Customer Behavior and Customer Relationship Marketing
Customer-Centric Marketing Approach
A business philosophy in which a co. bases all its plans and actions on customer wants and needs, and fulfilling those needs, to establish relationships with customers.
All the mental, emotional, and physical activities that ppl engage in when they choose, purchase, and use products and svcs. AKA buyer behavior.
Person who buys products & svcs for personal or household use.
Person who buys products/svcs for business purposes.
A means of getting info to use in making a purchase decision.
Routine Response Strategy
A problem solving strategy that involves decisions that are automatic or take little thought by customers making the purchase decisions.
Low priced, frequently bought product that takes little info for a customer to decide to purchase.
Limited Problem-Solving Strategy
A problem solving strategy that customers use for products they buy only occasionally or when they need to get & use info to evaluate product alternatives before making a purchase decision.
Product bought infrequently, is unfamiliar product category, and takes large cash outlay.
Extensive Problem-Solving Strategy
A problem solving strategy to gather lots of info before making buy and use several criteria to evaluate alternative brand choices.
In customer behavior, an influence on purchase decisions that exists apart from an individual or organization and can be measured and observed.
Ethnic, regional, religious, racial, age, or social group that exhibits characteristic patterns of behavior strong enough to set its members apart form others within the overall culture or society.
A social division of individuals or groups fitting into distinct societal hierarchy based on characteristics like wealth, education, and occupation.
Any group with which an individual identifies so closely that the individual adopts many of the beliefs, values, and norms held by the group as a whole.
A reference group that is small enough to allow group members to interact with one another face to face.
A reference group whose members share common interests or skills.
A socially expected behavior pattern that an individual in a particular position is supposed to follow.
The socially defined position an individual holds in relation to other members of a reference group.
The process by which young ppl develop the skills, knowldge & attitudes they need to function as consumers in the marketplace.
An informal, cross-departmental decision unit whose main goal is to acquire, spread, and process info pertaining to purchase decisions.
A mutual bond that forms as a result of all interactions b/t a customer and a business organization.
In customer behavior, an influence on purchase decisions that operates w/in the minds of consumers or organizational buyers and affects their behavior. AKA psychological factor.
In customer behavior, the internal force that drives ppl to exhibit certain behavior or to take certain actions to reach a purchase decision.
In customer behavior, an unsatisfactory condition w/in a customer that leads to a specific action to improve the customer's condition.
A need that is physically or biologically determined, such as food, shelter, sex and clothing.
A need arising from customer's social environment, such as the need for belonging, fulfillment, affiliation and achievement.
Hierarchy of Needs
Concept developed by psychologist Abraham Maslow that classifies needs into five hierarchical categories: (1)physiological needs, (2) security/safety needs, (3) social needs, (4) esteem needs (5) self actualization needs.
In customer behavior, a desire to have more than is absolutely necessary to improve a condition that is unsatisfying.
The process by which ppl select, organize, and interpret info to give it meaning.
A persons decision to acknowledge certain peices of info and ignore the rest.
A preconceived or fixed idea that a person develops over time about what is reality based on their own needs, values, attitudes, beliefs, learning, and previous expereiences.
The process by which ppl block out or modify info that conflicts with their preconceptions until it supports their perceptions.
The process by which customers remember and internalize info that supports their preconceptions.
A purchase behavior that is exhibited when a customer has a favorable attitude tward a specific brand that usually leads to consistent and habitual purchases of the same product over an extended period of time.
Stage in the purchase decision process where an individual or organization realizes that a difference exists b/t a desired state and the actual state; the differnce can be created by an unmet need or a potential opprtunity.
External source of purchase info including family, friends, associates.
External source of purchase info including gov't agencies, associations, product-testing org's, magazine & newspaper stories, info from the www.
External source of purchase info including advertising, salesppl, sales promo literature, point-of-purchase displays, web sites, etc. co's use to sell their products or svcs to consumers & org buyers.
A set of alternatives customers are left with at the end of the info search and from which they make a purchase decision.
Features, characteristics, or specs that a customer considers when making a choice.
A psychological state where customers question whether they should have bought a product at all, or whether they should have bought another brand/product other than the one they actually bought.
A psychological state where customer decides that his purchase behavior is inconsistent with his self-image and, because he cant change the behavior that created the dissonance, redefines his perception of the behavior in terms that support rather than challenge his self image.
Customer Relationship Marketing
The enterprise-wide busness strategy that allows a co. to create, maintain, and enhance relationships with customers and other stakeholders by creating customer value and satisfaction.
A customer that has very little value to a co becos the individual only occasionally buys a co's product or has needs that cannot be satisfied by a co's products, prices or svcs.
The gap b/t what the customer wants and what the co. can provide.
If this gap is large, the cost of attempting to satisfy the customer is likely to be high, and the co might be better off targeting other customer groups.
A benefit that is forfeited or given up in choosing one decision alternative over another.
A customer that offers great economic value to a co. bcos the custmr often buys a co's products or has needs that a co's products,prices or svcs can satisfy.
A principle of customer profitability that states that 80% of a co's profits are generated by 20% of its customers. AKA 80-20 Principle.
A high value customer whose needs a co can satisfy effectively and efficiently and whose business is dependable and profitable.
Lifetime Customer Value
The economic benefit a co gets from its relationship w/a customer calculated over time; generally measured by the extent to which the profits a customer generates over time exceed the co's cost of acquiring, developing, serving, and retaining the customer. AKA Lifetime Value.
With respect to lifetime customer value, the value of all transactions to date b/t a co. and a customer.
W/respect to lifetime custmr value, the present value of all expected transactions b/t the co and the customer, assuming the existing customer behavior pattern remains the same.
With respect to lifetime customer value, the value a co could realize if it could persuade a customer to increase future spending and/or reduce expenses by changing behavior patterns.
The extent to which a customer remains with a co.
Process a co. does to maximize customer value by expanding its products and svcs and more effectively satisfying customer needs.
The process of identifying an existing customer's needs for more products while selling, or after selling, a primary product and then promoting products that complement that primary product to provide a more complete solution to the customers needs.
A customer relationship marketing strategy that involves promoting a more powerful, more enhanced, or more profitable product than the one a customer originally considers purchasing.
A high level personalizing of product offerings and service delivery on a large scale.
A customer relationship marketing strategy where the service level and individual customer receives reflects the customers value to the co.
One of the ways a co. offers tiered svc to a customer that involves offering a consistent level of svc to each customer but varying the fees a customer pays for the service based on the customers profitability to the co.
One of the ways a co. offers tiered svc to a customer that involves varying the number and level of services a customer receives based on the customers value to the co.
Life Event-Oriented Marketing
The practice of timing sales and promotional efforts around significant events in customers lives.
Total Customer Benefit
The total of all the svcs, personal attention, recognition, and image the customer gains from the relationship that develops thru repeated interactions with a co.
Total Customer Cost
The total of all the time, energy, and emotion a customer invests in a relationship with a co.
The state in which the customer perceives that a co's products and svc meet or exceed the customers expectations and satisfy the customers needs.
The extent to which a customer remains with a company.
Retention of business that occurs when an insurance policy remains in force as a result of the continued payment of the policies renewal premiums.
measurement of persistency of a block of insurance policies determined by the % of business in force at the beginning of a specified period that remains in force at the end of the period.
The ratio of business in force that terminates for nonpayment of premium, whether by surrender or lapse, to the total business in force at the beginning of a specified period.
13-month Lapse Rate
A lapse rate based on the proportion of new policies on which no part of any required second-year-premium has been paid.
A policy sale in which (1) the co identifies the specific needs of the customer and the cstmr recognizes that those needs are important, (2) the ins product meets those needs, (3) the customer is financially capable of paying the premium. AKA quality business.
an expense charge imposed on some types of life insurance policies when the policyowner surrenders the policy.
Extra earnings a co. may offer to producers for favorable persistency results that serve as a sales force incentive.
A dept. in an ins co staffed with personnel specially trained to conserve - or keep in force - policies.
A policyowner who does not currently have a relationship with a producer.
The act of surrendering or lessening the value of one life insurance policy or annuity contract to buy another life ins policy or annuity.
In the US, a tax-free repl of an ins pol for another ins contract covering the same person that is performed in accordance with the conditions of Section 1035 of the Internal Revenue Code.
The commitment of a customer to remain a customer of and to place repeat busness w/a co., despite influences and marketing efforts of competing co's that may cause other customers to switch.
A customers abandonment of a current co for a competing co. AKA customer attrition.