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A survey conducted by the Chartered institute of marketing found that only 20%
of companies in the FTSE 100 had someone with a marketing background on
their board of directors (www.cim.co.uk (2003) “Hard edged marketing”, agenda
paper on the chartered institute of marketing’s website.
The failure of companies to give customers what they want is creating new
opportunities for effective marketers. Recognising a widening gap between
customers’ expectations and service, NatWest Bank, a subsidiary of the Royal
bank of Scotland, has hired an extra 6000 staff so its customers will no longer
have to deal with answering machines(“Banking: love me”, The economist (23.
February 2002) p.34).
Customer value delivery system: the system made up of the value chains of
the company and its suppliers, distributers and ultimately customers, who work
together to deliver value to customers (Kotler 2005).
The company must answer a key question: how do customers make their
choices? (Kotler 2005).
The customers choose the marketing offer that gives them the most value.
(Kotler 2005).
Customers form expectations of value and act upon them (Kotler 2005). They
compare the actual value receive in consuming the product to the value
expected, and this affects their satisfaction and repurchase behaviour.
Customers add value from; product, service, personnel and image = total
customer value (Kotler 2005). The total of these four value factors that a buyer
receives from a marketing offer.
Total customer cost- the total of the all the monetary, time, energy and psychic
costs associated with a marketing offer (Kotler 2005).
Customer delivered value- the difference between the total customer vale and
the total customer cost of a marketing offer- “Profit ” to the customer (Kotler
2005).
Expectations are based on the customer’s past buying experiences. The opinions
of friends and associates, and marketer and competitor information and
promises (Kotler 2005).
Note: Rather than complain most customers switch suppliers (Kotler 2005).
One out of every four purchases results in consumer dissatisfaction, but fewer
than 5 % of dissatisfied customers complain (kotler 2005).
This involves researchers posing as buyers. These ghost shoppers can even
present specific problems in order to test whether the company’s personnel
handle difficult situations well. (Kotler 2005)
Companies should contact customers who have stopped buying or who have
switched to a competitor, to learn why this has happened. Conducting exit
interviews (Kotler 2005).
2000)- David walters, ‘Implementing value strategy through the value chain’,
Management Decision, 38,3 (2000), pp. 160-78
Value chain- A major tool for identifying ways to create more customer value
(Kotler 2005).
The value chain breaks the firm into nine value- creating activities in an effort to
understand the behaviour of costs in the specific business and the potential
sources of competitive differentiation. The nine value-creating activities include
5 primary activities and four support activities.
The support activities occur within each of these primary activities, whereby the
company pulls in its resources from all departments. (Kotler 2005).
For a long time, firms have focussed on the product as the primary means of
adding value, but customer satisfaction also depends upon other stages of the
value chain (Jose M.M Bloemer 1992)- Jose M. M Bloemer and Jos G.A.M Lemmick,
‘the importance of customer satisfaction in explaining brand and dealer loyalty’,
Journal of marketing management, 8, 4 (1992), pp. 351-64
Under the value-chain strategy concept, the firm should examine its costs and
performance in each value-creating activity to look for improvements. It should
also estimate its competitors costs and performances as benchmarks. To the
extent that the firm can perform certain activities better than than its
competitors, it can achieve a competitive advantage. (Kotler 2005)
The firm’s success depends not only on how well a department does its work ,
but also on how well the activities of various departments are coordinated.
Too often individual departments maximise their own interests rather than
those of the whole company and the customer. Individual departments
have erected walls that impede the delivery of quality to the customer.
(Kotler 2005)
Companies used to view their suppliers and distributers as cost centres and, in
some cases, as adversaries. However now they are selecting partners
carefully and working out mutually profitable strategies. Increasingly in
today’s marketplace, competition no longer takes place between
individual competitors. Rather it takes place between the entire value
delivery systems created by these competitors. (Kotler 2005)
Work with other departments in managing core business processes and how to
build better external partnerships.(kotler 2005)
Internet companies are willing to pay a high price for prospective customers
because they hope to turn them into profitable customers. (Kotler 2005)
High customer churn involves higher costs than if a company retained all its
customers and acquired no new ones. (Kotler 2005)
The goal of relationship marketing is to deliver long term value to customers and
the measure of success is long term customer satisfaction. It involves building
relationships at many levels, economic, social, technical, and legal- resulting in
high customer loyalty (Kotler 2005).
Proactive- the salesperson or others in the company phone the customer from
time to time with suggestions about improved product use or helpful new
products.
Partnerships- the company works continuously with the customer and with other
customers to discover ways to deliver better value.
Another way in which to build strong customer relations is via the addition of
benefits (social or financial), via the use of air mile loyalty cards, where
customers may choose to pay more, in order to add miles together so as to
eventually receive a free ticket.
Through CRM companies such as MVC the music store are able to know what
they have, brought in and sold so as to target specific customers on promotions
as they know that they exist and how many there are, so via news were able to
attract customers who like country music over their promotions during the
Nashville country music festival. And Ping the golf equipment manufacturer have
customer specific data on products sold and brought in or manufactured in their
data-warehouse with specific details such as grip size and assembly instructions,
so all a customer has to do is call in and give then their serial number and ping
will ship the exact club to them within 2 days, when otherwise this process would
take a few weeks.(Kotler 2005)
Transaction marketing is good for customers with short time horizons where
they may switch suppliers due to the products in the market being more or less
undifferentiated...DELL (Kotler 2005)
Relationship marketing can be beneficial in the case of customers with long time
horizons, as the switching costs are quite high. (Kotler).
With the current recession prevailing market, there are three types of end consumers,
these are; “flight to thrifty”, “flight to quality”, “flight to provenance”. (Nikala Lane, lecture
5, 2009) Flight to thrifty is used to describe those customers, who have not been directly
affected by the recession. They develop the habit of resorting to cheaper forms of suppliers,
an example being; grocery shopping at Aldi. Flight to quality is used to describe those
customers who may have been affected by the recession but choose to treat themselves, and
so resort to Waitrose and Sainsbury. Finally flight to provenance describes those customers
who have weathered the recession and continue to shop at delicatessens.
A big company such as Tesco, which makes a strong effort in order to identify its
customer requirements via means such as their RFID, are seen to, in the near future, to be
stuck in the middle, when it comes to the post recession customer base. The consumers have
diversified on price, and quality, those choosing price shop at aldi, whilst those choosing
quality choose waitrose or their delicatessens.
SCM, Nigel
F peircy and Nikala Lane, Strategising the sale organization, oxford university
press, 2009.
SCM- Nikala
Lane.
Customer Relationships
Low Hig
h
Relationship
costs