Services Customers Value example essay topic

Introduction Listening to the voice of the customer is a fundamental of marketing. Needs and value assessment provides valuable inputs to product development, customer support services, logistics, and marketing communications. Customers will not only tell you what products and services they need, but which aspects of those products and services are most important in the supplier selection process and how well you perform on those attributes relative to your direct competitors. Customers can also tell you if they receive good value for those products and services, given their cost. Competitive suppliers may offer varying levels of service and / or product quality, and yet offer equal value to the customer, due to differences in cost.

Understanding which product features and service attributes are most important to customers, and how your company performs relative to competitors on those factors, allows for better allocation of resources for improvement efforts and development activities. With these in mind, the successful company will be the one that meets and exceeds the expectations of its target customers. To this end, it listens continually to its target customers to find out what products and services they want to meet their needs, and the way in which they want the products or services delivered. However, due consideration must be given to the fact that customers are moving targets and their expectations constantly change.

Hence, companies need as many opportunities to hear and respond to customer feedback as they can find. The business environment is experiencing a shift from a focus on the cost of servicing customers to the value of the customer's total relationship. The contrast between customer service and customer relationship can be explained as follows: customer service is usually a reactive activity with a goal of efficiency, while customer relationship is a powerful, continuous series of proactive customer interactions based on providing effective and flexible interactions supported by empowered employees. Customer service typically has its root in the complaint activity or as a transaction-based function.

In both cases, the underlying premise is that the business has a product focus, whether it sells products, services or a combination. The typical customer interaction is a transaction. It has been generally assumed that a low number of customer complaints meant that customers were mostly content with the particular product. The following report endeavours to harmoniously unite the concepts introduced above. At the conclusion of this report, the reader will understand the value of the customer and the need for customer retention, from how well the company knows about its customer. Effectively assess his needs and know the importance of making every effort to satisfy those needs.

Develop customer communications to open up channels of interaction. Assess the value of a complaint and treat it as a strategic tool to improve on either the product or service or both. Differentiate between reactive and proactive marketing practices, their value, and how to successfully implement them. This report also includes real world case studies of how proactive marketing strategies improved business turnaround as well as an interview with the client care manager of a leading telecommunications company in South Africa.

The primary focus of the interview was to ascertain the marketing strategy (reactive or proactive) of the company, evaluate this strategy and make recommendations for improvements. Know your Customer The strategic connection between the customer and the company comes from the demand-side perspective, the customer (rather than a project, product, or physical asset) is regarded as the source of cash inflows or revenues (Wayland and Cole, 1997: 5). The primary focus of company should be on its most important constituency i.e. its customers (Journal of Strategic Marketing, 1999: 175). Harley-Davidson, producer of America's most venerated motorcycle, almost went out of business in the 1980's.

The company lost touch with its customers, produced expensive yet low-quality bikes for which customers had to wait. Near bankruptcy in 1986, the company's new management committed itself to rekindling the Harley-Davidson spirit by getting closer to the customers and revitalizing the quality of the core product. In the words of Frank Cimermancic, Harley-Davidson director of business planning: ' we had to remove the reasons for people to not buy a Harley". Over the next few years, Harley-Davidson regained market share and increased output by 50 percent.

Revenue grew by 85 percent and profits skyrocketed a whopping 130 percent. A close-to-the-customer philosophy with distributors, dealers and customers was one of the underlying operating strategies that contributed to the Harley-Davidson turnaround (Wayland and Cole, 1997: 72). The preceding case was a typical example of reactive marketing practice and was based on observational knowledge. Although this approach has its merits, if Harley-Davidson had taken a more predictive or proactive marketing practice, it could have avoided being near bankruptcy.

AT&T Consumer Services is an example of a business using proactive marketing strategy. When the telecommunications industry was deregulated in the USA, a competitive landscape was created within which AT&T had to survive. Given this new environment, AT&T committed itself to having the needs of its customers drive the shape of its future business. AT&T first looks at customer needs then devises ways to outperform the competition. Its focus is now on building relationships with customers and retaining them over time, as opposed to selling products. South Africa is on the verge of deregulating the telecommunications industry.

Telkom and indeed the second fixed line operator can learn from and perhaps use AT&T's proactive customer marketing practice as a benchmark to gain a competitive advantage in SA. Most marketing theory and practice focus on the art of attracting new customers rather than on retaining existing ones. The key to customer retention is customer satisfaction. A highly satisfied customer: 1. Stays loyal longer 2. Talks favourably about the company and its products.

3. Buys more as the company introduces new products and upgrades. 4. Pays less attention to competing brands and price. 5. Routine transactions cost less than with new customers.

Thus a prudent company would measure customer satisfaction regularly (Kotler, 2000: 48) Today, more and more companies are recognising the importance of satisfying and retaining current customers. Here are some interesting facts on customer retention (Reich held, 1996): 1. New customers can cost five times more. 2. The average company loses ten percent of its customers annually. 3.

A five-percent reduction in defection rate can increase profits by twenty five percent. 4. The customer profit rate increases over the life of the retained customer. There are five different levels of investment in customer-relationship building: 1.

Basic marketing: simply sells 2. Reactive marketing: sells and encourages response 3. Accountable marketing: salesperson calls to check on product satisfaction 4. Proactive marketing: salesperson often calls with new product information 5. Partnership marketing: the company works closely with clients to discover ways to perform better The likely level of relationship marketing depends on the number of customers and the profit margin level as illustrated below (Kotler, 2000: 50): HIGH MARGIN MEDIUM MARGIN LOW MARGIN Many customers / Distributors Accountable Reactive Basic or reactive Medium number of customers / distributors Proactive Accountable Reactive Few customers / distributors Partnership Proactive Accountable Customer Needs Assessment and Customer Communications One of the best strategies to assess the needs of the customer is to spend a 'day in the life' of the customer (online).

The following table provides a handy checklist for marketers who are interested in implementing this strategy. I. Strategy and logistics Selection: should you visit a customer that is loyal, prospective, dissatisfied, etc.? Visitors: will marketing, sales, technical, and / or other staff participate in the visit? Timing: will you observe your customer during normal / peak /low activity time, etc? Length: do you want to spend an hour, a day, multiple visits?

II. Internal / Customer Relationships Internal organisation acceptance: have you established objectives and benefits to all key parties within your organisation, and co-ordinated with relevant customer contacts? Customer acceptance: have you established win-win understanding for your visit, and gained an understanding of any relevant sensitivities, limitations, etc.? Execution Sources of information: will you include workflow observation, interviews, and observation of working environment? Motivators: can you assess the customer's relevant incentive systems, personnel attitudes towards stakeholders, etc.? Data capture: will you take notes, photos, video, etc.?

Recognition of customer investment in your visit: will you compensate with fees, information sharing, etc.? Maintenance of customer relationship Good customer communications are a vital part of customer care (Wood, 2000: 18). The communication can be in writing, face to face or on the telephone. Irrespective of the method, it should be clear, concise, and courteous, creates the right impression and conveys the correct message. There is no doubt that thousands of companies implement customer care programmes and yet still have customers who receive poor service and complain about it. The problem often lies in allocating a specific department for customer care instead of training and empowering all staff to deal with customer care issues.

Another common problem is that companies impose customer care programmes without explaining the reasons behind them, or do not allow staff who deal with customers everyday to influence how customer care is implemented. Listening skills are also a vital part of customer care. By using effective listening skills, all the necessary and relevant information pertaining to customer wants and needs can be obtained. Listening is an active and not a passive activity. Listening is also a proactive marketing strategy because a potential problem can be averted because of some useful information that was received (Wood, 2000).

The following table lists some tools that can assist the marketer in listening to the customer and ascertain what needs to be done in order to improve the product or service that is being offered (online). This approach, which seeks to identify the customer needs and what they require in service delivery, is one of the cornerstones in marketing and the marketing firm must pay close attention to it. Relationship marketing as a strategic mechanism can not only deliver satisfaction, but can actually 'redefine' what satisfaction is for the customer and actively employ the co-creation process of satisfaction (Journal of Strategic Marketing, 1998: 194) TOOL NATURE AND PURPOSE ADVANTAGES DISADVANTAGES Focus groups Small groups of customers meet with a facilitator to answer open-ended questions. Provides an intimate view of customers; obtains deeper comments and ideas than surveys.

Small groups may not be totally representative of entire customer base. Customer panels Similar to focus groups, but panels meets on a regular basis. Regular meetings provide even more intimacy than focus groups. Customers who think about your problems over the long-term may come up with especially valuable ideas. Customer panels require considerable management effort. Face-to-face individual interviews Personal interviews provide nuances of different customers' thoughts.

In groups, customers influence one another's responses. Individual interviews may enable customers to articulate more idiosyncratic thoughts. In groups, customers help each other to articulate thoughts that may not be clear at first. This isn't possible with individual interviews.

Visits to customers and observation of their service use Thoughtful study of customers in the setting in which they actually use your service provides the most intimacy. Probably the most under-utilised method. When people who design the service see it in use they get ideas for improvement that customers themselves may never propose. Customers often like to be visited, but planning and systematic preparation are required to insure maximum utility.

Customer tours Invite customers to tour your facilities and discuss how you can serve them better. Customers offer excellent ideas while at your site. Customer tours won't provide comprehensive understanding of customer views Meeting trade shows Setting up a booth where customers congregate is a cost-effective and time-honoured method of hearing the customer. You can meet more customers per dollar expended than with other methods.

There is little time to talk; the atmosphere is artificial. Toll-free numbers Companies attach toll-free telephone numbers to services collateral or Web sites. An effective method of gathering data from customers whilst problems are being experienced; it also improves satisfaction and generates add-on sales. Can be expensive. Telephone, mail, or e-mail surveys Surveys ask a fixed menu of questions to a large number of people; can be most useful to gather opinions on closed-ended questions, the importance of which you have already established by other means. If well managed, can provide scientifically valid information on the thinking of the entire customer base (compared with smaller group meetings or individual interviews).

Information will be limited to the specific questions you ask, while worthwhile, it seldom produces extensive responses. Mystery shoppers Professionals visit your business posing as customers and report on how they were treated. Can give accurate that information on services you provide. May cause employees to feel they are not trusted. Customer Complaints: A Blessing or a Curse?

The effective handling of complaints and good service recovery are, for many companies, the best opportunities to show how far they are prepared to go for their customers in terms of service delivery (Barlow and Moller, 1996: 1). When customers are dissatisfied with a product or service, they have two options: they can complain or walk away. If they choose the latter, the organisation has no opportunity to mend their dissatisfaction. Thus, companies need a paradigm shift.

Complaints must be welcomed and treated as a gift because customers who take the time to complain still have some confidence in the organisation (Barlow and Moller, 1996: 13). It is less of a hassle for the customer to take the business elsewhere than to complain. In 1993, the Savings Bank of Manchester, Connecticut identified an area where a concentration of fraudulent activity was taking place. Criminals were using false automated teller machines to get customer account numbers and then emptying their accounts.

These criminals were caught only because customers complained (Barthes, 1993: 24). Wayne-Dalton, manufacturer of doors and security grilles, switched to a new packaging system after their customers complained about damaged doors. The new, more expensive packaging reduced the complaints and also ultimately resulted in a net reduction of costs (Wayne-Dalton, 1993: 72-73). By paying attention to customer complaints, Quick-Park Inc, a US company that manages parking lots, instituted several changes that expedited the processing of exiting cars. This pleased the customers and saved Quick-Park nearly $500000 annually (Luehlfing, 1993: 33-36). The above cases are examples of reactive marketing practice.

However, because the customers took the time to complain, and the companies listened, potential losses were averted. In fact complaints led to improvements in turnaround and service. Following are some proactive strategies, which can be implemented to avoid customer dissatisfaction (online). However, they do not dismiss the value of complaints.

Desired merchandise must not be out of place, out of stock, or on order Help should be always available when it is needed Employees must be highly trained, informed and focussed Get rid of bureaucratic processes and red tape which leads to delays Waiting: in line, on the phone or anytime should be discouraged in the company policy Prices clearly marked Advertising must not be misleading Value commensurate with price paid Quality that lives up to expectations Stand behind your products or services Customers value some combination of the following: Genuine courtesy Quality: people, product, process Efficiency Effectiveness Service has to be forethought, not an afterthought. Build service into all parts of your operations from the beginning, rather than frustrating yourself, your people, and your customers by trying to engineer it along the way. REACTIVE OR PROACTIVE MARKETING PRACTICE? WHAT IS IT GOING TO BE? Kotler (2000: 50) describes reactive marketing as the selling of products or services.

The customers are encouraged to call if they have any questions, comments or complaints. Proactive marketing, on the other hand, occurs when the salesperson contacts the customer from time to time with suggestions about improved product uses or helpful new products. It is clear that proactive marketing tends to be more customer-focussed and as such builds bonds between customers and companies. A recent interview with a product manager of a leading telecommunications company revealed the following: Before Transnet began privatizing the various divisions, Transtel enjoyed a monopoly. Company policy prohibited the other divisions from dealing with other companies.

Transtel had exclusive rights to provide products and services to the organisation. Following the privatisation of the divisions, profitability became a driving force. They now had to be leaner. Costs had to be kept to a minimum. The same applied for the Transtel. Because of the restructuring of Transnet, Transtel could not afford to be complacent anymore or else they would lose the business to its competitors.

The customers began to demand better and cheaper service. Transtel could no longer be just reactive if it wanted to remain competitive. Therefore, the client care division streamlined itself and began implementing this paradigm shift. Clients are visited on a regular basis and kept abreast of new technologies that would help them remain competitive. Because of this change in strategy from being reactive to being proactive, Transtel has not lost any of its customers but have actually gained more because of their reputation of being a customer-orientated company. Now the company is preparing itself for the second fixed line operator licence.

They are preparing business and marketing plans with the main focus on its customers and how they can best serve the public with what they have to offer. Another case where the proactive approach was beneficial was that of Advanced Communications (A inga, 1997). The company effectively reduced the number of incoming calls to its customer service department by eighty percent through a proactive approach to client handling. The business has since grown by ninety two percent. This was achieved by constant analysis of clients' needs.

They implemented a regular programme of mail-outs and Web information that addresses common queries, thereby reducing the need for customers to telephone the support department. The company also developed Free talk Plus, a service that enables customers to have quarterly checks on their mobile tariffs built into their accounts. This in effect guarantees customers of the validity of their accounts. They also require all staff to complete internal and external product, sales and service training courses. Their customers have come to expect that they stay one step ahead of the game. These and other numerous cases of successful implementation of proactive marketing practice which lead to increased turnover and reduced costs.

Clearly a company that wants to remain competitive needs to seriously consider its marketing practices. CONCLUSION In keeping to the topic, this report has focussed on the value of a customer, the need for customer retention and the importance of knowing your customer. Also, the effective assessment of customer needs and the satisfaction thereof, customer communication channels for interaction and the value of complaints as a strategic tool was investigated. Encompassing all of these was the reactive verses proactive approach to marketing using case studies and an interview. It is clear that companies need to shift from reactive service to proactive service (The Business Journal of Portland, 1997). Companies need to beat customers to the punch, be there before they need you, anticipate their needs and make customers feel that you care about them personally.