Page 318 - Introduction to Business

292 PART 3 Marketing

receive a promotion, what time of the year are they most and least likely to buy, and
what kind of incentive should be used.
share of wallet The percentage of a An increasingly important piece of information that databases provide is share
customer’s spending on a product or of wallet. This refers to the percentage of a customer’s spending on a product or
service category that is obtained by a service category that the company obtains. For example, if Ms. Smith spends $1000
specific company’s product or service
annually on clothing and $300 at one store, the store’s share of wallet is 30 percent.
Those customers for whom a firm has a low share of wallet should be targeted,
because potential exists to increase its revenues. Some examples of how companies
have benefited from using their databases include
• A men’s clothing store found it was overstocked with size 42 suits. The sales
manager called all of its size-42 customers; 50 percent of them purchased one
or more of the overstocked suits.
• Hilton Hotels got 50 percent of its frequent-guest club members to take
unplanned trips that included stops at Hilton Hotels.
• Land Rover identified 4000 Range Rover owners and invited them to a special
marketing event. It sold 1000 vehicles with an average price of $52,000, giving
it a return on investment of $150,000.
• Fashion Bug stopped mailings to the 10 percent of customers who had spent
less than $50 in the previous 18 months. It saved $90,000 a year without reduc-
ing profitability.
A company’s database can be used to help it develop long-lasting relationships
relationship marketing Developing with its customers. Called relationship marketing, the database will identify those
long-lasting, profitable relations with customers who are profitable for the firm and who have been customers for some
customers
time and hopefully will continue to be so in the future. This can be achieved by
making a strong effort to satisfy those customers so well that they will not consider
taking their business to a competitor.
Some ethical concerns have been voiced about databases and their uses. Critics
allege that the information contained invades the privacy of customers who are
included in the database. Another criticism is that companies will sell the information
in the database to other companies, which will then begin to heavily promote their
products and services to these persons, adding to the volume of junk mail that they
receive. Consumers often complain that they are not treated as well as the better cus-
tomers identified by the database.

Objectives

LEARNING OBJECTIVE 6
Identify and understand companies’ chief objectives.

objectives Goals or targets that Objectives are goals or targets that companies and their marketing operations are
companies and their marketing trying to achieve. Companies’ objectives usually emphasize revenues, profitability,
departments establish and try
to achieve market share, and market value. Revenues are firms’ sales in dollars and are found
by multiplying the number of units sold by the price customers paid. For example,
if 1000 units with a price of $40 each are sold, revenue is $40,000 (1000 $40).
Often, companies will stipulate a specific revenue that they are trying to achieve,
such as $60 million.
Profits are what a company has remaining after all costs for materials used to
produce products, wages, utilities, rent, advertising, transportation, and so on
have been deducted from revenues. If a company has $100 million in revenues and
$95 million in costs, it would have earned $5 million in profits ($100 million – $95
million). Profits are important because they reward owners for their risk in invest-
ing in a company, significantly affect the price of a company’s stocks, and are used

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