Chapter 18 Competitive Strategies: Building Lasting Customer Relationships PRINCIPLES OF MARKETING Eighth Edition Philip Kotler and Gary Armstrong
Defining Customer Value
- = Total Customer Value Total Customer Cost (Product, Service, Personnel, & Image Values) (Monetary, Time, Energy, & Psychic Costs) Customer Delivered Value (Profit to the Consumer)
Customer Satisfaction Results When a Company’s Performance Has Fulfilled a Buyer’s Expectations. Buyer’s Expectations Are Based On: Customer’s Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises Product’s Actual Performance Performance Exceeds Expectations- Customer is Delighted Performance Below Expectations - Customer is Dissatisfied
Total Customer Satisfaction
Highly satisfied (delighted) customers produce benefits:
They are less price sensitive,
They remain customers longer,
They talk favorably about the company and products to others.
Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty.
Therefore, the purpose of Marketing is to generate customer value profitably.
The Need for Customer Retention
The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider: New Customer Costs Lost Customer Costs Customer Lifetime Value
Building Customer Satisfaction and Loyalty by Relationship Marketing
Structural Ties Social Benefits Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with Customers and Other Stakeholders. Methods for Building Relationships Include Offering: Financial Benefits
Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Service Margin Support Activities Primary Activities
Customer Value-Delivery Network
Customer Retailer Producer Vendor Raw Material Supplier Delivery Order Order Order Order Order Delivery Delivery Delivery Delivery
Total Quality Marketing
Pursuing a Total Quality Marketing Strategy Necessary But May Not Be Sufficient Quality is in the Eyes of the Customer Does Not Cost More Every Company Activity Quantum Leaps Total Employee Commitment Cannot Save Poor Product Continuous Improvement High Quality Partners
Identifying Competitors Assessing Competitors Determining Objectives Selecting Competitors to Attack and to Avoid Competitor Analysis Identifying Strategies Assessing Strengths and Weaknesses Estimating Reaction Patterns
Developing Competitive Marketing Strategies Overall Cost Leadership Differentiation Focus Middle of the Road Basic Competitive Strategies
Market Leader Firm with the Largest Market Share Expand Total Market Protect Market Share Expand Market Share Market Challenger Runner-Up Firms that Fight Hard to Increase Market Share Market Followers Runner-Up Firms that Want to Hold Their Share Without Rocking the Boat Market Nichers Firms that Serve Small Segments Not Being Pursued by Other Firms Follow Closely Follow at a Distance By Customer, Market, Quality-Price, Service Multiple Niching Full Frontal Attack Indirect Attack Competitive Positions Competitive Strategies
Balancing Customer and Competitor Orientations Product Orientation Competitor Orientation Customer Orientation Market Orientation Competition-Centered No Yes Customer-Centered No Yes