Assignment No 1

How can a firm or organization acquire, retain, and grow customers .Also explain the main steps in the process of attracting and keeping customers.?

Today, companies face their toughest competition ever. Moving from a product and sales philosophy to a marketing philosophy, however, gives a company a better chance of outperforming competition. And the cornerstone of a well-conceived marketing orientation is strong customer relationships. Marketers must connect with customers informing, engaging, and maybe even energizing them in the process. John Chambers, CEO of Cisco Systems, put it well: "Make your customer the center of your culture." Customer-centered companies are adept at building customer relationships, not just products; they are skilled in market engineering, not just product engineering.

The Main Idea behind acquiring, retain & growing customers lays in the Concept of Customer Value Development. First Acquiring new Customers:More companies now recognize the importance of satisfying and retaining customers. Satisfied customers constitute the company's customer relationship capital. If the company were to be sold, the acquiring company would have to pay not only for the plant and equipment and the brand name, but also for the delivered customer base, the number and value of the customers who would do business with the new firm. Here are some interesting facts that bear on customer retention: 1. Acquiring new customers can cost five times more than the costs involved in satisfying and retaining current customers. It requires a great deal of effort to induce satisfied customers to switch away from their current suppliers.

2. The average company loses 10 percent of its customers each year.

3. A 5 percent reduction in the customer defection rate can increase profits by 25 percent to 85 percent, depending on the industry. 4. The customer profit rate tends to increase over the life of the retained customer.

Building Loyalty How much should a company invest in building loyalty so that the costs do not exceed the gains? We need to distinguish five different levels of investment in customer relationship building: 1. Basic marketing. The salesperson simply sells the product. 2. Reactive marketing. The salesperson sells the product and encourages the customer to call if he or she has questions, comments, or complaints. 3. Accountable marketing. The salesperson phones the customer to check whether the product is meeting expectations. The salesperson also asks the customer for any product or service improvement suggestions and any specific disappointments. 4. Proactive marketing. The salesperson contacts the customer from time to time with suggestions about improved product uses or new products. 5. Partnership marketing. The company works continuously with its large customers to help improve their performance. (General Electric, for example, has stationed engineers at large utilities to help them produce more power.) Most companies practice only basic marketing when their markets contain many customers and their unit profit margins are small. Whirlpool is not going to phone each washing machine buyer to express appreciation. It may set up a customer hot line. In markets with few customers and high profit margins, most sellers will move toward partnership marketing. Boeing, for example, works closely with American Airlines to design airplanes that fully satisfy American's requirements. As Figure 5.5 shows, the likely level of relationship marketing depends on the number of customers and the profit margin level. An increasingly essential ingredient for the best relationship marketing today is the right technology. However five imperatives of CRM and where technology fits in. As for Instance GE Plastics could not target its e-mail effectively to different customers if it were not for advances in database software. Dell Computer could not customize computer ordering for its global corporate customers without advances in Web

technology. Companies are using e-mail, Web sites, call centers, databases, and database software to foster continuous contact between company and customer. Here is how one company used technology to build customer value: Customers are becoming harder to please. They are smarter, more price conscious, more demanding, less forgiving, and they are approached by many more competitors with equal or better offers. The challenge, according to Jeffrey Gitomer, is not necessarily to produce satisfied customers; several competitors can do this. The challenge is to produce delighted and loyal customers.

Driving High Customer Value: Consumers have varying degrees of loyalty to specific brands, stores, and companies. Oliver defines loyalty as "A deeply held commitment to re-buy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior."6 A 2002 survey of American consumers revealed that some of the brands that have great consumer loyalty include Avis rental cars, Sprint long-distance service, Nokia mobile phones, Ritz-Carlton hotels, and Miller Genuine Draft beer.7 The key to generating high customer loyally is to deliver high customer value. Michael Lanning, in his Delivering Profitable Value, says that a company must design a competitively superior value proposition aimed at a specific market segment, backed by a superior value-delivery system.8 The value proposition consists of the whole cluster of benefits the company promises to deliver; it is more than the core positioning of the offering. For example, Volvo's core positioning has been "safety," but the buyer is promised more than just a safe car; other benefits include a long-lasting car, good service, and a long warranty period. Basically, the value proposition is a statement about the resulting experience customers will gain from the company's market offering and from their relationship with the supplier. The brand must represent a promise about the total experience customers can expect. Whether the promise is kept depends on the company's ability to manage its value-delivery system. The value-delivery system includes all the experiences the customer will have on the way to obtaining and using the offering.

Customer Growth Companies seeking to expand their profits and sales have to spend considerable time and resources searching for new customers. To generate leads, the company develops ads and places them in media that will reach new prospects; it sends direct mail and makes phone calls to possible new prospects; its salespeople participate in trade shows where they might find new leads; it purchases names from list brokers; and so on. All this activity produces a list of suspects. Suspects are people or organizations who might conceivably have an interest in buying the company's product or service, but may not have the means or real intention to buy. The next task is to identify which suspects are really good prospects customers with the motivation, ability, and opportunity to make a purchase by interviewing them, checking on their financial standing, and so on. Then it is time to send out the salespeople. It is not enough, however, to attract new customers; the company must keep them and increase their business. Too many companies suffer from high customer churn high customer defection. It is like adding water to a leaking bucket. There are two main ways to strengthen customer retention. One is to erect high switching barriers. Customers are less inclined to switch to another supplier when this would involve high capital costs, high search costs, or the loss of loyal-customer discounts. The better approach is to deliver high customer satisfaction. This makes it harder for competitors to offer lower prices or inducements to switch.

Satisfied customers constitute the company's customer relationship capital. If the company were to be sold, the acquiring company would have to pay not only for the plant and equipment and the brand name, but also for the delivered customer base.

The main steps in the process of attracting and keeping customers. The starting point is everyone who might conceivably buy the product or service {suspects). From these the company determines the most likely prospects, which it hopes to convert into first-time customers, and then into repeat customers, and then into clients people to whom the company gives very special and knowledgeable treatment. The next challenge is to turn clients into members by starting a

membership program that offers benefits to customers who join, and then into advocates, customers who enthusiastically recommend the company and its products and services to others. The ultimate challenge is to turn advocates into partners.

Markets can be characterized by their long-term buying dynamics and how easily and often customers can enter and leave. 1. Permanent capture markets. Once a customer, always a customer (e.g., nursing homes, trust funds, and medical care). 2. Simple retention markets. Customers can permanently be lost after each period (e.g., telecom, cable, financial services, other services, subscriptions). 3. Customer migration markets. Customers can leave and come back (e.g., catalogs, consumer products, retail, and airlines). Some customers inevitably become inactive or drop out. The challenge is to reactivate dissatisfied customers through win-back strategies. It is often easier to reattract ex-customers (because the company knows their names and histories) than to find new ones. The key is to analyze the causes of customer defection through exit interviews and lost-customer surveys. The aim is to win back only those customers who have strong profit potential.

Appendix: A Successful Stories:eBay : eBay helped facilitate the exchange of $20 billion of goods in 2003. Consumer trust is the key element of that success, which enabled the company to grow and support commerce between millions of anonymous buyers and sellers. To establish trust, eBay tracks and publishes the reputations of both buyers and sellers on the basis of feedback from each transaction, and eBay's millions of passionate users have come to demand a voice in all major decisions the company makes. eBay sees listening, adapting, and enabling as its main roles. This is clear in one of the company's most cherished institutions: the Voice of the Customer program. Every few months, eBay brings in as many as a dozen sellers and buyers and asks them questions about how they work and what else eBay needs to do. At least twice a week the company holds hour-long teleconferences to poll users on almost every new feature or policy. The result is that users (eBay's customers) feel like owners, and they have taken the *initiative to expand the company into ever-new territory.

CATERPLLIER: Caterpillar can improve its offer in three ways.; First, it can increase total customer value by improving product, services, personnel, and/or image benefits. Second, it can reduce the buyer's nonmonetary costs by reducing the time, energy, and psychic costs. Third, it can reduce its product's monetary cost to the buyer.

BRITISH AIRWAYS British Airways and American Airlines may use the same kind of aircraft to fly executive s first class between New York and London, but British Airways (BA) beats American Airlines by meeting customers' needs for convenience and rest at every step of the journey. BA's value-delivery system includes a separate first-class express check-in and security clearance, plus a pre-flight express meal service in the first-

class lounge so that time-pressed executives can maximize sleep time on the plane without the distraction of in-flight meals. BA was the first to put seats that recline into perfectly flat beds in its first-class section, and in the United Kingdom a fasttrack cus-i toms area speeds busy executives on their way.9 A similar theme is emphasized by Simon Knox and Stan Maklan in their Competing on Value.10 Too many companies create a value gap by failing to align brand value with customer value. Brand marketers try to distinguish their brand from others by a slogan ("washes whiter") or a unique selling proposition ("A Mars a day helps you work, rest, and play"), or by augmenting the basic offering with added services ("Our hotel will provide a computer upon request"). Yet, they are less successful in delivering distinctive customer value, primarily because their marketing people focus on the brand image and not enough on actual product or service performance. Whether customers will actually receive the promised value proposition will depend on the marketer's ability to influence various core business processes. Knox and Maklan want company marketers to spend as much time influencing the company's core processes as they do designing the brand profile. Here is an example of a company that is a master at delivering customer value.

SUPERQUINN Superquinn is Ireland's largest supermarket chain and its founder, Feargal Quinn, is Ireland's master marketer. A greeter is posted at the store entrance to welcome and help customers and even offer coffee, and to provide umbrellas in case of rain and carryout service to customers' cars. Department managers post themselves in the aisles to interact with customers and answer questions. There is a high-quality salad bar, fresh bread baked every four hours, and indications of when produce arrived, including the farmers' pictures. Superquinn also operates a child-care center. It offers a loyalty program that gives points for the amount purchased and for discovering anything wrong with the store, such as dented cans or bad tomatoes. The loyalty card is recognized by a dozen other firms (a bank, gas station, etc.) who give points for purchasing at their establishments. Because everything is done to exceed normal customer expectations, Superquinn stores enjoy an almost-cult H following.