Title: Marketing: Real People, Real Choices by Solomon and Stuart
1MarketOrientedBusinesses
2Every Business is at Risk for Survival
- The only thing that is constant is change
- Consumers will change in needs, demographics,
lifestyle, and consumption behavior - Competitors will change as new technologies
emerge and barriers to foreign competition shift - The environment will change as economic,
political, social, and technological forces shift
3High Cost of Losing a Customer
1. In the average business, for every customer
who bothers to complain, there are _____ others
who remain silent. 2. The average wronged
customer will tell _____ to _____ people (Over
_____ percent will tell more than 20 people.)
4High Cost of Losing a Customer
3. ______ percent of unhappy customers will
never purchase goods or services from you again.
4. If you make an effort to remedy customers
complaints, _____ percent to _____ percent of
them will stay with you.
5High Cost of Losing a Customer
5. It costs about ___ times as much to attract a
new customer as it costs to keep an old one.
6Fundamental Truths
Without customers, there is no
business. anonymous The sole purpose of a
business is to create a customer. Peter
Drucker The customer is always right, but we
get to pick who is a customer anonymous
7Satisfied Customers
- Remain loyal longer
- Buy more (new products and upgrades)
- Spread favorable word-of-mouth
- Exhibit more brand loyalty (less price sensitive)
- Offer feedback
- Reduce transaction costs
8Satisfaction Scale
- 0 Very Dissatisfied
- Moderately Dissatisfied
- Slightly Dissatisfied
- Neither
- Slightly Satisfied
- Moderately Satisfied
- Very Satisfied
Assume an average of 4.32. Is that good?
9Figure 1.3Customer Satisfaction A Wide Angle
View
10Classifying Customers
- Core Customers (Profitable and Loyal)
- At-Risk Customers (Profitable but Not Loyal)
- Non-Profit Customers (Not Profitable but Loyal)
- Spinners (Not profitable and Not Loyal)
11Characteristics of Market-Oriented Businesses
- Customer focused
- Competitor oriented
- Team oriented
12Building a Market Orientation
- Marketing Knowledge
- Marketing Leadership
- Employee Satisfaction
13Figure 1.6Customer Retention Tree
14Fig. 1.7, Profit Impact of 75 Percent Customer
Retention
Retained Customer Performance Customers
Number of Customers 150,000 (customer base of
200,000 X .75)
Revenue per Customer 800 Given
Sales Revenue (millions) 120.0 (150,000
retained customers X 800 rev./cust)
Variable Cost per Customer 400 Given
Margin per Customer 400 (800 revenue 400
variable cost)
Tot. Contribution (millions) 60.0 (150,000
retained customers X 400 margin)
Mkt. Expense per Cust. 60 Given
Tot. Mkt. Expense (millions) 9.0 (150,000
retained cust X 60 mkt exp/cust)
Net Mkt. Contr. (millions) 51.0 (60 tot
contribution - 9.0 tot mkt exp)
15Fig. 1.7, Profit Impact of 75 Percent Customer
Retention
Retained Lost New Overall Customer
Performance Customers Customers Customers Performa
nce
1 Number of Customers 150,000 50,000 50,000 250,00
0
2 Revenue per Customer (G) 800 200 400
3 Sales Revenue (millions)(1x2) 120.0 10.0 20.0
150.0
4 Variable Cost per Customer (G) 400 150 300
5 Margin per Customer (2-4) 400 50 100
6 Tot. Contribution (millions)(1x5) 60.0 2.5 5.
0 67.5
7 Mkt. Expense per Customer (G) 60 100 300
8 Tot. Mkt. Expense (millions)(1X7) 9.0 5.0 15.
0 29.0
9 Net Mkt. Contr. (millions)(7-8) 51.0 (2.5) (1
0.0) 38.5
10 Operating Exp. (millions)(G) 30.0
11 Net Profit before Tx (millions)(9-10) 8.5
12 Return on Sales (11/3) 5.67
16Fig. 1.8, Profit Impact of 5 Percent Improvement
in Customer Retention
Retained Lost New Overall Customer
Performance Customers Customers Customers Performa
nce
Number of Customers 160,000 40,000 40,000 240,000
Revenue per Customer 800 200 400 Sales Revenue
(millions) 128.0 8.0 16.0 152.0 Variable
Cost per Cust. 400 150 300 Margin per
Customer 400 50 100 Tot. Contribution
(millions) 64.0 2.0 4.0 70.0 Mkt. Expense
per Cust. 62.5 100 300 Tot. Mkt. Expense
(millions) 10.0 4.0 12.0 26.0 Net Mkt. Contr.
(millions) 54.0 (2.0) (8.0) 44.0 Operating
Exp. (millions) 30.0 Net Profit before Taxes
(millions) 14.0 Return on Sales 9.2
17Figure 1.9Customer Life Expectancy and Customer
Retention
18Figure 1.10Customer Lifetime Value