MKTG 465: Customer Centricity
Cyrus McCormick
First businessman to successfully execute a marketing strategy focused on customers -He understood the importance of quality and constant process improvement in building customer satisfaction and long-term brand loyalty (ex. moved his mechanical reaper factory closer to Mid-west customers to allow for cheaper transportation costs and savings for farmers) -Made service a priority to attain loyal customers
Who came up with net promoter score (NPS)?
Frederick Reichheld of Bain & Company
What company is mentioned in the reading for creating a successful demand landscape?
Frito-Lay -They discovered customers consumption of the chips had more to do with the emotions (joy, comfort, and reassurance) the chip provoked than the chip itself
What new theme did Frito-Lay apply across its marketing mix?
Frito-Lay clearly redefined the Lay's moment to be a typical moment in its customer's everyday lives-- the "smile break" --- when the customers could appreciate magical moments in their lives **This led brand equity to increase across all segments
HP's external customer-centric mission
HP's 100 discrete brands left customers unclear on the company's brand identity, so HP launched "Operation One Voice" that optimized marketing and developed the brand as a financial asset -Themes of "HP delivers more" and "+hp= everything is possible" refined across HP's three primary customer segments: enterprise, small business, and consumer -Result: HP's brand value increased by 18% with meaningful improvements in "adaptable," "trustworthy," "straightforward," and "human"
What does Jeff Bezos say about customer centricity?
He says that in our world today, it becomes increasingly important to align yourself with the customer. Companies must not make the mistake of decreasing their vigilance because bench marks say that they are the best- rather to stay successful, you must keep improving and focusing on customer relationships
Theodore Levitt
Introduced the most-influential marketing idea of the past half-century in his "Marketing Mytopia": businesses will do better in the end if they concentrate on meeting customers' needs rather than on selling products -Stated that railroads stopped growing because they didn't change and grow to fulfill customer needs (they thought they were in the railroad business, rather than the transportation business)
Connection
Involves developing relationships with external partners to make increasing the value of solutions more cost-effective -create higher value solutions by combining offerings with complementary partners
How did Frito-Lay switch its marketing tactics to reflect lessons from its new demand landscape?
It focused on the moments in everyday life when consumers take the time to think about what really matters and not simply the occasion of food consumption at meals -Positioning shifted away from emphasis on the product's quality and moved towards emphasis on Lay's inherent qualities of goodness, authenticity, and values of the home
What is the cost of creating a comprehensive CRM system?
It is very expensive; requires paying analysts and researchers for information that can take a lot of time to obtain -Data may be hard to analyze, inconclusive or imprecise
In NPS, who is considered a promoter? a passive? a detractor?
On a scale from 1-10, the promoters are the respondents giving a 9 or 10; the passives are those responding a 7 or 8; detractors respond with a 0-6
How has technology (Web 2.0) shifted marketing dynamics?
Technology has shifted power from companies to consumers, giving them a stronger voice in both the B2B and B2C sectors
Customer lifetime value (CLV)
The present value of the future income stream generated by an individual purchaser.
Effective Customer Feedback Programs
These firms begin their feedback loop at the front line, by having the customers they just served evaluate their employees right away so that these employees can then follow up with one-on-one conversation to understand in detail what the customers value **Keep customers front and center of the organization
How can marketers increase CPV?
They can do so by raising benefits, lowering costs, or both, but it is the overall benefit-to-cost ratio that matters -You don't want to reduce overall CPV and profits by reducing costs (ex. Dell)
How did the Taj Mumbai Hotel create their extremely customer-centric culture?
They included unusual hiring, training, and incentive programs that created an organizational culture in which employees were willing to do almost anything for guests -Hired from small towns with traditional Indian value -Rather than hiring for skills or talent, they hired for integrity and devotion to duty -18 month long training program (6 months longer than usual) -Timely recognition by supervisors as reward
What did Lego do when it faced challenging market conditions because children were spending more leisure time with computers, video games, and TV?
-Created programmable bricks equipped with sensors that allowed customers to create movable Lego designs/robots -Launched a successful line of girl-focused products following research that pointed to gender differences
What does the consumer demand landscape tell a company?
-How consumers go about living their lives -How products, services, or brands intersect in time and space with consumer occasions to live, play, and work as defined by the matrix of goals, activities, and priorities
How did Japan's Kikkoman use a combination of market driven and market driving strategies?
-Kikkoman created demand for soy sauce by hiring economists to create recipes incorporating soy sauce into the mainstream American diet -The company also created teriyaki sauce, as the American diet consisted heavily of meat consumption, and it became an immediate success
Customer Loyalty and Retention
-Major factors consistently contributing to corporate profitability and growth -Linked to employee and investor loyalty -Can help companies to re-examine and improve the fundamentals of their core strategies (Frederick Reichheld)
How did Cyrus McCormick focus his advertising on attracting customers?
-Posted testimonials from satisfied customers -Social networking that encouraged product demonstrations -Standard pricing, term payments, and money-back guarantees
What four things did HP's Total Customer Experience and Quality Program implement?
1) "Putting Customers First" training for employees to integrate customer experiences with HP values 2) Number of measures to gain feedback from customers, including competitive intelligence, focus groups, surveys, a "Carly Hotline" to contact the CEO, and "Voice of the Customer" so employees can log customer concerns and compliments 3) Measured customer experience from every transaction and created the Net Customer Loyalty Index (CLI) to establish the link between loyalty and financials 4) Rewards such as bonuses for good performance on the CLI
What are two follow-up questions Reichheld suggests for the NPS survey?
1) "What is the primary reason for the score you just gave us?" 2) "What is the most important improvement that would make you more likely to recommend us?"
4 examples of retro-marketing proposed by Brown
1) Exclusivity (hold back supply and delay customer gratification) 2) Selective secrecy (get customers wondering about the unknown) 3) Amplification (generate buzz about the secret) 4) Entertainment (make pitches fun and engaging)
Drivers of brand equity in the Customer Equity Model (6)
1) Free samples 2) Image advertising 3) Ethical corporate behavior 4) Brand awareness 5) Attitude towards the brand 6) Brand ethics
What three things does Chief Experience Officer Andy Levine of travel company Sixthman want its employees to do?
1) Go above and beyond whenever they come in contact with a guest 2) Hold the line, providing consistent service that upholds the values of the communities 3) Make it right when any mistakes are made
Sixthman management and employees strive to ensure that guests feel seven emotions throughout their cruise experience:
1) Invited 2) Informed 3) Excited 4) Welcomed 5) Looked after 6) Amazed 7) Appreciated
2 Flawed Assumptions with Customer Satisfaction
1) It is sufficient to merely satisfy a customer if they have rated the company 4 or higher on a 5-point scale 2) Investment required to change customers from satisfied to completely satisfied will not provide an attractive financial return
What two general things does Reichheld suggest companies do in calculating NPS?
1) Keep the surveys short for simplicity and clarity 2) Take measurements continuously to ensure maximum number of chances to try out new approaches (if not continuously, at least weekly or monthly--> this way people will pay attention to it)
Singapore Airlines (SIA): Customer-Centric Culture
To carve out a distinct identity in service, SIA established a rigorous recruiting system (3 interviews and tea party with management to judge poise, confidence, communication, and positive attitude towards work and service) -4 month training program and employees attend retraining sessions regularly ***rated 3rd in customer satisfaction by World Airline Awards
Customer-perceived value (CPV)
Value= Benefit-Cost **Customers seek to maximize CPV to get the greatest benefit for the lowest possible cost
Why may marketers who fail to incorporate customer centricity into strategic planning and across the entire marketing mix fatally damage a product or service?
Whether or not a product succeeds is less about the product's actual attributes and more about what it represents to customers and their sense of self-image/identity
"Creating the Demand Landscape" (Erich Joachimsthaler)
a detailed methodology of tracking thousands of customers behaviors (through observation, journals, interviews, etc.) and grouping them into categories according to goals, activities, and priorities -These contextual elements of customers needs, wants, pleasures, pains etc. make for a comprehensive consumer demand landscape
Market-driving strategies
breakthrough ideas that require educating customers on how or where to buy the product and helping customers to feel competent using it **role is to create customers in order to build an entirely new product category, rather than satisfying old customers
Net Promoter Score
categorizes its customers into one of three groups- promoters, passives, and detractors- to allow employees to see right away if a customer interaction was a success of a failure -Generated by asking the question: "How likely are you to recommend our product or service?" -NPS= (# of promoters) - (# of detractors)
What is the key to securing customer loyalty and generating superior, long-term financial performance?
complete customer satisfaction (not mostly satisfied) **why complete satisfaction should be an integral part of any corporate strategy
Building a Customer-Centric Culture
developing a deep understanding of, and effecting true organizational change to focus on, the customer -translating customer information and establishing some type of infrastructure to coordinate it all
Touch points (Consumer Demand Landscape)
direct contacts between the firm and a customer -each intersection between products, brands, and services with consumer occasions to live, play, work, etc. -ex. for a car rental property: the reservation process, check-in, car pick-up, car return, etc.
Cooperation
encouraging people in all parts of the company, through cultural means, incentives, and allocation of power, to work together in interest of customer needs
Capability
ensuring that enough people in the organization have the skills to deliver customer-focused solutions--> generalists with skills across multiple products and services that have a deep knowledge of customer needs
Coordination
entails establishing structural mechanisms and processes that allow employees to improve their focus on the customer by harmonizing information and activities across units -Employees in different units recognize customers as shared assets
Selective relationship management
examining customer bases in greater detail and performing profitability analyses to target fewer, but more lucrative, customers and even "fire" unprofitable customers
Peter Drucker
first to recognize marketing not as a specialized functional activity, but as "the whole business seen from a customer's point of view" -He believed the purpose of business is to create a customer and that the customer determines what a business is **Famous work: The Practice of Management
"Resonance Focus" Model
involves demonstrating a deep understanding of customers' needs and differentiating or highlighting offerings on the few elements that matter most to target customers -ex. paint resin company
Benefit assertion
making assumptions about features that may actually provide no benefit to target customers (particularly in the absence of any thorough competitive analysis) -Can create a list of benefits that may be so similar to competitors that true points of differentiation are lost
What two things have global research studies determined have a pattern of consistent, positive impact on business performance?
market orientation and innovativeness
In what markets are there tremendous differences between the loyalty of merely satisfied and completely satisfied customers?
markets where competition is intense (hard and soft durables, business equipment, financial services, and retailing)
Customer Equity Model
model for calculating customer equity that considers value equity (quality, price, and convenience of an offering), brand equity (customer's assessment of a brand's worth), and relationship equity (switching costs) -The model analyzes the drivers of brand equity to determine how much a customer's equity will increase with improvement of one of the drivers **Provides management with financial accountability for marketing decisions
Marketing is...
not something you do, rather how the customer influences your organization
"Favorable points of difference" approach
requires detailed competitive knowledge but often does not convey the value of highlighted differences -used most in the B2B environment -Sellers may make value presumptions and stress points of differentiation that have little value to the customer because they don't understand customer preferences
Royal Bank of Canada
surveyed 2,000 customers to assess their needs (CRM program) and realized that customers wanted their banks to value them as individuals -Shifted resources to managing customer relationships and greatly increased profits
What example does the book use to show that growing brand equity is not as successful as growing a customer base?
the cars Honda and Volkswagen: Honda was more successful developing the new Brand "Acura" in the U.S. because it had no baggage to overcome with upscale buyers. Volkswagen, on the other hand, was unsuccessful with the introduction of Phaeton that was made to compete with BMW and Mercedes because the company has virtually no brand equity among luxury buyers in the U.S.
customer orientation
the set of beliefs that puts the customer's interests first, ahead of those of all other stakeholders, such as owners, managers, and employees) *part of a set of values that reinforce customer focus throughout organizations
The value of a firm's customer base equals?
the sum of the lifetime values of its current customers and its future customers
Key to successful marketing
understand what benefits customers are seeking, translate those benefits into products, and then communicate the product offering effectively to the customer
Customer Relationship Management (CRM)
use of technology to gain detailed information about individual customers at all of the touch points in a consumer demand landscape -CRM system enables personalized customer service and gathers info that can drive product offerings, services, and programs -a tool for managing company's interactions with current and future customers
"All benefits" approach
when a company lists all the benefits they believe their offering might deliver to target customers -requires least amount of knowledge and work to construct **simplicity of this approach has several drawbacks (benefit assertion)
7 Directives for crafting customer-centric branding strategies
1) Make brand decisions subservient to decisions about customer relationships 2) Build brands around customer segments, not the other way around 3) Make brands as narrow as possible (to focus on a small set of customers' needs) 4) Plan brand extensions based on customers' needs not component similarities (avoid overextension) 5) Develop the capabilities and mind-set to hand off customers to other brands in the company 6) Take no heroic measures: get rid of brands that don't have avid customers 7) Change how you measure brand equity: Customer Equity Model
Studies found that organizations sharing this "success" profile exhibit a number of common characteristics (4)
1) They are customer-centric (rather than product or technology- centric) 2) They outcompete other firms in terms of customer insights 3) They integrate branding with customer centricity 4) They reward their employees for customer-focused innovation
3 Market Driving Strategies (used by Dell, Home Depot, and Palm)
1) They redefined value for customers in their respective markets 2) They built powerful, cohesive systems that could deliver more of that value than other competitors 3) The raised customer expectations beyond the competition's reach
How did Singapore Airlines (SIA) measure and continuously improve its service? (5 ways)
1) Tracked its compliment/complaint ratio and published positive and negative comments in the employee newsletter 2) Surveyed 25,000 passengers each quarter to complete a questionnaire on 78 key performance indicators 3) Participated in industry-wide customer satisfaction and benchmarking process 4) Launched expanded service program to include pre- and post-flight experience 5) Database to allow flight crews to access premium customer profiles and cater to their needs
What 3 ways does customer centricity fit into an organization?
1) as part of a knowledge management system (understanding the customer) 2) as part of the development of strategic competence as a learning organization (building a customer-centric culture) 3) as a foundation for corporate strategy development and execution (serving the customer)
How does a company build a customer-centric culture? (4C's)
1) coordination 2) cooperation 3) capability 4) connection
What concrete actions towards customer centricity can gathered market intelligence lead organizations to take? (3)
1) targeting select market segments 2) designing new products and programs 3) modifying existing programs to meet customer's needs
Why has customer centric become synonymous with proactive business strategy?
Because without customers, businesses could not succeed
Best Buy's Customer-Centric Strategy
Categorized its best customers as "angels" (those who made up the most of the company's profits by buying at full price) and its worst customers as "devils" (those who only bought at a discount) -Divided angels into 5 categories and trained employees to look for them (Barry's and Jill's) -Removed devils from the marketing list and decreased sales and discounts that attracted them
What example of a good feedback loop is mentioned in the reading?
Charles Schwab's use of automatic survey emails sent out after every customer interaction that are then evaluated by management
Market-driven strategies
Companies challenge themselves to maintain product leadership, relentlessly pursuing new solutions to the problems that their own latest product or service has just solved **continuous stream of state-of-the-art products and services with new creative ideas that often come from the customers themselves
Retro-Marketing
Concept proposed by Stephen Brown that suggests using tactics from the days when "marketers ruled the world" with "creativity and style" -He argued that customers don't know what they want/don't want and that marketers will get more by playing hard to get
The Innovation Funnel: One process by which ideas are turned to product (5 parts)
Customer needs and technological possibilities lead to: 1) Concept generation and selection 2) Product design 3) Prototyping and testing 4) Pilot production 5) Manufacturing ramp-up and release
What does the quote by Levitt "People don't want to buy a quarter inch drill; they want a quarter inch hole" mean?
Customers don't want to buy products; they buy products for the benefits that the product features provide
What company is mentioned in the reading for successfully executing the four activities (4 C's) to create a customer-centric culture?
Electronics company Hewlett-Packard (HP) *ranked first in customer service for Intel services and IT services
Taj Mumbai Hotel
Employees demonstrated great dedication to duty and desire to protect guests over themselves in laying down their lives during a terrorist attack (11 employees died)
What does Sandra Vandermerwe state that companies embracing a true customer-focus will achieve in the long run?
Even if they end up selling fewer items, they can expect to increase revenues and cut costs by increasing the longevity, depth, breadth, and diversity of spending from loyal customers