MARKETING STRATEGY
O.C. FERRELL • MICHAEL D. HARTLINE
5
Managing Customer
Relationships
Understanding Customer Behavior
• The Consumer Buying Process:
– Depicts the possible range of activities that may
occur in making purchase decisions
– Involves considering which product to buy AND
considering where to buy it
– Choice of a suitable merchant may take
precedence over the choice of a specific product
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The Consumer Buying Process
Exhibit 5.1
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Need Recognition
• Need:
– Occurs when the consumer’s current level of
satisfaction does not equal their desired level of
satisfaction.
• Want:
– A consumer’s desire for a specific product that
will satisfy the need.
• Demand:
– When the want for a specific product is backed
up by the customer’s ability and willingness to
pay for the product.
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Targeting Consumer Wants - Sportiness
5-5
Discussion Question
• Many people criticize marketing as being manipulative
based on the argument that marketing activities create
needs where none previously existed. Marketers that are
often implicated include the makers of SUVs, tobacco
products, diet programs, exercise equipment, and luxury
products. Also, any marketer that targets children or the
elderly is often seen as manipulative. Are consumers
being manipulated into believing that they need certain
products, or are marketers creating products that fulfill
previously unmet needs? Explain.
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Information Search (1 of 2)
• Marketing stimuli can stimulate a desire for
information:
– Passive Information Search
– Active Information Search
• Sources of information:
– Internal Sources
– Personal Sources
– External Sources
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Information Search (2 of 2)
• Time, effort and expense dedicated to information
search depends on:
– Degree of risk involved in the purchase
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Financial risk
Social risk
Emotional risk
Personal risk
– Amount of expertise with the product category
– Actual cost of the search
• Evoked set:
– A narrowed down set of alternatives that the customer is
considering
5-8
Evaluation of Alternatives
• Customers evaluate products as bundles of attributes
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Brand attributes
Product features
Aesthetic attributes
Price
• Customers place different levels of importance on
attributes
• Important considerations in the evaluation stage:
– Products must be in the evoked set
– Consumers’ choice criteria must be understood
– Marketing programs must be designed to influence consumers’
opinions about product or brand image
5-9
Purchase Decision
• Purchase intention and the act of buying are
distinct concepts
• Potential intervening factors between intention
and buying (car example):
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Unforeseen circumstances
Angered by the salesperson or sales manager
Unable to obtain financing
Customer changes mind
• Key issues in the purchase decision stage:
– Product availability
– Possession utility
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Postpurchase Evaluation
• Four possible outcomes in the postpurchase stage:
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(1) Delight
(2) Satisfaction
(3) Dissatisfaction
(4) Cognitive Dissonance
• Cognitive dissonance is more likely to occur when:
– Dollar value of the purchase increases
– Opportunity cost of rejected alternatives is high
– Purchase decision is very involving or emotional
• Firm’s ability to manage dissatisfaction and cognitive
dissonance is:
– A key to creating customer satisfaction
– A major influence on word-of-mouth communication
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Factors Affecting the
Consumer Buying Process
• Decision-Making Complexity
– High/Low Complexity
• Individual Differences
– Demographics, perceptions, motives, interests,
attitudes, opinions, lifestyles, etc.
• Social Influences
– Culture, subculture, social class, reference
groups, opinion leaders, etc.
• Situational Influences
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Common Situational Influences
Exhibit 5.2
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Understanding Business
Buying Behavior
• Four types of Business Markets:
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Producer markets (a.k.a. commercial markets)
Reseller markets
Government markets
Institutional markets
• Unique Characteristics of Business Markets
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The Buying Center
Hard and Soft Costs
Reciprocity
Mutual Dependence
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The Business Buying Process
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(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
5-15
Managing Customer Relationships
• Customer Relationship Management
(CRM):
– “A holistic process of identifying, attracting,
differentiating, and retaining customers.”
• CRM Stakeholders:
– Employees
– Supply Chain Partners
– Lateral Partners
– Customers
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Strategic Shift from Acquiring
Customers to Maintaining Clients
Exhibit 5.3
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Discussion Question
• One of the common uses of CRM in
consumer markets is to rank customers on
profitability or lifetime value measures.
Highly profitable customers get special
attention, while unprofitable customers get
poor service or often “fired.” What are the
ethical and social issues involved in these
practices? Could CRM be misused? How
and why?
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Developing Relationships
in Consumer Markets
• Increase share of customer rather than
market share
• Serve current customers rather than focus
on acquiring new customers
• The 80/20 Rule:
– 20% of the customers provide 80% of the
profit
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Stages of Customer
Relationship Development
Exhibit 5.4
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“The Relationship People”
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Developing Relationships
in Business Markets
• Relationships must be built on win-win
strategies
• Changes in business relationships:
– A change in buyers’ and sellers’ roles
– An increase in sole sourcing
– An increase in global sourcing
– An increase in team-based buying decisions
– An increase in productivity through better
integration
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Quality and Value: (1 of 2)
The Keys to Developing 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
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Components of the
Total Product Offering
Exhibit 5.5
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Marketing Strategy in Action
• This Mercedes ad
illustrates the power of
the Mercedes brand in
making its products
instant classics.
• What other name brands
can you think of that
exude quality? What
separates these firms from
other companies making
similar products?
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Quality and Value: (2 of 2)
The 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
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Customer Satisfaction:
Retaining Customers Over the Long Term
• Satisfaction vs. Quality vs. Value
– Expectations
• Customer Satisfaction and Customer Retention
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Understand what can go wrong
Focus on controllable issues
Manage customer expectations
Offer satisfaction guarantees
Make it easy for customers to complain
Create loyalty programs
Make customer satisfaction measurement an ongoing
priority
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Examples of Customer
Satisfaction Guarantees
Exhibit 5.7
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Customer Satisfaction Metrics
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Lifetime Value of a Customer (LTV)
Average Order Value (AOV)
Customer Acquisition/Retention Costs
Customer Conversion Rate
Customer Retention Rate
Customer Attrition Rate
Customer Recovery Rate
Referrals
Viral Marketing
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Discussion Question
• Why do you think many firms do such a
poor job of understanding the needs, wants,
and expectations of their customers? Do
they buy into the “better mousetrap”
philosophy and believe that quality is the
only necessary requirement of maintaining
customer relationships? Explain.
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