978-0136074892 Solution Manual Chapter 14 Part 2

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5. Mass Customization

·Technology is projecting this method further by offering customers ways to

customize their own products.

·Imparts feeling that product was made especially to the customer’s specifications

·Combines information technology and flexible manufacturing technologies

6. Community Building

·Customers who share information between themselves and the company

about the product/service

·Successful communities on the Internet offer:

·A forum for exchange of common interests

·A sense of place with codes of behavior

·Development of congenial and stimulating dialogues leading to

relationships based on trust

·Encouragement for active participation by more than an exclusive few

when customers feel a sense of belonging

·It takes considerable effort from a competitor to entice the customer to

switch product/brands.

7. Privacy Issues

·CFI: same issues as those of privacy in direct marketing.

·Online communities should display privacy policies

·TRUSTe is part of an independent initiative to build user confidence in

joining communities and using the web

I. Metrics

1.Traditional metrics for measuring effectiveness of marketing programs are:

·Market share

·Sales volume

·ROI

·And other similar aggregate measurements

2. In additional to traditional metrics, a number of customer-based metrics exist:

·Acquisition rate and costs, retention rate (opposite of churn)

·Survival rate (percent of customers obtained at same time that are still

customers)

·Probability of customer being active or purchase in a given time frame

[P(Active)]

·Lifetime duration (expected length of time a customer will remain active)

·Win-back rate (returning customers)

·Other popular metrics include:

·Share of category requirements (Percent of all purchase volume in the

category of your brand)

·Size of wallet (how much is spent on the whole category)

·Share of wallet (what percent of all purchase value in the category is

your brand)

3. Table 14.4 Page 432 CRM-Oriented Metrics Lists some of the kinds of

measures that should be obtained in a CRM-based marketing system.

Teaching Tips and Strategies from Barbara S. Faries, MBA

The purpose of this chapter is to introduce the concepts involved with customer

relationship management:

Key Terms and Concepts Introduced Include:

·Transaction buyers

·Relationship customers

·Customer relationship management (CRM)

·Lifetime customer value (LTV)

·Acquisition costs

·Customer information file (CIF)

·Datamining

·Expectation confirmation/disconfirmation model

·Customer service

·Loyalty programs

·Frequency marketing

·Mass customization

·Community

Note: Two recurring themes in this Instructor’s Manual are the first two items:

·Link theory to practice.

·Engage students to link work experience to the concepts demonstrated in

the text.

·Instructors are encouraged to link theory to practice by finding current examples

in the business environment that demonstrate the key concepts above.

·If your class contains those already working in the field, have them describe how

the concepts in theory match those in the actual workplace.

I have taught customer relationship management as a semester–long course within

an MBA program. Having an entire semester to teach what is contained in one chapter of

this text is extraordinarily informative and enlightening for students. What I have learned is

that most of your students will be familiar with the bulk of what is contained in the text

such as loyalty programs, transaction buyers, relationship buyers, mass customization, etc.

However, most will not be familiar with “lifetime customer value (LTV)” and the

associated calculation. In addition, most will be using some type of CRM system (see

below) but may not be aware of how to use it to determine certain customer metrics. A

good deal of them will understand the term customer relationship management but will not

understand the necessity of creating a strategy for managing customer relationships.

I often find it extremely useful to have the students create and calculate a

hypothetical or real LTV. Some of the students may want to create an example from their

own work environment. Most of the students will find this exercise extremely enlightening

and useful.

Since most of the students will encounter the metrics described in this chapter, I

spend a good amount of time on those. Especially useful are acquisition rate/cost, retention

rate, survival rate, etc. Putting these metrics in economic perspective demonstrates the

value of getting and keeping customers.

If time permits, I give the students an outside project by asking them to create a

customer relationship strategy for a hypothetical or real company. Another exercise is to

take a real company that has reportedly lost customers and ask the students to think about

how they would have created a strategy to retain the customers.

Finally, I have the students discuss some popular customer relationship

management systems (CRMs) from the standpoint of the types of metrics that they are

capable of producing. Well-known customer relationship management (CRMs) systems

include:

Salesforce www.salesforce.com

ACT! www.act.com

GoldMine CRM www.frontrange.com/goldmine

SalesNow www.salesnow.com

FreeCRM www.freecrm.com

SugarCRM www.sugarcrm.com

Review Questions

1. Think of a recent example in which you were treated poorly by a company. Assuming

you chose not to buy any more of that company’s products or services, approximately

what is the present value of the revenue that company has lost? (Assume the only lost

revenue is from your purchases and not, for example, from your negative word-of-

mouth.)

2. Consider the customer satisfaction model shown in Figure 14-9. Why is it important for

marketing managers to measure customer expectations as well as actual satisfaction

from consumption or usage?

3. Think of a company that has provided great customer service to you recently. What did

they do? How did they go beyond what you expected? What do companies have to do to

get employees to deliver such service?

4. Are loyalty programs more likely to be successful for certain kinds of products and

services than for others? Given the proliferation of loyalty programs, how can you

differentiate your program from competitors’ programs?

The answer to this question will vary.

5. Think about two contrasting products: one with which you are involved (e.g., a hobby,

cars) and one you don’t think about much when you purchase it (e.g., toothpaste, milk).

How would you go about building community about a brand in one of the latter

categories if you were the marketing manager?

intangible). For example: Crest is known for dental protection, this feature might help to

6. Continuing Question #5, how would you construct a database or CIF for the brand in

one of the low-involvement categories?