The foundation of holistic
marketing is strong customer relationships.
By connecting with customers to build value, satisfaction, and long-term
loyalty, marketers are able to beat their competitors. For competition to be successful depends on
the business’s ability to do a better job of providing value to customers and
meeting or exceeding their expectations.
The difference between the
prospective customer’s evaluation of all the benefits and all the costs of an
offering and the perceived alternatives is known as customer-perceived value
(CPV). It is a valuable foundation that
applies to many situations and yields rich insights. It suggests that the seller must assess the
total customer benefit and total customer cost associated with each
competitor’s offer to learn how his or her offer rates in the buyer’s
mind. Also, it implies that the seller
at a disadvantage has two alternatives; to increase total customer benefit or
to decrease total customer cost. Total
customer benefit is defined as the perceived monetary value of the bundle of
economic, functional, and psychological benefits customers expect from a given
market offering because of the product, service, people and image. Total customer cost is defined as the
perceived bundle of costs customers expect to incur in evaluating, obtaining,
using, and disposing of the given market offering, including monetary, time,
energy, and psychological costs.
Businesses want customers to
be satisfied. However, having satisfied
customers does not necessarily lead to making a profit. Businesses need to find a happy medium where
they can deliver a high level of customer satisfaction while also delivering
acceptable levels to the owners. They
are constantly measuring how well they treat customers, identifying the factors
shaping satisfaction, and changing procedures and marketing as a result. A highly satisfied customer is one who stays
loyal longer, buys more new and upgraded products introduced by the company,
talks favorably about the company and its products, pays less attention to the
company’s competitors, and is less sensitive to price. Satisfaction also depends on the product and
service quality. Quality has been met
when a product or service meets or exceeds the customers’ expectations.
Usually, the 80-20 rule
applies to businesses: 80 percent or more of the company’s profits come from
the top 20 percent of its customers. Average
customers who receive good service and pay nearly full price are often the most
profitable. A profitable customer is defined
as a person, household, or company that over time yields a revenue stream
exceeding by an acceptable amount the company’s costs for attracting, selling,
and serving that customer. Long-term
customer profitability is determined using customer lifetime value (CLV). This is the net present value of the stream
of future profits expected over the customer’s lifetime purchases. It provides a formal quantitative framework
fro planning customer investment and helps marketers implement a long-term
perspective.
It is imperative for
businesses to build strong, profitable long-term relationships with their
customers. Marketers used a concept
called customer relationship management (CRM), which focuses on developing
programs to attract and retain the right customers and meeting the individual
needs of those valued customers. Businesses
are also always looking to expand their profits and sales by searching for new
customers. Once these new customers are
obtained, they must be kept and their business must be increased. Often times, however, it is easier to
reattract ex-customers than to find new ones.
Three types of marketing activities that companies use to improve
customer loyalty and retention are interacting with the customer, developing
loyalty programs, and creating institutional ties. Keeping a tight connection to customers and
keeping them loyal will add financial benefits, social benefits, and structural
ties for the company.
Marketers use customer
databases to store information obtained about individual customers or prospects. This information is organized into a data
warehouse or data mining to detect trends, segments, and individual needs. However, the benefits of database marketing
do not come without costs and risks.
When used properly, a data warehouse yields more than it costs, but the
data must be in good condition, and the discovered relationships must be valid
and acceptable to consumers.
Example:
I work for a casino that
derives its revenue from its customers.
It’s not an upscale place, but the customers are happy. It has been asked many times when we were
going to get a new facility-a nicer, bigger one. The answer always is the same. We have repeat customers who have been going
there for years and years. We have created long-term and loyal relationships with them. They like the
atmosphere and the environment. They
like the design and layout. It has been
looked into to build a new facility that is bigger and has a more open floor
plan, but customers have frowned upon it.
We have found our market target and we are satisfying their needs and
wants. We are more profitable now that
we have ever been. Why fix something
that is not broke?
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