A Brief Introduction to Marketing and Customer

Relationship Building

Jeremy Kees, Ph.D.

Who is Jeremy Kees??

CONSUMER

• American Marketing Association’sAmerican Marketing Association’s new official definition of marketing released August 2007:

– Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.

• Kotler & Keller’sKotler & Keller’s definition of marketing management:

– The art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value.

Value, Value, Value

• Successful products and services deliver value and satisfaction to customers– We make buying decisions based on

which product is perceived to offer the most value

– Tangible/Intangible benefits vs. cost

How do we create customers?

– Identifying customer needs– Designing goods and services that meet

those needs– Communicate Information about those

goods and services to prospective buyers– Making the goods or services available at

times and places that meet customers’ needs

– Pricing goods and services to reflect costs, competition, and customers’ ability to buy

– Providing for the necessary service and follow-up

How do we create VALUE?• Identify the needs in the marketplace• Find out which needs the organization can

profitably serve• Design goods and services that meet those

needs• Developing a marketing mix that will convert

potential customers into actual customers• Providing for the necessary service and follow-

up after the service

“4 Eras” of Marketing

From transaction-based marketing to relationship marketing…

• Transaction–based marketing (Simple exchanges)

• Relationship marketing– Lifetime value of a customer– Converting new customers to

advocates

From transaction-based marketing to relationship marketing…

Transaction vs. Relationship Marketing

Three Levels of Relationship Marketing

Characteristic

Level 1 Level 2 Level 3

Primary bond Financial Social StructuralDegree of customization

Low Medium Medium to high

Potential for sustained competitive advantage

Low Moderate High

Let’s take a step back…

• Although it is very important to try to build relationships with customers to ensure LT success

• But, it is just as important to determine which consumers we want this relationship with!!– Target Market– “Costly” Consumers– Sprint Video

Customer Relationship Management (CRM)

The combination of strategies and tools that drive relationship programs, re-orientating the entire organization to a concentrated focus on satisfying customers

Strategies for Building Customer Relationships• Affinity Programs

– a marketing effort sponsored by an organization that solicits responses from individuals who share common interests and activities

– BOA

Strategies for Building Customer Relationships• Frequency Marketing

– frequent-buyer or user marketing programs that reward customers with cash, rebates, merchandise, or other premiums

– Examples??– Thankyou Rewards Spot– But not just for hotels and

airlines…

Strategies for Building Customer Relationships• Database Marketing

– software that analyzes marketing information, then identifies and targets messages toward specific groups of potential customers

– http://www.wyndham.com

Strategies for Building B2B Relationships• Strategic alliance

– a partnership formed to create a competitive advantage

– These more formal long-term partnership arrangements improved each partner supply-chain relationships and enhance flexibility

– Wal-Mart!

Strategies for Building B2B Relationships• Electronic Data Interchange (EDI)

– involves computer-to-computer exchanges of invoices, orders, and other business documents

• Vendor Managed Inventory (VMI)– is an inventory-management system

in which the seller–based on existing agreement with a buyer– determines how much of a product is needed

Strategies for Building B2B Relationships• Database Marketing

– software that analyzes marketing information, then identifies and targets messages toward specific groups of potential customers

Evaluating Relationships

• Lifetime Value (LTV)– Refers to the net present value of the

potential revenue stream for any particular customer over a # of years

– Starts with current purchase activity then extrapolates to include potential additions from cross-selling, upgrades, total ownership, etc.

Marketing Concept

• Based on Consumer Orientation– 100% focus toward the consumer– Consumer drives company-wide

decisions• Focused on LONG TERM success

Building Buyer-Seller Relationships• Many customers are seeking ways to simplify

their lives, and relationships provide a way to do this

• Customers find comfort with brands that have become familiar through their ongoing relationships with companies or when they feel like they can relate to a company– Dove’s Campaign for REAL Beauty

• Evolution

• Such relationships often lead to more efficient decision-making my customers and higher levels of customer satisfaction

The Value of Customer Retention

• On average, it costs over 10 TIMES more to acquire a new customer versus retain an existing one

• A 5% gain in customer retention can result in an 80% gain in profits.