Consumer Behavior 2

What is the Marketing Mix?

Consists of a company’s service and/or product offerings to consumers and the methods and tools it selects to accomplish the exchange.

What are the 4 Elements of the Marketing Mix (also known as the Four P’s)?

Product, Price, Promotion, and Place.

Define 'Product' or 'service purchase' in the Marketing Mix.

The features, design, brands, and packaging offered, along with benefits such as warranties and return policies of a product or service.

Define 'Price' in the Marketing Mix.

The list price, including discounts, allowances, and payment methods.

Define 'Promotion' in the Marketing Mix.

The advertising, sales promotion, public relations, and sales effort designed to build awareness of and demand for the product or service.

Define 'Place' in the Marketing Mix.

The distribution of the product or service through specific store and non-store outlets.

What are the 3 Drivers of a successful relationship between marketers and customers?

Customer Value, Customer Satisfaction, and Customer Retention.

What is Customer Value?

Defined as the ratio between the customer’s perceived benefits and the resources used to obtain those benefits.

What is Customer Satisfaction?

The individual’s perception of the performance of the product or service in relation to his or her expectations.

What is Customer Retention?

The overall objective of providing value to a customer continuously and more effectively than the competition.

Why do small reductions in customer defections lead to significant increases in profits?

Small reductions in customer defections produce significant increases in profits because:

• Loyal customers buy more products
• Loyal customers are less price sensitive and pay less attention to competitors’ advertising
• Servicing existing customers who are familiar with the firm’s offerings and processes, is cheaper
• Loyal customers spread positive word-of-mouth and refer other customers.

What is the Customer Pyramid?

A framework for segmenting customers based on their profitability and value to the company, typically including Platinum, Gold, Iron, and Lead tiers.

Describe the Platinum tier in the Customer Pyramid.

Includes heavy users who are not price sensitive and who are willing to try new offerings.

Describe the Gold tier in the Customer Pyramid.

Consist of customers who are heavy users but not as profitable because they are more price sensitive than those in the higher tier, ask for more discounts, and are likely to buy from several providers.

Describe the Iron tier in the Customer Pyramid.

Consist of customers whose spending volume and profitability do not merit special treatment from the company.

Describe the Lead tier in the Customer Pyramid.

Includes customers who actually cost the company money because they claim more attention than is merited by their spending, tie up company resources, and spread negative word-of-mouth.