1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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 %
Dr. Paul J. Solomon-Marketing Notes

19. 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

20. 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

21. 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

22. 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

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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