Marketing Principles 9 - Relationship Marketing and Ethics PDF

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Marketing Principles 7 (Semester 2, Year 1)

Marketing Principles 7 – Relationship Marketing and Ethics Objectives 1. Why are customer relationship important to an organisation? 2. The impact of ethics on both companies and their potential customers

1. Importance of Customer Relationships at an Organisation “It costs 5-10 times as much to get a new customer than to keep an existing customer” Gummerson (1999) Customer Acquisition Costs in Multi-Channel TV       

Creation of Marketing Materials Awareness Building Campaigns Sales Promotion Costs (Introductory offer = lower margins) Costs of approaching lapsed customers Admin of Contract Entry Installation costs (to the business) Equipment Costs

Attracting and Retaining Customers     

Reduce the rate of defection Increase longevity Enhance share of wallet Terminate low-profit customers Focus more effort on high-profit customers

Relationship marketing refers to the process of creating, maintaining and enhancing strong, value-laden relationships with customers and other stakeholders (Kotler et al 1999). Why is it important?   

Shift from Sellers’ market to Buyers’ market Relationships are important to marketing as they deliver long-term value to customers. Relationships can build satisfaction and by establishing relationships with customers, their needs and wants can be addressed profitability

Transactional Marketing vs Relationship Marketing Relationship  Customer Retention  Long Term  Loyalty (RM Tools) Transactional  Customer Acquisition  Short Term  Product Focus  Transaction (Marketing Mix) 1

Marketing Principles 7 (Semester 2, Year 1) E.g. books Traditional bookshops (TM)  Majority of customers buy books in physical stores, face to face (except some b2b and some book clubs)  No knowledge of who the customers are Traditional 4Ps approach – location, stock of books, pricing, national promotion e.g. print advertising Amazon.com (RM)  Knowledge of customers and purchases  Access to data  Repeat business opportunity  Service emphasis  Competition based on service delivery  Price and payment issues 

Relationship Marketing is good for all products, BUT don’t build a database when:  The product is a once-in-a-lifetime purchase  Customers do not show loyalty  The unit sale is very small  The cost of gathering information is too high Customer Satisfaction & Loyalty  

Customer satisfaction is a customer’s positive, neutral, or negative feeling about the value received from an organisation’s product in specific use situations Loyal customers results in strong business performance as they provide sales to increase revenues, have less concern about price and help reduce the organisation’s costs.

The Customer Satisfaction 

Problem

Why bother about customer satisfaction?

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Marketing Principles 7 (Semester 2, Year 1)

TGI Friday’s a ‘plus, minus and zero’ theory   

Minus: ‘we’re not really happy with the meal and things are not okay’ Zero: ‘everything was ok, not really impressed, average restaurant’ Plus: ‘we won the customers, they will come back

Relationship between Customer Satisfaction and Loyalty in Competitive Industries

Factors Leading to Customer Switching Behavior        

Pricing Inconvenience Core Service Failure Service Encounter Failures Response to Service Failure Competition Ethical Problems Involuntary Switching

Does Satisfaction Always Drive Sales Growth 

No In this example a bank had lower sales growth in branches where customer satisfaction was higher

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Marketing Principles 7 (Semester 2, Year 1) 

The explanation is that as the branches got busier customer service and satisfaction declined as management were reluctant to put on more staff, because the business as a whole was suffering

Customer Relationship Groups

Customer Relationship Management  

... is IT-based applications that integrate a company’s information about customers with the knowledge of how to use that information (Kotler et al., 2002). Various uses – Call centres, Loyalty schemes, Websites - ‘Next best product’, Email campaigns, Social CRM .....

Tesco’s Clubcards: ‘Every little helps’ 

‘Clubcard’ a loyalty scheme where shoppers are rewarded for their spending by being allocated points which could then be converted into vouchers (quite similar to Sainsbury’s Nectar, Boots Advantage)

CRM - E-mail Campaign 

E-Newsletter o Personalised o Target customer o Gives offers, competitions, prizes etc. o Keeps customers up to date o Different content for diff. customers o Aims retention, repeat purchases

Limitations of CRM 

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“There is no doubt that CRM can be a major factor in achieving competitive advantage but get CRM wrong and customers leave, never to return.” (Malcolm McDonald, cited in Kotler et al.,2002, p.410) “It’s one thing to collect data, another to know what to do with it … “

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Marketing Principles 7 (Semester 2, Year 1)

2. Impact of Ethics on Organisations and their Customers Marketing and the Individual Consumers  Prices  Advertising  Deception  Disadvantaged groups Marketing’s Impact on Society  On other businesses  Materialism  Consumerism and sustainability  Social and societal marketing

Positive Aspects of Marketing  Communicate Brand Choices  Monetary Savings (Sales Promotions)  Convey product knowledge& Customer rights  Improve Customer Satisfaction  Promote product Awareness Common Criticisms of Marketing  Materialism & Greed  Deception/Misleading info  Consumerism  Unethical Practice  Irresponsible Advertising  Gimmicks Ethics in Advertising   

Misleading Advertising Influence on society Advertising to children

Ethics in Branding 

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Brands and Value o Aren’t brands just empty things? o Cost to produce Vs retail price – Levi’s, Nike Endorsements o Michael Jordan and Nike o Gary Lineker and Walker’s Crisps Branding and Developing countries o Global brands Vs local o Brands in poor countries – Nestle in Africa

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Marketing Principles 7 (Semester 2, Year 1) Ethics in Product Management

Ethics in E-Marketing 

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The Digital Divide o Not everyone can afford the technology o The rich pay less, the poor pay more Intrusions on Privacy o Software that spies – or steals o Spam Marketing to Children o Unhealthy eating o Inappropriate products o Drugs, violence, sex

Consumerism and Sustainability 

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What is Consumerism? o Organised group pressure o ‘Protecting’ consumers from firms o Lobbying government and industry Past examples o ASH – anti smoking o ‘Which?’ type magazines o Anti-apartheid Sustainability o Food miles o Packaging o Manufacturing o Pollution The Challenge o A sustainable global economy

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Marketing Principles 7 (Semester 2, Year 1) Influence of Marketing   

Mass media (TV) campaigns Mass media (Print) campaigns Educational campaigns (schools)

Social Media Marketing

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‘Marketing decisions are made by considering customers’ wants and interests, the company’s requirements and society’s long term interests’. Aim: to design products that are not only pleasing but also beneficial.

Corporate Social Responsibility   

Socially responsible behavior Ethical behavior Legal behavior

Societal Classification of Products

Reputation has Value 

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Imagine that you had to give up the use of your company’s name, but that you had the chance to pay a percentage of your annual revenue, as a license fee to continue to use the name. What percentage of your turnover do you think it is worth? Now estimate how long you would make a contract for, to license back the use of your own name.

What is Reputation Worth?       

Differences within the same organisation of between 12 and 20 % of sales growth Dimensions of personality and/or satisfaction explain about 50% or more ‘Tidying up’ Reputation appears to be worth 3-7 % sales growth, i.e. merely learning from within Exxon Valdiz cost Exxon about 5% sales loss The capital value of reputation is about 50% of annual sales Improving reputation is worth 5% per annum sales growth, say 1% on profit Assuming a 20% ROCE then the maximum investment in Reputation should be 5% of sales, about the same as the advertising budget for a consumer product

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Marketing Principles 7 (Semester 2, Year 1)

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Marketing Principles 7 (Semester 2, Year 1) Summary 

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What is Relationship Marketing ? o The importance of RM in today’s competitive marketplace o The shift from TM to RM o The relationship between customer satisfaction and loyalty o What is CRM and its limitations ? Ethics in Marketing o Accusations of Marketing o Reputation & it’s Value

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