Managing Customer Relationships

1
APPLIED MARKETING MANAGEMENT
5
Managing Customer Relationships
2
Why Are Marketers Concerned with Understanding
the Buying Behaviors of Consumers and
Organizations?

• This information provides the foundation for all
  marketing decisions relative to a particular
  market.
• It is the basis for forming ongoing relationships.

3
The Consumer Buying Process
Exhibit 5.1
4
Need Recognition

• Needs motivate behavior and are experienced when
  there an individuals current state is less than
  desired.
• Maslows need hierarchy illustrates the prepotent
  range of human needs.
• Physiological air, water, food
• Safety shelter from physical, social and
  psychological danger
• Social be accepted as part of a group
• Esteem distinguish oneself from a group
• Self Actualization max out your abilities in an
  area
• What classes of products appeal to each need
  level?

5
Wants Demand

• Wants
• How a person chooses to satisfy a need. Is often
  reflected in a customers desire for a specific
  product that will satisfy the need. Thus, wants
  are subsequent to needs and more numerous.
• Demand
• When the want for a specific product is backed by
  the customers ability and willingness to pay for
  the product.

6
Consumer Wants - Sportiness
7
Information Search (1 of 2)

• Once activated, needs motivate us to search for
  solutions
• Passive Information Search
• Active Information Search
• Sources of information
• Internal Sources
• Personal Sources
• External Sources

8
Information Search (2 of 2)

• Time, effort and expense dedicated to information
  search depends on
• Degree of risk involved in the purchase
• Functional risk
• Financial risk
• Social risk
• Emotional risk
• Personal risk
• Amount of expertise with the product category
• Perceived costs/benefits of the search
• Evoked set
• A narrowed down set of alternatives that the
  customer finds acceptable and is considering
  obtaining

9
The Evaluation of Alternatives Involves

• Developing and applying the criteria used in the
  choice process. These criteria can reflect
  aspects of the
• Product, its price, availability and promotion
• Consideration of the type of problem solving
  used.
• E.g., Extensive, Limited, Routine problem solving
• The presence of the following conditions
• Products must be in the evoked set
• Choice criteria must be understood
• Marketing programs should be designed to
  influence customers perceptions of key product
  or brand attributes relative to competing
  products

10
Purchase Decision

• Purchase intention and the act of buying are
  distinct concepts. How do they differ?
• What potential factors may intervene between
  intention and buying ?
• Key issues in the purchase decision stage
• Product availability (Place/Time utility), and
• Financial ability (Possession utility)

11
Postpurchase Evaluation

• Possible outcomes of a purchase
• (1) Delight
• (2) Satisfaction
• (3) Dissatisfaction
• (4) Cognitive Dissonance
• Cognitive dissonance is more likely to occur
• For high involvement purchases
• When the choice among alternatives is difficult
• Firms ability to manage dissatisfaction and
  cognitive dissonance is
• A key to customer retention
• A major influence on word-of-mouth communication

12
Situational Influences on the Buying Process
Exhibit 5.2
13
Organizational Buying Behavior

• Four types of Business Markets
• Producer/Industrial markets
• Reseller markets
• Government markets
• Institutional markets (non-govt service
  providers)
• Unique Characteristics of Business Markets
• The Buying Center
• Hard and Soft Cost considerations
• Reciprocity
• Mutual Dependence (Relational exchange)

14
The Business Buying Process

• (1) Problem Recognition
• (2) Develop Product Specifications
• (3) Vendor Identification and Qualification
• (4) Solicitation of Proposals or Bids
• (5) Vendor Selection
• (6) Order Processing
• (7) Vendor Performance Review

15
Managing On-Going Customer Relationships

• Customer Relationship Management (CRM)
• A holistic process of identifying, attracting,
  differentiating, and retaining customers.
• How does CRM differ from traditional sales
  management techniques?
• It ties into higher-level organizational
  initiatives.
• It is supported by organization-wide systems.
• It extends the customer-sales rep relationship
  into the organization.

16
Strategic Shift from AcquiringCustomers to
Maintaining Clients
Exhibit 5.3
17
Developing Relationshipsin Organizational Markets

• Changes in organizational markets
• The roles of buyers and sellers
• An increase in sole sourcing
• An increase in global sourcing/outsourcing
• An increase in team-based buying decisions
• An increase in productivity through better
  integration
• suggest that relationships must be built on true
  win-win strategies that are regularly reviewed.

18
Quality and Value (1 of 2)Keys to Building
Customer Relationships

• Understanding the Role of Quality
• The core product is not enough
• Supplemental products are critical
• Delivering Superior Quality (four issues)
• Understand customers expectations, needs, and
  wants
• Translate customer research into specifications
  for quality
• Deliver on specifications
• Promise only what can be delivered

19
Components of theTotal Product Offering
Exhibit 5.5
20
Quality and Value (2 of 2)Keys to Developing
Customer Relationships

• Understanding the Role of Value
• A simple formula for value

• A more useful formula for value

• Core Product, Supplemental Product, and
  Experiential Quality
• Monetary and Nonmonetary Costs
• Competing on Value

21
Marketing in Action

• This Mercedes ad illustrates the power of the
  Mercedes brand in making its products instant
  classics.
• How do its customers define value?

22
Customer SatisfactionForging Ongoing Customer
Relationships

• Satisfaction (Actual Outcomes Expected
  Outcomes), (Oliver 1980).
• Where do Expectations come from?
• What is the Actual outcome, from whose
  perspective?
• Customers are Satisfied when the equation 0.
• When its lt 0, Customers are dissatisfied.
• When its gt 0, Customers are delighted.
• Why are both inequalities bad?

23
Examples of CustomerSatisfaction Guarantees
Exhibit 5.7
24
Discussion Question

• Do you think most firms do a poor job of
  understanding the needs, wants, and expectations
  of their customers? Why/Not?
• What are some factors happening in todays
  business environment that indicate the importance
  of building long-term customer relationships?