By Martin Nana Baffoe Pieterson
Modern day marketing should focus seriously on customer retention, and this implies giving great customer services. This is the because the new marketing economy has become such that it is very easy to lose customers and thus get out of business. The factors characterizing the new economy places lots of emphasis on the consumer. Consider what consumers have today that they didn’t have yesterday:
1. A Substantial Increase in Buying Power: Buyers today are only a click away from comparing competitor prices and product attributes. They can get answers on the internet in a matter of seconds. They don’t need to drive to stores, parks, wait on line and hold discussions with salespeople. They have the comfort of doing all that through the internet
2. A Greater Variety of Available Goods and Services: Today, a person can order almost anything over the internet: furniture, washing machines, Books, etc. Moreover buyers can order these goods from anywhere in the world which helps people living in countries with very limited local offerings to achieve great savings. It also means that buyers in countries with high prices can reduce their costs by ordering in countries with lower prices
3. A Great Information About Practically Anything: People can read almost any newspaper in any language from anywhere in the world. They can access on-line encyclopedias, dictionaries, medical information, consumer reports, moving ratings and other information sources
4. A Greater Ease in Interacting and Placing and Receiving Orders: Today’s buyers can place orders from home, office, or mobile phone 24 hours a day, 7 days a week, and the orders will be delivered to their home or office quickly.
5. An Ability To Compare Notes on Products and Services: Today’s customers can enter a chat room centered on some area of common interest and exchange information and opinions.
In the old Marketing Economy, companies organize themselves by way of product units. Thus a company may for instance set up a business unit to manage their washing machines, dryers, refrigerators and stoves. Though this makes sense, it makes more sense to also add marketing groups that address the needs of different customer groups such as households and building contractors who buy differently. This would mean a switch from being product-centered to being customer-segmented centered
The Old Marketing Economy also focuses on Profitable transactions other than customer lifetime value. Companies normally focus on individual transactions with the aim of making a profit on each transaction. New economy companies add a focus on estimating individual customer lifetime value and designing their market offerings and prices to make a profit over the customer’s lifetime. New economy companies will sometimes underprice to gain new customers and be generous in its pricing and services to existing customers with an eye toward retaining them for the long run.
Mention can also be made of the Financial Scorecard focus of the Old Marketing Economy. Most senior managers in the old marketing economy will judge the company’s performance by financial results as reflected on the profit and loss statement and the balance sheet. Top management in the new economy will however, in addition to the financial scorecard, examine the marketing scorecard to interpret what is happening to market share (not just sales revenue), customer loss rate, customer satisfaction, product quality relative to competitors, and other measures. They recognize that changes in marketing indicators predict changes in financial results.
The Old Marketing economy focuses on shareholders other than stakeholders. Top management in the old market economy sees its primary mission as making profits for shareholders. The costs of working with other stakeholders such as employees, suppliers, and distributors are kept under tight rein. They treat businesses as a zero-sum game, whereby paying the least to employees, suppliers and distributors, the company will be left with the most profit. Top management in the new economy companies respects the importance of creating co-prosperity among all the business partners and customers. These managers carefully define their stakeholders and develop policies and strategies to balance the returns to all the key stakeholders. They believe business success depends on high-level performance by employees and business partners.
Marketing in the old marketing economy is left to the Marketing department alone. The task of creating and delivering customer value is left to the Marketing department alone. Marketing, as done in the new economy, should be done by everyone in the company. As the late David Packard of Hewlett-Packard observed, “Marketing is far too important to leave to the marketing department”. Every employee has an impact on the customer and must see the customer as the source of the company’s prosperity.
The old economy also builds brands through advertising other than performance. Brands are ultimately built by customers’ experience with the brand and by word-of-mouth. Companies are also recognizing other tools that build brands including sponsorships, event management, public relations and charitable gifts. Hence it is better to focus not only on advertising in building brands.
The Old Economy does not also pay attention to customer retention but rather focuses on customer acquisition. Most old economy companies seek growth and reward salespeople handsomely for finding new customers. As a consequence, salespeople spend less time ensuring the satisfaction of existing customers, with the result that some current customers defect. New economy companies place much more emphasis on customer retention. Attracting a new customer may cost five times as much as doing a good job to retain existing customers.
Old Economy Companies fail to systematically measure and track customer satisfaction and factors shaping it. Instead they rely on anecdotal information that is not reliable. In depth customer satisfaction is the aim of the new economy companies. Many of such companies are thus making it a priority in their business.
Lastly, old economy companies are characterized by Over Promise Under Delivery. To get the order, salespeople frequently over promise on quality or delivery, and worry later about the repercussions. This is true of the ads that exaggerate the performance of a company products. New economy companies recognize that customer satisfaction is a function of the match between customer expectations and company performance. These companies want their messages and promises to be accurate. Some would even prefer that their sales people under-promise and over-deliver as a way to create customer delight.
The Business World is gradually moving towards the New Market Economy style of operation; thus those still with the old marketing economy may soon be out of business. It is therefore imperative for all business to operate in the new market economy style which will mean:
1. Moving from Organizing by product units to organizing by customer segments
2. Moving from focusing on Profitable transactions to focusing on customer lifetime value
3. Moving from focusing on just the financial scorecard to focusing also on the marketing scorecard
4. Moving from focusing on shareholders to focusing on stakeholders
5. Moving from ‘Marketing does the Marketing ‘to ‘everyone does the marketing’
6. Moving from building brands through advertising to building brands through performance
7. Moving from focusing on customer acquisition to focusing on customer retention
8. Moving from customer satisfaction measurement to In-depth customer satisfaction measurement and
9. Moving from Over –Promise- Under- Delivery to Under- Promise- Over-Delivery