Chapter 10 Class Notes
Relationship Marketing Definition:
Organizations efforts to develop a long term, cost effective link
with individual customers for mutual benefit.
Handout...Unisys system helps companies
Handout...Using Computers to Divine Who Might Buy a Gas Grill
Indicate the developments and benefits of relationship marketing.
3 key elements link the organization to its customers:
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IT designed computer and communication systems to satisfy
organizations information needs.
Marketing Research (Chapter 8) is the information gathering
arm of IT.
IT is the framework for the day-to-day management and structuring
of information gathered regularly from sources outside and inside
the organization:
Data Inputs------>Processing-------->Information Outputs
^ |
| |
--------------Feedback--------------
DATA----------->PROCESSING--------------->INFORMATION
Difference between DATA and INFORMATION...Effective IT
Provides a continuous flow of information, re: prices, advertising
expenses, sales, competition and distribution expenses.
Inputs:
- Accounting records
- Information from 1-800 #s
- Transaction Information
- Frequent User Programs
- Public Information
- Survey Information
Processing-classifying information and developing categories for
meaningful storage and retrieval. Marketers can then determine
which information-the output-is useful for decision making.
Feedback enables adjustments to the input.
Recent Developments in IT:
- Enabled marketers to effectively utilize the information they have been storing for
years, but have not been able to use, it was therefore data, not
information.
- Processing element of IT has allowed marketers to merge (essentially)
their transactional databases with their customer profile databases.
- Customer relations, locate/identify problems more quickly. Identify problem in 10
calls, not 10,000
- Customer service reps on 1-800 lines have computer info
- Customer service major IT expense
- Lower inventory costs...renegotiate with suppliers etc.
- $1bn spent in 1994 on IT
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An Organizations efforts to collect:
- demographic
- media
- consumption profiles of customers.
In order to target customers more efficiently marketers can use multi variable segmentation
incorporating Buyer Behavior information and Demographic
information.
What people have done in the passed (Purchase) is a better
predictor to future behavior than any other characteristic/variable
Use frequent user programs to collect
data on heavy user customers.
Media...direct mail...catalogs
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Old model, sell one product to as many customers as possible
(target market).
New model, sell as many products to one person, one-to-one
Focus on the life-time value of the customer (LVC) instead of the
individual transaction.
Customers always had a 1 2 1 relationship with companies, now
companies have the technology to have a 1 2 1 (few) relationship with
their customers.
Handout...Bank
Need continual monitoring of customers.
Relationship marketing and information...key weapons that offer a competitive advantage for
those with the technological capabilities.
Customers becoming more demanding...have many alternatives, therefore have high
expectations.
Increasing number of communication sources going into home (500
channels cable etc.), fragments audience, therefore must develop
customer relations.
Used to be only the small "mom" and "pop" stores had the
ability to perform relationship marketing.
Must satisfy customers to keep them...cost to keep vs. cost to
recruit!!....Five times as much to market to a new customer than to keep an existing customer
satisfied.
PROBLEM:
"information chernobyl"...all this information on our customers can be of
concern to the customer if the information is used inappropriately.
American Express debacle...offering 7 yrs of info on many customers as
opposed to one months information on a couple of customers.
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Need to measure the sales potential of the chosen markets.
Market Potential--Industry wide, need to specify time frame and
level of industry marketing activities.
Sales Potential--Maximum % of Mkt. potential that a single firm
within an industry expects to obtain - absolute limit.
Breakdown approach: economic-mkt. potential-sales potential
Buildup approach: # of potential buyers purchases * # buyers in
area, same for each area, then add areas to calculate total market
potential. Then estimate the proportion for the company.
Sales penetration= Actual sales/Sales potential
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Sales forecast is the amount of a product that a company actually
expects to sell during a specific period at a specified level of
marketing. Actual instead of potential. Can be short term, medium
term or long term.
Methods: Choice depends on costs, type of product, characteristics
of market, time span of the forecast, purpose of the forecast,
stability of historical data, availability of required information
and forecasters expertise and experience.
- Executive judgement--swayed by recent experience, based only
on passed experience
- Surveys--Customer, good when only a few customers (business
markets), expensive, rely on customer estimates. Sales forecast
surveys, expert forecast surveys
- Time Series Analysis--trend, cycle, seasonal and random factor
- Correlation method, regression analysis, indicates association
not causal relationships.
- Market tests, actual vs. intended. Can see changes in MM.
Other companies can manipulate, other companies can see offering.
Marketers will generally use more than one method.
Future
Marketers will look at the sales potential of a customer
(LCV) for all its products as opposed to the market of one product with
the use of relationship marketing.
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