Ephesians outlined: Chapters 1-3=Prescribed beliefs Chapters 4-6=Prescribed behaviors
Chapters 3 and 4
description
Transcript of Chapters 3 and 4
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Chapters 3 and 4Chapters 3 and 4
Understanding Market Understanding Market Potential, Customer Satisfaction Potential, Customer Satisfaction
and Loyalty - Links to Firm and Loyalty - Links to Firm Performance. Performance.
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Let’s start by understanding what Let’s start by understanding what drives performancedrives performance
• Make a short list of the things that drive Make a short list of the things that drive firm performance. firm performance.
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Market-Based Performance DriversMarket-Based Performance Drivers
• Share Growth.Share Growth.• Sales Growth.Sales Growth.• Improvements in market position.Improvements in market position.• Improvements in price position.Improvements in price position.• Successful new product introductions.Successful new product introductions.
But, what drives these factors?But, what drives these factors?
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Market-Driven Organizations:Market-Driven Organizations:• Characterized by a focus on Characterized by a focus on customer customer
needs and interests.needs and interests. • Resulting in generation, dissemination and Resulting in generation, dissemination and
utilization of market intelligence, resulting in utilization of market intelligence, resulting in coordinated inter-functional action directed coordinated inter-functional action directed at creating at creating superior customer valuesuperior customer value..
• It is through delivery of superior customer It is through delivery of superior customer value that market driven firms attain value that market driven firms attain superior performance. superior performance. e.g. Apple. e.g. Apple.
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Market Orientation, Competitive Advantage Market Orientation, Competitive Advantage and Business Performanceand Business Performance
Market Orientation •Customer Focus•Competitor Focus•Inter-Functional Coordination and Response.
Core Capabilities •Customer Service•Quality•Innovation•Responsiveness•Value
Competitive Advantage •New Prod. Success•Share Growth•Differentiation•Cost Efficiency
Business Performance •Sales Growth•Satisfaction•Loyalty•Profitability
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Market Driven FirmMarket Driven Firm
CustomerInformation
CompetitorInformation
Other Mkt.Information
Information Acquisition
InterfunctionalAssessment
SuperiorCustomerValueShared
Diagnosis and
CoordinatedAction
Organizational Values and Culture
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Internally OrientedInternally Oriented
Who are our customers?Who are our customers?
What are their needs?What are their needs?
Who is the competition?Who is the competition?
What are our capabilities?What are our capabilities?
What is our competitiveWhat is our competitiveadvantage?advantage?
What is the product?What is the product?
What channels are used?What channels are used?
How does the market respond toHow does the market respond topricing and promotionpricing and promotion
Market Driven vs. Internal OrientationMarket Driven vs. Internal Orientation
Where can we sell our products?Where can we sell our products?
What can we provide?What can we provide?
Why worry about competition?Why worry about competition?
What can we do to be more efficient ?What can we do to be more efficient ?
How do we make more money?How do we make more money?
What can R&D come up with?What can R&D come up with?
How can we drive channel efficiency?How can we drive channel efficiency?
How we set price to make the most $.How we set price to make the most $.
How can we get customers to buy?How can we get customers to buy?
Market-DrivenMarket-Driven
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Where can we find new customers?Where can we find new customers?
What new needs can be created?What new needs can be created?
Who do we want as competition?Who do we want as competition?
What new capabilities can we develop?What new capabilities can we develop?
What type of competitive advantageWhat type of competitive advantageshould we develop?should we develop?
What new products can be created?What new products can be created?
What new channels can be created?What new channels can be created?
What new pricing and promotionWhat new pricing and promotionapproaches can be created?approaches can be created?
Market-DrivenMarket-Driven Market-DrivingMarket-Driving
Who are our customers?Who are our customers?
What are their needs?What are their needs?
Who is the competition?Who is the competition?
What are our capabilities?What are our capabilities?
What is our competitiveWhat is our competitiveadvantage?advantage?
What is the product?What is the product?
What channels are used?What channels are used?
How does the market respond toHow does the market respond topricing and promotionpricing and promotion
Market Driving - The Next StepMarket Driving - The Next Step
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IssuesIssues
• How do we become a market-driver?How do we become a market-driver?• Is the customer the main focus of our Is the customer the main focus of our
action?action?• Are managers focused on acting in the Are managers focused on acting in the
interest of customers?interest of customers?• Do we have the data to support action?Do we have the data to support action?• Not just Marketing Dept’s job.Not just Marketing Dept’s job.
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Understanding Market PotentialUnderstanding Market Potential
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Market Potential and Market GrowthMarket Potential and Market Growth
• Forces affecting rate of market growthForces affecting rate of market growthMarket potentialMarket potentialMarket penetrationMarket penetrationRate of entryRate of entry
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Market GrowthMarket Growth
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Market ShareMarket Share• Market Share Index (MSI) = Market Share Index (MSI) =
Product X Product X Price X Product X ServiceProduct X Product X Price X Product X Service Awareness Preference Acceptability Availability Awareness Preference Acceptability Availability
ExperienceExperience
• Share Development Index (SDI) = Share Development Index (SDI) = Market Share Index Market Share Index x 100x 100
Share Index PotentialShare Index Potential
• Note: This is predicated on having the data to do the Note: This is predicated on having the data to do the calculations.calculations.
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Market Demand vs PotentialMarket Demand vs Potential
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Customer Value CreationCustomer Value Creation
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Building Customer FocusBuilding Customer Focus• The FundamentalsThe Fundamentals• Determining Buyer NeedsDetermining Buyer Needs• Setting PrioritiesSetting Priorities• Aligning the OrganizationAligning the Organization
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Customer Focus is Built on Customer Focus is Built on Information:Information:• From CustomersFrom Customers• From Internal SystemsFrom Internal Systems
Trouble Reporting/Tracking.Trouble Reporting/Tracking.Complaints.Complaints.Customer Satisfaction Programs.Customer Satisfaction Programs.
• From Field Contact Personnel.From Field Contact Personnel.Reporting and tracking systems.Reporting and tracking systems.
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External StimuliExternal Stimuli Buyer’sBuyer’sBlack BoxBlack Box ResponseResponse
Marketing MixMarketing Mix
““Other” ExternalOther” ExternalInfluencesInfluences
ProductProduct PricePrice
PromotionPromotion DistributionDistribution
DecisionDecisionProcessProcess
InternalInternalInfluencesInfluences
PurchasePurchase
Post-PurchasePost-PurchaseBehaviorBehavior
Understanding Buyer Behavior
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Problem Recognition
Customer Decision Process
Information Search
Alternative Evaluation
Purchase
Post-Purchase
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Customer BuyingCustomer Buying
• Remember that many purchases (even Remember that many purchases (even B2B) are habit-based.B2B) are habit-based.
• Customer does not do extended Customer does not do extended problem solving and search.problem solving and search.
• Rather they see the need to rebuy and Rather they see the need to rebuy and simply do.simply do.
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TotalCustomerBenefits
TotalCustomer
Costs
TotalCustomer
Value
Customer Value is a Function of Benefits Received and Costs to Obtain
Do BenefitsReceivedOutweighCosts?
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Automobile Purchase Benefits & Costs
TotalCustomerBenefits
TotalCustomer
Costs
TotalCustomer
Value
ServiceService
SearchSearch
TV AdsNewspaper Ads
.
.Web Site
Part CostsFrequency
.
.Distance
PricePrice
Base ModelAccessories
.
.Trade-In
ServiceService
Sales Sales StaffStaff
InformedFriendlyAttitude
ImageHandling
AttitudeTimely
InformedHoursParts
ProductProductBenefits
WarrantyTest DriveCondition
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Life Cycle Costs and Economic ValueLife Cycle Costs and Economic Value
Life-Cycle Cost =Life-Cycle Cost =Price + Acquiring + Ownership + DisposalPrice + Acquiring + Ownership + DisposalPaid Cost Cost Paid Cost Cost Cost Cost
Economic Value =Economic Value =Competing Product’s – Our Product’s Competing Product’s – Our Product’s Life-Cycle Cost Life-Cycle Cost Life-Cycle CostLife-Cycle Cost
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Life Cycle Costs and Economic ValueLife Cycle Costs and Economic Value
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Life Cycle Cost Component ExamplesLife Cycle Cost Component Examples
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Benefit and Cost MappingBenefit and Cost Mapping
Implementation Issues:Implementation Issues:• Value Map Must Be Developed From Value Map Must Be Developed From
the the Customer’s PerspectiveCustomer’s Perspective• What’s measured becomes ‘Real’• Avoid ‘washing out’ differences.• Abstract Goals Must Be ActionableAbstract Goals Must Be Actionable
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Objective - Find Value Gaps!Objective - Find Value Gaps!Performance
High
Low
LowPrice
RAV4
HighPrice
Outback
OldWrangler
Real Hummer
Xterra
Where are the need gaps?
Explorer
Hummer 2
NewWrangler
4 DrWrangler
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Turning Value Positions into ActionTurning Value Positions into Action
• Just knowing where the customer finds Just knowing where the customer finds value is obviously not enough. value is obviously not enough.
• Your firm must strive to deliver the value Your firm must strive to deliver the value customers desire.customers desire.
• This means implementing strategies This means implementing strategies designed to capture and hold the designed to capture and hold the desired position.desired position.
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CustomerCustomerSatisfactionSatisfaction
Service ReliabilityService Reliability
Fast Service ResponseFast Service Response
1 Hour Response 1 Hour Response 99.999 % of the time99.999 % of the time
Org. Obj.Org. Obj.
Action ItemAction Item
Make Abstract Objectives ActionableMake Abstract Objectives ActionableThe Drill Down
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Action Items - System DevelopmentAction Items - System Development• Example: Customer contact tracking Example: Customer contact tracking
system for field reps.system for field reps.Sales representativesSales representativesCustomer service personnelCustomer service personnel
• What feedback should we give the What feedback should we give the customer?customer?
• What information should be widely What information should be widely available within the company.available within the company.
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The Satisfaction - Loyalty LinkThe Satisfaction - Loyalty LinkCustomer Loyalty
High
Low
1 2 3 4 5Completely Dissat. Completely Sat.
LessCompetition
MoreCompetition
PersonalComputers
Automobiles
Airlines
Hospitals
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INITIALEXPECTATIONS
Customer Satisfaction is a Customer Satisfaction is a Confirmation/DisconfirmationConfirmation/Disconfirmation
of Expectationsof Expectations
EXPERIENCE
PERCEIVED OUTCOME
CUSTOMERSATISFACTION
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Information is the KeyInformation is the Key• We must understand the benefits We must understand the benefits
customers receive from use.customers receive from use.• Who do we ask?Who do we ask?
CustomersCustomersCompany SourcesCompany SourcesCompetitive MonitoringCompetitive Monitoring
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Importance
Which Components RequireWhich Components RequireImmediate Attention?Immediate Attention?
high
medium
low
highmediumlow
NeedsNeedsImprovementImprovement
OverachievingOverachieving
Performance
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Satisfied Customers Typically:Satisfied Customers Typically:• Find more value in the firm’s products.Find more value in the firm’s products.• Are willing to spend more to maintain this Are willing to spend more to maintain this
high level of need satisfaction.high level of need satisfaction.• Are less influenced by competitor Are less influenced by competitor
promotions.promotions.• Are very willing to tell others about your Are very willing to tell others about your
product (WOM).product (WOM).• Are often willing to try other products you Are often willing to try other products you
sell.sell.
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Does it Work? Does it Work? Evidence from the Trucking IndustryEvidence from the Trucking Industry
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A Recent StudyA Recent Study
• We looked at trucking firms strategies We looked at trucking firms strategies for evidence that they were for evidence that they were implementing a market-driven implementing a market-driven approach, then looked at their approach, then looked at their performance.performance.
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ConclusionsConclusions• Better customer value (e.g., higher Better customer value (e.g., higher
customer service levels and customer customer service levels and customer relations) lead to increased share and relations) lead to increased share and higher ROA despite a 1 pt loss in higher ROA despite a 1 pt loss in efficiency. efficiency.
• Thus, to build satisfaction, you must Thus, to build satisfaction, you must understand the customer needs.understand the customer needs.
• Let’s look at how to do this.Let’s look at how to do this.
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Conclusions for Typical Organization:Conclusions for Typical Organization:• Customer orientation will require Customer orientation will require
changes in operating procedures.changes in operating procedures.• Specific customer satisfaction metrics Specific customer satisfaction metrics
are needed.are needed.• Culture must evolve to support use of Culture must evolve to support use of
customer information and Sat. metrics.customer information and Sat. metrics.• Information gathering systems must Information gathering systems must
evolve to support needed customer evolve to support needed customer information. information.
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Information System Needs.Information System Needs.• Database of customer requirements.Database of customer requirements.
Primary needsPrimary needs Secondary needs.Secondary needs. Priorities!Priorities! Current usage. Current usage. Satisfaction levels for customer groupsSatisfaction levels for customer groups Date last contacted.Date last contacted. Name of contact.Name of contact. Competitor information.Competitor information.
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Additional IssuesAdditional Issues
• Processes for dealing with customers Processes for dealing with customers must be revised. must be revised.
• New ideas and solutions must be New ideas and solutions must be implemented quickly to resolve implemented quickly to resolve customer problems and meet needs.customer problems and meet needs.
• Bureaucracy must be reduced to aid Bureaucracy must be reduced to aid quick response (delegation!). quick response (delegation!).
• Competitor information must be Competitor information must be developed and refined.developed and refined.
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• Segmentation is needed and will help Segmentation is needed and will help define customer value proposition and define customer value proposition and methods to deliver.methods to deliver.
• Price sensitive customers may defect.Price sensitive customers may defect.• Quality Sensitive customers may defect Quality Sensitive customers may defect
if quality not made priority.if quality not made priority.
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A Customer Lifetime Value ExampleA Customer Lifetime Value Example
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Lifetime Value of a CustomerLifetime Value of a Customer• The long term profits obtained by The long term profits obtained by
retaining customers over their lifetime.retaining customers over their lifetime.• Enables firm to reduce marketing Enables firm to reduce marketing
expenses.expenses.• NPV is useful to assign valuation.NPV is useful to assign valuation.
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A Customer Loyalty ExampleA Customer Loyalty Example• Loyalty is an attitude towards a Loyalty is an attitude towards a
product/service and the providerproduct/service and the provider• Loyalty is driven by perceived value and Loyalty is driven by perceived value and
satisfactionsatisfaction• Loyalty is related to repeat purchase, WOM, Loyalty is related to repeat purchase, WOM,
motivation to search and resistance to counter-motivation to search and resistance to counter-persuasion but is not always translated into persuasion but is not always translated into these post-purchase behaviorsthese post-purchase behaviors
• Many loyalty programs cost more than they Many loyalty programs cost more than they generate in additional profitability (at least in generate in additional profitability (at least in the short-run)the short-run)
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Mobile Telephone LoyaltyMobile Telephone Loyalty• Average churn rate in mobile telephony today is Average churn rate in mobile telephony today is
2.1% per month2.1% per month So average customer life is only 48 months – So average customer life is only 48 months –
which is the life of the service contract.which is the life of the service contract.
Mobile providers must replace all its customers every 4 years. The potential is to only replace them every 8 years!
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Assessing The Value of LoyaltyAssessing The Value of Loyalty• Existing Cellular ProviderExisting Cellular Provider
Cost of Acquisition $350Cost of Acquisition $350 Monthly revenue $45Monthly revenue $45 Monthly network cost $5Monthly network cost $5 Monthly operating cost 15%Monthly operating cost 15% NPV of customer over 48 monthsNPV of customer over 48 months
$915$915 NPV of customer over 96 monthsNPV of customer over 96 months
$1,700$1,700
Cellular can increase share owner value by 86% by just realizing the real customer life potential of their customers.
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Questions?Questions?