Week7 -Product strategy & RM

• Product strategy – ch 14• Case studies – Colgate• Project – part 1 feedback

Colgate

• Analyse situation in terms of market attractiveness model

• What risks do they face in entering this sector ?

Product strategy – ch 13

• Product component model

• Line extensions

Product component model

• Sony camcorder• Core benefit- convenient , high quality way to capture

important moments

• Augmented product-warranty on parts, instruction booklet, freephone No for enquiries

• A hotel eg . Holiday Inn

• Product is not just a simple set of tangible benefits, it is complex bundle of benefits

Brand strategies

• Line extension- flavours, colours,

• Brand extension- Honda cars, lawnmowers, Cadbury biscuits, Heinz petfood, Bic pantyhose, Virgin , Colgate

• Multibrands-portfolio of brands in same category serving different segments, Lever, P & G , Mars, Coke, Fatnta, Sprite

• New brands –Lexus, Pulsar ( Seiko brand )

Brand strategies

• Line extension or Multibrand?

• Lucozade, Ribena cf. Coke

• Your examples ?

Relationship marketing ( RM )- definition

• An organisation engaged in proactively creating, developing and maintaining committed, interactive and profitable excahnges with selected customers ( partners ) over time is engaged in RM– Harker 1999

Evolution of Customer Relations

Tutorial 3 OHT 3.1

1970s–1980s 1980s–1990s 1990s Beyond 2000

Persuasion

Group statistic

Traditional marketresearch

One-way(to target groups)

Transaction Relationship Co-creation

Passive Collaborators

Approach

Managerial viewof customers

Interactions withcustomers

Communications

Role of customer

Individual statistic Person to becultivated

Individual memberof society

Customer serviceand support

Deeperunderstanding

Customers as co-developers

Two-way(database marketing)

Two-way(relationshipmarketing)

Active, multi-leveldialogue

Source: based on Prahalad and Ramaswamy, 2000

The Six Markets Model - Christopher

• Customers• Referral markets• Suppliers• Employees• Influencers• Internal markets

Tutorial 3 OHT 3.3

Six markets model

• Customers- always the primary focus• Referral markets

– eg.independent financial advisors, clothing brands recommending detergents

• Supplier markets– Win- win sitaution rather than adversarial. Supermarkets with

fresh food suppliers

• Influencer markets– Finance markets( capital ), regulators, governments

Six markets model

• Employee markets– Competing for the best talent

• Internal markets– Rationale that by treating employees as customers , levels of

customer service and quality can be improved.

Six markets model- internal markets

• Employees as internal customers• BUY IN leads to motivation• RM / satifaction with customers achieved

through staff

RM- practice

• Promotions are ad hoc- eg buy 2 get 1 free, 25 % extra, consumers revert to pre- promotion behaviour or to their favourite brand

• Idea is to lock consumers in if possible• As brand owner gets more knowledge about

consumers can change product / service thus leading to increased loyalty

• Costs of switching may be increased to further help loyalty

RM- practice/ examples

• Personal banking • Loyalty schemes- airmiles• Fly Buys- largest in Australia, covering 20 % of

retail spending, 3m households (25 % )• Owners Clubs – Harley Owners‘ Club• Magazines- Nikon Pro , aimed at professional

photographers• Heinz- failed attempt at magazine instead of TV

RM- practice/ examples

• Customer care/ hotlines• Targeted mail• Corporate magazines ( hard copy / electronic)• Book, wine , music clubs• Beanie Babies• Magazine subscription

Characteristics of Successful Relationships

• Maintain rules of friendship:

– respect privacy

– look in the eye

– keep confidences

– do not criticize publicly

• Establish trust, warmth and intimacy

• Develop frequent and easy interactions

Tutorial 3 OHT 3.4a

Characteristics of Successful Relationships (Cont’d)

• Become close to the customer (propinquity)

• Tailor messages to fit with customer (similarity)

• Give and take favours (mutuality)

• Help customers to achieve their goals (goal interdependence)

• Conform to customer’s culture (establish peer groups norms)

Tutorial 3 OHT 3.4b

RM- lifetime value of a customer

• Can be calculated for individual customers ( key accounts), segments of customers, or the average customer

• Objective is to calculate future profitability of customer

• Data needed– Cost of winning customer– Periodic cost of maintaining customer– Gross margin from 1st, 2nd, nth sale – Probability customer will buy 2nd, 3rd, nth time– Number of purchases made by customer from the company

RM- lifetime value of a customer

Customer value to Blue Dolphin

€Cost of aquisition 400Gross margin p.a. 350Maintainence costs p.a 50Contribution p.a 300Retention rate 90%Average life of customer 10 yearsLifetime contribution 3000less acquisition cost -400Lifetime value 2600

Lifetime value importasnt

• Banking, insurance• Telecoms , internet• Utilities• TV• Car organisations eg AA, RAC

RM – technological tools

• Bank ATM‘s, call centers, voice response systems, email, fax, Electronic data interchange, POS applications, 24 hour interaction

• Database marketing

RM- costs & benefits

• Significantly more expensive than mass marketing

• Investments needed in technology, internal marketing , maintaining customer

• Some customers more profitable on a transactional basis ?

• A long term commitment does not constitute a relationship- customer might defect !

The services triangle

Service relationships

• Zeithaml et al ( 1985) distinguish 4 common factors for all services to differentiate them from goods

1. Intangibility

2. Inseparability of production from consumption

3. Heterogeneity

4. Perishability

Service relationships

• Intangibility- can not touch , see, taste, hear before they are bought

• Inseparability- produced & consumed at same time eg haircut, pop concert, lesson.

• Heterogeneity- variable , hotels , restaurants• Perishability- can not be stored for use later . No

stock !

Next week

• Week 8 , week 9 is project deadline• Channel management• Check