Implementing Total Quality Management Thursday, August 29, 2019

TQM is an organization wide approach to continuously improving the organizations processes, products and services.

There is an intimate connection between the quality delivered by a company and the corresponding customer satisfaction and company profitability. This is because higher levels of quality support higher prices while delivering high satisfaction at lower costs.

Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

A company that satisfies most of its customers’ needs most of the time is called a quality time.

Conformance quality is satisfied if all the units deliver the expected quality.

Performance quality, however, is different in that it is based upon the grade.

Eg. A Mercedes and Hyundai may both deliver Conformance Quality, but Mercedes can be said to deliver higher Performance quality.

The main responsibilities of a Marketing Manager are –

They must participate in formulating strategies and policies designed to give company total quality.

They must deliver marketing quality aside production quality.

In implementing TQM, a marketer’s job could subsume the following –

Identifying customer’s needs

Communicate these requirements to the product designers

Ensure that customer’s orders are filled on time and correctly

Ensure customer is trained enough to use the product well

Ensure after sales service and satisfaction

Get improvement suggestions from the customers, convey them to respective depts..

Quote : Marketing Management by Philip Kotler 10th Edition

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Relationship marketing

The task of creating strong customer loyalty is called Relationship Marketing.

The steps in customer development process is

Suspects -> Prospects -> First-time customers -> repeat customers -> Clients -> members -> Advocates -> Partners.

There might be defections from any of these levels, in which case, relationship marketing works on customer win-back strategies.

There are 5 different types of levels of investment in customer relationship marketing –

Basic marketing: the sales person simply sells the product

Reactive marketing: the salesperson sells the product and encourages the customer to call if he or she has questions comments or complaints.

Accountable marketing: the salesperson phones the customer a short time after the sales to check whether the product is meeting the expectation.

Proactive marketing: the company salesperson contacts the customer from time to time with suggestion about the improved product uses or helpful new products.

Partnership marketing: the company works continuously with the customer to discover ways to perform better.

There are also certain marketing tools which can be used for added customer satisfaction –

Adding financial benefits - through frequency marketing programs and club marketing programs. Club membership programs to bond the customer closer to the company can be open to everyone who purchases the product or service, such as frequent flier or frequent diner club, or it can be limited to the affinity group.

Adding social benefits – developing more social bonds with the customer; help make brand communities; etc.

Adding structural ties – Supplying customers with special equipment or computer linkages to help them manage their payrolls, inventory, etc. better.

Customer profitability the ultimate test

Ultimately, marketing is the art of attracting and retaining profitable customers. The well known 20-80 rule says that the top 20% of the customers may generate as much as 80% of the company’s profits. The largest customers who are yielding the most profit. The largest customers demand considerable service and receive the deepest discounts. The smallest customers pay full price and receive minimal service, but the costs of transacting with small customers reduce their profitability. The mid size customers receive good service and pay nearly full price and are often the most profitable.

A company should not pursue and satisfy all customers.

A profitable customer is a person, household, or company that over time yields a revenue stream that exceeds by an acceptable amount the company’s cost stream of attracting, selling, and servicing that customer.

Quote : Marketing Management by Philip Kotler 10th Edition

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Attracting and Retaining customers Wednesday, August 28, 2019

Customer Acquisition – This process is accomplished in 3 steps viz.,

Lead generation – to generate leads, the company develops ads and places them in media that will reach new prospects; its sales person participate in trade shows where they might find new leads and so on. All these produces a list of suspects.

Lead qualification – the next task is to qualify which of the suspects are really good prospects, and this is done by interviewing them, checking for there financials, and so on. The prospects may be graded as hot warm and cool. The sales people first contact the hot prospects and work on account conversion, which involves making presentations, answering objections and negotiating final terms.

Computing cost of lost customers –

Too many companies suffer from high customer churn namely they gain new customer only to lose many of them. Today companies must pay closer attention to their customer defection rate (the rate at which they lose customer).

The steps involved here are

A company must define and measure retention rate

The company must distinguish the causes of customer attrition and identify those that can be managed better. Not much can be done for customer who leave the region or go out of business but much can be done about the customer who leaves because of poor service shoddy products or high prices.

The company needs to examine the percentages of customer who defect for these reasons.

Third, the company needs to estimate how much profit it loses when it loses customer. In case of an individual customer the lost profit is equal to the customers lifetime value that is the present value of the profit stream that the company would have realized if the customer had not defected prematurely.

Fourth the company needs to figure out how much it would cost to reduce the defection rate. As long as the cost is less than the lost profit the company should spend the amount to reduce the defection rate.

The key to customer retention is customer satisfaction. A highly satisfied customer:

·         Stays loyal longer

·         Buys more as the company introduces new products or upgrades existing products

·         Talk favorably about the company and its products

·         Pays less attention to competing brand s and advertising and is less sensitive to price.

·         Offers product or service ideas to the company

Importance of retaining customers – The following statistics are helpful to this end

Acquiring new customers costs 5 times more than retaining old ones

A 5% reduction in customer defection can increase profits by 25% to 85%

Customer profit rates tend to increase over the lifetime of the customer.

The two ways of retaining a customer would be –

To erect high switching costs customers are less inclined to switch to another supplier when this would involve high capital costs, high search costs, or loss of loyal customer discounts.

Deliver high customer satisfaction

Quote : Marketing Management by Philip Kotler 10th Edition

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Nature of High Performance Businesses Tuesday, August 27, 2019

Stakeholders – A company should strive to perform above the minimum expectations of all of it’s stakeholders, including the employees, customers, suppliers so that this dynamic relationship ultimately leads to higher profits and hence stockholder satisfaction.

Processes – The trick lies in overcoming the problems posed by departmental organization. The successful companies are those which achieve excellent capabilities in managing core business process through cross – functional teams.

Core processes here could be new-prod development, customer attraction, order fulfillment, etc

Resources – The major businesses are nowadays trying to own and nurture only their respective core resources and competences, while out sourcing the rest of the processes.

Companies are paying increasing focus on their core competences and distinctive capabilities. One should go in for outsourcing, if through outsourcing, better quality can be obtained, lower costs are incurred, if  resources are less critical

Core competence has 3 characteristics

1.      Difficult for competitors to imitate

2.      Source of competitive advantage if it makes significant contribution to perceived customer benefits

3.      Potential breadth of application to a wide variety of markets

Set strategies to satisfy key stakeholders	Stakeholders
By improving critical biz processes	Processes
And aligning resources and organization	Resources  and Organisation

Organization and Organizational Culture –

According to the article Built to Last, there are 3 commonalities amongst the visionary companies –

They all held a core value system from which they did not deviate

They expressed their purpose in enlightened terms

They have developed a vision for their future and they strive towards it. They communicated it to their employees and embrace a higher purpose beyond making money

Senior management must encourage fresh ideas from 3 groups with respect to strategy making

Employees with youthful perspectives

Employees away from headquarters

Employees new to the industry

Delivering Customer value and satisfaction

Here are two important concepts from the customer value point of view –

Value chain – Michael Porter defined 9 processes as vital to a value building network of a company, viz.

Primary Activities: Inbound logistics, Operations, Outbound logistics, Marketing Sales and Service.

Support Activities: Infrastructure, HRD, Technology development, Procurement.

A firm’s task is to examine all costs and performance of these processes and try and improve them for better value-creation. Also a firm’s success depends upon how each of these processes are coordinated to seamlessly perform the following core business processes –

New – product realization

Inventory management

Customer acquisition and retention

Order-to-remittance

Customer service

Value delivery network – A firm needs to partner with its suppliers, distributors and customers to gain significant competitive advantages by creating a superior value-delivery network.

Quote : Marketing Management by Philip Kotler 10th Edition

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Customer Satisfaction

Customer Satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations

Customer Satisfaction is a function of perceived performance and expectations of the customer.

A company must develop a competitively superior value proposition and a superior value delivery system.

It often happens that customers are dissatisfied because of a wide gap between Brand value and Customer value. So it is recommended that marketers pay as much attention to building brands as in influencing company’s core processes.

The goal of a company should be to maximize customer satisfaction, subject to delivering acceptable levels of returns to the other stakeholders within constraints of its resources.

Four methods of tracking customer satisfaction:

1.      Feedback and Suggestion Forms

2.      Customer Surveys

3.      Ghost shopping

4.      Analyze lost customers 

Quote : Marketing Management by Philip Kotler 10th Edition

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Customer Value

Customer Value or Customer Delivered Value is the difference between Total Customer Value and Total Customer Cost. Customer Value = Product Value + Service Value + Personnel Value + Image Value

Total Customer Value is the bundle of benefits that the customers expect from a given product or service.

Total Customer Cost is the bundle of costs customers expect to incur in evaluating, obtaining, using and disposing of the product or service. Total Customer Cost = Monetary Cost + Time Cost + Energy Cost + Psychic Cost

Customers make their purchases based on Customer Delivered Value or on the basis of value-price ratio. Value – price ratio = Total Customer Value / Total Customer Cost

Seller who is at a delivered value disadvantage has two alternatives:

Increase Total Customer Value: strengthen product, service, personnel and image benefits

Decrease Total Customer Cost.: reduce price, simplify ordering and processing process, absorb buyers risk by offering warranty etc.

Quote : Marketing Management by Philip Kotler 10th Edition

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