The Impact of CRM on Customer Loyalty and Retention
In the final analysis, companies want to accomplish two things: improve customer service relationships and improve customer retention. It is typically easier and less expensive to retain a loyal customer than acquire a new one. One way to accomplish that is through customer relationship management (CRM)—the means through which companies track, manage, and analyze customer interactions.45
There are a number of CRM software systems available in the marketplace, and most accomplish the same thing. They basically track and work with data about customers. For example, they link and analyze customer contact information. They store and track contact with company representatives, such as phone calls, emails, live chat conversations, service requests, purchases, and returns. One good example of CRM software is Salesforce, which is the market leader for CRM software in North America, Western Europe, Latin America, and the Asia-Pacific region.46
There are many types of CRM software; however, most CRM software focuses primarily on one of the following major categories:
- Operational. Operational CRM software deals with three types of operations: marketing, sales, and service automation. Operational CRM software is intended to assist businesses in automating how they approach leads and potential customers in order to convert those potential customers into actual customers.47
- Analytical. Analytical CRM software is all about data management and analysis. The software is designed to collect, organize, and analyze the inputted data, providing management with insights needed to better understand market trends, understand customer needs and wants, and make data-driven strategic decisions.48
- Collaborative. No business functions on an island. When businesses share customer data with one another, they gain insights and additional perspectives on customer behavior that is mutually beneficial. This collaboration allows each business to obtain information that it would not otherwise have access to. 49
Before we can explore how CRM impacts customer loyalty and retention, it’s probably a good time for a few definitions. Customer loyalty is an ongoing positive relationship between a customer and a business. Customer loyalty is at the crux of repeat purchases of your product versus those of your competitors. One common way to accomplish this is to offer reward/loyalty cards. For example, you may have a frequent flyer card from an airline or a loyalty card from Starbucks or a retailer like Designer Shoe Warehouse (DSW), which rewards VIP customers with points for each purchase.
Customer retention is a closely related concept; it refers to a company’s ability to transform new customers into returning customers. In its simplest terms, it’s how you keep your customers coming back for more. The goal of customer retention is to reduce the number of customer defections, or those who buy your product at least once and then not again.
How does CRM impact customer loyalty and retention? Let’s take a look at some of the ways CRM accomplishes this:
- Leveraging Customer Data. With CRM, a business can gather data on your existing customers and prospective customers so that their experience is a more positive one. For example, you can keep track of important dates such as customer birthdays or purchase anniversaries, and CRM software can send automatic emails to them with coupons or other incentives.50
- Enhanced Customer Communications. CRM software can be programmed to automatically send thank you notes to customers, send newsletters regarding new products, and send customer satisfaction surveys or polls so that you can glean more insight into your customers’ levels of satisfaction with your product or service.51
- Ascertaining Customer Needs. Fostering customer loyalty begins with understanding what your customers want and need. An effective CRM program can track customers’ purchase history, habits and preferences, and even web and email interaction. From this information, you can gain valuable insights that will aid you in developing targeted marketing strategies.52
- Gathering Feedback. We’d previously mentioned distributing customer surveys through use of your CRM software. This will provide you with valuable feedback not only about customers’ perceptions of your product or service but also about their customer experiences. Have you ever received a message from Amazon after an online purchase, asking if you’d review the item you purchased? That’s likely the result of an effective CRM system.53
- Managing Customer Loyalty Programs. CRM software can assist you in identifying prospective loyalty program members and track member rewards. Loyalty programs reward members for purchases and have been shown to increase customer retention. For example, according to research, approximately 84 percent of customers indicate that loyalty programs are an incentive to remain with a brand, and 66 percent report that their spending behavior is actually altered by the ability to earn rewards.54
The Role of CRM in Building Customer Equity
We have already talked about customer equity—the potential profit a company earns from all of its customers, both current and potential—and customer equity is a core CRM benchmark. CRM isn’t a one-way communication street to customers. It’s a two-way street that allows customers to define and consequently shape offerings in terms of their requirements. This paves the way for open, honest dialogue that can ultimately lead to benefits to customers, thus resulting in higher customer equity.
Knowledge Check
It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.
1.Customer relationship management is accomplished by all of the following EXCEPT ________.
establishing and tracking customer interactions
finding ways of improving customer satisfaction from prior customer experiences
communicating with customers in a personalized way
offering the lowest price of all the companies on the market
2.What do you call the process of managing customer information in order to maximize brand loyalty?
Marketing
Customer relationship management
Consumer retention management
Branding
3.An ongoing positive relationship between a customer and a business is known as ________.
customer equity
customer loyalty
customer retention
customer lifetime value (CLV)
4.Which type of customer relationship management (CRM) system would pool data from outside companies and organizations in order to create even better experiences for their customers?
Customer loyalty programs
Operational CRM
Analytical CRM
Collaborative CRM
5.A program that offers discounts and special incentives designed to attract and retain customers is called a ________.
customer loyalty program
sweepstakes
discount plan
CRM software
Pic 2. Ethical Marketing Defined
As the term suggests, ethical marketing involves companies not only trying to market their products and services but considering how society will benefit from the introduction of those offerings. It’s not so much a practice as it is a philosophy that tries to promote fairness, honesty, and a sense of responsibility in all of the marketing done by the company.
What are the principles of ethical marketing? According to Lapaas Digital, a digital marketing agency based in Delhi, India, some of those principles include the following:
- All marketing should be true.
- The privacy of the end user is most important.
- Marketing campaigns must adhere to the norms, standards, rules, and regulations set forth by the government and other lawmaking authorities.
- Marketing professionals must be transparent about what they are trying to convey and whom they are approaching to convey the same.55
Ethical marketing is a philosophy and a strategy that seeks to promote honesty, trustworthiness, fairness, values, and responsibility in all marketing projects and actions. Ethical marketing includes marketing research, customer segmentation, and the management of all marketing campaigns.
Ethical (e.g. truthful) marketing is critical as 58% of consumers buy and advocate for businesses based on their values. That's why any company caught using exaggerated or manipulative claims in marketing campaigns would probably can out of business very quickly.
All ethical marketing examples are based on five important principles: empathy, honesty, sustainability, transparency, and promise-keeping (Pic 2).
These essential ethics perspectives should inform businesses committed to ethical marketing:
Ethical marketing puts people above profits
Marketers are responsible for the outcome of the campaigns and advertisements they use
Marketers should embrace the essential ethical principles
Adoption of marketing ethics principles by the top management is crucial to creating ethical marketing campaigns
Businesses need to have a good understanding and implementation of ethical decision making when it comes to marketing
[Source: Laczniak, G. R., & Murphy, P. E. (2006). Normative Perspectives for Ethical and Socially Responsible Marketing.]
The Importance of Ethical Marketing
Ethics are critical to a company’s reputation, particularly when public opinion—particularly negative public opinion—can go viral in an instant, thanks to social media.
Ask yourself a question: how important are a company’s ethics to you when you decide to purchase a product or service? According to new research by Mintel, 56 percent of US consumers stop buying from companies they believe are unethical. Perhaps even more importantly, approximately one-third of consumers are inclined to tell others when they perceive a brand to be taking actions that they perceive to be honest, fair, and responsible. Taking this one step further, 29 percent of them will share their support of ethical companies via social media.56
The Dos and Don’ts of Ethical Marketing
The data cited above presents a somewhat dire picture for companies that do not practice ethical marketing, so let’s take a look at some of the dos and don’ts of ethical marketing.
First, the dos:
- Ensure transparency. Transparency is key, and marketers should attempt to provide the maximum amount of information to the consumer regarding the product, its usage, and safety concerns. For example, Southwest Airlines ran a clever marketing campaign entitled “Transfarency,” promoting its philosophy that customers should be treated honestly and fares should actually stay low. The result? The campaign garnered nearly 5 million likes on Facebook alone.57 How’s that for earning the trust of potential customers?
- Respect data privacy. As we noted in our discussion of CRM above, marketers have the ability to collect vast amounts of data about consumers. Data privacy is the biggest concern for consumers in this data-driven world, so marketers must always respect data privacy. Consider the fallout experienced by Vizio (the TV manufacturer) when it was learned that its devices did not ask customers for permission to track and report viewing information. The amount of data being gathered and the fact that Vizio did not request permission from customers meant the company was potentially in violation of the Video Privacy Protection Act. The company was sued in a class action lawsuit.58
- Prioritize the concerns of the consumer. No matter how small the concern of your consumer is, a marketer’s top priority should be to respond to those concerns in a prompt, meaningful way. How long do you expect to wait for a response to an email to a company regarding its product or service—a day, two days, a week? You might be surprised to learn that, according to research, 42 percent of consumers expect a response within 60 minutes and 32 percent expect a response within 30 minutes. That illustrates the importance of responding promptly in order to increase the chances of a positive customer experience.59
Now, the don’ts:
- Don’t overemphasize or exaggerate. In marketing, this is sometimes referred to as “puffery.” Of course, you want to convey the features and benefits of the product or service to the customer, but these need to be stated clearly and accurately. Don’t promise something you can’t deliver— doing so is unethical and not beneficial in the long run.
- Don’t make false or unverified claims. One case illustrates the importance of honesty in advertising: Living Essentials, LLC, the makers of 5-Hour Energy shots, advertised its product as “doctor-recommended” and superior to traditional caffeine. Those claims were found to be misleading, and Living Essentials, LLC was ordered to pay $4.3 million in damages.60
- Don’t make false comparisons. Not only shouldn’t you make false or unverified claims about your own products or services, but you shouldn’t do it to competitors’ products either. As a matter of fact, companies can sue competitors for false advertising claims under the federal Lanham Act, alleging that they suffered lost sales or damage to their reputation as a result of the false statements by the competitor.61
COMPANIES WITH A CONSCIENCE
TOMS (see Figure 1.11) was founded by Blake Mycoskie in 2006 after a trip to Argentina, where he saw how people were living in impoverished areas. Mycoskie decided to establish his company with giving in mind. He introduced what he calls the “One for One” concept: for every pair of TOMS shoes sold, the company donates another pair to a child in need. In a recent Impact Report, TOMS reported it had provided more than 95 million pairs of shoes to children in 82 countries.62
Emboldened by the success of the “One for One” concept, Mycoskie later expanded the model. For example, in 2011, the company introduced a line of eyewear and decided to use the same philanthropic principle but this time with a bit of a twist. Instead of donating glasses, TOMS donated a portion of the profits from each sale to save or restore the eyesight of those living in developing countries. To give you an idea of the success of this program, the company’s website indicates that TOMS Eyewear has helped restore sight to more than 780,000 people.63
“Newsflash: Fashion pollutes the planet.”
Kind of intense, right?
Yet, it’s one of the marketing slogans that Allbirds is sticking with.
This brand is shaking up the clothing industry with its unwavering commitment to eco-friendly production. Allbirds measures everything that contributes to its carbon footprint and even publishes sustainability reports.
Allbirds highlight their environment-friendly practices in their marketing strategy. They have built awareness of their innovative supply chain, which involves renewable materials, green energy, and regenerative agriculture.
The brand even advertises the carbon footprint of each product. Wool Dasher Mizzle shoes, for example, generate 12.9 kg of CO2 that is later compensated.
Other notable recent marketing projects include:
The list goes on and on.
By using ethical marketing, Allbirds successfully sets itself apart from other businesses (and became one of the top Shopify stores). Now, it’s almost impossible to find any marketing content where Allbirds doesn’t mention something related to sustainability or social causes.
Needless to say, Allbirds is a certified B Corporation (a title given to businesses with the highest standards of verified social and environmental performance and public transparency). Another big accomplishment that consumers appreciate.
Talk to any environmental activist, and they’ll tell you one thing: the fashion industry is one of the largest contributors to climate change. It generates 2.1 billion metric tons of greenhouse gas emissions annually—more than Germany, France, and the UK combined.
But businesses like Patagonia are changing the industry.
The brand’s philosophy is all about being green, so ethical marketing is a natural part of the strategy. Besides sharing awareness of environment-friendly practices, Patagonia also promotes anti-consumerism.
The “Don’t Buy This Jacket” campaign is a great example of ethical marketing.
Instead of encouraging consumers to buy more on Black Friday, Patagonia asked them to take a pledge to reduce consumption (see below). The campaign raised the awareness of the environmental impacts of consumerism in the industry and encouraged many to consider the effect of their purchases.
Patagonia’s ethical marketing strategy extends to all their content.
The company’s blog is a treasure trove of inspiring social activism stories, clothing repair tips, and video stories of people protecting the environment.
This amazing illustrated guide from the Patagonia blog teaches people to “donate with dignity” by outlining tips for donating clothes. It’s a part of the brand’s mission to protect the environment and encourage recycling of fashion.
But there’s one more huge aspect that makes Patagonia’s ethical marketing strategy brilliant: its own initiatives. With its “1% For The Planet” project, the brand has donated 1% of sales to the preservation and restoration of natural environments—over $140 million so far.
The bottom line here?
Thanks to the focus on ethical marketing, Patagonia is now a thought leader in social activism, environmental protection, and eco-friendly practices. Plus, it generates an impressive $19.8 million in annual revenue.
Do you wear prescription eyeglasses? I bet you’ve lost them at least once.
The same happened on a backpacking trip to Dave Gilboa, one of Warby Parker’s founders. Being a student, he couldn’t afford to buy a new pair. Needless to say, that semester wasn’t quite the experience he wanted.
Fast forward a few years—
Gilboa’s business disrupted the eyeglasses market by drastically lowering prices. The success is phenomenal, as the founders (Gilboa is on left in the image) report a 38% annual revenue growth rate and two million active customers:
Gilboa’s frustration with the monopoly in the industry was the driving factor that set his company on a different course from its competitors.
Unlike other players, Warby Parker:
Has lower prices for prescription eyeglasses
Practices ethical marketing with charity programs
Started a foundation to donate glasses to those in need
The last two points make this business one of the best examples of ethical marketing. Warby Parker put its social philanthropy at the center of its marketing.
Let’s take the “Buy a Pair, Give a Pair” as an example of ethical marketing.
This program makes consumers agents of change. For each pair purchased, the brand donates one to charities through the Warby Parker Foundation. So far, over eight million glasses have been distributed in 50+ countries.
What makes Warby’s marketing strategy great is that every customer purchase makes a difference to the cause, and to the lives of the people it supports. That leads to emotional engagement, which is the strongest driver of loyalty.
For example, Warby Parker publishes an annual Impact Report to show how it is achieving its mission with the help of customers.
The report itself is a brilliant example of marketing that offers detailed info on everything from the company’s carbon footprint to the number of screenings and glasses distributed bits affiliated charity programs.
Here’s an extract offering an update on “Buy a Pair, Give a Pair.”
To sum up the biggest takeaways from this ethical marketing strategy example: a) Make customers a part of your social programs, and b) Provide updates on your commitments with digestible and shareable reports.
Following this tip is a great way to create ethical marketing examples that will resonate with like-minded consumers.
“All it takes is your barefoot photo.”
In the One Day Without Shoes campaign, the brand aimed to spread awareness of the lack of footwear available to children in developing countries.
"A shoe company asking people to go barefoot? I know it's odd, but we are so excited for people to once again join us in One Day Without Shoes. We ask people to go the day, part of the day, or even just a few minutes, barefoot, to experience what millions of children endure every day. Awareness and empathy are the catalysts of change."
Blake Mycoskie, TOMS Shoes, Founder
Anyone could participate by posting a photo of their bare feet on Instagram with the hashtag #WithoutShoes. The reward was more than worth it: one photo equaled the donation of one pair of shoes to a child in need.
The results of the campaign were amazing.
As many as 296,243 photos were shared, making One Day Without Shoes one of the most successful ethical marketing examples from social media.
The culmination was this post from TOMS announcing the results.
As far as ethical marketing is concerned, the One Day Without Shoes campaign was a big win for everyone.
On the one hand—
The donated shoes will help, as the children often have to walk barefoot for miles to get food or clean water. Also, this basic necessity prevents podoconiosis, a debilitating disease that affects 4 million people globally (and is preventable by wearing shoes from an early age).
On the other hand—
TOMS was able to raise lots of brand awareness, improve customer relationships, and lower marketing costs. The campaign was even cited in academic marketing journals as an example of successful value co-creation campaigns on social media.
When it comes to eco-friendly and ethical clothing companies, Faguo one is the example of a complete package.
Faguo maintains its eco-friendly standard by:
Offsetting its carbon footprint
Reducing harmful emissions from production
Planting a tree for every item sold (2+ million so far)
Promoting reasonable consumerism by repairing products
Collecting and recycling second-hand pieces from customers
Ethical marketing is at the heart of Faguo’s strategy. Their ethical marketing focuses on the ethical principles of sustainability, honesty, and transparency by investing in customer education, activism, and accountability.
First, customer education.
Faguo helps customers make more conscious choices about the fashion they buy. They use production processes that minimize the impact on the environment and then they educate their customers about these processes. And why they’re important.
Customers can click links on product pages to find out more. This one, for example, leads to the page where the brand’s manufacturing process is described:
Next, activism.
Faguo is involved in several initiatives. The brand promotes reduced consumerism, plants trees when purchases are made, and encourages recycling.
One example of ethical marketing we can pinpoint is The Make Friday Green Again project, whose goal is to spread awareness of the environmental impact of huge sales like Black Friday:
And finally, accountability.
Faguo takes its environmental responsibility seriously. The company has maintained a carbon footprint report (more info), which tracks the progress they’ve made towards achieving carbon neutral status.
Faguo isn’t in charge of measuring its own emissions, by the way. This is done by the Goodplanet Foundation, an independent authoritative body.
Customers also can learn how each aspect of Faguo’s operations contributes to the overall carbon footprint with website content like this:
Everything Faguo does ties back to its mission: become a carbon neutral business that takes an active part in fighting climate change along with its customers.
The world’s first sustainable, 100% compostable phone case—
This is Pela Case’s original product developed to fight environmental pollution caused by the plastic-heavy smartphone case industry.
The brand is an example of using two ethical principles in advertising: promise keeping (a genuine intention to fulfill a goal) and integrity (being transparent with marketing).
The brand applies these ethics principles by:
Offsetting their entire carbon footprint
Sharing all data about manufacturing, materials, and footprint
Donating one percent of sales to environmental organizations
The brand also constantly reinforces its mission in marketing. Let’s see a couple of campaign examples.
“Plastic-Free July” was an example of an ethical marketing campaign that raised awareness of plastic pollution and ways everyone can reduce their footprint.
This post was a part of the effort:
The next great ethical marketing example—
A campaign where the brand’s Instagram followers could win an eco-getaway and other weekly prizes.
Here’s the announcement post with more details:
Like other great ethical marketing examples above, this campaign was a win for the brand, its cause, and the customers.
Pela Case demonstrated a commitment to environmental activism and promoted sustainable travel with this campaign. By staying true to the ethical principles of marketing, the brand also generated lots of awareness and engagement.
Asphalte is another brand that is changing the fashion industry.
Alongside the mission to eliminate overproduction, the company constantly promotes reasonable consumption.
But what really sets Asphalte apart is the pre-order business model. The brand only makes items that customers choose, so there’s no excess inventory or overproduction.
Choosing items is easy: just rate clothing from zero to 10 in a product survey. The whole thing takes a minute—a small commitment for setting fashion trends, agree?
To increase the longevity of products and reduce carbon footprint, Asphalte uses only quality, eco-friendly materials. Product care guides are also there to help reduce overconsumption.
The Winter Overshirt, for example, is made of 100% wool, so it needs specific care. Consumers can get tips from the care guide and make the item last longer.
Overall, Asphalte serves as a solid example of ethical marketing in fashion. The brand’s marketing focuses on the pressing issues that plague the industry, helping to raise awareness of solutions and promote reasonable consumerism.
8. Yes Straws
Guilt-free slurping.
That’s the promise of Yes Straws to their consumers.
The company is on a mission to reduce the number of plastic straws that could join the 8.3 billion already polluting the environment.
How?
With biodegradable straws made from 100% natural materials. Unlike its plastic cousin, it doesn’t contain any harmful chemicals and breaks down within weeks.
The family of products is made using wheat and cane stems:
Needless to say—
The brand’s marketing is centered around a unique value: protecting the environment by choosing a harmless alternative to plastic.
Here’s how Yes Straws achieves its goal to adhere to marketing ethics principles:
Has an almost zero-waste production
Uses innovative production methods, including an original technology to clean and sterilize wheat stems
Recycles waste from agricultural wheat harvesting
Another great thing about ethical marketing from Yes Straws is content.
The business produces articles that raise awareness of the dangers of plastic and the benefits of harmless alternatives. This way Yes Straws helps customers realize that every small thing matters when it comes to reducing their environmental burden:
Healthy beverages are incredibly common and popular these days.
That’s good but … there’s a problem.
Tea bags contain plastic (even one bag can release up to 11.6 billion microplastic particles into the cup!). Even paper ones are sealed with plastic glue (non-biodegradable polypropylene). Most of that plastic, unfortunately, ends up polluting the environment.
That’s where Cusa wants to make a difference.
Cusa’s marketing strategy promotes environmentally responsible choices in several ways:
Support of environmental projects
Use of eco-friendly packaging materials
Exchange of used tea and coffee sticks for coupons
Terracycle, the exchange program, is an interesting ethical marketing example. Cusa promises free shipping and a $5 coupon for those who send them used tea and coffee sticks. By doing so, the business reduces food waste and encourages eco-friendly choices.
To encourage more people to join the effort, Cusa also uses social media campaigns.
This one below, for example, challenges followers to guess how many tea pockets can fit in the so-called zero-waste box
The prize for the winner:
A free 30-serving pack of tea or coffee of their choice.
That’s a nice reward for a guess, agree?
Besides, the campaign is also a great example of ethical marketing. It shows the commitment to recycling and shares awareness of environmentally-friendly practices.
Combined with a long-term strategy of education and activism, Cusa is a good example of how business can market their products while staying true to admirable missions.
“Radical transparency.”
That’s Everlane’s motto when it comes to … well, everything.
The business even shares costs behind their products—from materials to transportation. For example, here’s the breakdown of the price for denim products.
Everlane is also committed to several important objectives.
As of December 2021, the company has completed 90% of its goal of eliminating all virgin plastic from the supply chain. Also, they’re pursuing several goals related to reducing emissions.
Another interesting element of Everlane’s ethical marketing strategy is sharing details about labor conditions.
The company's website has a special Factories section where we can find info about their locations, materials and techniques used, as well as images of employees at work.
These images, for example, come from a Hanoi-based facility:
Everlane really stands out on this list because of the willingness to disclose more information than others (especially production prices). It’s a huge step in the right direction, as far as ethical marketing is concerned.
Illy has been recognized for ten consecutive years as “a leader in advancing ethical business standards,” which applies to both operations and marketing.
The company is on the mission to change the coffee industry, which is known for exploitation of farmers, wasteful packaging, environmental destruction, and high carbon emissions.
To find out how Illy resolves these ethical issues, we can visit their “Road to becoming B Corp” website section.
There, we can see specific projects Illy implements.
For example—
To tackle the negative environmental impact, the company does reforestation, installs wastewater treatment facilities, and more.
Other notable projects include:
The “Escuela y Café” project: funding 64 rural schools in Colombia
The “Viveiro de Atitude” project: a nursery for 100 plant species
Buying wastewater treatment systems for 13 coffee producers in Nicaragua and Honduras
Overall, Illy has a lot of ethical marketing examples to share—and it’s a great example of how a company focuses on all critical issues its industry faces.
Ethical marketing examples: summary
Ethical marketing is important, and it benefits everyone.
The examples you've just read about show us that many companies are having huge success applying ethical principles to marketing. This strategy helps them appeal to like-minded customers and contribute to society in meaningful ways.
Also, the examples show us that ethical businesses share several things in common: they care about the environment, their customers, and local communities.
And, they help us learn how to make more conscious choices about the products we buy!
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Chapter Summary
Chapter 1 introduces the basic concepts of marketing, including adding value to a company’s business. Marketing begins with strategy and relies on creating and delivering value to customers. It is crucial for marketers to understand exactly what customers value and determine how to deliver the value while also meeting company goals.
There are many activities involved in the marketing process, including creating products and services, advertising, selling, distributing, communicating, and building relationships. Marketers must also acknowledge the importance of employees, suppliers, and other partners involved in analyzing market opportunities. The most important aspect of creating value is understanding both the customer and the marketplace.
There are many tools marketers can rely upon as they develop strategies. The marketing mix—product, price, place, and promotion—has traditionally comprised the marketer’s toolbelt. Understanding the marketing environment, or forces outside and within the control of marketers, forms the context of all marketing efforts. Consumers ultimately expect companies to be ethical, honest, and trustworthy. Marketers know success is contingent upon abiding by ethical, societal, and corporate governance standards.
Key Terms
- 5Ms of marketing
- internal elements of a marketing plan that need to be resolved if the plan is successful
- buyer
- a person or institution that purchases goods or services
- consumer
- the final user of a purchased product or service
- customer
- a person who purchases a product or service
- customer equity
- total combined customer lifetime values of all the company’s customers
- customer loyalty
- an ongoing positive relationship between a customer and a business
- customer relationship management (CRM)
- all strategies, techniques, tools, and technologies used by companies to develop, acquire, and retain customers
- customer retention
- the ability of a company to turn customers into repeat buyers and prevent them from switching to a competitor
- customer value
- the ratio of the perceived benefits relative to the costs incurred by the customer in acquiring the product or service
- customer-driven marketing strategy
- a marketing strategy that shifts the focus from the product or service to its users
- delight needs
- an added value that a customer might receive from a seller without prior expectation or request for the same
- desired object
- a physical good, service, or experience that consumers expect will satisfy their wants and/or needs
- ethical marketing
- process that emphasizes trustworthy, transparent, social, and culturally sensitive marketing policies
- exchange process
- the process of satisfying a need or want by giving something of value in exchange
- external interested parties
- a person or organization that does not have a direct relationship with a company but is affected by the operations of the business
- form utility
- the value given to a product by virtue of the fact that the materials and components that comprise it have been combined to make the finished product
- interested parties
- a group that has an interest in a company or organization and can either affect or be affected by it; often referred to as “stakeholders”
- internal interested parties
- those persons whose interest in a company comes through a direct relationship such as employment, ownership, or investment
- internal marketing
- the promotion of a company’s objectives, products, and services to internal parties, such as employees, owners, managers, and shareholders
- internet advertising
- a set of tools for delivering promotional messages to people worldwide, using the internet as a global marketing platform
- macroenvironment
- the set of external factors and forces, not controlled by the company, that influence its operations
- marketing
- the activities a company undertakes to promote the buying or selling of a product or service
- marketing concept
- marketing philosophy that firms should analyze the needs of their customers and then make decisions to satisfy those needs better than the competition
- marketing environment
- all of the internal and external factors that drive and influence an organization’s marketing activities
- marketing mix
- the set of actions or tactics that a company uses to promote its brand or product in the market
- marketing process
- the series of steps that assist businesses in planning, analyzing, implementing, and adjusting their marketing strategy
- marketing strategy
- a plan of action designed to promote or sell a product or service
- microenvironment
- those factors or elements in a firm’s immediate environment that affect its performance and decision-making
- organizational culture
- beliefs and behaviors that determine how a company’s employees and management interact and handle customer relationships
- PESTLE analysis
- a strategic framework used to assess the political, economic, social, technological, legal, and environmental factors affecting an organization
- place
- the geographical location in which the company sells its products and/or provides its services
- place utility
- making goods and/or services physically available or accessible to potential customers
- possession utility
- the amount of usefulness or perceived value from owning a product
- price
- the cost that consumers pay in order to acquire a product or service
- product
- anything that can be offered to a market that might satisfy a want or need
- product concept
- the orientation that consumers will favor those products that offer the most quality, performance, or innovative features
- production concept
- the orientation that consumers will always acquire products that are cheaper and more readily available
- promotion
- any type of marketing communication used to inform audiences of the relative merits or a product, service, or brand
- real needs
- the value the customer is going to derive from the stated good or service
- retailers
- companies that purchase large quantities of goods from producers and then sell smaller quantities to end customers for personal use or consumption
- sales concept
- orientation that analyzes buying and selling effects to place the focus primarily on generating sales transactions
- secret needs
- the needs that the consumer feels reluctant to admit
- seller
- the individual or organization that supplies the need-satisfying product, service, or experience
- societal marketing concept
- philosophy that a company should make marketing decisions by considering not only consumers’ wants and the company’s capabilities but also society’s long-term interests
- stated needs
- those product or service needs that are clearly specified by the customer
- suppliers
- sometimes also called vendors, these are partners from whom we receive the parts and products necessary for our business
- time utility
- adding value to the consumer by having the product or service available when the consumer needs it
- unstated needs
- those needs that are not obvious but are expected by the customer
- utility
- how a product can be useful to customers in a way that convinces them to make a purchase
- value
- the difference between a customer’s evaluation of the benefits and costs of one product when compared with others
- value proposition
- a promise of value to be delivered, communicated, and acknowledged
- wholesalers
- companies that purchase large quantities of products from producers and then sell to smaller businesses, such as retail stores
Applied Marketing Knowledge: Discussion Questions
1.Why is capturing customer lifetime value so important? Choose a retailer, and apply this concept as a way to explain, in part, its profitability and long-term viability in the marketplace.
2.The marketing mix has been compared to a toolbelt. In other words, successful marketers can devise an appropriate marketing mix by combining the right blend of tools: product, price, place, and promotion. Describe a recent product that you purchased on Amazon.com or some other online retailer (place), how you located it (promotion), and whether the price was competitive when compared to similar products.
3.Why do some marketers prefer to follow the 4Ps (product, price, place, and promotion) of marketing and others might prefer to follow the new pattern of the 5Ms (minds, minutes, machinery, materials, and money)?
4.A person can be a product. Please give an example of this.
5.According to the US Centers for Disease Control and Prevention, the birthrate is falling in communities around the world. In the United States, the birthrate fell by 4 percent in 2020, an all-time low. Describe why dwindling population is a demographic concern in the macroenvironment all businesses must contend with.
Critical Thinking Exercises
1.Your roommate in the dorm talks on his cell phone incessantly while you’re trying to study. Since you’re a broke college student and it’s too cold to walk to the library, you decide to explore the marketplace for used noise-canceling headphones. How will you locate the best, most-affordable market offering to meet your needs? Describe how marketing messages may guide your steps in this process.
2.All consumers have needs and wants. You likely felt a state of deprivation this morning—hunger—and decided what you wanted to eat for breakfast. Do a bit of research to discover how your breakfast preference (want) compares to what a college student living in Osaka, Japan, might want to satisfy their need for sustenance.
3.Because relationships are so important in marketing, multiple tools have been developed to help manage customer relationships. Many technological advances assist marketers in their efforts. Promotional strategies include utilizing social media posts, websites, advertising, public relations, and sponsorships to communicate with the target audience. One of the most effective tools in planning/calendaring these promotional contacts or touch points is a Gantt chart. Do a bit of research on Gantt charts so you better understand this scheduling tool that also visually illustrates linkages between promotional activities and progress toward a marketing goal. List and discuss five benefits of using this CRM planning tool. Finally, in your research, did you discover an alternative method to visually depict a marketing project schedule?
4.In 2016, Amazon announced it was building its own logistics and shipping business in an effort to put the brakes on rising delivery costs. The overall goal was to deliver Amazon packages as well other packages from retailers and consumers in order to cut delivery costs in half. By 2021, Amazon was shipping 72 percent of its own packages as well as packages for Walmart and eBay.
Read more about the effort.
With this new shipping venture in mind, answer the following questions:
- How is Amazon’s decision to enter the logistics and shipping industry a move toward improving customer loyalty and equity?
- How will Amazon’s new delivery service benefit Amazon?
- How do you predict Amazon’s rivals in this distribution channel have responded?
5.Is it OK for companies to profile customers and predict their purchase behavior? Every time you, as a consumer, visit a website, your “cookies” are gathered and used to better understand your shopping behavior. Several years ago, Target’s analysts developed an algorithm based upon Target customer buying behavior that predicted pregnancy. Those predicted to be pregnant—based upon the products they bought—were sent targeted marketing materials. The angry father of a high school student accused Target of erroneously sending his daughter a sales flyer for baby products. Supposedly, the daughter was pregnant.
Read more about the incident.
How do you feel about companies gathering intimate details about you for marketing purposes? Do you believe these companies develop a better relationship with you as a result? Despite being accurate, was Target’s pregnancy-predicting algorithm ethical, invasive, or somewhere in between?
Closing Company Case
Batdorf & Bronson
Coffee is a global drink loved by so many. From the simple espresso in Italy to the cinnamon added in Mexico, coffee is a global beverage. The origins of coffee date back to the ninth century. Legend has it that in a remote part of Ethiopia, a goat herder noticed his goats dancing about and full of energy. He realized they had eaten some nearby small red berries. Once the herder tried the berries, he too was dancing. The small red berries ushered in the discovery of coffee as a drink we cannot seem to get by without.
With a love for coffee and the thoughts of goats dancing in their heads, husband and wife Larry and Cherie Challain opened their first coffee bar—Dancing Goats in Olympia, Washington, in 1988. But as any coffee entrepreneur knows, a coffee bar is only as good as the coffee it serves. In a quest to serve the freshest coffee in the world, the duo acquired Batdorf & Bronson Coffee Roasters.
Roasting good coffee starts with finding the best coffee beans. The Challains know that to get good coffee beans, it is important to go to the source. By developing direct relationships with coffee farmers, Batdorf & Bronson is assured of the most sustainable and environmentally sourced beans in the industry.
For example, the Ethiopia Sidamo Guji is a grade 1 natural-processed bean grown on a privately held farm—Kayon Mountain. The farm is owned by Ato Esmael and his family. This organic-certified farm produces all-natural, sun-dried, and fully washed coffee. Sun drying means that once the beans are picked and washed, they are dried on raised beds for 12–20 days.
It has been over 30 years since the Challains served their first cup of coffee. Through their quest to improve the coffee experience for patrons and to elevate the growing experience, the Challains expanded their footprint. The duo knows that coffee beans are best served fresh. Freshness means being close to the source. The journey from the family farms to your cup is made easier through their additional roasting facility in Atlanta, Georgia. Being centrally located on the West and East Coasts means that beans can be roasted at either facility and be within a day’s delivery of their own Dancing Goats coffee bars in Atlanta and Olympia as well as into the hands of their retail coffee partners across the country.
Both roasting facilities in Washington and Georgia can serve customers. Every Monday, orders are taken from the Dancing Goats retail partners. Batdorf & Bronson waits to receive orders on Monday before beginning roasting. For those who have not experienced the difference between freshly roasted coffee and all the rest— there is no comparison. Coffee is roasted on Tuesday, and retail partners receive their shipments on Wednesday.
Batdorf & Bronson is diligent about the roasting, brewing, and extraction process for all of its Dancing Goats Coffee Bars. It is equally concerned for its retail partners across the country. To provide the support needed by its small independent coffee bars, it provides instruction from its on-staff master baristas.
The experience of an adult coffee lover visiting a Batdorf & Bronson roasting facility is similar to that of a kid winning the golden ticket to the Willy Wonka Chocolate Factory. While your GPS is calculating the yards before turning into the parking lot, you can smell the coffee roasting. Upon entering the facility, you feel as though you are entering a sophisticated laboratory. Scales, thermometers, pristine roasting chambers, and carefully calibrated espresso machines are everywhere. Bags of green coffee beans are piled high and deep. The beans have recently arrived from the family farms located in coffee regions around the world.
To be a retail partner with Batdorf & Bronson means that you have a team behind you. It provides training for baristas, sample bags of new beans, and roast profile sheets describing the growing and harvesting process for the coffee you are serving your local community residents. Batdorf & Bronson is as diligent with every cup of coffee served to a customer as it is with every bean that is harvested and purchased for its roasting facilities. Because of this laser-like focus on quality, a cup of coffee brewed with Batdorf & Bronson beans is like no other coffee found at your typical coffee shop.
For customers who frequent the Dancing Goats Coffee Bars, they know the quality they can expect with their brewed coffee and espresso-based coffee drinks, and for that quality Dancing Goats is the go-to coffee of choice. For those who experience the Batdorf & Bronson difference at local coffee bars nationwide, the fresh taste and exceptional quality provide a reason to choose handcrafted, small-batch coffee shops over traditional “fast-food” coffee chains.64
To learn more about this coffee company, check its website here.
Case Questions
1.Batdorf & Bronson is a coffee roasting facility. Dancing Goats Coffee Bars are retail stores. How does the ownership of a retail store help the supplier (Batdorf & Bronson) understand its customer?
2.Batdorf & Bronson has direct relationships with the family farms that grow the beans it buys, roasts, and distributes nationwide. How does this relationship with the coffee growers benefit its retail partners?
3.When Batdorf & Bronson provides a master barista to help train and educate retail partners, what is the value proposition it provides to the coffee bars that buy beans from it?
4.How is Batdorf & Bronson fulfilling the marketing concept?
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