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MNM3712 Q&A-CUSTOMER RELATIONSHIP MANAGEMENT
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By: Nomanombewu • 6 year ago
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Questions by the eTutorStudy Unit 1
Questions:
1. Discuss market segmentation.
2. Discuss and outline the marketing mix for Cadbury’s (chocolate manufacturer). You can make your own assumptions.
1. The traditional approach was to divide heterogeneous market into fairly homogenous sub-sets of customers
– each segment will have similar needs and respond similarly to offerings. Organisation then decides which
segment it can best satisfy and then develop offerings and a strategy around the needs of that segment.
Segmentation can be based on: behavioural (buying behaviour), psychographic (social class, lifestyle,
personality) and profile segmentation (geographic, demographic, socio-economic). But these traditional
market segmentation strategies were vulnerable and not operating effectively. The unsteadiness of this
indicates that there are no more market segments, only individual customers. Thus, a paradigm shift was
necessary – from marketing to anonymous masses to developing and managing relationships with somehow
identifiable customers. Companies have to transform marketing from a narrow set of functional skills based on
conventional marketing mix to a broader business orientation where delivery of superior customer value.
Make sure that you discuss enough theory, as most essay type questions require a thorough theoretical
discussion and then application to the given case study.
2. Firstly, discuss the theory and then apply it to the case study e.g: The marketing mix comprises of Product,
Price, Promotion and Place.
Product: Traditionally the marketer developed product concepts, researched the customer, then developed a
product that would yield desired profit margin to business. Relationship marketing takes into account the
needs of the customer. Where applicable, organisations could offer custom products to customers.
Cadbury’s product are chocolates of several flavours and sizes. Customisation is not possible as it is for e.g. a
company that sells cars or computers. They recently opened pop-up stores across the country where
customers can create their own chocolates with the help of staff – there customers can decide how much they
want to spend on their ‘creations’ (saw it online some time ago). Cadbury’s have to do research on the type of
chocolate products or offerings that customers would want to buy and not merely push products on them.
They developed a fun new range called Marvellous Creations that appeals to the younger market (this info will
be given in the case study, I got it off their website).
Price: Traditionally, the company sets price (value) for product/offers in exchange for money. Price seeks to
secure a fair return on the investment the business has made in its more-or-less static product.
Cadbury’s products should be priced to reflect the value of the product e.g. a 80g chocolate slab will cost
R12.99. It is good value for money and the customers will be willing to pay said amount for the chocolate.
Promotion: Traditionally, companies used one-way mass communication, but that needs to be replaced with
integrated marketing communication / customer-centred communication. Technology can make promotion
become communication where customers choose how they wish to communicate with the company.
Cadbury’s does not directly sell to the public, but to retail stores such as Pick n Pay, who then sells to the end-
customers. Cadbury’s can perhaps launch campaigns such as ‘buy one, get one free special’ that all their
retailers can partake in. In the past on their website, is a competition that you can win a family holiday if you
sms the code in your chocolate wrapper to them, also urging customers to buy more frequently from the retail
stores.
Place: Traditional marketing sees distribution as the channel which consists of producers, consumers and
intermediaries to provide a means of transferring title/possession of product/service from producer to
consumer. But relationship marketing considers distribution from perspective of customer who decides
where/how/when to buy the combo of products/services that comprise supplier’s total offering – it is not a
channel, it is a process. Process allows customer to choose where and from whom they will obtain the value
they want.
Cadbury’s can choose several retailers that will stock their chocolates, such as Pick n Pay stores, Spar,
,Checkers, Makro and even smaller cafés, spaza shops and school tuck shops. The pop-up shops are mostly
in malls across the country. Customers can therefore choose where and when they will make their purchases.
Some stores will also offer online-purchasing.
At the end you can add: Cadbury’s needs to be approach the marketing mix differently according to new focus
on CRM. Technology can assist in combining the 4P’sin numerous ways offering customers many choices so
they can obtain the desired product, when and how they want it (distribution), at a suitable price. Technology
allows business to engage with customers with whom they wish to communicate (promotion). Using
technology appropriately, organisations can serve customers as individuals. A data-driven approach will
enable them to assess each customer’s needs and potential profitability and tailor sales offers and service
accordingly
Obviously this is a very broad discussion of the marketing mix, but it is important to have the thorough theoretical knowledge as you get
marks for both theory discussed and application to case study.
Study Unit 2
Questions:
1. Discuss how a company selling furniture can reconsider the traditional marketing mix in their shift towards relationship
marketing and CRM.
2. Discuss CLV-based segmentation.
Question 1:
Relationship marketing aims to satisfy existing customers’ needs and wants and then to spread the word to
potential customers. Businesses need an individual customer approach where they customise/personalise to
individuals. The furniture company can customise their products/offerings to suit individual needs.
Companies should approach the traditional marketing mix differently, with a new focus on CRM. Technology
can be used to assist in combining the 4P’s in numerous ways to offer customers many choices so they can
obtain the desired product, when and how they want it (distribution), at a suitable price. Technology allows
business to engage with customers with whom they wish to communicate (promotion). The focus has changed
– not for marketer to provide what he thinks customer wants, but rather for customer to choose what they
want/need. When companies use technology appropriately, organisation can serve customers as individuals.
A data-driven approach enables organisations to assess each customer’s needs and potential profitability and
tailor sales offers and service accordingly.
Product: Traditionally, the marketer developed product concepts, researched customer, then develop product
that would yield desired profit margin to business. With CRM, they need to recognise that customers are
different and want different things in different amounts at different times (thus profit from each vary). For
instance, the furniture company can have options for customers to upholster their couches – they choose a
style and then have options for leather, fabric and different colours.
Price: Traditionally, companies set price (value) for product/offers in exchange for money. Price seeks to
secure a fair return on the investment the business has made in its more-or-less static product. With
relationship marketing, the product varies according to customer’s preference, thus price will vary too (reflects
choices made about product/service). For instance, with the options offered by the furniture company for
customers to upholster their couches, the prices will differ. Leather will be more expensive than fabric. But
customers can choose the option that best fit their pocket.
Promotion: Traditionally, companies use one-way mass communication. With CRM, it must be replaced with
integrated marketing communication / customer-centred communication – driven by need to convey certain
messages. Technology can make promotion become communication. Relationship marketing gives individual
customers an opportunity to decide how they wish to communicate with businesses. For instance, customers
can choose if they want to be on the mailing list of the furniture company and receive the latest specials or
offerings. Customers can then respond to the communication if they choose to.
, Place: Traditionally, marketing sees distribution as the channel which consists of producers, consumers and
intermediaries to provide a means of transferring title/possession of product/service from producer to
consumer. Relationship marketing considers distribution from perspective of customer who decides
where/how/when to buy the combo of products/services that comprise supplier’s total offering – it is not a
channel, it is a process. Process allows customer to choose where and from whom they will obtain the value
they want. For instance, the customer can decide if they want to buy online or in store. The customer can
also choose which branch to visit – the nearest one or the flagship store with more options. They can also
choose how and when to buy the specific product or products they need.
Question 2:
A Customer Lifetime Value (CLV)-based segmentation is a segmentation approach that groups customers into
meaningful segments based on customer profitability and lifetime value, and other factors. It is fast becoming
accepted as new bases for customer segmentation. CLV is seen in customer equity, which is defined as the
total number of the discounted lifetime value of all the customers of the business.
With advances in technology and segmentation methods, segmentation strategies are evolving to reflect a shift
in power towards the customer. CLV-based segmentation groups customers into meaningful segments based
on customer profitability and lifetime value and other factors. Customer profitability can be measured on the
level of sales, increase in order volume and size of transactions. Indirect costs are allocated across the
customer base, in proportion to the total sales of each customer. It is a more profitable use of an
organisation’s resources than individual-level customer profitability models.
CLV looks at what the retained customer is worth to the organisation now, based on predicted future
transactions and costs. It is based on the assumptions that the business will be able to ensure customer
retention amongst these customers and that customer will continue to buy from this business. CLV suggests
that the value of a relationship with a customer can be increased either by increasing the amount of profit or by
extending the relationship lifetime.
Customers at beginning of relationship lifetime need different approach than those at the end of lifetime. CRM
is designed to provide increased value to the customer, which ultimately yields a lifetime value to the marketer
(higher customer value increases satisfaction, creates loyalty, results in higher profit from repeat purchase and
positive word-of-mouth referrals).
Study Unit 3
Questions:
1. Some relationships are unrealistic - Discuss four scenarios and give a practical example of each.
2. Name and discuss what information an ideal database would contain. Apply the theory to Woolworths. (It is not a
specific case study, just use general knowledge that you have of Woolworths. You can make assumptions.)
Scenario 1: Where there is no reason why, or little likelihood that, a buyer will purchase again from a supplier.
A buyer who is unlikely ever to patronise a supplier will see no benefit from establishing a relationship and
may indeed be annoyed by the tactics with it, such as data capture
e.g. The Ultra City rest stop on the way to Durban. Most customers make use of it once or twice (on their way
to the sea), but are not likely to become regular customers. Investing in a relationship with these customers
have little to no value.
Scenario 2: Where buyers want to avoid a relationship, as it may lead to a dependency on a seller. This
situation may exist when any benefits associated with the relationship are outweighed by lost opportunities
elsewhere.
e.g. One time a company that manufactures pipe for a mine, received a big order. So big that they did not
have the capacity to produce. Instead of turning it away, they made a deal to buy pipe from a competitor (at a
reduced rate). It would be unrealistic for the competitor to invest in this company, as they know they
manufacture their own pipe (it was just a once-off situation).
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