Chapter 18 Competitive Strategies Attracting Retaining and Growing

Chapter 18 Competitive Strategies: Attracting, Retaining, and Growing Customers 1

What is Relationship Marketing? Relationship Marketing is the Process of Creating, Maintaining, and Enhancing Strong, Value. Laden Relationships With Customers and Other Stakeholders. 2

Customer Relationship Marketing Why the new emphasis on retaining and growing customers? n n n Changing demographics, more sophisticated competitors, and overcapacity in many industries means fewer customers. Costs five times as much to attract a new customer as to keep a current one satisfied. Losing a customer means losing the entire stream of purchases over a lifetime of patronage - the customer lifetime value. 3

Customer Delivered Value (Fig. 18. 1) 4

Customer Satisfaction Expectations are Based on Customer’s Past Buying Experiences, the Opinions of Friends, & Marketer and Competitor Information and Promises. Product Falls Short of Expectations Product Matches Expectations Customer is Dissatisfied Customer is Satisfied Product Exceeds Expectations Customer is Highly Satisfied or Delighted! 5

Customer Satisfaction Today’s most successful companies are raising expectations – and delivering performance to match. These companies embrace total customer satisfaction. Firm that seeks total customer satisfaction doesn’t have to attempt maximum customer satisfaction. Purpose of marketing is to generate customer value profitably – offer customer satisfaction without sacrificing profits. 6

Customer Loyalty and Retention Highly satisfied (delighted) customers produce benefits: n n They are less price sensitive, They remain customers longer, They talk favorably about the company and products to others. Tremendous difference between the loyalty of satisfied customers and completely satisfied customers. Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty. 7

Building Lasting Customer Relationships Financia l Benefits i. e. Frequenc Social y Benefits Marketing i. e. Programs Learning Individua Structu l Customer ral Ties ’s Needs i. e. &Supply Wants Custome rs With Special Marketing Tools to Build Stronger Bonds With Consumers 8

Customer-Product Profitability Analysis (Fig. 18. 3) 9

Discussion Connections More than three decades ago, Peter Drucker observed that a company’s first task is “to create customers”. How to the following companies create customers: n n Intel, Delta Airlines, Your university or college, American Online 10

Customer Value-Delivery Network Customer Producer Delivery Order Retailer Vendor Raw Material Supplier 11

Total Quality Marketing Japan was the first country to award a national quality prize, the Deming prize. Mid-1980’s, the U. S. established the Malcolm Baldridge National Quality Award. Europe has developed the ISO 9000 which is an exacting set of quality standards. Total quality has become a truly global concern. 12

Total Quality Marketing Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Marketers play a major role in helping their companies define & deliver high quality products and services to target customers: n n Must correctly identify the customers’ needs and requirements and communicate this to product designers, Marketing must deliver each marketing activity to high quality standards. 13

Steps in Analyzing Competitors (Fig. 18. 4) Identifying the company’s competitors Assessing competitor’s objectives, strategies, strengths and weaknesses, and reaction patterns Selecting which competitors to attack or avoid 14

Basic Competitive Strategies Overall Cost Leadership Focus Differentiation Middle of the Road 15

Competitive Strategies: Value Disciplines Companies Gain Leadership Positions by Delivering Superior Value to their Customers Through These Strategies: Operational Excellence Customer Intimacy Product Leadership 16

Competitive Marketing Strategies Firms Competing in a Given Target Market Differ in their Objectives and Resources so May Choose the Following Forms: 17

Competitive Marketing Strategies Firm With the Largest Market Share Expand the Total Market Protecting Market Share Expanding Market Share Runner-Up Firms that Fight to Increase Market Share Attack the Market Leader Avoid the Market Leader Attack Other Firms Acquire Smaller Firms 18

Competitive Marketing Strategies Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Follow Closely Follow at a Distance Firms that Serve Small Segments Not Pursued by Other Firms End-User Specialist Geographic Market Specialist Customer-Size Specialist Quality. Price Specialist Service Specialist 19

Balancing Customer and Competitor Orientations Customer-Centered Competition -centered No No Yes Product Orientation Competitor Orientation Yes Customer Orientation Market Orientation 20

Review of Concept Connections Discuss customer value and satisfaction and how companies attract, retain, and grow profitable customers. Explain the roles of the company value chain, valuedelivery network, and total quality in delivery of customer value and satisfaction. Discuss the need to understand competitors as well as customers through competitor analysis. Explain the fundamentals of competitive marketing strategies based on creating value for customers. Illustrate the need for balancing customer and competitor orientations in becoming a truly marketcentered organization. 21