Showing posts with label Market. Show all posts
Showing posts with label Market. Show all posts

Patterns of Target Market Selection

Patterns of Target Market Selection


After evaluating the segments on the basis of segment potential, competitor’s position and potential goal and objective achievement, the firm can select the segment that will be the target market(s). The firm can consider five patterns of target market selection. They are as follows: 

1. Single segment concentration: In the simplest case, the firm selects a single segment. It is also called as concentrated marketing (see following figure)

Single Segment Concentration

Through single segment concentration strategy, the firm achieves a strong market position in the segment owing to its greater knowledge of the segment’s needs and the special reputation it gains. Furthermore, the firm enjoys operating economies through specializing its production, distribution and promotion. As it captures leadership in the segment, the firm can earn a high return on its investment. At the same time, concentrated marketing involves higher than normal risks. The particular market segment can turn bitter.

2. Selective specialization: In this strategy, the firm selects a number of segments (see following figure), each objectively attractive and appropriate, given the firm’s objectives and resources. There may be little or no synergy between segments but each segment promises to be a money maker.

Selective Specialization

This strategy has the advantage of diversifying the firm’s risk. Even if one segment becomes unattractive, the firm can continue to earn money in other segments.

3. Product specialization: The firm makes a certain product that it sells to several segments (see following figure). An example would be a microscope manufacturer who sells to university, government, and commercial laboratories. The firm makes different microscopes for the different customer groups and builds a strong reputation in the specific product area. The downside risk is that the product may be supplanted by an entirely new technology.

Product Specialization

4. Market specialization: The firm concentrates on serving many needs of particular customer group (see following figure). An example would be a firm that sells an assortment of products only to university laboratories. The firm gains a strong reputation in serving this customer group and becomes a channel for addition products the customer group can use. The downside risk is that the customer group may suffer budget cuts.

Market Specialization

5. Full market coverage: When a company decides to enter all or at least most segments, full coverage market segmentations is used. This is a high sales strategy, since greater penetration into each segment is combined with broad coverage of a total market (see following figure).
Full Market Coverage

Extensive resources are required to implement the strategy because it affords limited opportunity for economies of scale. Full coverage market segmentation is therefore most likely to be adopted by a large organization.

6. Niche marketing: The niches are the market segment that has been neglected by large organizations. Market niches are identified by dividing the market segments into sub-segments or by identifying customer groups whose needs have not been met by the large organizations.

Niche Marketing

Many companies succeed by producing a specialized product aimed at a much focused segment of market (or ‘niche’). In this pattern an organization concentrates on niche market segments to exploit market opportunities.

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Role of Market Segmentation in Marketing Decision Making

Market segmentation is the act of identifying and profiling distinct groups of buyers who might prefer or require varying products and marketing mixes. It is a process of dividing the total market for a good or service into several groups, such that the members of each group are similar with respect to the factors that influence demand. It plays a vital role in marketing decision-making. Market segmentation plays the following roles in marketing decision making. They are:

1. Identification of market opportunities

Without segmentation organization cannot find the needs of customer easily. Organization can identify the market opportunities like most profitable sectors, through well segmentation.

2. Understanding of the customer

A segmentation perspective leads to more precise definition of the market in terms of consumer needs. Segmentation thus improves management’s understanding of the customer and more importantly, why he/she buys.

3. To direct marketing programs

Management, once it understands consumer needs, is in a much better position to direct marketing programs that will satisfy these needs and hence parallel the demands of the market.

4. Strengthen management capabilities

A continuous program of market segmentation strengthens management capabilities in meeting changing market demands.

5. To assess competitive strengths and weakness

Management is better able to assess competitive strengths and weakness of greatest importance; it can identify those segments where competition is thoroughly entered. This will save company resources by forgoing a pitched battle of locked-in competition, where there is little real hope of market gain.

6. Systematic planning

It is possible to assess a firm’s strengths and weakness through identifying market segments. Systematic planning for future markets is thus encourages.

7. Efficient allocation of marketing resources

Segmentation leads to a more efficient allocation of marketing resources. For example, product and advertising appeals can be more easily coordinated. Media plans can be developed to minimize waste through excess exposure. This can result in a sharper brand image, and target consumers will recognize and distinguish products and promotional appeals directed at them.

8. Market objectives

Segmentation leads to a more precise setting of market objectives. Targets are defined operationally, and performance can later be evaluated against these standards.

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Environmental Scanning and Methods of Environment Scanning

Environmental Scanning

Scanning is generally defined as acquiring information. In the context of marketing programs and plan environmental scanning involves monitoring changes and developments in the marketing environment that have potential impact on the marketing activities. It is essential for formulating plans.
According to Richard Steers –“Environmental scanning involves monitoring changes and developments in the environment that have potential impact on the organization.”
In conclusion, environmental scanning is the process by which marketing management monitor its relevant environment to identify opportunities and threats affecting the business. Environmental scanning should be done to bring controllable environment in favor of the organization and plans.

Methods of Environmental Scanning


Environmental scanning is absolutely necessary for strategy formulation. As the environment is complex environmental scanning should be cautiously dealt. For the environmental scanning, some of following methods can be used.
  1. Extrapolation method: These methods require information from the past to explore the future. The future is assumed to be some function of the past. There are a variety of extrapolation methods, including trend analysis, forecasting and regression analysis.
  2. Historical analogy: When past data cannot be effectively used to analyze an environmental trend, the trend is studied by establishing historical parallels with other trends. This method assumes that sufficient information is available from the other trend. Turing points in the progression become guideposts for predicting the behaviors of the trend being studied.
  3. Intuitive reasoning: This method calls for a rational intuition by the scanner. Intuitive thinking requires free thinking unconstrained by past experience and personal biases.
  4. Scenario building: This procedure involves constructing a time-ordered sequence of events that have a logical cause-and-effect relationship to one another. The resulting forecast is based on interrelationships among the events.
  5. Cross-impact matrix: When two different trends in the environment point to two conflicting futures, the trends are studied to see their potential impact on each other.
  6. Morphological analysis: This method is used to identify all possible ways to achieve an objective. It can be used to anticipate and to develop ideal patterns for achieving desired objectives.
  7. Network methods: Two types of network methods are popular: Contingency Trees and Relevance Trees.
    1. Contingency Tree: A contingency tree is a graphic display of logical relationships among environmental trends that focuses on branch points, at which several alternate outcomes are possible.
    2. Relevance tree: A relevance tree is a logical network similar to a contingency tree, but assigning degrees of importance to various environmental trends with reference an outcome.
  8. Missing line approach: This approach combines morphological analysis and the network method. Many developments and innovations that appear promising may be hindered because something is missing. Under such circumstances this unique may be used to study new trends to see if they reveal the missing links.
  9. Model building: This method is similar to network methods but relies more on developing mathematical representations of the environmental phenomena in question. Simulations are good examples of model building techniques.
  10. Delphi technique: The Delphi technique is the systematic solicitation of experts opinion in varying stages, using feedback to develop new forecasts.

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Major Tasks of Marketing for the Success in Marketing

Marketing management has to do a set of tasks necessary for success in marketing. The basic tasks of marketing are as follows:

1. Develop marketing strategies and plans


The first and foremost tasks of marketing are to develop marketing strategies and plans. They consist of following tasks:
  • Determining the strategies consist of identifying the marketing objectives or goals of the organization, their determination, and modification as well as determination of specific resources to achieve objectives or goals set. They are concerned with product, price, channel, promotion, competitors, etc.
  • Marketing plans involve mangers by which the marketing goals can be achieved. They involve deciding policy, strategy, tactics, procedures, rules and regulations and marketing programs, budgets and schedules to achieve the long-term as well as short-term goals.
  • Marketing strategies and plans allocate economic, physical and managerial resources of the organization for future.
  • They assess and analyze strength and weakness, opportunities and threats (SWOT).


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2. Creating marketing information system


It is concerned with understanding what is happening inside and outside the company. Simply there are four components of marketing information. They are Internal Record System, Marketing Intelligence System, Marketing Research and Decision Support System.

3. Build customer relationship


Marketing needs to build customer relationship. Building customer relationship is a very effective way to increase satisfaction and sustain in market. The relationships can be built by using the emerging concepts such as relationship marketing and customer relationship management.

4. Build strong brands


Marketing needs to build strong brand. It is also a major task of marketing. Strong brand helps in promotion, value creating, image development, product positioning, brand loyalty and expansion of product lines.

5. Determine marketing mix


Marketing needs to create and determine and effective marketing mix to satisfy needs of target markets. It is the combination of four inputs such as the product, the price, the place and the promotional activities. Different marketing mix is essential for different groups of customers.

6. Deliver value


Marketing needs to deliver value to the target customers. Value is the ratio between what the customers pay and what they receive. Marketing must determine how to properly deliver the value embodied by the products and services to the target market. Customers’ product choice is guided by value. So, marketing should add maximum value to the customers.

7. Communicate value


Marketing needs to communicate value to target markets. It has to develop an integrated marketing communication program that maximizes the individual and collective contribution of all communication activities by which firm attempts to inform, persuade, remain and reassure consumers about the brands. For this, marketing has to set up mass communication programs consisting of advertising, personal selling, sales promotion, public relations and publicity.

8. Create long-term growth


Marketing must take a long-term view of its products and brands and how its profits should be grown. Based on its positioning, it must initiate new-product development, testing and launching.

9. Implementation and control


Marketing must organize its marketing resources and implement and control the marketing plans. It must build a marketing organization that is capable of implementing marketing plans and strategies. Similarly, it must find out any deviations between achieved performances against planned or budgeted performance using predetermined standards. It provides feedback about marketing planning and strategies.
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Customer Profitability Analysis for Corporate Growth

Customer Profitability


Smart marketers should always seek to establish strong relationship with profitable customers. Marketers have to bear so many costs and efforts for attracting, dealing and retaining customers. All such kinds of costs should be recovered for profitability. They should measure the profitability. They should focus on the lifetime stream of revenue and costs. In this regard, customer profitability is the difference between the revenues earned from and the costs associated with the customer relationship in a specified period.

Customer profitability is the result of applying the business concept of profit to a customer relationship. Measuring the profitability of a firm’s customers or customer groups can deliver useful business insights.

Customer Profitability Analysis


Marketers need to analyze customer profitability for corporate growth. A useful type of profitability analysis can be presented in the following figure:
Customer-Product Profitability Analysis

In above figure, columns represent customers and rows represent products. Each cell contains a symbol for the profitability of selling that product to that customer.

  • Customer 1: S/he is very profitable customer. S/he buys three profit making products. (P1, P2 and P4)
  • Customer 2: S/he yields a picture of mixed profitability. S/he buys one profitable product (P1) and one unprofitable product (P3).
  • Customer 3: S/he is losing customer because s/he buys one profitable product (P1) and two unprofitable products (P3 and P4).

Here, customer 2 and customer 3 are unprofitable customers for a company. The company can do the following activities about them.
  • It can raise the price of its less profitable products or eliminate them.
  • It can try to sell them its profit-making products.

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Emerging Trends in Marketing in a Competitive Market

The new trends in marketing as follows:

1. Globalization


Globalization is an emerging trend in marketing. It refers to free flow of ideas, goods and services all over the world. Effect of globalization is increasing in marketing. Increasing globalization is crating both opportunities and challenges for marketers. It is also creating international competition.

2. Changing technology


Changing technology is also an emerging trend in marketing. Development in information and communication technology, electronics, new materials and nano-technology development advances are opening many new opportunities for marketing.

3. Direct marketing


Direct marketing is also increasing. Direct mail, catalogue, telephone, television etc. are used in direct marketing. Now-a-days Internet and websites are also using and e-commerce is getting popular. Business-to-business purchasing is growing fast on the Internet.

4. Service marketing


The role of service products to satisfy needs, wants and demand of customers.

5. Outsourcing


An emerging trend in marketing is outsourcing. It is the process by which marketers purchase inputs such as capital, human resources, technology, machines, raw materials, technical know-how, skills, services from other organizations throughout the world. Outside suppliers are playing greater role in supply of goods and services.

6. Relationship marketing


Relationship marketing is also the emerging trend in marketing. It is concerned with building long-term mutually satisfying relationship with customers. Marketers focus on managing their customers as well as their products and series. They also focus on quality, value, customer satisfaction, customer loyalty and partnership with customers.

7. Quality marketing


Quality marketing is concerned with customer satisfaction. In order to deliver customer satisfaction, marketers have to offer ‘quality’ in their goods and services. Now-a-days total quality management (TQM) is getting popular.

8. Growth of global brands


Global companies, with very large size and scale of activities, have now been growing. These companies are able to establish their brands in global markets. Global brands in electronics, foods, clothing, autos, intellectual property etc. are becoming popular all over the world. Due to the practices of licensing and franchising strategies global brands are increasing.

9. Global life style


Advances in global communication, television networks, transportation, technology, cross cultural exchange, flow of tourists across the globe etc. are promoting global life styles. Global life style is providing added opportunities for marketers.


High-tech industries: Now-a-days high-tech industries also growing. Mechanization, automation, computerization, robotics, information technology, biotechnology, nano-technology, new materials and artificial intelligence are getting popular. Marketers can achieve gain economies of scale by using high-tech.

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Considerations for Global Market Entry: the age of globalization and tough competitive market

This 21st Century is the age of globalization. Today’s world has become a ‘small commercial village.’ Due to the development of trade and commerce, science and technology etc., many companies are going global. The need to think and act from global perspective is universal. Globalization increases global competition. It brings competition everywhere in the world. Thus, this is the age of competition. Today’s company should pay more attention to quality and price to survive in the competitive market. The variety of products and products forms in the market will significantly and substantially increase the customer choice. Besides these, the companies should create value to global target customers, it should gain competitive advantages, it should focus on needs and wants of target markets and it should follow positioning strategy to create strong brand image in global markets. In this regards, we can say that it is a great challenge to do marketing in the era of globalization.

Consideration for Global Market Entry


Going global is very challenging job. So a company should consider many things for global market entry. They are as follows:
  1. Political risks: A company going global should consider the political risks of global market. The elements of political risks are political instability, terrorism, civil war, etc. These all factors should be uncertainty in global markets.
  2. Access to market: Many factors may limit companies to access to global market. They are reservation policy for nationals, local content requirements, balance of payment problems, competition with local industry, regional cooperation agreements, etc. These all factors should be taken into consideration before going global.
  3. Cost structure: Cost structure should be taken into consideration for the companies going global. They should consider costs associated with factors of production such as land, capital, labor etc. Similarly they must consider the wages rate and tax related matters as well.
  4. Logistics: Logistics which is also known as physical distribution that consists of transportation, inventory management, warehousing, materials handling and order processing. These all are crucial to success in global markets. The cost of making goods and services readily available to global markets are very important for market entry. Similarly, there should be adequate infrastructure facilities, good governance, etc. in host country.
  5. Foreign exchange rate: The companies going global need to deal different currencies at a time. They need to follow foreign exchange regulations of the concerned countries and need to solve the currencies exchange problem. They should consider the exchange risk resulting from changing rates and control procedures.
  6. Marketing programs: Different countries have different political system and different government decisions. Different laws, rules and regulations of their own, govern marketing activities in different countries. So, the companies going global should prepare marketing programs as per the law, acts and local environment of host country.

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Holistic Marketing Concept: an approach to recognize and reconcile the scope and complexities of marketing activities

Holistic marketing concept is an approach to marketing that attempts to recognize and reconcile the scope and complexities of marketing activities. These activities are concerned to the relationship marketing, integrated marketing, internal marketing, social responsibility marketing and performance marketing. Marketers can create, maintain and renew customer value through holistic marketing concept.

The holistic marketing concept is the new and emerging concept which emphasizes the development, design, and implementation of marketing programs, process and activities. This concept recognizes that “everything matters” with marketing. It also recognizes that a broad, integrated perspective is necessary to get success in marketing.

According to Philip Kotler and Kavin Lane Keller –“The holistic marketing concept is based on the development, design and implementation of marketing programs, processes, and activities that recognizes their breadth and interdependencies.”


Components of Holistic Marketing


1. Relationship Marketing

It is a key component of holistic marketing. Marketers need to establish long-term relationship with customers. Relationship marketing is an act of building of long term mutually satisfying relationship with the different kinds of customers to earn and retain their long-term loyalty because they are good partners in creating value. Relationship marketing’s focus is not immediate sales; rather it is directed at building a large group of satisfied and loyal customers. Customer retention and winning back lost customer are the key strategy in relationship marketing. This marketing uses sustained long-term efforts in delivering value to the customers and profit to the firm.

2. Integrated Marketing

Integrated marketing is coordination of all of a company’s marketing activities in establishing marketing strategies such as packaging, media promotion, point of purchase materials, after sales services etc. It is the process of mixing and matching marketing activities to maximize their individual and collective actions. Marketing organizations must integrate their systems for demand management, resource management and network management.

3. Internal Marketing

Internal marketing is the process of bringing out support for a company and its activities among its employees, in order to encourage them to promote its goals. It describes the task of hiring, training and motivating able employees who want to serve customers well. It also refers to investment in human resources to train and motivate employees to better serve the customers.

4. Social Responsibility Marketing

Social responsibility marketing is a management orientation that holds that the key task of the organization is to determine the needs and wants of target markets and to adopt the organization for delivering the desired satisfactions more effectively and efficiently than its competitors in a way that preserves or enhances the consumers’ and society’s well being. It implies the orientation of the organization’s social responsibility to face the major environmental and demographic challenges.

5. Performance Marketing

It focuses on the value of marketing efforts. Performance marketing is practiced to ensure financial accountability in profitability term. Holistic marketing concept uses performance marketing to ensure profitability from marketing efforts and activities.

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How a marketing firm can benefit from the adoption of the system approach?

System


A system is made of components and their interrelationship. It is a set of units with relationship among them. In other word, a system is a network of interrelated and interacting components to achieve desired goals. Regularly interacting group of activities forming a unified whole is known as system. Solar system, natural system, economic system, political system, educational system, marketing system are some of the examples of systems. Their parts and sub systems interact with each other in order to achieve common objectives or goals.
According to J.A. Morton –“A system is an integrated assembly of specialized parts acting together for common purpose.”

 

According to Fremont E. Kast and James E. Rosenzweg –“A system is an organized, unitary whole composed of identifiable boundaries.”

 

According to S. A. Sherlekar –“A system is a set of interacting or independent components or groups co-ordinated to form a unified of objectives.”


Now we can conclude that a system is a set of objects together with the relationship among them and their objectives. It is consist of several sub-systems interact each other and work for common objectives. Problems arise in each sub-system affects the performance of whole system.

System can be of two types. They are as follows:
  1. Open system: In an open system, there are interactions between the system and its environment. Open system responds to change. All marketing organizations are open systems.
  2. Closed system: A closed system is one, which does not interact with its environment. It is self-sufficient entity. Automatic machinery system is an example of closed system

System Approach in Marketing


Simply, a system is made of components and their interrelationship. It is an integrated assembly of specialized parts acting together for common purpose. In this regards, a marketing system is a unified whole composed of interrelated and interacting parts to achieve desired objectives.
According to S. A. Sherlekar -“A system is a set of interacting or independent components or groups co-ordinated to form a unified of objectives. Likewise marketing system is also an integrated assembly of interrelated and interacting parts to achieve organization’s marketing objectives.”

According to W. J. Stanton –“Marketing system consists of two interacting elements – the marketing organization and its target market. These two elements are connected by two sets of flows. One the distribution of product/service to its customers in exchange for some kind of payment and the other flow is an information flow from the market to the organization.”

We can apply system approach in marketing. A firm’s marketing system is the set of significant institutions and flows that connect an organization to its market.
System approach in marketing can be made clear with the following figure:

System Approach in Marketing

Under the system approach, marketing is viewed as an organized and integrated effort to secure customer satisfaction and profit. Marketing itself is considered as a subsystem of economics, legal and competitive marketing system. The systems approach also integrates commodity, functional, institutional, and managerial approaches. It emphasizes the importance of the use of right information. Markets can be understood only through the study of marketing information. The system model (inputs-processing, output-feedback) places emphasis on the inputs of resources, outputs produced and it enables the determination of marketing programs to achieve those objectives. System approach to marketing includes the following factors. They are: objectives, inputs, processing, outputs, and feedback.
  1. Objectives: Objectives consist of profit matching products with markets, etc.
  2. Inputs: Inputs consist of capital, raw material, physical assets, human resource, information, machines and technology, management tools and in general, marketing mix elements.
  3. Processing: Processing consists of product planning and development, pricing, distribution and promotion.
  4. Outputs: Outputs consist of products, services, profit, customers’ satisfaction, social responsibility, goal integration etc.
  5. Feedback: Besides these, system approach also includes feedback which provides information to redesign inputs and processing.

Marketing is an open system. It interacts with environment. Definitely, system approach in marketing is used as an orderly method of dealing with marketing problems because it has many benefits. A marketing firm can get many benefits by using system approach in marketing.

Benefits of System Approach


We can apply system approach in marketing. A firm’s marketing system is the set of significant institutions and flows that connect an organization to its market. System approach to marketing has many benefits such as:

1. Synergistic effect


Synergistic is the combined effect of the components of a system that exceeds the sum of their individual effects. 2 + 2 = 5 is the result of synergistic effect. The systems approach in marketing generates synergistic effect. This idea has been well adapted in the marketing system where each sub-system works in close cooperation and coordination in order to achieve higher level results in terms of customer satisfaction or market share. Such-optimization is avoided because all sub-systems work efficiently in a coordinated manner.

2. Marketing effectiveness


By using systems approach in marketing a firm can efficiently coordinate and utilize the marketing resources. It helps to achieve marketing objectives. Under the system approach, all marketing activities and resources are efficiently utilized and coordinated. They look at the total picture and carefully design the marketing mix by giving needed importance to all the elements which definitely enhances the effectiveness or marketing.

3. Environmental adaptation


Marketing is an open system which interacts with its environment. In the interaction process it receives inputs form the environment in the forms of information, trends and resources and it also provides outputs to the environment in the forms of goods, services, ideas and experiences. Changing forces in the environment are carefully responded in designing the marketing program. By adopting systems approach, a firm can carefully consider the changing forces in the environment in designing marketing program. It helps to adopt environment changes.
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Relationship Marketing and Customer Development Process

Relationship Marketing


Marketers need to establish long-term relationship with customers. Relationship marketing is an act of building of long term mutually satisfying relationship with the different kinds of customers to earn and retain their long-term loyally because they are good partners in creating value. Relationship marketing’s focus in not on immediate sales; rather it is directed at building a large group of satisfied and loyal customers. Customer retention and winning back lost customer are the key strategy in relationship marketing. This marketing uses sustained long-term efforts in delivering value to the customers and profit to the firm.

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Now we can say that relationship marketing is a long-term partnership between marketers and customers in which both parties collaborate on identifying needs and developing as well as up-dating marketing mixed to satisfy needs. Besides these, in a competitive market, it is not enough to build relationship only with customers; it is
equally important to establish relationship with the vendors, intermediaries, and other influence groups.

Importance of Relationship Marketing

The major importance of relationship marketing can be listed as flows:
  • It maintains log term relationship with key customers.
  • It leads to develop loyalty and satisfaction, which in turn increases transactions with the same customers, again and again.
  • It supports for long-run business.
  • It focuses on customer retention. It can stop customers switching to another brand.
  • It results in positive image projection and enhanced brand equity on account of high degree of customer relation, loyalty and customer satisfaction.


Levels of Investment in Customer Relationship Building


A company needs to invest its time and money in building customer loyalty. How much should it invest in building loyalty so that costs do not exceed the gains? We need to distinguish different levels of investment in customer relationship building.

As following figure shows, the likely level of relationship marketing depends on the number of customers and the profit margin level.


Levels of Investment in Customer Relationship Building

  1. Basic marketing: The salesperson simply sells the product.
  2. Reactive marketing: The salesperson sells the product and encourages the customer to call if he or she has questions, comments or complaints.
  3. Accountable marketing: The salesperson phones the customer to check whether the product is meeting expectations. The salesperson also asks the customer for any product or service improvement suggestions and any specific disappointments.
  4. Proactive marketing: The salesperson contacts the customer from time to time with suggestions about improved product uses or new products.
  5. Partnership marketing: The company works continuously with its large customers to help improve their performance.

Most companies practice only basic marketing when their markets contain many customers and their unit profit margins are small. At the other extreme, in markets with few customers and high profit margins, most sellers will move toward partnership marketing. The best relationship marketing going on today is driven by technology. Companies are using e-mail, web sites, call centers, databases, and database software to foster continuous contract between company and customer.

Customer Development Process


The relationship marketing involves a long-term process of building satisfied and loyal customers. The process is explained below:
  1. Suspects: Most firms start from the pool of suspects. Suspects constitute of everyone who has the possibility of everyone who has the possibility of building the firm’s product or service.
  2. Prospects: From the pool of suspects the firm identifies customer groups who are mot likely to buy the product or service.
  3. First time users: They are those who buy a product for the first time. Then, the firm makes its maximum efforts to convert the first time customers into the repeat customers.
  4. Repeat customers: They are the first time customers who repeatedly buy the product or service. This group has the potential to be become loyal customers if the firm tries to build relationship in absence of the firm’s effort to build the relationship, the repeat customers may switch to competing firm’s product or service. They also move to the ex-customer pool.
  5. Clients: They are the loyal and satisfied customers who normally buy the firm’s product or service for a longer period of time. Firms need to work closely with clients so that they maintain long-term loyalty.
  6. Members: They are those clients who join membership programme to take advantage of benefits.
  7. Advocates: They are those clients who enthusiastically recommend the firm and its products and services to other prospects.
  8. Partners: The advocates may convert into partners, who work actively with the firm for mutual benefits.

There may be the possibilities, at each stage of customer development process, that some of the customers may become ex-customers, if they are dissatisfied. So, firm should try to satisfy the customers and to create strong customer loyalty.

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How can companies attract customers and retain them?

How can companies attract customers and retain them?

Traditionally, the focus of marketing has been on building new markets and attracts new customers. But it is not enough to be skillful in attracting new customers; the firm must keep them and increase their business. Now, firms are found giving more weight to attract customers and retain them. The key to customer retention is customer satisfaction. A highly satisfied customer stays loyal for long periods; buys more when the company introduces new product; talks favorably about the product and the firm; pays less attention to competitor’s advertisement and brands; is less sensitive to competitors price and other offers; provides ideas to the firm to improve the product; and the cost of servicing a loyal customer is lower than the cost of servicing a new.

Firms seeking to expand their market have to attract customers and retain them. For this, they have to spend considerable time and resources. They must develop several advertisements and places them in various indoor, outdoor, direct and display media that will reach new prospects. Advertising is the cheapest, fastest, and reliable medium to attract the new customers as well as current customers.

Besides these, customer retention can be done by the following methods:

1. Erecting High Switching Barriers


In order to make customer retained, the firm can erect high switching barriers. Switching may involve high capital costs, high search costs, and loss of attractive discounts for current customers. It could sometimes be wise to phone recent buyers and get information to what degree they are satisfied with the products and services.

2. Developing Relationship Marketing


Relationship marketing is best tool to retain the customers. Therefore, the firm needs to develop relationship marketing remembering customers between calls, building a personal reputation, improving customer relations, maintaining after sales services, providing solutions to their problems, etc. The firm takes steps to know and serve its customers better.

3. Customer’s Expectation


For the retention of the customer, it is also very necessary to set the customer’s expectation in prior state. The setting of customer’s expectation help to minimize the uncertainty level of offering your services to your clients. The expectation of the customers should be made developed as positive and delivering the services in the particular time. But sometimes, it may also lead to negative, if the delivery the services is not done in the particular time. Due to such negative expectations, the client/ customers may also cancel their order from the business.

4. Being the Expert


Now a days, the small business organization needs to be more dependent upon the services. So, being the expert in the particular services you are delivering surely help to retain the customers towards your services. The business organization should be trusted advisor for building customer loyalty and reduce customer churn.

5. Conduct Customer Surveys


In order to know the reactions of the customers towards the delivered services, it is also very necessary to conduct customer surveys. By conducting the surveys, the business organization can triggered out the weakness of the services and can turn into strength. The feedback of the customers also play great role because the information provided by the customers are very valuable for the services delivered in relation to the customers’ expectations.

6. Online Relationship


In the age of advanced communication technology, business can build online relationship with their clients very easily and building an online relationship is also taken as the way of retaining customers towards your services. Nowadays, there are a lot of social media networking sites that can connect millions of customers within your computer screen. It will be also better to create a social profile in some popular social networking sites like Facebook, LinkedIn, Twitter, Pinterest and many others. Majority of the people are engaged in these media.

7. Post-support Services


Selling huge quantity for a time is not the entire goal of your business. But selling for a long period of time and retain customers for long period of time is a most. For that, business companies should provide post-support services or post-sales services to the clients. By providing such services, customers become more loyal towards your services and continue to use your services.

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Value Creating Activities: Activities creating benefits and utilities to the customers

Value Creating Activities


Value creating activities refer to the activities cornering to create benefits and utilities to the customers. Value creating activities in marketing are very important. The major task of marketing is to create value to the customers. It needs to deliver value to the target customers. It should add maximum value to the customers. If a marketing firm creates value, it can run its business successfully. If not it may disappear from the market. In this reality, the marketing firm should perform value creating activities and deliver the maximum value to the customers for their satisfaction. For this, the firm can use value delivery network concept in marketing.

Value Delivery Network


To be successful a firm also needs to look for competitive advantage beyond its own operations, into the value chains of its suppliers, distributors, and customers. Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network which is also known as supply chain. Value delivery network is building mutually beneficial relationship with key stakeholder to capture the value generated by the supply chain. This network is a set of participating companies or stakeholders who agree upon building mutually beneficial relationship among them for capturing the value generated by the supply chain. It involves partnering with key stakeholders to create superior supply chain.

The value delivery network for sugar can be shown in the following figure:

Value Delivery Network for Clothes

The participating firms of this network are fully aware of each other’s needs and priorities and are prepared in advance to deliver products and services at the right time at a low cost.
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Marketing is seen as the task of creating, promoting and delivering goods

Marketing is seen as the task of creating, promoting and delivering goods and services to consumers and business

Marketing is a term of common usage. In general view, it is related to buying and selling goods produced. But marketing is not only concerned with buying and selling of goods and services. It is that commercial process which attends and facilitates the movement of goods and services through the economy to enlarge and satisfy consumer need consistent with the corporation's fundamental objectives. In other words, marketing is an exchange process between producers and consumers, in which the producer matches a marketing offering (the product or service, plus its promotion, distribution, and price) to the wants and needs of the consumer.

Marketing is the business function that identifies customer's needs and wants, determines which target markets the organization can serve best, and designs appropriate products, services, and programs to serve these markets. However, marketing is much more than just an isolated business function. It is a philosophy that guides the entire organization. The goal of marketing
is to create customer satisfaction profitably by building value-laden relationships with important customers.

Definitely, marketing is seen as the task of creating, promotional and delivering goods and services to consumers and business. Following definitions help to explain it. 

According to E. Jeome McCarthy, "Marketing is the performance of activities that seek to accomplish an organization's objectives by anticipating customer or client needs and directing a flow of need-satisfying goods and services from producer to customer or client."
In the words of Stanton, Etzel and Walker, "Marketing is a total system of business activities designed to plan, price, promote and distribute want-satisfying products to target markets to achieve organizational objectives."
According to American Marketing Association, "Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals."
According to Philip Kotler, "Marketing is a societal process by which individuals and groups obtain what they need and want through creating, offering, and freely exchanging products and services of value with others."

The above definitions emphasize that marketing focuses on activities to satisfy customer. Marketing consists of those activities which are associated with product, price, place and promotion. Marketing is an on-going process of discovering and translating consumer needs and wants into products service through planning, producing and creating demand, serving customer and business demand through planned physical distribution system and expanding markets in the face of keen competition under certain commitments.

Now, we can say that marketing is seen as the task of creating, promotional and delivering goods and services to consumers and business because these are the core function of modern marketing. It focuses on consumer and business needs, coordinates all the activities that will influence consumers and business firms and generates profit by satisfying them.
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Customer Satisfaction and Factor Determining Customer Satisfaction

Customer Satisfaction


Customer satisfaction is a post-purchase outcome where a customer compares the expected benefits with the actual benefit received from the use of product. If the performance of the product fails short of expectation; the customer is dissatisfied. If the performance matches the expectation, the customer is highly satisfied or delighted. Thus, customer satisfaction is a function of performance and expectations. It is the customer's perceived performance from the product in relation to the expectations. Customer expectations are formed by post buying experiences, advice from friends and relatives and marketing promotion and promises.

According to Philip Kotler, "Satisfaction is a person's feeling of pleasure or disappointment resulting from comparing a product's perceived performance in relation to his/her expectations."

Customers should be satisfied by the firm's offering: products and services. High customer satisfaction leads to high customer loyalty. It creates emotional bond of customer with the brand.

Factors Determining Customer Satisfaction


High satisfaction level is required to be created by marketing organizations in order to develop customer loyalty and retain the customer for a long period of time. For this, following factors can be used:
  1. Complaint and suggestion systems: A customer-centered organization makes it easy for customers to register suggestions and complaints. Some customer-centered companies are: P&G, General Electric, Whirlpool, etc. They establish hot lines with toll-free numbers. Companies are also using websites an e-mail for quick, two way communications.
  2. Customer satisfaction survey: Studies show that although customers are dissatisfied with one out of every four purchases, less than 5 percent will complain. Most customers will buy less or switch suppliers. Responsive companies measure customer satisfaction data, it is also useful to ask additional questions to measure repurchase intention and to measure the likelihood or willingness to recommend the company and brand to others.
  3. Ghost shopping: Companies can hire people to pose as potential buyers to report on strong and weak points experienced in buying the company's and competitor's products. These mystery shoppers can even test how the company's sales personnel handle various situations. Managers themselves should leave their offices from time to time, enter company and competitor sales situations where they are unknown, and experience firsthand the treatment they receive. A variant of this is for managers to phone their own company with questions and complaints to see how the calls are handled.
  4. Lost customer analysis: Companies should contact customers who have stopped buying or who have switched to another supplier to learn why this happened. Not only is it important to conduct exit interviews when customers first stop buying; it is also necessary to monitor the customer loss rate.
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