Week7 -Product strategy & RM

1. Week7 -Product strategy & RM • Product strategy – ch 14 • Case studies – Colgate • Project – part 1 feedback

2. Colgate • Analyse situation in terms of market attractiveness model • What risks do they face in entering this sector ?

3. Product strategy – ch 13 • Product component model • Line extensions

5. 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

7. 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 )

8. Brand strategies • Line extension or Multibrand? • Lucozade, Ribena cf. Coke • Your examples ?

9. 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

10. Evolution of Customer Relations 1970s–1980s 1980s–1990s 1990s Beyond 2000 Approach Persuasion Transaction Relationship Co-creation Role of customer Passive Collaborators Managerial viewof customers Group statistic Individual statistic Person to be cultivated Individual memberof society Customers as co-developers Deeper understanding Customer serviceand support Traditional market research Interactions withcustomers Communications One-way (to target groups) Two-way (database marketing) Two-way (relationship marketing) Active, multi-level dialogue Source: based on Prahalad and Ramaswamy, 2000 Tutorial 3 OHT 3.1

11. The Six Markets Model - Christopher • Customers • Referral markets • Suppliers • Employees • Influencers • Internal markets Tutorial 3 OHT 3.3

12. 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

13. 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.

14. Six markets model- internal markets • Employees as internal customers • BUY IN leads to motivation • RM / satifaction with customers achieved through staff

15. 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

16. 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

17. RM- practice/ examples • Customer care/ hotlines • Targeted mail • Corporate magazines ( hard copy / electronic) • Book, wine , music clubs • Beanie Babies • Magazine subscription

18. 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

19. 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

20. 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

21. RM- lifetime value of a customer Customer value to Blue Dolphin

22. Lifetime value importasnt • Banking, insurance • Telecoms , internet • Utilities • TV • Car organisations eg AA, RAC

23. RM – technological tools • Bank ATM‘s, call centers, voice response systems, email, fax, Electronic data interchange, POS applications, 24 hour interaction • Database marketing

24. 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 !

25. The services triangle

26. Service relationships • Zeithaml et al ( 1985) distinguish 4 common factors for all services to differentiate them from goods • Intangibility • Inseparability of production from consumption • Heterogeneity • Perishability

27. 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 !

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