|By: Dr. Alvin Chan|
In a world economy that is in constant flux and undergoing turbulence, more companies are realizing that their most precious asset is their customer base. An even more important realization is the need to satisfy the whims and fancies of these customers in order to survive in these increasingly competitive markets. Organizations that do not act on this dictum have suffered the loss of market share or worse, total annihilation. Such dire consequences have awakened many organizations to rethink the way they see marketing. Thus, there is urgency for an organization (be it products or service providers) as a whole to develop appropriate holistic customer-focused strategies to ensure that the customer remains at the core of their organizational thinking.
With the rapid advancement of information technology (especially the rise of the Web) and the increasing difficulties of meeting customer’s needs and wants (for example, their expectations of 24 / 7 customer service especially for online transactions), there is a shift from a traditional marketing approach to customer targeted marketing. Many organizations and marketing consultants are emphasizing the need to allocate more funds to apply new-found knowledge of consumer behavior in new products development, build better customer relationships through customer loyalty and retention programs.
This purpose of this paper is to raise the awareness of the need to concentrate marketing efforts towards the customer rather than the inward-looking traditional product-focused arrangement. And more importantly, the paper will shed light on how an organization could go about in making this important transition in this current competitive market.
Marketing Approaches Explained:
Before I proceed to discuss the shift in the marketing approach, it will be appropriate to explain briefly the two marketing approaches separately for greater clarity.
Traditional Marketing-The 4 Ps of Marketing:
The marketing mix or what is commonly known as the 4 Ps is a framework for marketers to implement a marketing concept. It consists of a set of major decision areas that a company needs to manage in order to at least satisfy consumer needs. According to Kotler et al. (1999), the mix is a set of 'controllable tactical marketing tools [...] that the firm blends to produce the response it wants in the target market' (p.8). Hence, in an effective marketing program, all of those elements are 'mixed' to successfully achieve the company's marketing objectives.
The traditional marketing mix contains four major elements, the '4 Ps of marketing'. As defined by Kotler et al. (1999):
1.Product: Anything that can be offered to a market for attention, acquisition, use or consumption that might satisfy a want or need. In includes physical objects, services, persons, places, organizations and ideas.
2.Price: The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.
3.Promotion: Activities that communicate the product or service and its merits to target customers with a view to persuading them to buy.
4.Place: All the company’s activities that make the product or service available to target customers.
With the rapid changes surrounding organizations, the traditional marketing mix of the 4 Ps has been criticized for being too myopic in this current market situation. The traditional marketing mix has also been disparaged for being too product-focused and for taking an overly inward-looking strategy with regards to the organization’s resources and capabilities in production matters. This is antithetical to attending to the more important organizational goal of satisfying the desired needs and wants of customers.
In addition, the Web and E-commerce revolution has played a major role in alleviating customers’ ability to shape their relationships with the company. This has led customers to expect companies to market their products and services in ways that reflect more directly their individual needs.
These changes have prompted enterprises that wish to stay ahead of their competitors to shift their traditional marketing approach to customer-targeted marketing.
Customer Targeted Marketing:
In customer targeted marketing, the customer becomes the central focus of the organization’s strategy and activities, rather than the product itself (which is the prime concern in traditional marketing). The organization’s paradigm shift in marketing requires a company to build a commitment to quality and to listen critically to the customer to determine the market needs and how the company can meet those needs more effectively.
One of the major characteristics of the approach is to focus on each customer’s interests and interactions with the organization to deliver targeted, personal messages. This would require the company to be constantly gathering information about their customers in an effort to better serve them and, most importantly, to retain them as loyal customers. As suggested by Peppers and Rogers (1998), the organization would need to use various techniques and strategies (possibly with the help of information technology and the Web), such as focus groups, in-depth interviews, customer surveys, attitude testing and so on to obtain information about consumers for more effective marketing of a product or service. With these customers’ data and feedback, the organization will apply the knowledge to develop more customer-centric products and services and/ or to improve existing ones. In addition, the information will be shared within the organization to encourage employees at all levels to focus on creating maximized customer value and loyalty.
Why Customer-Targeted Marketing?:
In order to have a competitive edge and to satisfy increasing levels of customers’ desires, companies realized that they have to see their customers as individuals rather a homogeneous mass of similar tastes, values and buying behaviors. Due to such transformation, companies need to be more customer-focused in its overall marketing strategy. This has resulted in organizations adopting a customization strategy to increase customer’s loyalty to their products and services. For example, in banking and insurance industry, there has been a move towards greater customization. Standard products/services have been given way to a varied menu of features from which customers may select their own preferred combination.
In view of these changes, companies that understand the asset value of each customer, and that tailor their marketing efforts (and their costs) to acquire and sustain the highest-value assets, will win over less-adaptable traditional marketing approach of the 4 Ps.
The Process of Transition:
In order to strategically change from a traditional marketing approach to customer targeted marketing, an organization must be aware of these following areas:
Paradigm Shift. A company must fully understand that customer targeted marketing requires a shift in the organizational mindset, and not just structural organizational changes. They must realize that their sole purpose is to continuously satisfy customers’ needs and wants. Thus, to ensure a smooth transition from a traditional marketing approach to customer targeted approach, an organization must reflect and ask itself questions as to what areas need to be analyzed and to understand the ramifications of such a transition in the organization. On the other hand, an organization needs to realize the negative consequences for not willing to be a more customer-focused marketing organization.
Customer Targeted Planning. As in any organizational change initiative, proper planning is needed. The objective of planning customer-centric marketing strategies is to find win-win opportunities with customer and to identify the best mutual opportunities for your customers and your company. This requires the organization to see the issue(s) from the customers’ perspectives and to strategically plan the organization’s resources around them.
In short, the organization’s shift to customer-targeted marketing should embrace these three important points:
1.Planning should focus on customer wants and not looking inwardly at company goals
2.Focus on the honest feedback and suggestions through creating different channels of communications. Listen to the customers, rather than forcing them to listen to you.
3.Integrate your customers in every aspects of your business, from new product design to after-sales services and more.
Organization-wide Responsibility. For the approach to be successful, members need to understand the new philosophy of marketing and embrace it organization-wide. Many organizations tend to underestimate the degree to which every facet of the enterprise needs to be involved in the process and to be integrated into the actual customer relationship.
Organization Redesign. An organization has to assess the roles of all functional departments interacting with customers to ensure that they add value to customers instead of increasing the costs. By reorganizing the company with the customer as the focus, many departmental roles and responsibilities will have to be redesigned. And when that happens, the employees will have to adopt new work processes that would be more customer-centric in nature.
Human Resource Training. There is a need to develop customer-focused human resource through customer behavior training, across the functional departments. By investing in such training at all levels, the members will be more knowledgeable, more autonomous, and more efficient in anticipating and meeting the needs of the customers.
Use of Information Technology. With the advancement and increased affordability in information technology, more companies are able to collect available data on customer purchase behavior more efficiently. For example, technologies ranging from checkout scanning to Internet cookies are commonly used to track customers' buying behaviors. Companies that employ such technology will be more adept at acquiring new customers, retaining existing customers, and cross selling than those who do not.
Enhanced Customers Communications. With the use of the Internet as a medium for targeted communication, this allows companies to be in touch with customers at less than one-hundredth of the cost of more traditional snail mail, brochures or flyers. Communication through emails with the customers is almost free, and the customers can retrieve communications almost immediately. However, this has also resulted in customers having 24 / 7 service expectations of these companies.
Customer Targeted Measurement. An organization must be able to measure and evaluate the success of their customer targeted marketing strategy. In most cases, traditional measurement techniques such as profitability, market share and profit margins are used to measure the success. There should be an added emphasis given to developing measures that are customer-centric and which are able to assess the marketing strategy. Customer acquisition costs, conversion rates, retention rates, customer sales rates, loyalty measures and customer share within a brand are some examples of customer-centric measures than a customer-focused organization can adopt
The need for survival has provoked many organizations to shift from traditional to customer targeted marketing. The market conditions surrounding us will continue to change at an accelerating rate and customer’s expectation will continue to rise. Hence, without any doubts, more and more companies will adopt a customer-targeted marketing strategy with increased intensity.