Marketing
...elatively inexpensive for the university. During these courses the university is able to build a type of relationship with these potential students. There is therefore an increased probability that the students will continue further to complete their education. Price “Relationship marketing invites customers into the pricing process and all other value -related processes, giving customers and opportunity to make any trade-offs and to further develop trust in the relationship” (Gordon, 1998). On the whole, price is the sum of money that customers have to pay to obtain a product or service. Universities acquire the bulk of their money from the local government and students. But as a non-profit organisation their objectives are not to achieve extraordinary profits, though granted they do require money to cover their outgoings. The price of knowledge is dependant on the university. From time to time students have to pay more, but they get better quality and can study in superior conditions. It is noted that in particular areas such as the UK and the USA, students have to pay additional ‘costs’ for the establishment’s reputation alone. This situation is comparable with purchasing a pair of branded shoes like that of Nike or Manolo Blahniks. The customer has to pay for the brand name also (Oxford, Harvard, Yale etc). Transactional vs. relationship marketing Traditionally, marketing is considered as an intermediate function, where the specialists of the marketing department are the only employees responsible for the impact on the customers and their buying behaviour. However in recent years the traditional approach to marketing has changed and a new relationship focused definition of marketing has emerged. The foremost distinction between transactional/traditional marketing and relationship marketing is based on orientation to customer and its value rather than on products or services provided by a company. Relationship marketing concentrates on continuous contact with customers and its value and also on meeting customer needs and expectations to create strong relationships. There are two key components of relationship marketing. The first is communications strategy, which is made up of consistent communications to customers on a regular basis. The second component of relationship marketing is keeping the customer informed of new products and services, updates, pricing information, market conditions, dividends etc. It has been found that the UAD adopts more of a transactional approach than relationship marketing, as it emphasizes predominantly the service and does not really anticipate a large amount of customer loyalty. UAD aims to meet various needs of the students but it does not pay a great deal of attention on relationships with them out with term time. Universities on the whole are predominantly focused on service (knowledge) features than on students’ value. This warrants the suggestion that the university can indeed be viewed as a company and its unusual customers, the students. But this does not indicate the ignorance of UAD in disregarding current market trends and the demands of its prospective customers. Its strategy instead is to improve the quality of all staff and their teaching but also to work alongside in partnerships with students and thereby creating relationships for the duration of their stay. A simple example of this is the Student Union and the elected representatives in each class who communicate regularly with divisional leaders. The focuses of these two methodologies are displayed below (Christopher et al., 1994) Acquiring and retaining customers Originally marketing activities were geared more towards acquiring customers. Various incentives such as gifts and discounts were offered to customers who provided information. However, since the marketing environment is constantly evolving, there is now more emphasis on retaining customers to increase profits and reduce costs. One verified customer is more helpful to the company than customers acquired by mass marketing who have questionable loyalty. With this in mind, it is clear that customer retention is one of the most significant pursuits for every company. “It has long been claimed that it is between five and ten times as expensive to win a new customer than it is to retain an existing one (e.g. Rosenberg and Czepiel,1984). While the factor will differ between industries and companies, it is evident that recruiting new customer is a costly business. Not only are there the direct costs of the successful conversion of a prospect into a customer but there are also the costs of unsuccessful prospecting. These costs of failure also have to be recovered.” (Buttle, 1996) In spite of this the UAD still spends the majority of their money on acquiring, rather than on retaining its customers. The main reason for this is because of the fact that each student who chooses to study at Abertay is anticipated to stay there for at least one year or more. This gives the University a form of guarantee that each pound spent on acquiring is at the same time pound spent on retaining. UAD is one of a few universities in Scotland that encourage people to study at it by using mass marketing (billboards, newspaper advertisements, etc.) alongside more personal methods of advertising like leafleting and sending out a prospectus to potential customers. The university searches for new customers and concentrates on attracting people from different age groups and different countries, with similar interest in particular subject areas. However this does not denote that UAD completely is ignorant to retaining customers. The university spends a significant amount of money on keeping its students by offering many interesting modules in each department, also by organising sport events and being concerned with students’ future careers. UAD knows that with satisfied customers there is the possibility for returning to do follow up studying and use the service again, for example studying a Masters. Customer Lifetime Value The Lifetime Value of a Customer or LTV is the amount of profit that each average customer will generate over the lifetime of their relationship with a company. When we talk about Customer Lifetime Value “We are exploring the relationship between on the one hand the gross margin that we obtain from customers, and on the other hand the amount we can spend marketing to them. This spend is used to attract customers in the first place, and then to ensure they maintain or increase their value to us. The allowable marketing spend is calculated not as one departmental total but, more usefully, for individual customers.” (Tapp, 2001) With the UAD, it is tricky considering profit, as a University is a “non-profit company” and another consideration is the time the customer (student) will be using the service is inevitable and the university cannot extend this duration. The University does however offer its students some extra advantages to remain attractive among the competition, such as access to extensive gym equipment for use during social hours or the highly revered quality of the qualification among employers in the local area. There is also the possibility of attending university entertainments and developing job/career prospects. The university endeavours to attract international students through dealing with SAAS regarding tuition fees and providing opportunities to improve language skills. The Six Markets Model Initially developed to respond to the insufficiencies of the traditional relationship marketing, the “Six Markets Model” developed by Christopher et al., (1991) highlights the importance of an extended group of stakeholders in a commercial organisation. “The model consists of six role related market domains, each representing dimensions of relationship marketing and involving relationships with a number of parties – organizations or individual – who can potentially contribute, directly or indirectly, to an organization’s market place effectiveness.” (Peck et al., 1999) “The key stakeholder in this framework is the customer. Added to this, five markets domains that are also acknowledged, including referral markets, influence markets, recruitment markets, suppliers and alliance markets, internal markets” (Christopher et al., 2002). (Peck, 1996) The customer market The customer market domain is the central market within the model. In the context of the UAD, the students are the marketed customers. This market can also include people who work and those that are unemployed but wish to complete their training. Indeed, the aim of a university is to impart instruction, assess students, and otherwise promote education, empowered to confer degrees in various arts and faculties. Though they benefit from courses provided by the University, students have to pay tuition fees, which are a significant financial resource. In this way, the relationship between the university and students is buyer maintained. However, their relationship is also seller maintained due to the fact the university invests money to recruit students, such as advertisings and posters, and also, to provide the finest courses. The university builds a relationship with the students via the quality of services it offers. The key point is the quality of the courses. It consists mainly, of the quality of the teaching profession, but also the means provided by the University for partaking in its courses, such as computer equipment, access to Internet/intranet, documentation, and in a way more pragmatic, premises. Added to this, the university “extra life”, as the career service, the students union, the sport union and all the perks of the student’s status, is also taken into consideration. Actually, it is truly this whole which forms the relationship between the university and the customers. Grönroos (1997), states that “marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfilment of promises.” The difficulty with university is it cannot maintain the relationship with students once they graduate and complete their training; from hence they enter in the labour market. Nevertheless, they could be a part of the referral markets or/and the recruitment markets. The referral market Customer and non-customer referral sources are the two main categories within the referral market domain. The existing (and former) customers are essential for the organisations in so far they are often its best marketers. “When the students are fully satisfied with the university services, they become advocates where they recommend the university to other potential customers; it is both cheap and effective” (Christopher et al, 2002). With regard to the third party referral, this concerns aspects such as when the university is recommended by another, if it cannot fulfil a specific need or is at over-capacity, which is more a “complementary referral”. The non-customer referral includes also the recommendation from schools, parents, and existing and former employees. The influence market The influence market domain usually has the most diverse range of constituent groups (Christopher et al, 2002). It comprises of government, which is both a regulatory influence and an investor. Additionally, other universities are also a part of the influence market. The way they manage their students and their employees is not a trifling source of information, and it can be a good strategy to be inspired by their methods. There is also a media influence that exists between the university and its potential students. Ultimately such pressure groups as the student’s association, can wreak serious damage in case of the university fails its obligations or makes unpopular choices. The recruitment market Christopher et al. (2002) asserts that “the scarcest resource for most organisations is no longer capital or raw material, but skilled people.” The personnel both administrative and teaching profession are the most significant resource to the university. The lecturers disperse knowledge among students, which is the “product/service” sold by the university, and the administrative staff focuses on an effective functioning between the different players concerned. Therefore, the university must select its employees cautiously in order to sustain or gain advantages. The supplier and alliance market The importance of the supplier markets is lesser than the alliance markets in the context of the university. Firstly, the products they supply are not used to make something. They are just a necessary support. Second, the products used such as tables, chairs, boards, desks and so forth, have an extensive lifetime. They do not need to be replaced or up-dated very often. At the same time, alliance markets provide much more beneficial resources. Indeed, the alliances with overseas universities permit the enhancement of the customer markets, and hence the referral markets. Moreover, it offers the university a broader choice of courses at a limited cost. The internal market The internal market is divided into two categories, which are the administrative staff and the teaching profession. The teaching profession is the cornerstone of the university. A great part of the university’s success is based on them, whether the teachers are bad or not committed, the quality of the courses will decrease and simultaneously the satisfaction of students. The good reputation of university and the excellence of its teaching profession are consubstantial. The administrative staff is charged with the efficient functioning of the university. In the fact, the structure of the university is shared in five departments, inc...