“The Bagwan Marketing insights from every manager needs to know_4

oyalty “Loyalty” is an old-fashioned word describing being deeply commit-ted to one’s country, family, or friends. It came into marketing with the term brand loyalty. But can people be loyal to a brand? Tony O’Reilly, former CEO of H. J. Heinz, proposed this test of brand loyalty: “My acid test . . . is whether a housewife, intending to buy Heinz tomato ketchup in a store, finding it to be out of stock, will walk out of the store to buy it elsewhere.” That some people will be exceptionally loyal to some brands is incontrovertible. The Harley Davidson motorcycle owner won’t switch even if convinced that another brand performs better. Apple Macintosh users won’t switch to Microsoft even if they could gain some advantages. BMW fans won’t switch to Mercedes. We say that a company enjoys high brand loyalty when a sizable number of its cus-tomers won’t switch. Brand loyalty is roughly indicated by the company’s customer retention rate. The average firm loses half its customers in less than five years. Firms with high brand loyalty may lose not more than 20 percent of their customers in five years. But a high retention rate may indicate other things than loyalty. Some customers stay on because of inertia or indifference or being held hostage to long-term contracts. 97 98 Marketing Insights from A to Z Building loyal customers requires a company to discriminate. We are not talking about racial, religious, or gender discrimination. We are talking about discriminating between profitable and unprof-itable customers. No company can be expected to pay the same at-tention to an unprofitable customer as to a profitable customer. Smart companies define the types of customers they are seeking who would most benefit from the firm’s offerings; these customers are the most likely to stay loyal. And loyal customers pay back the company in long-term cash flows and in generating a stream of referrals. Some companies believe that they win customer loyalty by of-fering a loyalty award program. A loyalty program may be a good feature as part of a customer relationship management program, but many loyalty schemes do not create loyalty. They appeal to the cus-tomer’s rational side of accumulating something free but do not nec-essarily create an emotional bond. How can frequent-flier miles win customer loyalty in the face of canceled flights, overcrowded planes, lost baggage, and indifferent cabin crews? Some programs are disloy-alty programs, as when an airline says the points will be lost unless the customer flies within two months. Companies should reward their loyal customers. Too often, however, companies give a better deal to new customers than to their old customers. Thus a telecom company may offer brand-new hand-sets and a reduced-price call plan to attract new customers while old customers are stuck with outdated handsets and pay more. Why not offer a trade-in plan for old equipment and a call plan that cost less each year that the customer stays with the company? State Farm Mu-tual Automobile Insurance does this, where each year the insured au-tomobile owner gets a reduced rate if there are no claims. While every company should aim to build loyal customers, loy-alty is never so strong that customers can resist a competitor who shows up with a much stronger value proposition that gives cus-tomers everything they now have and more. anagement Management is the task of making trade-offs and juggling contra-dictions. Harvard’s Rosabeth Moss Kanter observed: “The ulti-mate corporate balancing act: Cut back and grow. Trim down and build. Accomplish more, and do it in new areas, with fewer resources.” Everyone in a company has a different agenda. The advertising manager sees the company’s salvation as being in more advertising; the sales manager wants more salespeople; the sales promotion manager wants more money for incentives; and the R&D depart-ment wants more money for product improvement and new prod-uct development. The problem is that if every department only does its own job well, the company will fail. Departments have individual agen-das, not company agendas. The gift of reengineering thinking is to switch the focus away from departments toward managing core processes. Each core process—product development, cus-tomer attraction and retention, order fulfillment—requires team-work from several departments. Increasingly major company initiatives are launched as interdisciplinary team projects, not de-partment projects. 99 100 Marketing Insights from A to Z Management must never relax its vigilance. Business is a race without a finishing line. Andrew Grove, former CEO of Intel, postulated Grove’s Law, “Only the paranoid survive.” But the Japanese see management’s task more positively and call it kaizen: “Improving everything all the time by everyone.” They would rather improve their business every day than pray for an occasional breakthrough. The company that stops getting bet-ter gets worse. At the same time, improving the efficiency of the current opera-tions is not enough. Defining good management in this way has caused many businesses to fold. Management puts the company at risk by staying indoors and not wandering out. In viewing the busi-ness from inside out rather than from outside in, they miss changes in customers, competitors, and channels. They miss threats and oppor-tunities. John Le Carré observed: “A desk is a dangerous place from which to view the world.” Most companies are managed by committees. Richard Hark-ness, a journalist, defined a committee as “a group of the unwill-ing, picked from the unfit, to do the unnecessary.” Others say that committees are a fine device when you don’t want to accom-plish anything. Peter Drucker observed: “Ninety percent of what we call ‘management’ is making it difficult to get things done.” Every committee meeting should end in 45 minutes, or at least the attendees should take a vote to continue. Some say that the opti-mum size of a committee is zero. Former U.S. Senator Harry Chap-man gave this advice about being on a committee: 1. Never arrive on time; this [punctuality] stamps you as a be-ginner. 2. Don’t say anything until the meeting is half over; this stamps you as being wise. Marketing Assets and Resources 101 3. Be as vague as possible; this avoids irritating the others. 4. When in doubt, suggest that a subcommittee be appointed. 5. Be the first to move for adjournment; this will make you popular; it’s what everyone is waiting for. arketing Assets and Resources Companies think that they have a complete list of their assets on their balance sheets: physical assets, accounts receivable, working capital, and the like. But their real assets are off balance sheet items such as the value of their brands, employees, distribution partners, suppliers, and intellectual knowledge including patents, trademarks, and copyrights. You need to go further and list your core competencies and core processes as assets. Any special skills and proprietary processes are assets. Strategy is essentially the way a company chooses to link its competencies, core processes, and other assets to win marketplace battles. At the same time, don’t limit your search for opportunities by starting with your assets and resources. First look outside the firm for ... - tailieumienphi.vn