Dr. Paul J. Solomon- Marketing Notes 1 QUALITY MANAGEMENT/ LEADERSHIP Quality Management /...

Dr. Paul J. Solomon-Marketing Notes

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QUALITY MANAGEMENT/LEADERSHIP

Quality Management / Leadership is the second requirement of a Market Driven Philosophy.

Quality Management / Leadership style focuses on customers.

In a Quality oriented company Marketing is everybody’s business.

Quality Management / Leadership has had a big impact on Marketing.


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Quality Management / Leadership (continued)

Quality Concepts: Systems Thinking and

Interconnectedness

Shared Vision, Commitment & Purpose

Control-through values not force

Proactive Strategies

Education of the work force, the broad view.


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Quality / Leadership (continued)

Curious Corporation Hire curious people Remove human resources

blocks Weird Market Place

may need weird people clean desk people


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Quality / Leadership (continued)

Excellence What does excellence mean? Is excellence still relevant?

Key questions to ask: Would you want your son or

daughter to work here. If the answer is no, how do we fix

the problem. If the answer is yes, you have a

chance to succeed.


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CUSTOMER LOYALTY

A critical component of the Market Driven Firm is Customer Loyalty.

Customer Loyalty is the concept that ties Marketing to the long run goals of the company.

How well a company creates loyal customers will determine the firm’s profitability.


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How to create loyal customers

Customer Selection

Loyalty-based product/service design

Meet and exceed expectations

Nurture loyalty by adding value

Customer loyalty measurement

Handling customer complaints


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A. Selecting the Right Customers for Loyalty

Not easy to doPlan to attract customers one at a timeEstimate the value of the customer: Sales Volume Prestige Potential Margins Fit with the business Potential for Strategic Alliance

Calculate profit by customer!


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Selecting Loyal Customers (continued)

Answer additional questions: Are there unusual costs associated

with this customer? Slow pay Unusual fixed-capital costs Complexity of order entry Billing complexity Customer service complexity Senior management time required Fit between customer’s needs and

our capabilities


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Selecting the Right Customers for Loyalty

Ability to serve customer compared to our major competitor

Health of customer’s industry Health of customer Customer’s prospects for growth Can we learn from this customer? Will the customer help us attract

other customer that fit our capabilities?


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B. Designing Product &Services for Loyalty

Suspect

Prospect

First time customer

Repeat customer

Client

Advocate

Inactive customers or clients

Defector


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Example of Loyalty Planning-Hotel

A.Turning suspects into prospects 1.Identify suspects

Corporate wide sources National reservations system Corporate telemarketing Corporate sales program to key

national accounts property-specific sources

Site analysis Visual survey of nearby business

centers Visits with property managers of

nearby commercial buildings Chamber of Commerce


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Example of Loyalty Planning-Hotel (cont)

2. Qualify suspects as prospects average hotel volume /month Who is traveling Decision maker names/titles lodging use rates under contract/expiration criteria used to select hotel Who makes lodging decision?


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Example of Loyalty Planning-Hotel (continued)

II. Turning prospects into first-time customers Send introductory direct mail package Make telephone follow-up Make initial sales call Schedule property tour Conduct property tour Send follow-up thank-you letter for tour Establish ongoing sales call frequency based on

account classification Send goodwill:

Birthday Card Thanksgiving Card

Repeat till successful


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Example of Loyalty Planning-Hotel (continued)

III. Turning first-time customers into repeat customers, clients, and advocates Send new customer welcome letter Conduct telephone interview (How did

we do?) Make regular sales/telephone calls Send monthly Select Newsletter Send goodwill:

Birthday Card Thanksgiving card You’re “our favorite client” card Send mail-back questionnaire every six

months


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Example of Loyalty Planning-Hotel (cont)

IV. Making inactive customers active again Send “We Miss You” Card Make follow-up telephone and/ or

sales call Reevaluate the account based on

information Keep account in or remove from

active customer list Try to activate and move to

schedule III.


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Why do customers switchservice providers?

Core Service Failures 44% Mistakes Billing Errors Service Catastrophes

Failed Service Encounters 34% Uncaring Impolite Unresponsive Unknowledgeable

Pricing 30%


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Service Switching

Inconvenience 21%

Response to Failed Service 17% Reluctant responses Failure to respond Patently negative response

Competition 10% Found better service

Better service More personable More reliable Provided higher quality Often accepted higher price


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Service Switching

Ethical Problems 8% Dishonest behavior Intimidating behavior Unsafe or unhealthy Conflict of interest

Involuntary Switching 6%

Other 9%


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Service Switching

Switching may be complex 45 % of all switching is due to a single act 55% of all switching is complex. They

compose two or more problems

Switching is demonic 75% of all switchers told one to several

people about the switch: Family Friends Neighbors Co-workers Other known customers of service Only 7% told the original service provider

of switch


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Determinants of Customer Delivered Value

Determinants of Customer Delivered Value

Image valueImage value

Personnel valuePersonnel value

Services valueServices value

Product valueProduct value

Totalcustomer

value

Totalcustomer

value

Monetary costMonetary cost

Time costTime cost

Energy costEnergy cost

Psychic costPsychic cost

Totalcustomer

cost

Totalcustomer

cost

Customerdelivered

value

Customerdelivered

value


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C. Meeting & Exceeding Expectations

Looking for the WOW factor!!! Disney Dell Sopranos

How do you get the WOW factor? Systematic Listening Programs “How are we Doing?” Programs Opportunistic Listening Observation Total Market Surveys Defection Identification


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D. Nurture Loyalty by Adding Value

1. Understand the Customers Total Experience

British Airways…dinner on the ground, showers, dressing rooms, cots, pressed clothes. Delta has now copied them (Business Lounge)

Whirlpool..why does it take so long to clean up after a meal? Solution is a range top that is flat and easy to clean


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D. Nurture Loyalty by Adding Value

2. Breaking Customer Compromises Shop the way the customer shops Pay careful attention to behavior (do

customers repeat a behavior over and over)

Explore latent dissatisfactions within the category

Look for sub-segments that are not fully satisfied

Look for problems in the industry’s value chain

Look for solutions from other industries


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D. Nurture Loyalty by Adding Value (cont)

Charles Schwab an example: breaks the discount brokerage

compromise invests in technology to allow

immediate confirmation of order invests in brand name and opens retail

offices to instill confidence] Schwab One cash management account

with VISA card/checking account automated phone trading electronic trading via PC become a value-priced provider of cash,

stocks, bonds, and mutual funds.


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D. Nurture Loyalty by Adding Value (cont)

Schwab One Source…a single purchase point for 350 no load mutual funds in 50 different fund families

one statement no transaction fees no longer forced to compromise on assortment,

price, and convenience

Schwab’s mutual fund assets rose from $6 billion to $60 billion between 1991 and 1996 in a very competitive market place.


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E. Customer Loyalty Measurements

New customer retention rate

Client retention rate

Share of customer

Average number of new customers per month

Purchase frequency

Average purchase amount

Attrition rate


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F. Lost Customer Analysis

Calculate the real cost of losing a customer: must think in terms of the life time

value of a customer calculate the value:

monthly expenditure per year value per life time value (10 years)

other costs: additional products and services referrals negative word of mouth cost of attracting, servicing and

administration not recovered


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G. Service Recovery

How to keep a customer from leaving: Make it easy for customers to complain. When customers need help, provide it quickly. Reduce the hassles of repairs, refunds, and

warranties. Learn how to handle complaints

let customers vent care and concern find out what customer wants empowerment suggest a solution based on what customer

thinks is fair Make a follow-up satisfaction call or letter


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G. Service Recovery

Service Concepts Important to Customers: Being called back when promised. Receiving an explanation of how a

problem happened. Providing information so customer

knows what numbers to call. Being contacted promptly when a

problem is resolved. Being allowed to talk to someone that

is knowledgeable. Being told how long it will take to

solve a problem. Being treated like a person, not an

account number.


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G. Service Recovery (continued)

Service Concepts Important to Customers:(continued) Being given useful alternatives if a

problem can not be solved. Being told about way to prevent a

future problem. Being given progress reports if a

problem can not be solved immediately.


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Lost Customer Analysis

One of the most expensive things a firm can do is lose a customer.

A key to financial success is customer retention.

Analysis starts with: internal records (sales logs, pricing records,

customer survey results) outside defection research (benchmarking

studies, statistics from trade assoc.

Questions asked: Do customers defect seasonally? Does retention vary by region? Is their a relationship with price? Where do lost customers go? How do we compare to industry norms? Is their a superior retention company?

Dr. Paul J. Solomon- Marketing Notes 1 QUALITY MANAGEMENT/ LEADERSHIP Quality Management /...

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