Chapter 3

Customer Focus: Costs and Benefits

Customer Satisfaction
Customer Satisfaction with a purchase depends on the products performance relative to a buyers expectations. If performance exceeds or meets expectations the customer is highly satisfied or delighted.
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Customer 2elight
Many organisations have come to realise that customer satisfaction (or, better still, customer delight) is the only route to long-term sustainable competitive advantage.
If an organisation does not know how good it is at delivering customer service, then it will tend to become complacent.
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Customer 2elight
Problems and obstacles include the following: use of vague, generalised statements
like quite good, getting better, world class (without any comprehension of what being world class might actually entail)

incidence of customer complaints

without realising that, in most cases, only between 10 to 20% of customers actually complain and the rest simply take their business elsewhere.

Customer 2elight
Problems and obstacles include the following: (contd)

customer perceptions
reliance on infrequent survey data about customer perceptions and the selective application of the data thus acquired

limited improvements
so-called improvements which only address front-line customer-care features like answering the telephone within three rings when what really matters is how customers are handled once the telephone has been picked up.
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3hy is Customer 4oyalty important5

If customers are satisfied they may: buy again from the same supplier buy more of the same item, or more expensive items Regular customers provide reliable income and turnover advise their friends to buy from the supplier

Ho) loyalty is promoted, achie,ed and enhanced5

Loyalty is promoted, achieved and enhanced by several ways: launch of specific initiatives
to engage customer in schemes e.g. guarantee loyalty such as airmiles, the Tesco ClubCard, Sainsburys reward card and various SMART card offers run by retailers and others.

creating customer proposition

offering something which customers may feel they cannot refuse, e.g. Essos price-offer advertising campaign

creating dialogue
engage the customer in a dialogue, thus ensuring that the customer feels an affinity with the product or service on offer

Customer +etention Cost

Mc'insey, the top management consultancy estimates that the cost of ac7uiring a ne) customer is 7 times higher than retaining an e8isting customer&
Costs may include some or all of the following:

Advertising Salesmen time Credit checks Agent commission Initial discounts

%mportance of relationships
4oyal customers are ,alua9le 9ecause:

They do not ha,e to 9e ac7uired they 9uy a 9road range of products they cost less to ser,ice as they are familiar )ith the company;s )ay of doing 9usiness they 9ecome less sensiti,e to price o,er time they can recommend 9y )ord of mouth

Five Levels of Relationships

Basic Reactive Accountable Proactive
The salesperson or others in the company phone customers from time to time to seek suggestions. The company sells the product but does not followup The company sells the product and encourages the customer to call when the have problems or questions. The companys representative checks on customer after the sales and the event to make sure things were satisfactory and to get feedback.

Partnership
The company works continuously with the customer to discover ways to develop better value.
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From Transactional to Relationship marketing . Firms aim to build loyalty

Relationship marketing Traditional Marketing

Orientation to customer retention Continuous customer contact Focus on customer value Long time scale High customer service emphasis High commitment to meeting customer expectations Quality is concern of all staff

Orientation to single sales Discontinuous customer contact Focus on product features Short time scale Little emphasis on customer service Limited commitment to meeting customer expectations Quality is the concern of the production staff
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Marketing for Hospitality and Tourism, 3e #hilip 'otler, (ohn Bo)en, (ames Makens

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+elationship Marketing
The purpose of relationship marketing is to establish, maintain and enhance relationships )ith customers and other parties so that the o9<ecti,es of 9oth parties in,ol,ed are met&
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The =uality Mo,ement

=uality means >the degree of e8cellence of a thing; ? ho) )ell made it is, or ho) )ell performed if it is a ser,ice, ho) )ell it serves its purpose, and ho) it measures up against its ri,als&
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The =uality Control

@im for a le,el of 7uality )hich minimises costs, like inspection of goods produced or super,ision of front line customer ser,ice staff on the one hand and the costs of repairing the damage )hen goods or ser,ices fall 9elo) standard on the other& @im for zero rejects and 1 ! "uality& The desired standard is contained )ithin the product or ser,ice specification and e,ery unit produced or ser,ice performed ought to achie,e this standardA in other )ords, there ought to 9e no defects& BeroCdefect targets are one aspect of (apanese management philoshopy&
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=uality and Customer Care

Customer care emphasises the importance of attitude and co,ers e,ery aspect of the organisation;s relationship )ith its customers&
%t aims to close the gap 9et)een customers; e8pectations and their e8perience&
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=uality and Customer Care

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Total =uality Management

Total =uality Management means the management of all the organisation;s resources so that a culture of continuous improvement focuses on the customer;s needs&
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Total =uality Management

'ey element of of T=M is customer care, )hich in,ol,es the follo)ing: Constantly collecting information on customer needs pu9licising this information in the organisation using the information to design, produce and deli,er the organisation;s goods and ser,ices so that the customer;s needs are fulfilled&

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=uality #rogrammes
The heart of 7uality programmes is the need to define, research and respond to customer need& This is the marketing orientation at )ork&
Top management should pro,ide leadership and aims to take consumer consumer# #driven approach& @ll parts of the organisation must 9e committed& %t must 9e monitored and measured to check that the systems &are )orking,
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+esult of T=M
The result of T=M is to aim to get it right, first time, and to impro,e ser,ice continuously& continuously& @ ,ery important )ay of achie,ing this is to train for 7uality and to design 7uality into e,ery stage of the deli,ery of the organisation;s products and ser,ices to is customers&
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