The Philosophy Of Customer Orientation

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The Philosophy Of Customer Orientation

  1. 2. <ul><li>Customer value. </li></ul><ul><li>customer delivered value is the difference between total customer value and total customer cost. </li></ul>
  2. 3. <ul><li>Total customer value. </li></ul><ul><li>customer expectation from a given product or service. </li></ul>
  3. 4. <ul><li>Total customer cost. </li></ul><ul><li>cost which incur in using a product or service. </li></ul>
  4. 5. The Indian consumer <ul><li>Demographic profile . </li></ul><ul><li>920 million consumers in 1995. </li></ul><ul><li>In 2007 more than one billion consumers.. </li></ul><ul><li>Geographical distribution . </li></ul><ul><li>Diversity in language, religion and social customs. </li></ul>
  5. 6. <ul><li>Religious diversity. </li></ul><ul><li>Linguistic diversity. </li></ul><ul><li>Diversity in dress ,food habits etc. </li></ul><ul><li>Diversity in literacy level. </li></ul><ul><li>Diversity in density of population . </li></ul>
  6. 7. Social class. <ul><li>Social class can be used as a base for market segmentation and is usually “ measured” by a weighted index of several demographic variables such as Education , occupation and income. </li></ul><ul><li>The concept of social class implies a hierarchy in which individuals in the same class generally have the same degree of status, while members of other classes have either higher or lower class. </li></ul>
  7. 8. Social class categories <ul><li>The most general categorization of social class structure can be put under three groups. </li></ul><ul><li>Upper class. </li></ul><ul><li>Middle class. </li></ul><ul><li>Lower class. </li></ul><ul><li>Where as middle class represents the largest proportion of population and is considered as the largest consumption group. </li></ul>
  8. 9. <ul><li>The middle class can be further be divided creating a total of five groups of social class. </li></ul><ul><li>such a division can be more useful to marketers for developing appropriate products and services targeting specific social class consumers. </li></ul><ul><li>Upper class. </li></ul><ul><li>Upper middle class. </li></ul><ul><li>Middle, middle class. </li></ul><ul><li>Lower middle class. </li></ul><ul><li>Lower class. </li></ul>
  9. 10. The upper class. <ul><li>The upper class of most societies is a varied group of individuals who include the aristocracy, the nouveau riches (the new social elite) and the upper-middle class. </li></ul><ul><li>Aristocracy consists of traditional old money families who acquired great wealth and power </li></ul><ul><li>E.g. : maharajas and business people. </li></ul>
  10. 11. The middle class <ul><li>This class consists of primarily white –collar workers at managerial levels. </li></ul><ul><li>E.g. : doctors ,lawyers, medium sized business. </li></ul><ul><li>In India middle class is the largest consuming class. </li></ul>
  11. 12. The lower class. <ul><li>They are poor people and generally represent a sizable population, particularly in the poorer developing countries. </li></ul><ul><li>E.g. : un represent farm workers ,un organized labour , unskilled workers. </li></ul><ul><li>Studies shown that consumers in different social class vary in terms of values product preference and buying habits. </li></ul>
  12. 13. Societal marketing concept.
  13. 14. Societal marketing concept <ul><li>Holds that the organization task is to determine the needs, wants and interests of target markets and to deliver the desired satisfaction more than its competitors in a way that preserves or enhances the consumers and the society's well being. </li></ul>
  14. 15. <ul><li>Societal marketing concept is based on the following premises. </li></ul><ul><li>The marketer has to fulfill the customer demand and also to contribute to the enrichment or quality of life. </li></ul><ul><li>The marketer shall not offer a product to consumers if it is not in the best interests of consumers. </li></ul><ul><li>The marketer will offer long run consumer and public welfare. </li></ul>
  15. 16. <ul><li>Societal marketing concept calls upon marketers to build upon social and ethical considerations . </li></ul><ul><li>Marketers have to balance on </li></ul><ul><li>Profitability. </li></ul><ul><li>Consumer satisfaction. </li></ul><ul><li>Public interest . </li></ul>
  16. 17. <ul><li>E.g. of successful companies using societal marketing concept. </li></ul><ul><li>Ben & jerry </li></ul><ul><li>The body shop. </li></ul>
  17. 18. Societal Marketing Concept <ul><li>Do what is good for society </li></ul><ul><li>Who determines what is good for society? </li></ul><ul><li>Ethics </li></ul><ul><li>Honesty–Trust </li></ul><ul><li>Give back to the community </li></ul>
  18. 19. cause related marketing <ul><li>cause related marketing is a form of corporate philanthropy that links a company’s contributions (usually monetary) to a predesignated worthy cause with the purchasing behavior of consumers. </li></ul>
  19. 20. Relationship marketing.
  20. 21. <ul><li>Aim of building long term relationship with customers, suppliers. </li></ul><ul><li>Marketing network consists of the company and its supporting stakeholders (customers, employees, retailers ) with whom it has built mutually business relationships. </li></ul><ul><li>Rather competition between the companies but with the networks. </li></ul><ul><li>E.g. :Harley Davidson. </li></ul>
  21. 22. Process involved in the customer relationship marketing. <ul><li>Suspects. </li></ul><ul><li>prospects.>disqualified prospects. </li></ul><ul><li>First time customers. </li></ul><ul><li>Repeat customers. </li></ul><ul><li>Clients. </li></ul><ul><li>Members. </li></ul><ul><li>Advocates </li></ul><ul><li>Partners </li></ul>In active or Ex customers
  22. 23. <ul><li>Win back-strategies. </li></ul>
  23. 24. <ul><li>Suspects- everyone who might conceivably buy the product or service. </li></ul><ul><li>Prospects- company looks harder at the suspects to determine who are the most likely people who go for the buy. </li></ul><ul><li>Disqualified prospects – are those people in which the company rejects because of the inability to pay. </li></ul><ul><li>Converts many of qualified prospects to first time customers. </li></ul><ul><li>And then to convert the first time customers to repeat customers. </li></ul>
  24. 25. <ul><li>And the repeat customers when they go for repeated purchase will turn to clients. </li></ul><ul><li>People whom the company treats very specially. </li></ul><ul><li>then the clients to members is the next step in membership program –offers a whole set of benefits to join. </li></ul><ul><li>Members to advocates </li></ul><ul><li>Advocates to partners where the company and the customer work together actively. </li></ul>
  25. 26. <ul><li>Some customers will move out because of dissatisfaction , bankruptcy </li></ul><ul><li>Bring back the customers through customer win back strategies. </li></ul>
  26. 27. Different levels of investment in customer relationship building.
  27. 28. <ul><li>Basic marketing. </li></ul><ul><li>Re-active marketing. </li></ul><ul><li>Accountable marketing. </li></ul><ul><li>Pro-active marketing. </li></ul><ul><li>partnership marketing. </li></ul>
  28. 29. <ul><li>Basic marketing: the sales person simply sell the product. </li></ul><ul><li>Re –active marketing : the sales person sells the product and encourages the customer to call if he or she has questions ,comments or complaints. </li></ul><ul><li>Accountable marketing : sales person phone the customer after sometime sale occur to check the product is meeting expectations. </li></ul>
  29. 30. <ul><li>Pro-active marketing : </li></ul><ul><li>the company sales person contacts the customer from time to time with inviting suggestions and any specific disappointments. </li></ul><ul><li>partnership marketing : </li></ul><ul><li>the company works continuously with the customer to perform better. </li></ul>
  30. 31. Marketing environment
  31. 32. <ul><li>marketing environment comprises of </li></ul><ul><li>Internal marketing environment (micro). (objectives and resources) </li></ul><ul><li>External marketing environment. (macro). </li></ul>
  32. 33. <ul><li>External marketing environment. (macro). consists of </li></ul><ul><li>Socio-cultural environment. </li></ul><ul><li>Economic environment. </li></ul><ul><li>Legal/political environment. </li></ul><ul><li>Competitive environment & technological environment </li></ul>
  33. 34. Environmental scanning.
  34. 35. <ul><li>Environmental scanning is the practice of keeping track of environmental changes that can affect an organization and its markets. </li></ul>
  35. 36. <ul><li>These changes can occur in all dimensions of external environment- </li></ul><ul><li>Economic. </li></ul><ul><li>Political. </li></ul><ul><li>Legal. </li></ul><ul><li>Social. </li></ul><ul><li>Technological & competitive. </li></ul>
  36. 37. economic income inflation recession Interest rate Exchange rate
  37. 38. <ul><li>Recession is a period of economic activity when income ,production and employment tend to fall. </li></ul>
  38. 39. Technology Technology for Nation Technologies For Products and services Technology For business
  39. 40. SOCIAL-CULTURAL FACTORS VALUES TIME STRAVED CUSTOMERS MULTIPLE LIFESTYLES
  40. 41. Market oriented strategic planning
  41. 42. <ul><li>Strategic planning is a stream of decisions and actions which leads to help the firm achieve its objectives. </li></ul><ul><li>Strategic planning is a route map to the firm. </li></ul><ul><li>Strategic planning serves as a hedge against risk and uncertainty. </li></ul>
  42. 43. <ul><li>planning is a formal framework to act and it involves deciding the actions to be perused well in advance. </li></ul><ul><li>planning occurs at three levels in an organization. </li></ul><ul><li>top level management- long range corporate strategic planning. </li></ul><ul><li>middle level management- planning of marketing mix strategies, allocation of resources , co-ordaining the activities of operational units. </li></ul>
  43. 44. <ul><li>Lower level management- operational planning takes place at the bottom of organizational structure i.e. day to day weekly or monthly activities. </li></ul>
  44. 45. <ul><li>Business unit strategic planning consists of the following steps. </li></ul><ul><li>Business mission </li></ul><ul><li>Swot analysis. </li></ul><ul><li>Goal formulation. </li></ul><ul><li>Strategy formulation. </li></ul><ul><li>Program formulation & implementation. </li></ul><ul><li>Feed back and control. </li></ul>
  45. 47. <ul><li>Goal formulation . </li></ul><ul><li>After the swot analysis ,firm can proceed to goal formulation. </li></ul><ul><li>Every business is having a goal may be a mix of goals . </li></ul><ul><li>Objectives for profitability , sales growth , market share improvement ,risk containment ,innovation and reputation. </li></ul>
  46. 48. <ul><li>Strategy formulation </li></ul><ul><li>The way to achieve goals is strategy. </li></ul><ul><li>Michael porter has condensed them into three types of marketing strategies </li></ul><ul><li>Cost leadership. </li></ul><ul><li>Differentiation. </li></ul><ul><li>Focus. </li></ul>
  47. 49. <ul><li>Cost leadership </li></ul><ul><li>Business works for the lowest production and distribution costs so that it can price lower than its competitors </li></ul>
  48. 50. <ul><li>program formulation </li></ul><ul><li>once the business unit has developed its strategies it must work out. </li></ul><ul><li>strengthening r&d development ,training the sales force and develop ads. </li></ul>
  49. 51. <ul><li>Implementation. </li></ul><ul><li>implementing the strategies in an effective way is an important factor. </li></ul><ul><li>every company is having their own strategies based on these they will implement the same (employees hiring , training , assigning them the right jobs. </li></ul>
  50. 52. <ul><li>Feed back and control </li></ul><ul><li>firm needs to track and monitor new developments in the internal and external environment. </li></ul>
  51. 53. Corporate and division strategic planning.
  52. 54. <ul><li>All corporate headquarters undertake four planning activities. </li></ul><ul><li>Defining the corporate mission. </li></ul><ul><li>Establishing strategic business units. </li></ul><ul><li>Assigning each resources to sbu </li></ul><ul><li>Planning new business , downsizing older business. </li></ul>
  53. 55. <ul><li>Strategic business units. </li></ul><ul><li>An sbu has three characteristics. </li></ul><ul><li>It is a single business or collection of related business that can be planned separately from the rest of the company. </li></ul><ul><li>It has its own set of competitors. </li></ul><ul><li>It has a manager who is responsible for strategic planning and profit performance and who controls most of the factors affecting profit. </li></ul>
  54. 56. Planning new business, downsizing older business.
  55. 57. <ul><li>When there is a gap between the projected sales and current sales corporate management have to develop or acquire new business to fill it. </li></ul><ul><li>How can it fill the strategic planning gap? </li></ul>
  56. 58. <ul><li>Three options are available. </li></ul><ul><li>Further growth within the current business (intensive growth strategies) </li></ul><ul><li>Identify the business that are related to the current business (integrative ) </li></ul><ul><li>Identify opportunities that are unrelated to the company’s current business (diversification ) </li></ul>
  57. 59. <ul><li>Growth strategies . </li></ul><ul><li>Two major growth strategies are intensive growth strategies and integrated growth strategies. </li></ul>
  58. 60. <ul><li>Intensive growth strategies. </li></ul><ul><li>can be explained in terms of Ansoff’s (1957) product /market matrix. </li></ul><ul><li>market penetration strategy. </li></ul><ul><li>market development strategy. </li></ul><ul><li>product development strategy. </li></ul><ul><li>diversification strategy. </li></ul>
  59. 61. <ul><li>ANSOFF’S PRODUCT/ MARKET MATRIX. </li></ul>MARKET PENETRATION STRATEGY PRODUCT DEVELOPMENT STRATEGY MARKET DEVELOPMENT STRATEGY DIVERSIFICATION STRATEGY EXISTING MARKET EXISTING PRODUCTS NEW PRODUCTS NEW MARKET
  60. 62. <ul><li>Market penetration strategy : </li></ul><ul><li>a firm seeks increased sales volume from its current products in the current market through more aggressive marketing efforts. </li></ul><ul><li>market development strategy: </li></ul><ul><li>a firm enters into new market with the existing products. This is nothing but expanding the market region. </li></ul><ul><li>e.g. : a firm operating in the domestic market may decide to move in to foreign market. </li></ul>
  61. 63. <ul><li>Diversification strategy . </li></ul><ul><li>diversification is a strategic tool for companies when further growth is restricted or limited in a market. </li></ul><ul><li>diversification can be formulated in two ways . </li></ul><ul><li>they are related diversification and unrelated diversification. </li></ul>
  62. 64. Diversification Related diversification Unrelated diversification Through Taking over Another business Through Merger with Another Business Through Forming Joint ventures Through Forming Strategic Alliances.
  63. 65. <ul><li>Product development strategy. </li></ul><ul><li>A firm develops new products to launch in to the existing markets. </li></ul><ul><li>EG : MARUTI ZEN ESTILO </li></ul>
  64. 66. Integrative growth strategy.
  65. 67. <ul><li>When there is a possibility of having a strong growth future. A firm may adopt integrative growth strategy. </li></ul><ul><li>Generally there are three types of integration exists. </li></ul><ul><li>Backward integration . </li></ul><ul><li>Forward integration. </li></ul><ul><li>Horizontal integration. </li></ul>
  66. 68. <ul><li>backward integration enable the firm to have control over the supply system. </li></ul><ul><li>(suppliers, components ). </li></ul><ul><li>forward integration helps to have control over the distribution system (networks). </li></ul><ul><li>horizontal integration either to seek control over competitors or ownership of the competitive firms. </li></ul>
  67. 69. Boston consulting group’s (BCG) market growth /share matrix.
  68. 70. <ul><li>The basic process for creating a portfolio plan is to evaluate strategic business units in the organizations portfolio. </li></ul><ul><li>Two techniques for evaluating the sbu’s in a business portfolio management are Boston's consulting group’s growth /share matrix and general electric’s industry attractiveness /business strength matrix. </li></ul>
  69. 71. <ul><li>The Boston consulting group was founded in the middle of 1960 to provide consultancy service to strategic marketing planners in USA. </li></ul><ul><li>BCG developed a simple but very useful method which came to known as BCG’s </li></ul><ul><li>business portfolio matrix on two measures :market growth rate (low or high) and relative market share (low or high) </li></ul>
  70. 73. <ul><li>Stars. </li></ul><ul><li>Cash cows. </li></ul><ul><li>Dogs. </li></ul><ul><li>Question marks. </li></ul>
  71. 74. <ul><li>Stars – are leaders in their markets but they have to focused on building sales or market share. More cash is required to finance their rapid growth. If the market share falls , a star can be changed in to a problem child. </li></ul><ul><li>. </li></ul>
  72. 75. <ul><li>Question marks- they are also called problem children products. The market is growing at a high rate but the market share is low. </li></ul><ul><li>choice is to increase investment and build market share to turn it to a star, or to withdraw support by either harvesting (raising prices while lowering marketing expenditure) or divesting (dropping or selling ) </li></ul>
  73. 76. <ul><li>cash cows – The market is growing at a slow rate and business is high in the form of market leader. </li></ul><ul><li>The company’s objective is to hold sales and market share. If the business fails to hold on its market share , it will be converted to dog. </li></ul>
  74. 77. <ul><li>Dogs – the market is growing at a slow rate and the market share of the business is low. </li></ul><ul><li>Company have to check by making investments it can boost the business. </li></ul><ul><li>If the business is weak company have to take decision whether to harvest or divest. </li></ul>
  75. 78. <ul><li>The company’s next task is to determine what objective , strategy and budget to assign to each sbu. Four strategies can be perused. </li></ul>
  76. 79. <ul><li>Build – here the objective is to increase market share . It is appropriate for question marks whose market shares must grow if they are to become stars. </li></ul><ul><li>Hold –preserve the market share. </li></ul><ul><li>strategies are designed to retain customers. </li></ul>
  77. 80. <ul><li>Harvest – for weak question marks and dogs managers may decide to harvest. </li></ul><ul><li>Involves a decision to withdraw from a business by implementing a program of continuous cost retrenchment. </li></ul><ul><li>Eliminating r&d expenditures ,reducing advt expenses. </li></ul>
  78. 81. <ul><li>Divest – </li></ul><ul><li>The objective is to sell or liquidate the business and used elsewhere. </li></ul><ul><li>Appropriate for dogs and question marks that are acting as a drag on company’s profits. </li></ul>
  79. 82. Peter Drucker’s (1973) Seven Types of Business Portfolios
  80. 83. <ul><li>high </li></ul>Market attractivy low <ul><li>Business strength </li></ul><ul><li>low </li></ul><ul><li>high </li></ul>Failure Yesterdays bread winners Todays bread winners Developments Sleepers Ego trips Tomorrows Bread winners
  81. 84. <ul><li>Today’s bread winners: </li></ul><ul><li>Tomorrow’s bread winners: </li></ul><ul><li>Yesterday’s breadwinners: </li></ul><ul><li>Developments : </li></ul><ul><li>Sleepers : </li></ul><ul><li>Ego trips : </li></ul><ul><li>Failures : </li></ul>
  82. 85. General electric’s ( G E) approach business strength matrix.
  83. 86. strong average weak Business strength high medium low Market Attrac- tivity Sbu1 sbu2 sbu3 sbu4
  84. 87. <ul><li>Green zone consists of three cells at the upper left indicating favorable industry/market attractiveness. </li></ul><ul><li>So it suggests the company to invest and grow. </li></ul><ul><li>Yellow zone consists of markets and business are medium in over all attractiveness. </li></ul><ul><li>So the company decide to maintain the shares. </li></ul><ul><li>Red zone indicates markets/business are low in attractiveness so decide to harvest or divest. </li></ul>

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