Ability to draw on sales force knowledge about markets and customers Executed with relative ease at minimal cost Limitations Does not involve systematic analysis of cause and effect Reliance on informed judgment and opinions Overestimation of the forecast to look good Sales Force Composite 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Opinions of a panel of experts on future sales are converted into an informed consensus through a highly structured feedback mechanism Process involved Written opinions about the likelihood of some future event are sought Responses to the first questionnaire are used to produce a second one Qualitative Method: Delphi Method 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Analyst assembles, clarifies, and consolidates information for dissemination in the succeeding round Generally applied to long term forecasting of demand Suitable for new products or for situations that are not well suited for quantitative analysis Difficult to measure the accuracy of the estimates Qualitative Method: Delphi Method (continued) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Uses historical data ordered chronologically to project the trend and growth rate of sales Past patterns can be applied to the future Time series of sales may include trends, seasonal, cyclical, and irregular patterns Well suited for short range forecasting Quantitative Methods: Time Series 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Identifies factors that have affected past sales and implements them in a mathematical model Forecast is derived by: Projecting values for each of the factors in the model Inserting these values into the regression equation Solving for expected sales Reliable for intermediate forecasts Quantitative: Regression or Causal Analysis 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. One individual in the firm is given the responsibility for coordinating the forecasting process with functional managers across the firm Parties who may influence sales performance will participate directly in the demand estimation process Results in a very accurate forecast of demand due to the intensive sharing of information Collaborative Planning Forecasting and Replenishment © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 0 Chapter 3 Customer Relationship Management Strategies for Business Markets © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 12e The patterns of buyer–seller relationships in the business market The factors that influence the profitability of individual customers A procedure for designing effective customer relationship management programs The critical determinants of relationship marketing effectiveness Chapter Outline 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Created by demonstrating special skills in: Managing relationships with key customers Developing innovative strategies with alliance partners Collaborative Advantage 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Figure 3.1 - Buyer–Seller Relationships © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Transactional exchange: Centers on timely exchange of basic products at highly competitive market prices These transactions are autonomous Collaborative exchange: Features close information, social, operational linkages, and mutual commitments Operational linkages: Reflect how much the systems, procedures, and routines of the buying and selling firms have been connected to facilitate operations Types of Relationships 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Fall between transactional and collaborative exchanges Selling firms shift from attracting customers to keeping them by: Understanding customer’s needs and changing requirements Tailoring the firm’s offerings to those needs Providing continuing incentives that promote repeat business Value-Adding Exchanges 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Figure 3.2 - Characteristics of Relationships © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Include investments and risk of exposure Organizational buyers invest in their relationships with suppliers Investments include: Money People Training costs Equipment Procedures and processes Switching Costs 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Customers perceive more risk when they: Purchase products important to their operations Buy from less established suppliers Buy technically complex products Switching Costs (continued) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Strong and lasting commitments are recommended Marketers can invest resources to secure commitments and directly assist customers with planning Regular visits to the customer by executives and technical personnel strengthen the relationship Operational linkages and information-sharing mechanisms should be designed to keep product and service offerings aligned with customer needs Collaborative Customers © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Service support and personal interaction Supplier’s know-how and its ability to improve a customer’s time to market Product quality and delivery performance Cost savings associated with the acquisition process and from operations Value Drivers in Collaborative Relationships 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Display less commitment to a particular supplier and can easily switch part or all of the purchases from one vendor to another Marketer needs to offer an immediate, attractive combination of product, price, technical support, and other benefits Transaction Customers 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Value created has to exceed the cost of creating and delivering the customized features and services Measured by higher margins and higher sales volumes Marketer needs to understand the drivers of customer profitability Can allocate marketing resources and take action to convert unprofitable relationships into profitable ones Differentiation Strategy 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Illuminates activities associated with serving a particular customer and how these activities are linked to revenues and the consumption of resources Link customer transaction data from customer relationship management (CRM) systems with financial information Provides marketing managers with an accurate picture of the gross margins and cost-to-serve components Activity-Based Costing (ABC) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 0 Figure 3.3 - Whale Curve © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. High-cost-to-serve customers Low-cost-to-serve customers Presale costs Extensive presales support required (i.e., technical and sales resources) Limited presales support (i.e., standard pricing and ordering) Production costs Order custom products Small order quantities Unpredictable ordering Pattern manual processing Order standard products Large order quantities Predictable ordering cycle Electronic processing Post-sale service costs Extensive post-sales support required (i.e., customer training, installation, technical support) Limited post-sales support Characteristics of High- versus Low-Cost-to-Serve Customers © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Determined by looking at the cost/profitability structure with the plan to: Keep profitable customers Convert unprofitable ones to profitability Fire those who are not profitable Customer Profitability 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Figure 3.4 - Profit Lens © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Marketing manager should: Explore possible ways to reduce the cost of activities associated with serving these customers Direct attention to the customer actions that contribute to higher selling costs Managing Unprofitable Customers 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Should occur only when the customer resists all attempts to convert the unprofitable relationship into a profitable one Let customers fire themselves Refuse to grant discounts and reduce or eliminate marketing and technical support Customer divestment Must be exercised sparingly Firing the Customer 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Cross-functional process for achieving: Continuing dialogue with customers across all contact and access points Personalized service to the most valuable customers Increased customer retention Continued marketing effectiveness Customer Relationship Management (CRM) 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Enterprise software systems that integrate sales, marketing, and customer service information Synthesize information from all of a company’s contact points to: Support later customer interactions Inform market forecasts, product design, and supply chain management Yields positive returns when a firm has a customer strategy CRM Systems 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Steps in Successful Customer Strategy 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 23 Acquiring the right customer Crafting the right value proposition Instituting the best processes Motivating employees Learning to retain customers Customer relationship management places importance on: Stock of current and potential customer relationships Collective knowledge of how to select, initiate, develop, and maintain profitable relationships with these customers Customer portfolio management - Process of creating value across a firm’s customer relationships Acquiring the Right Customer 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Value proposition: Encompasses the products, services, ideas, and solutions that a business marketer presents To advance the performance goals of the customer organization Marketer can gain an advantage over rivals by adding a justifier to the value proposition Best-practice suppliers base their value proposition on their target market’s needs Crafting the Right Value Proposition 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Figure 3.5 - Bandwidth of Strategies © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Offering should include the bare-bones-minimum number of services valued by all customers in a particular market segment Optional services need to be created that add value by reducing costs or improving the performance of a customer’s operations Creating Flexible Service Offerings 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Sales force plays a key role in relationship-management Technical service and customer service personnel assume implementation roles Requires effective organization and deployment of personal selling effort and close coordination with supporting units Through careful management and screening, transactional accounts can progress to partnerships Instituting Best Processes 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Responsiveness of the supplier in meeting the firm’s needs Product quality Broad product line Delivery reliability Knowledgeable sales and service personnel Performance Attributes that Influence Customer Satisfaction © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Dedicated employees are the key to a successful customer relationship strategy Employee loyalty is earned by: Investing in training and development Providing challenging career paths to facilitate professional development Aligning employee incentives to performance measures Motivating Employees 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Reasons to retain loyal customers Established customers buy more Cost of serving loyal customers declines Less expensive than acquiring new customers Ways to retain customers Provide superior value to ensure high satisfaction Nurture trust and developing mutual commitment Help customers grow their business, if possible Learning to Retain Customers 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Identifying and cultivating customers that offer the most growth potential by: Estimating current percent share of wallet the firm has attained Pursuing opportunities to increase share Projecting and enhancing customer profitability Pursuing Growth from Existing Customers 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Some relationship-building efforts fail as expectations of the parties do not weave together By isolating customer needs and the costs of augmented service features, marketer is equipped to match their product offerings to the needs Goal of a relationship is to enable the buyer and seller to maximize joint value Business marketers should continually update the value of their product and relationship offering Evaluating Relationships 0 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Relationship quality: High-caliber relational bond characterized by commitment and trust Relationship breadth: Number of interpersonal ties that connect the relationship Relationship composition: Decision-making capability of relational contacts at the customer firm Drivers of Relationship Marketing Effectiveness © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 34 Relationship strength: Ability of the buyer–seller relationship to withstand stress and/or conflict Relationship efficacy: Ability of an interfirm relationship to achieve desired objectives Drivers of Relationship Marketing Effectiveness (continued) © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 35 Figure 3.6 - Model of Interfirm Relationship Marketing © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. Relationship Marketing (RM) Programs © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 37 Social RM programs Use social engagements, personalized communication that develop bond and highlight the customer’s special status Structural RM programs Designed to increase productivity and/or efficiency for customers through targeted investments Financial RM programs Provide economic benefits to increase customer loyalty Represents the customer’s desire to engage in strong relationships with a current or potential supplier RM investments improve if business marketers are able to target customers on the basis of their RO rather than size Relationship Orientation (RO) © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.