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32 Cards in this Set
- Front
- Back
marketing objective includes
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acquisition and retention
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marking theory, practice has long prioritized ______ ____ over _____ _____
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making sales over building relationships
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about ___ times cheapter to satisfy/retain existing customer than to acquire new customer (win backs are cheaper than acquiring too)
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5
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Defining customers using RFM (recency-frequency-monetary) analysis
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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
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common loyalty definition (acquisition challenge)
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A deeply held commitment to rebuy a product or service
despite situational influences and marketing efforts having the potential to cause defection |
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4 origins of loyalty
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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 |
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Heart loyalty
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Magnitude of involvement: high
Type of involvement: emotional Resistant to rational appeals |
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Heart loyalty is not the same sa favorable attitudes..how? 3 things
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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 |
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Head loyalty
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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 |
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Hand loyalty
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Mag of involve: low
type of involvement: habitual/automated First experience with product critical..typically lower ticket items |
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20-80 rule
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20% of customers account for 80% of company
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4 benefits of loyalty
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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 |
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Price premiums
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a basic indicator of loyalty (additional amount a customer will pay for a comparison to another brand with similar benefits)
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Why the relationship between loyalty and profitability may be more nuanced than typically assumed (2 reasons)
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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 |
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common categorization of short and long term customers
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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 |
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low share of wallet (barnacles)
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spending not much money on own product but more on other similar products
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low size of wallet (barnacles)
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loyal but not much proft because of coupons used and not much purchasing
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Combining internal and external data
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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 |
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2 factors that influence easy of collecting internal data
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interaction frequency (high, lo), and type of customer interaction (direct/indirect)
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Customer lifetime value
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present value of all future profits generated from a particular customer
A function of several components |
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Margins (m)
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annual revenue-operating expenses
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Annual retention rate (r)
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percent of current customers who will still be with the firm at the end of the year (how many customers stay..80%?)
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Discount rate or cost of capital (i)
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typically around 10-16%
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Computing lifetime value equation
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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 |
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More on marketing objective
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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! |
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4 illustrations of retention marketing objective
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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 |
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Marketing objective typically affects ____ and ____ customers
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light and moderate
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Hard to get loyalty programs just right
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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) |
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Applying research on the Goal-Gradient hypothesis to reward programs...pinkberry pound off things
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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 |
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3 things that loyalty programs can do
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• 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) |
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loyalty programs can also ______
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yield insight into preferences
but they cannot make you more emotionally attached |
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2 final ways to build loyalty
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customer service (get personalized service)
community building (jeep) some companies it is not necessary for loyalty program like pianos or wedding dressess |