18-1 18-1

PRINCIPLES OF MARKETING

Chapter 18 Chapter 18 Competitive Strategies: Building Lasting Customer Relationships

Defining Customer Value Defining Customer Value

18-2 18-2

Total Customer Total Customer Value Value

= =

Total Customer Total Customer Cost Cost Customer Customer Delivered Value Delivered Value

(Product, Service, (Product, Service, Personnel, & Personnel, & Image Values) Image Values) (Monetary, Time, (Monetary, Time, Energy, & Energy, & Psychic Costs) Psychic Costs) (Profit to the (Profit to the Consumer) Consumer)

Customer Satisfaction Customer Satisfaction

18-3 18-3

Customer Satisfaction Results When a Companys Performance Has Fulfilled a Buyers Expectations.
Products Actual Performance
Performance Exceeds ExpectationsCustomer is Delighted

Buyers Expectations Are Based On: Customers Past Buying Experiences Opinions of Friends & Associates Marketer/ Competitor Information & Promises

Performance Below Expectations Customer is Dissatisfied

Total Customer Satisfaction 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.

18-4 18-4

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 Need for Customer Retention

18-5 18-5

The Key to Customer Retention is Superior Customer Value and Satisfaction. Companies Must Consider:

New New Customer Customer Costs Costs Customer Customer Lifetime Lifetime Value Value

Lost Lost Customer Customer Costs Costs

Building Customer Satisfaction and Building Customer Satisfaction and Loyalty by Relationship Marketing Loyalty by Relationship Marketing
Relationship Marketing Involves Creating, Maintaining, and Enhancing Strong, Long-Term Relationships with Customers and Other Stakeholders. Methods for Building Relationships Include Offering:

18-6 18-6

Financial Financial Benefits Benefits Social Social Benefits Benefits Structural Structural Ties Ties

Value Chain Value Chain

Support Activities Firm Infrastructure Firm Infrastructure Human Resource Management Human Resource Management Technology Development Technology Development Procurement Procurement
Inbound Inbound Logistics Logistics Operations Operations Outbound Outbound Logistics Logistics Marketing Marketing and and Sales Sales Service Service

18-7 18-7

Margin

Primary Activities

Customer Value-Delivery Network Customer Value-Delivery Network

Customer Customer
Delivery

18-8 18-8

Retailer Retailer

Producer Producer

Vendor Vendor Raw Material Raw Material Supplier Supplier

Delivery

Delivery

Delivery

Delivery

Order Order Order Order Order

Total Quality Marketing Total Quality Marketing

18-9 18-9

Necessary But May Necessary But May Not Be Sufficient Not Be Sufficient Does Not Does Not Cost More Cost More Quantum Quantum Leaps Leaps Continuous Continuous Improvement Improvement

Quality is in the Quality is in the Eyes of the Customer Eyes of the Customer

Pursuing Pursuing a Total a Total Quality Quality Marketing Marketing Strategy Strategy

Every Company Every Company Activity Activity Total Employee Total Employee Commitment Commitment High Quality High Quality Partners Partners

Cannot Save Cannot Save Poor Product Poor Product

Competitor Analysis Competitor Analysis

Identifying Competitors Identifying Competitors Assessing Competitors Assessing Competitors
Determining Objectives Determining Objectives Identifying Strategies Identifying Strategies Assessing Strengths and Assessing Strengths and Weaknesses Weaknesses Estimating Reaction Estimating Reaction Patterns Patterns

18-10 18-10

Selecting Competitors to Selecting Competitors to Attack and to Avoid Attack and to Avoid

Developing Competitive Marketing Developing Competitive Marketing Strategies Strategies

Basic Competitive Strategies Basic Competitive Strategies Overall Cost Overall Cost Leadership Leadership Differentiation Differentiation

18-11 18-11

Focus Focus

Middle of Middle of the Road the Road

Developing Additional Competitive Developing Additional Competitive Marketing Strategies Marketing Strategies Value Disciplines Value Disciplines
Operational Operational Excellence Excellence Customer Customer Intimacy Intimacy

18-12 18-12

Product Product Leadership Leadership

Competitive Positions Competitive Positions

Competitive Positions Market Leader Market Leader Competitive Strategies
Expand Total Market Expand Total Market Protect Market Share Protect Market Share Expand Market Share Expand Market Share Full Frontal Attack Indirect Attack

18-13 18-13

Firm with the Largest Firm with the Largest Market Share Market Share Runner-Up Firms that Runner-Up Firms that Fight Hard to Increase Fight Hard to Increase Market Share Market Share

Market Challenger Market Challenger

Runner-Up Firms that Want Runner-Up Firms that Want to Hold Their Share Without to Hold Their Share Without Rocking the Boat Rocking the Boat Firms that Serve Small Firms that Serve Small Segments Not Being Segments Not Being Pursued by Other Firms Pursued by Other Firms

Market Followers Market Followers

Follow Closely Follow Closely Follow at a Distance Follow at a Distance By Customer, Market, By Customer, Market, Quality-Price, Service Quality-Price, Service Multiple Niching Multiple Niching

Market Nichers Market Nichers

Balancing Customer and Balancing Customer and Competitor Orientations Competitor Orientations
Customer-Centered Customer-Centered Competition-Centered Competition-Centered
No No No No Yes Yes

18-14 18-14

Product Product Orientation Orientation Competitor Competitor Orientation Orientation

Customer Customer Orientation Orientation Market Market Orientation Orientation

Yes Yes