Your job as a marketer is to examine the costs and performance of each value-creating activity, and find ways to improve in each area. It's helpful to compare competitors costs and performance in the value chain as a benchmark. If you can outperform your competitors you can gain a competitive advantage.
It's important to note that internal departments sometimes act in ways to maximize their interests rather than those of the company or customers. For example, a credit department may take too long ensuring the credit worthiness of a customer to avoid the possibility of a bad debt. During this time, the customer is waits and waits, and the sales person becomes frustrated.
The solution to this problem, is to ensure the core business processes are managed smoothly, by using cross disciplinary teams to manage core processes.
It's important to look beyond your own operations as well. Finding competitive advantages beyond your own operations will increase your chances of success. For example, Walmart's suppliers are plugged directly into its inventory system so that they can track sales and replenish items as needed. This reduces the chances of stock outages.
The importance of customer retention
Often, organizations focus a lot or their marketing efforts on attracting new customers and far less attention retaining customers. Satisfied customers are loyal customers. Here are some interesting statistics from the Harvard Business Review (The Loyalty Effect by Frederick F. Reichheld and Thomas Teal):
• It can cost 5 times more to get a new customer than to satisfy and retain a current customer
• In a typical company, customers are defecting at the rate of 10-30% per year
• The profitability of a customer tends to increase the longer the customer is retained
A 5% reduction in the customer defection rate can increase profits by 25% - 80%, depending on the industry
The consumer is faced with an infinite number of choices in his buying behavior. He makes a decision on whether to spend his money or save it. If he chooses to spend it, he has a wide range of product choices available to him. Even within the relatively narrow field of paint industries the consumer has, from five to ten different brands of paints from which to choose in the average paint shop or depot, obviously, no one brand is going to be sold for long if it stops giving the customer what he wants. Hence, it is a total error for a marketing manager to believe that the consumer must buy his product.
The consumer bestows his favor on those who give him what he wants in product, price, promotion and convenience. The penalty for disobeying his mandate is almost certain failure. There are numerous illustrations of firms that refused to obey “Key consumerâ€, thereby incurring his wrath. At one time, the Waltham Watch Company was held in high esteem by watch buyers decided that the wrist watch was preferable to the pocket watch and subsequently, the consumers changed their buying habit, Waltham was a stubborn until the consumer forced it to do so by refusing to buy pocket watches. Meanwhile, key consumer decided that he wishes his wrist watch to do more than ten times, he wanted a fashionably styled time piece. The majority of firm in that country immediately entered a competitive race on a fashion basis, but not Waltham. His refusal to produce a properly style watch eventually caused its failure.
Obviously, the consumer seldom directly commands a manufacturer.
