Mkt Exam 1 09 12 12

Front 1

marketing objective includes

Back 1

acquisition and retention

Front 2

marking theory, practice has long prioritized ______ ____ over _____ _____

Back 2

making sales over building relationships

Front 3

about ___ times cheapter to satisfy/retain existing customer than to acquire new customer (win backs are cheaper than acquiring too)

Back 3

5

Front 4

Defining customers using RFM (recency-frequency-monetary) analysis

Back 4

different industries will have different RFM cutoffs for efining customers..better to also combine purchase data with attitude data..need to know how they think about our product because some customers vulnerable

Front 5

common loyalty definition (acquisition challenge)

Back 5

A deeply held commitment to rebuy a product or service
despite situational influences and marketing efforts having
the potential to cause defection

Front 6

4 origins of loyalty

Back 6

1. emotional attachment (heart loyalty..hot cocoa!)

2. deliberate assessments of quality, value (head loyalty)

3. Habit (hand loyalty..toilet paper)

Differ in type of involvement and magnitude of involvement

Front 7

Heart loyalty

Back 7

Magnitude of involvement: high
Type of involvement: emotional

Resistant to rational appeals

Front 8

Heart loyalty is not the same sa favorable attitudes..how? 3 things

Back 8

1. attitudes can be developed without interaction with product

2. no "separation distress" with just a favorable attitude

3. Will defect if something better comes along if only hold a favorable attitude

Front 9

Head loyalty

Back 9

Mag of involvement: high
type of involvement: cogni/rational

Can lead to heart loyalty
Rational appeals have a chance..but consumers may not devote more thinking..plus, consumers may counter argue to reduce dissonance

Front 10

Hand loyalty

Back 10

Mag of involve: low
type of involvement: habitual/automated

First experience with product critical..typically lower ticket items

Front 11

20-80 rule

Back 11

20% of customers account for 80% of company

Front 12

4 benefits of loyalty

Back 12

1. can be barrier to entry
2. allows time to response to competitor innovations
3. protection against price attacks of customers loyal
4. source of price premiums

Front 13

Price premiums

Back 13

a basic indicator of loyalty (additional amount a customer will pay for a comparison to another brand with similar benefits)

Front 14

Why the relationship between loyalty and profitability may be more nuanced than typically assumed (2 reasons)

Back 14

1. surveys consistently reveal that consumers believe loyal customers deserve lower prices

2. loyal customers more knowledgeable about product offerings, prices..might be more price sensitive

Front 15

common categorization of short and long term customers

Back 15

ST and high profit: butterflies
ST and low profit: strangers (don't care)
LT and high profit: true friends
LT and low profit: barnacles

for barnacles, we measure size of wallet and share of wallet

Front 16

low share of wallet (barnacles)

Back 16

spending not much money on own product but more on other similar products

Front 17

low size of wallet (barnacles)

Back 17

loyal but not much proft because of coupons used and not much purchasing

Front 18

Combining internal and external data

Back 18

Both needed to distinguish between high size‐of‐
wallet / low share‐of‐wallet customers from low size‐
of‐wallet / high share‐of‐wallet customers
• They are indistinguishable based on internal data
alone, but call for diff relationship mgmt strategies
• Infeasible to obtain transaction records from
competitors
– But can obtain this info from surveys, secondary sources

Front 19

2 factors that influence easy of collecting internal data

Back 19

interaction frequency (high, lo), and type of customer interaction (direct/indirect)

Front 20

Customer lifetime value

Back 20

present value of all future profits generated from a particular customer

A function of several components

Front 21

Margins (m)

Back 21

annual revenue-operating expenses

Front 22

Annual retention rate (r)

Back 22

percent of current customers who will still be with the firm at the end of the year (how many customers stay..80%?)

Front 23

Discount rate or cost of capital (i)

Back 23

typically around 10-16%

Front 24

Computing lifetime value equation

Back 24

LV = m(r/(1 +i -r)

if r = .9, then after one year, there is a 90% chance that the customer will still be with the company...r is constant

Front 25

More on marketing objective

Back 25

Choose to focus on acquiring new customers or retaining existing customers

Not an exclusive focus..try to acquire customers you'll be able to retain...retain happy customers that will spread positive word of mouth

finallyfast.com!

Front 26

4 illustrations of retention marketing objective

Back 26

1. building awareness (finallyfast)
2. leveraging awareness of existing category leader (starbucks and mcdonalds)
3. ads that focus less on product (wuzzah)
4. loyalty? kroger plus cards

Front 27

Marketing objective typically affects ____ and ____ customers

Back 27

light and moderate

Front 28

Hard to get loyalty programs just right

Back 28

Must create incentives good enough to change
behavior, but no so generous that they erode margins
• Most grocery store membership cards reward card
ownership, not loyalty
• Some companies starting to reward profitability over
mere volume of purchases
– e.g., Harrah’s gives best rooms, rates to people who play
games with biggest house take (e.g., craps)

Front 29

Applying research on the Goal-Gradient hypothesis to reward programs...pinkberry pound off things

Back 29

General idea: how eagerly you pursue a goal
depends on how close you are to achieving the goal
• Hypothesis proposed by behavioral psychologists
– Rats in a maze run faster as they near the food box than at
the beginning of the path
• Research with humans also finds that the closer
people are to their goal, the more quickly they work
to accomplish the goal  

Front 30

3 things that loyalty programs can do

Back 30

• Create barriers to exit (a “lock‐in”)
– e.g., Sprint offers airline miles that disappear if you leave
• Win greater share of wallet (consolidate purchases)
– e.g., Amazon Visa offers 1 point/$1 spent but 3 points/$1
spent at Amazon
• Encourage purchases that wouldn’t normally happen
– Multi‐tier reward programs (e.g., Silver, Gold, Platinum)

Front 31

loyalty programs can also ______

Back 31

yield insight into preferences

but they cannot make you more emotionally attached

Front 32

2 final ways to build loyalty

Back 32

customer service (get personalized service)
community building (jeep)

some companies it is not necessary for loyalty program like pianos or wedding dressess