MARKETING MANAGEMENT Kotler Connecting with Customers Chapters 5 and 6

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CREATING LONG-TERM LOYALTY
RELATIONSHIPS
Marvin Pedregosa
Nadia Tantuco
Rea Uy
ATENEO GRADUATE SCHOOL OF BUSINESS
Connecting with Customers

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Outline
How are STRONG, LOYAL and
PROFITABLE Customer Relationships
Created?
1. Maximize Value
2. Ensure Delight
3. Solidify Quality
4. Invest in the Right Customers
5. Manage Relationships
6. Mine Data

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Cust. Perceived Value = Total Benefits – Total Costs
Loyalty Relationship Concept 1 of 6: Maximize Value
DO THE MATH: VALUE IS A DIFFERENCE
Customer
Perceived
Value
Product
Benefit
Services
Benefit
Personnel
Benefit
Image Benefit
Total Customer
Benefit
Monetary Cost
Time
Cost
Energy
Cost
Psychological
Cost
Total Customer
Cost
= -

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Undergo CUSTOMER VALUE ANALYSIS
QUANTIFY, COMPARE, ACT
1. Identify benefits, etc
customers value
2. Assign weights
3. Assess company and
competitors’
performance
4. Ask customers to rate
5. Monitor

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STACK BENEFITS, LIGHTEN COSTS
HOW TO MAXIMIZE VALUE? 2 WAYS
DECREASE
COSTS
INCREASE BENEFITS

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Loyalty Relationship Concept 2 of 6: Ensure Delight
ERR, WHAT IS SATISFACTION?
THE PLEASURE OR DISAPPOINTMENT THAT RESULTS FROM
EXPERIENCING A PRODUCT VIS-À-VIS EXPECTATIONS
EXPECTATION
S
EXP. OF PRODUCT
PERFORMANCE

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DELIGHT THY CUSTOMER
Performance < Expectations
DISSATISFIED
Performance = Expectations
SATISFIED
Performance > Expectations
DELIGHTED

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THEY:
1. Stay loyal longer
2. Buy more as the company introduces new & upgraded products
3. Talk favorably to others about the company
4. Pay less attention to competing brands
5. Are less price sensitive
DELIGHT IS A BIG DEAL ($$$$$)
EVERY COMPANY WANTS DELIGHTED CUSTOMERS! WHY?

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HIGH QUALITY BRINGS ABOUT:
Loyalty Relationship Concept 3 of 6: Ensure Product Quality
HIGH QUALITY -> HIGH PROFITS
Satisfaction
Loyalty
Prices
HIGH
Costs
LOW
HIGH PROFITS

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Loyalty Relationship Concept 3 of 6: Ensure Product Quality
HIGH QUALITY STANDARDS SHOULD BE
INTERNAL TARGETS
HOW? Codify QUALITY as a company priority
Ensure departmental objectives and
targets reflect QUALITY as a priority
Develop action plans to achieve QUALITY
targets through daily processes or projects
PERIODICALLY MONITOR

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Loyalty Relationship Concept 4 of 6: Invest in the Right Customers
KNOW YOUR PROFITABLE CUSTOMERS
Marketing is the art of attracting and
keeping PROFITABLE CUSTOMERS
They are persons, households, or
companies that over time yields…
REVENUE STREAM > COST STREAM
For attracting, selling to, and
serving those customers
$$$+ $$$-

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NOT ALL CUSTOMERS ARE EQUAL
Customer Profitability Analysis

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TAKE PROFITABLE CUSTOMERS ON
A JOURNEY TO LOYALTY
The Marketing Funnel

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CUSTOMER RELATIONSHIP MANAGEMENT
CRM
Loyalty Relationship Concept 5 of 6: Manage Your Relationships
DRAW PERSONALIZED INSIGHTS
FROM DATA

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BUILD LASTING BONDS
CRM can be practiced through…
1. Personalized Marketing
2. Customer Empowerment
3. Recommendations from Consumers
Companies can create stronger bonds with
customers by personalizing relationships.

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WHEN GETTING PERSONAL, BE
SYSTEMATIC
CRM
1. Identify Prospects, Customers
2. Differentiate customers: needs, and value to company
3. Interact
4. Customize products and messages for each customer
I Do It with Care: 4-Step Framework for Personalized Marketing

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Loyalty Relationship Concept 6 of 6: Mine Data
BE DATA SAVVY
BUILD A CUSTOMER DATABASE
ANALYZE
SPOT OPPORTUNITIES

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Summary
STRONG, LOYAL and PROFITABLE
Customer Relationships are within reach when
companies:
1. Maximize Value
2. Ensure Delight
3. Solidify Quality
4. Invest in the Right Customers
5. Manage Relationships
6. Mine Data

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Conclusion
LOYAL CUSTOMERS ARE RESULTS OF
1. Good recognition of needs
2. Not settling for anything less than the BEST in Product Quality
3. Well-managed interactions
4. Strategically focused efforts
LOYAL CUSTOMERS ARE PRIORITY!
Repeat Sales, Positive Word-of-Mouth, Neutralized Competition

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CREATING LONG-TERM LOYALTY
RELATIONSHIPS
Marvin Pedregosa
Nadia Tantuco
Rea Uy

in/marvinpedregosa
in/reauy
ANALYZING CONSUMER
MARKETS
in/marvinpedregosa
pub/rea-uy/53/620/552/
Marvin Pedregosa
Nadia Tantuco
Rea Uy

in/marvinpedregosa
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Outline
HOW DO WE LOOK INTO CONSUMER
BEHAVIOR?
1. WHAT Influences Consumer Behavior
2. HOW Do Consumers Think
3. HOW Do Consumers Choose
4. HOW To Influence Consumer Behavior

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Analyzing Consumer Markets Concept 1 of 4: Behavioral Influencers
MARKETERS MUST UNDERSTAND
BEHAVIOR
What is consumer behavior?
It is how
CONSUMERS
of GOODS
to SATISFY
their needs and wants.
Select Buy
Use Dispose

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CULTURAL SOCIAL
PERSONAL
DIFF INFLUENCES -> DIFF
BEHAVIOR
FACTORS
3

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FACTORS: CULTURE
DETERMINES OUR WANTS.3
Culture Sub-Culture Social Class
Family
Key Institutions
Nationality
Religion
Racial Group
Geographic Region
Lower Lowers
Upper Lowers
Working Class
Middle Class
Upper Middles
Lower Uppers
Upper Upper
3

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FACTORS: SOCIETY
INFLUENCES WHAT WE BUY.
Reference group
Membership
group
(direct influencer)
Non-membership
groups (indirect
influencer)
Primary/informal
groups
Secondary/formal
groups
Aspirational
groups
Dissociative
groups
3

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AGE ECONOMIC
CIRCUMSTANCES
AND
OCCUPATION
PERSONALITY
AND SELF-
CONCEPT
LIFESTYLE AND
VALUES
3 FACTORS: PERSONAL
CIRCUMSTANCES IMPACT
BEHAVIOR.

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Analyzing Consumer Markets Concept 2 of 4: Mental Processes
MENTAL PROCESSES AFFECT HOW
CONSUMERS BUY GOODS
CONSUMER
Perception
Motivation
LearningExperience
Memory

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MOTIVATION drives us to ACT on a WANT.
3 theories of human motivation:
1. Freud 2. Maslow 3. Herzberg

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1) FREUD: People’s behavior are mostly
unconscious.

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2) MASLOW: People are driven by a hierarchy of
needs.

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3) HERZBERG: People need satisfiers to be
motivated; not just the absence of dissatisfiers.

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PERCEPTION is how we SEE THE WORLD.
Different perceptions result from:
SELECTIVE...
1) Attention 2) Distortion 3) Retention

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LEARNING induces CHANGE IN BEHAVIOR.
LEARNING arises from experiences.
Marketers can thus build product demand by associating it with
strong drives, using motivational cues, and providing positive
reinforcement.

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EMOTIONS invoke different FEELINGS.
Emotions are involved when consumer response is not rational.
• Emotional marketing campaigns help build stronger connections with
consumers.
• People can relate more to the brand instead of just associating it as
a product.

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MEMORY creates BRAND ASSOCIATIONS.
Marketers help consumers remember certain brands by:
• Creating brand associations that become linked to the brand.
• Making sure that consumers have positive brand experience and
knowledge.

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Analyzing Consumer Markets Concept 3 of 4: The Purchase Process
MARKETERS HELP CONSUMERS
CHOOSE
PROBLEM
RECOGNITION
PURCHASE
DECISION
POSTPURCHASE
BEHAVIOR
INFORMATION
SEARCH
EVALUATION OF
ALTERNATIVES

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A NEED IS TRIGGERED BY STIMULI
PROBLEM
RECOGNITION
1.
Internal
Stimuli
External
Stimuli
External
Stimuli
External
Stimuli
External
Stimuli

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INFORMATION
SEARCH
ONLY A LIMITED AMOUNT OF
INFORMATION IS SEARCHED.
2.
4 MAJOR INFORMATION SOURCES:
1. Personal
2. Commercial
3. Public
4. Experiential

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IN EVALUATION, NO SINGLE PROCESS IS
USED BY ALL.
3.
EVALUATION OF
ALTERNATIVES
THE EVALUATION PROCESS IS INFLUENCED BY
1. Beliefs
2. Attitudes
3. Expectancy Values (Rationalization)

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ALL CONSUMERS REACH DECISIONS
DIFFERENTLY
4.
NON COMPENSATORY MODELS
Makes use of “Mental Shortcuts” or HEURISTICS
1. Conjunctive– Minimum Cut Off per Attribute
2. Lexicographic – Choose among the best of a perceived most
important Attribute
3. Elimination-by-Aspects
PURCHASE
DECISION

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MARKETING DOES NOT END WITH
PURCHASE!
5.
POSTPURCHASE SATISFACTION
POSTPURCHASE ACTIONS
POSTPURCHASE USE AND DISPOSALS
POSTPURCHASE
BEHAVIOR

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Analyzing Consumer Markets Concept 4 of 4: Contextual Influences
Birds of the same Feather, Flock
Together
DECISION HEURISTICS OR RULES OF THUMB
1. Availability Heuristics
– Based on the quickness and ease with which a particular
example of an outcome comes to mind
e.g. Safety of Malaysia Airline flights

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Follow the Leader!
2. Representativeness Heuristics
- Based on how representative or similar the outcome is to
other examples
e.g. Coffee Creamer Packaging

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First Impressions last!
3. Anchoring or Adjustment Heuristics
– Consumers arrive at an initial judgment and then adjust it
based on additional information
e.g. Important First Impressions

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Summary
HOW DO WE LOOK INTO CONSUMER
BEHAVIOR?
1. Influences of Consumer Behavior
2. Mental Processes AFFECTING Consumers
3. Their Purchase Process
4. Contextual Influences and Heuristics
LOL found it

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Conclusion
ANALYSIS LEADS TO REWARDS
1. Consumer behavior is affected by a lot of factors
2. Purchase decisions are not purely rational
3. GOOD MARKETING can influence these factors and lead to
meeting company objectives!

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ANALYZING CONSUMER MARKETS
in/marvinpedregosa
pub/rea-uy/53/620/552/
Marvin Pedregosa
Nadia Tantuco
Rea Uy

MARKETING MANAGEMENT Kotler Connecting with Customers Chapters 5 and 6

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