Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
Related questions
Question
Read the pages and make a brief summary of them with your own words, please. Don't make copy-paste, please. Mention important parts only. Also, you will put your comments and ideas about the topic. Write your comments and opinions briefly on the subject in a separate paragraph at the bottom. Please don't write item by item. Write the summary in paragraph form.
Transcribed Image Text:that teaches this difficult lesson is not likely to retain its
customer feedback and input, 11) communicate continually
with stakeholders concerning improvements and progress,
and 12) ensure management review of metrics continually.
customers.
Whether customers are satisfied will depend on the sum
of their perceptions relative to all of these factors. The issue
of customer satisfaction is complicated even more by the fact
that different customers place a different priority on these
factors. That fact makes it even more critical that organiza-
CUSTOMER-DEFINED VALUE
It is important for organizations to understand how custom-
ers define value. The value of a product or service is the sum
of a customer's perceptions of the following factors:
tions maintain close, personal, and continual contact with
their customers.
a telephone survey, one-on-one interviews, or focus
groups.
• Product or service quality
• Service provided by the organization
- The organization's personnel
- The organization's image
. Selling price of the product or service
. Overall cost of the product or service
Customer-Defined Value at Federal Express
2. Rate the relative importance of the attributes. Ask
customers to prioritize the list of attributes identified in
the first step. The ranking should run from most impor-
tant to least important.
Federal Express is one of the most successful package de-
livery companies on the globe. Many businesspeople think
Federal Express sets the worldwide standard in customer
service. One of the keys to the success of this company is its
commitment to customer-defined value. Part of the operat-
ing philosophy of Federal Express is that customers are the
best judges of quality.
In order to capture customers' input in a meaningful
and useful manner, Federal Express developed a system of
Service Quality Indicators (SQIS). These indicators reflect
the customers' views concerning their satisfaction with the
performance of Federal Express. The list of SQIS is as follows:
CUSTOMER SATISFACTION
PROCESS
Customer focus is more than just sending out surveys.
Customer focus is part of a process that leads to continual
improvements in the organization that, in turn, result in
customer satisfaction. Resources are limited; consequently,
they must be applied where they will do the most to improve
customer satisfaction and customer retention. The process
described in the following list will help meet all these goals:
1) identify your customers, 2) identify the product or service
attributes your customers value, 3) prioritize these attributes,
4) determine customer satisfaction with the attributes, 5) tie
customer feedback to your processes, 6) develop metrics,
7) implement monitoring at the lowest levels, 8) put the
most effort into high value attributes that show show cus-
tomer satisfaction, 9) focus on process areas that have the
best opportunities for improvement, 10) continually update
All of these factors are important to customers. The
product or service must have the attributes customers
want, and those attributes must be of the quality expected.
The customer's interaction with the organization and how
this interaction is measured are important. Just making a
good product or service available is not enough. Customer
satisfaction will also be affected by how effectively, courte-
ously, and promptly customers are served. The appearance,
knowledge, and attitudes of an organization's personnel also
affect the level of satisfaction that customers experience.
Customers will build relationships with personnel in the
organization who are knowledgeable, professional in appear-
ance, and positive. Such relationships promote loyalty. On
the other hand, no matter how satisfied customers are with a
product or service, if they don't like an organization's people,
they are likely to defect to the competition.
An organization's image is important to customers.
Consequently, it is vital not just to have quality products,
service, and personnel but also to project an image that is
consistent with these quality characteristics. Think of the
adage that one should "not just talk the talk but walk the
walk." In establishing and nurturing an image, it is important
to do both those things. The key is that organizations must
be concerned with both substance and appearances. An or-
3. Assess your organization's performance relative to the
prioritized list of attributes. Is the most important
attribute on the list the strongest attribute of the product
or service in question? Ideally, the relative strength of
the attributes of a given product or service will match
the priorities established by customers.
4. Ask customers to rate all attributes of your product or
service against the same attributes of a competitor's
product or service. To consistently beat the compe-
tition, an organization's product or service must have
more value for customers on an attribute-by-attribute
basis. By asking customers to rate attributes, the orga-
nization can determine how they perceive the value, on
a relative basis, of its product or service attributes. This
gives the organization the information it needs to im-
prove the attributes of its products or services in accor-
dance with customer preferences.
1. Delivery on the right day but after the promised time
2. Delivery on the wrong day
3. Unsuccessful trace of a package
4. Customer complaints
5. Proof of performance is missing
6. Missed pickups from customers
7. Damaged packages
8. Lost packages
9. Unanswered calls from customers (not answered within
20 seconds)
Federal Express continually collects data for all of these
criteria and uses the data to identify service problems and
their root causes. Of course, identifying the problems is
just the first step. Correcting them and eliminating the root
causes follow quickly once a cause has been identified.
5. Repeat the process periodically. Over time, cus-
tomer preferences might change, as might the attributes
of competing products or services. Consequently, it is
important to periodically repeat the CVA process.
ganization's image is defined by what customers believe to be
true about it.
Customer Value Analysis
Selling price
the easiest characteristic to compare. The point to under-
stand here is that customers have become so sophisticated
that they no longer confuse selling price and cost. In other
words, they know the difference between cheap
pensive. A competitive selling price is a must in the modern
workplace, but it should not be achieved by sacrificing qual-
ity or service.
Most customers know that the selling price is just the
beginning of the actual cost of a product. Only when main-
tenance, upkeep, replacement parts, warranty issues, and
service are factored in does one know the product's real cost.
Customers who don't understand the difference between
important to customers, of course. It is
What is it that customers want from our organization? What
is it about our products or services that customers value? A
total quality organization must know the answers to these
questions. Organizations that don't know what their custom-
ers value run the risk of wasting valuable resources and, in
turn, improve the wrong things. The process used to deter-
mine what is inmportant to customers is called customer value
analysis (CVA). The CVA process consists of the following
five steps:
inex-
1. Determine what attributes customers value most.
Ask customers to describe the attributes of the product
or service. At this point, no priority value is assigned to
the attributes. This can be done using a written survey,
price and cost soon learn-the hard way. The organization
Transcribed Image Text:tim
Customer s
widely used mechanism in this area is the customer com-
plaint process. Feedback-based processes, although neces-
sary and useful, have three glaring weaknesses. First, they are
activated by problems customers have already experienced.
Even if these problems are solved quickly, the customer who
complains has already had a negative experience with the
organization. Such experiences are typically remembered-
even if only subconsciously-no matter how well the organi-
zation responds.
Second, feedback-oriented processes are based on the
often invalid assumption that dissatisfied customers will
take the time to lodge a complaint. Some will, but many
won't. Some people are just too busy to take the time to
complain. Others provide their feedback by simply going
elsewhere. In a survey of retail customers conducted by the
Institute for Continual Improvement (ICI), 72% of respon-
dents said they would simply go elsewhere if dissatisfied
rather than taking the time to complain. Retail customers
don't necessarily have the same characteristics as custom-
ers of service or production organizations. However, the
ICI survey still points to a fundamental weakness with
tomer complaint processes, which rely on information col-
lected ex post jacnfor
thought out and objective, given in the form of open, honest,
constructive criticism. Members of the focus group should
change periodically to bring in new ideas and a broader
cross-section of input.
A variation on the focus group concept is the input
. The purpose of both types of groups is to provide
input the organization can use to improve its processes and
its products and services. The difference between the two is
that focus group participants meet together for group dis-
cussion. Input group participants provide their data individ-
usually
do not meet together for group interaction.
If properly trained concerning what to look for, what to ask,
and how to respond, sales personnel can bring back invalu-
able information from every sales call. In addition to pro-
viding sales personnel with the necessary training, organi-
zations should provide them with appropriate incentives for
collecting customer input. Otherwise, they may fall into the
trap of simply agreeing with the customer about complaints
received, thereby undermining the customer relationship
even further.
CUSTOMER RETENTION
QUALITY CASE
Customer satisfaction is a fundamental cornerstone of total
Delivering Quality and Value at Cargill Corn Milling
quality. An organization develops a customer focus to be
better able to satisfy its customers. Consequently, forward-
looking organizations use customer satisfaction data to
measure success. But measuring customer satisfaction alone
is not enough. Another important measure of success is
Cargill Corn Milling (CCM) of North America began operations
in 1967 as part of its parent firm Cargill Inc., a global provid-
er of food, agriculture, and risk-management products. CCM
manufactures corn and sugar-based foods, including whole-
grain com meal, corn oil, animal feed, ethanol, dextrose, and
acidulants. CCM employs more than 2,300 personnel in nine
manufacturing plants and eleven distribution centers through-
out the United States. These personnel and facilities process
more than 10,000 bushels of com every day. CCM is one of
three Cargill business units to receive the Baldrige National
Quality Award.
By putting customers at the heart of all decisions and applying
the other principles of total quality, CCM has been able to become
a world-class organization able to compete successfully on the
global stage. Examples of how CCM applies the principles of total
quality include the following:
d servicer
customer retention
It is a fact that even satisfied customers will some-
by mail, telephone, or
facsimile machine. They
migrate to a competitor. The customer whose feed-
back in
might, in reality, have migrated in spite of being satisfied.
Consequently,
retention than just customer satisfaction. Customer reten-
tion is a more accurate indicator of customer loyalty than
is customer satisfaction.
r is important to understand this point. No one is saying
customer satisfaction survey is very positive
methods
Other
hiring test customers and conducting
representative sample of the customer base. Test
are individuals who do business with
collecting customer input include
periodic surveys of
for
it makes more sense to measure customer
customers
organization and
perceptions to designated representatives of the
the
report
organization. This method can backfire unless employees
are fully informed that
ploys. This does not mean that employees should know who
the test customers are; they shouldn't, or this method will
lose its value. However, they should know that any customer
they interact with might be a test customer.
atisfastion
taking the
their
. Establishing and maintaining a team-based corporate cul-
ture that emphasizes effective communication, skill sharing,
and leveraging of diverse ideas. This culture led to more
than $15 million in cost savings from ideas generated by
employees.
1 Consistently maintaining an error-free delivery record of 99%
or better.
it is a method the organization em-
that customer satisfaction is not important. Customer satisfac-
tion is critical, but it is a means to an end, not an end in itself.
desired
cus-
The
end is customer retention. Organizations should
measure success based on customer retention data rather than
on customer satisfaction data. The issue is not whether custom-
ers are satisfied with the organization's products or services; it
is whether they are satisfied enough to be retained. Satisfied
customers will sometimes defect in spite of
if for no other reason than curiosity about a competitor or the
everpresent lure of variety. How, then, can an organization go
Third, the information that the customer complaint
s provide is often too sketchy to yield an accurate
picture of the problem. This situation can result in an or-
ganization wasting valuable resources chasing after symp-
toms rather than solving root causes. The weaknesses as-
sociated with after-the-fact processes do not mean that
organizations should stop collecting customer feedback.
On the contrary, customer feedback can be important
to supplement the data collected using input-
surveys conducted periodically can help iden-
. Committing to achieving the world-class benchmark of a
98% operational reliability effectiveness rate as established
by the Society of Maintenance and Reliability Professionals
(CCM has achieved a 95% record to date).
tify issues that may become problems. If this method is used,
the survey instrument should be brief and to the point. One
of the surest ways to "turn
complete a lengthy survey instrument. Some type of reward
should be associated with
their satisfaction,
off"
"customers is to ask them to
1 Committing to maintaining steady "per bushel" costs even
as such factors as energy and chemical costs have in-
creased. CCM has achieved this goal by strictly applying
such tactics as real-time and predictive monitoring of equip-
ment health, careful energy use, and continual process im-
provement.
completing the survey that says,
"Thank you for your valuable time and assistance." Each
time a survey is conducted, care should be taken to select
a different group
complete surveys over and over is sure to alienate even the
most loyal customers.
of customers. Asking the same people to
based processes.
Customer input is customer information provided
a problem occurs. An effective vehicle for collect-
By applying the principles of total quality, CCM has become
the partner of choice for its customers worldwide while main-
taining its commitment to such corporate values as integrity,
safety, customer focus, innovation, talent development, collabo-
ration, and community involvement.
Source: www.nist.gov.
before
ustamen
ing customer input is the focus group. Focus groups consist
of qustomers who
Collect Both Registered and
Unregistered Complaints
agree to meet periodically with repr
геpre-
sentatives of the organization for the purpose of pointing
out issues before they become problems. Focus groups
can provide a mechanism for overcoming all three of the
weaknesses
Many organizations make the mistake of acting solely on
what customers say in complaints instead of going beyond
what is said to include what is unspoken. Often, what is not
said is more important than what is said. For this reason, it
associated with feedback systems. Participants
or potential issues to the organiza-
point out weaknesses
tion's representatives so that they can be dealt with
emptively. Focus group input does not depend on the
willingness of customers to lodge complaints; participants
agree to provide input at periodic meetings before becom-
ing members of the group.
The focus group approach can also solve the problem
of sketchy information. In a focus group, there is discussion,
debate, and give and take. This type of interaction provides
the
beyond just satisfying its customers to retaining them? The
short answer to this question is as follows:
important for organizations to collect both registered and
unregistered complaints.
Focus groups-
way to
and test customers can also serve this purpose. Another
way to get at that part of the iceberg that floats beneath the
surface is the
tomers who have registered complaints are contacted ei-
r in person
in greater depth. This approach gives representatives
the
is
pre-
To retain customers over the long term, organizations
must turn them into partners and proactively seek their
input rather than waiting for and reacting to feedback
provided after a problem has occurred.
-already discussed-are an excellent
solicit unregistered complaints. Customer surveys
follow-up interview. With this method, cus-
cus
The following strategies can help organizations go be-
yond just satisfying customers to retaining them over the
long term. These strategies will help organizations opera-
tionalize the philosophy of turning customers into partners.
or by telephone to discuss their complaints
of
organization's representatives with opportunities to dig
deeper and deeper until they get beyond symptoms to root
causes. Input provided by one participant will often trigger
input from another.
To be effective, the focus group must consist of partici-
pants who understand what they are being asked to do. The
organization is well served by neither sycophants nor witch
hunters. What is needed is information that is thoroughly
the opportunity to ask clarifying ques-
organization
tions and to request suggestions.
Another way to get at unregistered complaints is to use
the organization's sales representatives as collectors of cus-
tomer input. Sales representatives are the employees who
have the most frequent face-to-face contact with customers.
Be Proactive-Get Out in Front
of Customer Complaints
Many organizations make the mistake of relying solely on
feedback from customers to identify problems; the most
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