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. Dr. Paul J. Solomon-Marketing Notes

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. Dr. Paul J. Solomon-Marketing Notes

Quality / Leadership (continued) Curious Corporation Hire curious people Remove human resources blocks Weird Market Place may need weird people clean desk people Dr. Paul J. Solomon-Marketing Notes

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. Dr. Paul J. Solomon-Marketing Notes

Dr. Paul J. Solomon-Marketing Notes 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. Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

Selecting the Right Customers for Loyalty Not easy to do Plan to attract customers one at a time Estimate the value of the customer: Sales Volume Prestige Potential Margins Fit with the business Potential for Strategic Alliance Calculate profit by customer! Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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? Dr. Paul J. Solomon-Marketing Notes

B. Designing Product &Services for Loyalty Suspect Prospect First time customer Repeat customer Client Advocate Inactive customers or clients Defector Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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? Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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. Dr. Paul J. Solomon-Marketing Notes

Why do customers switch service providers? Core Service Failures 44% Mistakes Billing Errors Service Catastrophes Failed Service Encounters 34% Uncaring Impolite Unresponsive Unknowledgeable Pricing 30% Dr. Paul J. Solomon-Marketing Notes

Dr. Paul J. Solomon-Marketing Notes 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 Dr. Paul J. Solomon-Marketing Notes

Dr. Paul J. Solomon-Marketing Notes Service Switching Ethical Problems 8% Dishonest behavior Intimidating behavior Unsafe or unhealthy Conflict of interest Involuntary Switching 6% Other 9% Dr. Paul J. Solomon-Marketing Notes

Dr. Paul J. Solomon-Marketing Notes 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 Dr. Paul J. Solomon-Marketing Notes

Determinants of Customer Delivered Value Image value Personnel value Services value Product value Total customer value Customer delivered value Monetary cost Time cost Energy cost Psychic cost Total customer cost Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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. Dr. Paul J. Solomon-Marketing Notes

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. Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

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 Dr. Paul J. Solomon-Marketing Notes

Dr. Paul J. Solomon-Marketing Notes 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 Dr. Paul J. Solomon-Marketing Notes

Dr. Paul J. Solomon-Marketing Notes 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. Dr. Paul J. Solomon-Marketing Notes

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. Dr. Paul J. Solomon-Marketing Notes

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