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Chapter 18

Competitive Strategies: Attracting, Retaining, and

Growing Customers

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What is Relationship Marketing?

Relationship Marketing is the Process of Creating,

Maintaining, and Enhancing Strong, Value-Laden

Relationships With Customers and Other Stakeholders.

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Customer Relationship Marketing

Why the new emphasis on retaining and growing customers? Changing demographics, more sophisticated

competitors, and overcapacity in many industries means fewer customers.

Costs five times as much to attract a new customer as to keep a current one satisfied.

Losing a customer means losing the entire stream of purchases over a lifetime of patronage - the customer lifetime value.

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Customer Delivered Value (Fig. 18.1)

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Customer SatisfactionExpectations are Based on Customer’s Past Buying Experiences, the Opinions of Friends, & Marketer and Competitor Information and Promises.

Product Falls Short

of Expectatio

ns

Customer is

Dissatisfied

Product Matches

Expectations

Customer is Satisfied

Product Exceeds

Expectations

Customer is Highly

Satisfied or

Delighted!

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Customer SatisfactionToday’s most successful companies are raising expectations – and delivering performance to match.These companies embrace total customer satisfaction.Firm that seeks total customer satisfaction doesn’t have to attempt maximum customer satisfaction.Purpose of marketing is to generate customer value profitably – offer customer satisfaction without sacrificing profits.

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Customer Loyalty and Retention

Highly satisfied (delighted) customers produce benefits: They are less price sensitive, They remain customers longer, They talk favorably about the company and

products to others. Tremendous difference between the loyalty of

satisfied customers and completely satisfied customers.

Delighted customers have emotional and rational preferences for products, and this creates high customer loyalty.

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Financial Benefitsi.e. Frequency Marketing

Programs

Financial Benefitsi.e. Frequency Marketing

Programs

Social Benefitsi.e. Learning Individual Customer’s Needs &

Wants

Social Benefitsi.e. Learning Individual Customer’s Needs &

Wants

Structural Tiesi.e. Supply Customers

With Special Equipment

Structural Tiesi.e. Supply Customers

With Special Equipment

Marketing Tools to Build Stronger Bonds

With Consumers

Building Lasting Customer Relationships

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Customer-Product Profitability Analysis (Fig. 18.3)

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Discussion Connections

More than three decades ago, Peter Drucker observed that a company’s first task is “to create customers”. How to the following companies create customers: Intel, Delta Airlines, Your university or college, American Online

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CustomerCustomer

RetailerRetailer

ProducerProducer

VendorVendor

Raw Material SupplierRaw Material Supplier

Customer Value-Delivery Network

Ord

er D

eliv

ery

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Total Quality MarketingJapan was the first country to award a national quality prize, the Deming prize.Mid-1980’s, the U.S. established the Malcolm Baldridge National Quality Award.Europe has developed the ISO 9000 which is an exacting set of quality standards.Total quality has become a truly global concern.

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Total Quality MarketingQuality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.Marketers play a major role in helping their companies define & deliver high quality products and services to target customers: Must correctly identify the customers’ needs

and requirements and communicate this to product designers,

Marketing must deliver each marketing activity to high quality standards.

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Steps in Analyzing Competitors (Fig. 18.4)

Identifying the company’scompetitors

Assessing competitor’s objectives, strategies,strengths and weaknesses,and reaction patterns

Selecting whichcompetitors toattack or avoid

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Overall CostLeadership

Overall CostLeadership

DifferentiationDifferentiation

FocusFocus

Middle ofthe RoadMiddle ofthe Road

Basic Competitive Strategies

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Competitive Strategies: Value Disciplines

Operational Excellence

Customer Intimacy

Product Leadership

Companies Gain Leadership Positions by Delivering Superior Value to their Customers Through These Strategies:

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Competitive Marketing Strategies

Firms Competing in a Given Target Market Differ in their Objectives and Resources so May Choose the

Following Forms:

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Firm With the Largest Market Share

Firm With the Largest Market Share

Expand theTotal MarketExpand theTotal Market

Protecting Market ShareProtecting

Market Share

Expanding Market ShareExpanding

Market Share

Competitive Marketing Strategies

Runner-Up Firms that Fightto Increase Market Share

Runner-Up Firms that Fightto Increase Market Share

Attack theMarket Leader

Attack theMarket Leader

Avoid the Market Leader

Avoid the Market Leader

Acquire SmallerFirms

Acquire SmallerFirms

Attack OtherFirms

Attack OtherFirms

Motorola, a marketleader, is looking toexpand total market, so itemphasizes the overallneed for pagers, whilemaking it clear tha tits product can fulfill thatneed.

MarketLeader

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Runner-Up Firms that Wantto Hold Their Share Without

Rocking the Boat

Runner-Up Firms that Wantto Hold Their Share Without

Rocking the Boat

Follow CloselyFollow Closely

Follow at aDistance

Follow at aDistance

Competitive Marketing Strategies

Firms that Serve Small Segments Not Pursued by Other Firms

Firms that Serve Small Segments Not Pursued by Other Firms

End-UserSpecialistEnd-UserSpecialist

Customer-SizeSpecialist

Customer-SizeSpecialist

ServiceSpecialistService

Specialist

Quality-Price

Specialist

Quality-Price

Specialist

GeographicMarket

Specialist

GeographicMarket

Specialist

Here, Oldsmobile is making cars that resemble its foreign competitors, then appealing to customers to buy these domestic cars.

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Balancing Customer and Competitor Orientations

Customer-Centered

Com

peti

tion

-cen

tere

d

Product OrientationProduct Orientation

Competitor Orientation

Competitor Orientation

Customer OrientationCustomer Orientation

Market OrientationMarket OrientationYes

No

YesNo

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Review of Concept Connections

Discuss customer value and satisfaction and how companies attract, retain, and grow profitable customers.Explain the roles of the company value chain, value-delivery network, and total quality in delivery of customer value and satisfaction.Discuss the need to understand competitors as well as customers through competitor analysis.Explain the fundamentals of competitive marketing strategies based on creating value for customers.Illustrate the need for balancing customer and competitor orientations in becoming a truly market-centered organization.