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.
Marketing for Hospitality and Tourism, 3e Philip Kotler, John Bowen, James Makens 2003 Pearson Education, Inc. Upper Saddle River, NJ 07458 2

Customer Delight
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 Delight
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 Delight
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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Why is Customer Loyalty important?

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

How loyalty is promoted, achieved and enhanced?

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 Retention Cost

McKinsey, the top management consultancy estimates that the cost of acquiring a new customer is 7 times higher than retaining an existing customer.
Costs may include some or all of the following:

Advertising Salesmen time Credit checks Agent commission Initial discounts

Importance of relationships
Loyal customers are valuable because:

They do not have to be acquired they buy a broad range of products they cost less to service as they are familiar with the companys way of doing business they become less sensitive to price over time they can recommend by word 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
2003 Pearson Education, Inc. Upper Saddle River, NJ 07458

Marketing for Hospitality and Tourism, 3e Philip Kotler, John Bowen, James Makens

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Relationship Marketing
The purpose of relationship marketing is to establish, maintain and enhance relationships with customers and other parties so that the objectives of both parties involved are met.
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The Quality Movement

Quality means the degree of excellence of a thing how well made it is, or how well performed if it is a service, how well it serves its purpose, and how it measures up against its rivals.
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The Quality Control

Aim for a level of quality which minimises costs, like inspection of goods produced or supervision of front line customer service staff on the one hand and the costs of repairing the damage when goods or services fall below standard on the other. Aim for zero rejects and 100% quality. The desired standard is contained within the product or service specification and every unit produced or service performed ought to achieve this standard; in other words, there ought to be no defects. Zero-defect targets are one aspect of Japanese management philoshopy.
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Quality and Customer Care

Customer care emphasises the importance of attitude and covers every aspect of the organisations relationship with its customers.
It aims to close the gap between customers expectations and their experience.
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Quality and Customer Care

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Total Quality Management

Total Quality Management means the management of all the organisations resources so that a culture of continuous improvement focuses on the customers needs.
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Total Quality Management

Key element of of TQM is customer care, which involves the following: Constantly collecting information on customer needs publicising this information in the organisation using the information to design, produce and deliver the organisations goods and services so that the customers needs are fulfilled.

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Quality Programmes
The heart of quality programmes is the need to define, research and respond to customer need. This is the marketing orientation at work.
Top management should provide leadership and aims to take consumer consumer-driven approach. All parts of the organisation must be committed. It must be monitored and measured to check that the systems .are working,
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Result of TQM
The result of TQM is to aim to get it right, first time, and to improve service continuously. continuously. A very important way of achieving this is to train for quality and to design quality into every stage of the delivery of the organisations products and services to is customers.
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