Overall Preview, An Abstract

This report covers two chapters and three reading materials. Basically, the aim is to introduce the concepts market and customers in marketing management.

Firstly, marketing management's terminologies and its trend in the present world is viewed. Customers, being the essential unit in marketing, would then be the central focus. However, to be consumer/market-oriented is not an easy task. Barriers exist in developing the culture is the next subject covered. To further understand marketing issues faced bay organization in the real world, the paper would take the case of The Gillette Company. After learning the basics about market and consumer, the last part would take a brief look on a method used in retaining customer, transactional segmentation.

Except for Reading 2 (Gillette), this report is arranged that each part covered is subdivided into:

1. Summary & Analysis (of the chapter or reading material)

2. Asian Perspective (relevant to the chapter or reading materials)

This report put forward the subjects in simplified manner. Further explanation, argument, or analysis on certain issues, are supplemented in the appendices.

Assessing Marketing’s Critical Role in Organizational Performance

B.1. SUMMARY & ANALYSIS

B.1.i. Marketing Core Concepts

First and foremost, to understand marketing management, there are several terminologies in the discipline of marketing need to be known.

MARKETING is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering and exchanging products of value with other.

NEEDS is a state of felt deprivation of some basic satisfaction (like food and shelter). Society or marketers do not create it; yet it exist in the very texture of human biology and conditions.

WANTS is a desire for specific satisfiers of deeper needs. For instance, Malays want ketupat. It is shaped and reshaped by social forces and institutions.

DEMANDS is a wants for specific products that are backed by an ability and willingness to buy them.

PRODUCT (GOODS, SERVICES & IDEAS) is anything that can be offered to satisfy needs and wants. Marketer’s job is to sell the benefit or services built into physical products.

VALUE is the consumer’s estimation of product’s overall capacity to satisfy his or her need considering factors such as cost and capacity.

EXCHANGE is the act of obtaining a desire product from someone by offering something in returns. Frequently describe as a value creating process as both parties better of as result of the process.

TRANSACTION occurred when agreement of exchange has been reached. Transaction can be either in form of monetary transaction or barter transaction.

RELATIONSHIP In today’s environment smart marketers would try to build a long term, trusting, win-win situation with valued customer.

A MARKETING NETWORK consists of the company and its suppliers, distributors & customers with which it has build solid, dependable business relationship.

B.1.ii. The Five Competing Concepts

There five ways on how organizations oriented their marketing activities:

THE PRODUCTION CONCEPT[1] holds that consumers will favor products that are widely available and low in cost. Manager who is production oriented would concentrate on achieving high production efficiency and wide distribution.

PRODUCT CONCEPT is of a view that consumer will favour the products that offer the most quality, performance or innovative features. Focus on products rather than customer need.

THE SELLING CONCEPT believes that if left alone, customers will not buy enough of the organization products. Thus, the organization must undertake aggressive selling and promoting efforts. Normally occurred in “Unsought Goods” Goods that the buyers normally do not think of buying it (for instance, insurance, encyclopedia, and funeral pot). The aim is to sell what they produce rather that what the market wants.

THE MARKETING[2] CONCEPT holds that the key to achieving organizational goal consist of being more effective than competitors in integrating marketing activities towards determine and satisfying the needs and wants

THE SOCIETAL MARKETING CONCEPT calls upon marketers to build social and ethical considerations into marketing practices.

B.1.iii. The Trend of Marketing Management Practices Adoptions

Presently, there is a growing trend of adoptions of marketing management practices in various business sectors and in global arena.

In profit generating business sector, the adoption spread most rapidly in consumer packaged-goods, consumer durables, and industrial-equipment companies.

In nonprofit business sector, marketing increasingly attract the interest of nonprofit organization as motivation and promotion devices, especially in developed countries The need for marketing management is it is necessary to sustain those organizations in facing the rapidly complex customers. Nonprofit organizations use marketing tools in their social marketing campaigns such as in anti smoking and safe sex campaigns.

Viewed globally, Marketing theories and practices spread rapidly throughout the world through MNCs that conduct their businesses globally. In new markets, these large firms have forces local companies to learn and adopt the similar marketing techniques in order to compete. This consequently assists in the spreading of marketing management practices globally.

B.2. ASIAN PERSPECTIVE

B.2.i. Technological Advent

World economy has undergone a radical transformation. Geographical & cultural distances have shrunk with the advent of jet airline, fax, and computer network. These advances have permitted companies to widen substantially their geographical market and their supplier sources. For examples:-

· Texas Instruments design some of its sophisticated computer chips in India.

· Motorola set up computer programming and equipment design centers in Australia, India, China.

· Matsushita has relocated operations to Malaysia, Mexico and Wales.

B.2.ii. Economic Boom & Bust

In Asia Pacific, the high economic growth in the early 90s resulted to the ability of business to satisfy more consumer needs and demands and to improve their services. However, the sudden recession in late 90s has caused adverse environment to businesses.

B.2.iii. What Asian Companies should do?

Asian companies can no longer ignore emerging technology, materials, equipment and new ways of conducting marketing. They should also start to acknowledge the critical importance of being customer oriented and driven in conducting their activities if they want to stay ahead in the current scenario.

Building Customer Satisfaction Through Quality, Service And Value

C.1. SUMMARY & ANALYSIS

C.1.i. Customer Value

To a customer, value is the satisfaction of his requirements at the lowest total cost of acquisition, ownership and use. This does not mean just satisfying the customers. One has to strive to delight and 'wow' them.

Customer will buy from the firm that they perceive to offer the highest customer delivered value (CDV). CDV is the difference between total customer value (TCV) and total customer cost (TCC). TCV is the bundle of benefits customers expect from a given product or service. TCC is the bundle of cost customers expects to incur in evaluating, obtaining, and using the product or service.

One has to understand the unique characteristics of the customer sets, which have different needs and expectations. Customer value is dynamic. That is because customers keep changing their minds and the things that go onto their balance scale keep changing, as do competitors' offerings! Thus, a focus on increased customer value must be kept.

C.1.ii. Customer Satisfaction

In general, satisfaction is a person's feeling of pleasure or disappointment resulting from comparing a product perceived performance (or outcome) in relation to the person’s expectations. Thus, satisfaction is a function of perceived performance and expectations.

A customer is said to be in a state of delight when his expectations are met and exceed beyond normal customer satisfaction. The difference between the two is that while customer satisfaction is an organizational initiative, customer delight is an individual’s effort. Customer satisfaction is imperative for organizational survival but delight can win you customers for life.

C.1.iii. Delivering Customer Value and Satisfaction

Customer value and satisfaction could be delivered through value chain and value-delivery system.

1. Value Chain

Every firm is a collection of activities that are executed to design, produce, market, deliver and support its product. A value chain[3] is a set of support and primary activities that work together to create greater customer value.

2. Value Delivery Systems

All Value Delivery Systems (VDS) are processes, but not all processes are necessarily VDSs. A VDS is the comprehensive set of activities and communications that collectively creates and delivers value to the customer.

3. Value Delivery Network

Value Delivery Network consists of the value chain, its suppliers, distributors and the ultimate customers, all of which work together to add value to the customer[4].

C.1.iv. Customer attraction and retention

Customer defection rate is a measure of customer leaving the business from a firm causing the firm to experience a reduction in the market share.

To counter the defection rate, a firm must be able to understand the root that contributed to the problem. First, the firm must define how much was the defection rate and measure it against the industry’s defection rate as a benchmark. This comparison will lead the firm to assess its overall performance and enable it to determine causes of customer defection that it faces.

Applying statistic, a firm could measure how much loss is being incurred per defection. Knowing this, the firm then should measure the cost of providing a solution to attract back the deviated customer. As a rule of thumb, if the cost of attracting the deviated customer is less than the loss incurred, the firm should apply the solution to attract the customer.

C.1.v. Customer retention

Most marketing literatures now focus on the defensive strategies (retaining existing customer) as opposed to the offensive strategies (attracting new customers). Generally[5], the cost of attracting new customer is estimated to be 5 to 10 times higher than the cost of retaining existing customer. This finding is valid since most of the existing customer is already familiar with the firm and its products. So it is easier and cheaper to retain existing customer than attracting new customer who is yet to know the firm and the type of products it offers.

There are two ways a firm can adopt to retain the customers. One method is to create high switching barriers for the customers that make them difficult to leave the firm. For example, in the banking sector, a penalty could be imposed on the customer if they wanted to switch their financing institution from existing to another. Another solution is through creating high customer satisfaction through products offered. This would make the customer feel obligated to continue patronizing the firm.

C.1.vi. Relationship marketing[6]

Relationship marketing is a type of marketing where a firm focuses on creating high customer satisfaction from the products it offers. In relationship marketing, there are five levels of relationships towards creating high customer satisfaction.

1. Basic marketing: the firm only focused on selling the products and services.

2. Reactive marketing: the firm sells the product and encourages the customer to call them if they need any assistance or further information.

3. Accountable marketing: the firm sells the product and calls back the customer to get some feedback on the products it has just sold to the customer.

4. Proactive marketing: after the sale of products, the firm will periodically call the customer to get the feedback, and offers suggestions and help.

5. Partnership marketing: the firm works closely with the customer to help them improve their operations and perform better. For instance, Johnson & Johnson helped the customer to set up an inventory management system and give additional support for maintenance of the system.

In order to improve the relationship, there are three approaches that can be used by a firm in retaining and creating high satisfaction to the customer.

1. Financial benefits given to the customer through having a special membership card that give discounts to new or subsequent purchase or gift points that can be exchanged with other products.

2. Social benefits where customer could attend a special annual dinner made by the firm or attend a special talks organized by the firm.

3. A structural ties with the customer in which firm can help the customer to improve their operation as well as encourage the customer to take advantage from the services that it offers.

C.1.vii. Total Quality Management

TQM is one method that can be used by a firm to improve the customer satisfaction by providing an outstanding quality products and services to the customers. TQM encourages every employee to continuously improve the products, services and process.

C.2. ASIAN PERSPECTIVE

C.2.i. Customer Retention

An instance of a successful customer retention practice by business in Malaysia is Nokia. Nokia exploits its easy-to-use and attractively designed handphones in retaining its clients. Moreover, the after sale service is very good in the sense that it is easy to lodge a complaint through the customer care center and customer are invited to join a special Nokia club that offers attractive price for accessories and news update. Consequently, Nokia has been able to retain its customers by providing satisfying services.

C.2.ii. Relationship Marketing

Maybank, a banking institutions in Malaysia, uses the financial benefit approach in its relationship marketing. It continuously offers a special discount for the Visa cardholder to purchase from its participating retailers with its EzyPay 0% sheme.

Another firm, MPH bookstore, applying the social benefit relationship marketing by organizing special talks on promoting the reading habit to the children to its members and give a special gifts to the member who attend the talks.

C.2.iii. Total Quality Management (TQM)

Texas Instruments (Malaysia) (TI) is the best example of a company utilizing TQM in its organization. TI has been able to improve the overall operations and provide quality products by employing the TQM concept in its manufacturing plant in Malaysia. This has helped in providing quality services to its clients. Moreover, through TQM, it has been found that 38% of its employees have recorded full attendance and the production line has emerged as one of the best among all of TI’s manufacturing plants throughout the world.

Barriers In Developing Market Orientation

D.1. SUMMARY & ANALYSIS

D.1.i. Market orientation[7]

Market orientation can be defined as a kind of philosophy, a culture run deep in an organization that stresses on satisfying market’s (consumers’) needs.

D.1.ii. Studies in barriers of developing market orientation

There are 2 main approaches[8] used in various studies. Specific approach views only a particular aspect, whether employees-focused or system-focused. On the other hand, holistic approach looks into every possible barrier to developing market orientation.

D.1.iii. Proposed model for developing market orientation: PEOPLE-FOCUSED[9]

The main theme of the model is that as market orientation essentially an organizational culture, to develop a market oriented company; the initial point is to change the belief, understanding, and commitment of the organization’s members through internal marketing[10].

D.1.iv. Implications found on studies of barriers of developing market orientation[11]

Managerially the implication is that management seldom focuses on the humane aspect when developing market orientation plan. Instead too much emphasize is on the structure. Theoretically, Most marketing theories focused on objective aspects to the development of market orientation, overlooking the subjective factors such that employees beliefs and attitudes. Therefore, there is a need to cross-disciplinary studies on market and cultural issues.

D.2. ASIAN PERSPECTIVE

D.2.i. Market orientation in Asia

It is found that in Asia, particularly in service industry, the organizations are people-oriented. The tendency might be due to that for Asians, quality comes with consumer-oriented services. Instances of consumer or market orientation behaviors existed in Asian businesses are the courteous Singapore Girls of Singapore Airlines and the creatively ritualized gift-wrapping service of the Japanese salespersons.[12]

D.2.ii. Studies in barriers of developing market orientation in Asia

It is noted that there are few studies done on the Asian practice as concerned to the market orientation. Most researches on the subject were done within the U.S context.[13]

The Gillette Company

E.1. COMPANY BACKGROUND[14]

King C. Gillette established the company back in 1901. It produces mass consumer products such as razors and blades (its main product since its inception in 1901), batteries (bought Duracell in 1996), dental care (acquired in Oral-B 1984), toiletries (Right Guard, its own brand since 1970s), electric shavers (acquired Braun in 1967), pen (acquired Paper Mate in 1955 and Parker in 1993), and luxury lighters (purchased S.T. Dupont in 1971).

E.2. SITUATIONAL ANALYSIS[15]

E.2.i. External Environment

The widespread of western grooming practices through media and others, the improved transportation and distribution technologies are some trends that contribute greatly to Gillette market expansion programs.

E.2.ii. Industry Environment

In 80s, disposable razor has captured much of the shavers market. BIC presented as the main competitor to Gillette in this niche.

E.2.iii. Internal Environment

Gillette’s passion for innovation proved by its generous research budget. It has built its strengths through innovation and product quality.

E.3. MARKETING ISSUES & PROBLEMS[16]

In the mid 1980s, Gillette faced a stagnant market with stiff competition. Revenue and profit of the company fell, and this has worried the management.

E.4. MARKETING STRATEGIES[17]

E.4.i. Strategies For The External Environment

The company chose to expand into new markets, especially in the Third World. In those countries, it firstly introduced the concept of western grooming to the population, put out its basic two-blade razors. Thenceafter, it would embark on introducing others products.

E.4.ii. Strategies For The Industry Environment

Gillette plays a ‘defensive war strategy’ against its main competitor, Bic Pen Corp.

E.4.iii. Strategies For The Internal Environment

It built its image on quality and innovative products, as per their tagline, “The best a man can get”. R&D plays an indispensable role in its internal strategy of innovation.

E.5. THE FUTURE

In 1990s Gillette has been successful in repositioned itself as the market leader in shavers market. Its strategy to persistently introduce innovative, quality products paid off handsomely. Yet, the clear objective to become the world leader translated into mission statement and more co-ordinated global promotional efforts have also played an important role in improving the company performance.

Transaction Segmentation To Slow Customer Defections

F.1. SUMMARY & ANALYSIS

F.1.i. An Overview

This paper focuses on the issues faced by the banking sector in the North America, with respect to ways being adopted to slow the rate of customer defections.

In the banking industry, the problems of customer defections are becoming a common issue. A study made and reported from Banker’s Monthly[18] stated that most banks are losing 20% of its customer each year. Another article has also been published in the Harvard Business Review² reporting that other bank industry is facing 15-20% defection rates. The article also stated that a 5% increase in the service improvement to reduce customer defection could lead to 85% of increase in profit for the bank. This is one of the potentials that could be exploited by the bank to maintain its market share.

The potential has made the bank to adopt a defensive strategy, retaining the existing customer, rather than the offensive strategy (attracting new customers). This adoption has also been backed by a common estimation that the cost of attracting new customer is about five times costlier than retaining existing customer[19].

F.1.ii. Transactional Segmentation

The defection problem has made banks to segment their customers in order to find a common pattern of customers' behavior. One segmentation method used is transactional segmentation. While other methods focuses more on group basis (by age, income level and life-cycle segmentation), the transactional segmentation is focused on an individual basis.

What made the transactional segmentation preferable is that it has lead to improvement in reducing the defection rates among the customers. Each individual customer’s past transaction records are analyzed and a pattern is established. On a monthly basis, the analysis is done and compared against the pattern. The deviated customer is then identified and marketing effort is directed to the customer.

F.1.ii.a. Requirements for transactional segmentation

Transactional segmentation uses the firm’s internal data to find out the customer’s transaction patterns. The internal data requires the firm to deal with the following requirements:

· Identify the customer through knowing the transaction pattern in spending behaviors.

· Store the information about the customers and their past transactions for analysis.

· Householding the accounts to form a single record for an improved understanding of economic behavior of the unit.

Thus, with the requirements are in place, a transaction modeling could be established. In this model, the standard transactional pattern is first constructed. Then, past customer’s records are analyzed and compared against the pattern. Lastly, the deviated customer is flagged and identified for direct marketing plan.

F.1.ii.b. Problems of transactional modeling

Some of the difficulties in transactional modeling are detailed below:

The established pattern is multivariate since a customer may have checking, savings, Visa, home loan. To establish a pattern in reality would require high multivariate techniques.
The customer has different transaction rates and whether to use the percentage change or absolute number change to measure the deviation from the pattern.
Massive amount of data storage is required since the information of each customers and their past transactions history are needed for analysis.
Modeling expertise is necessary since the quality of the information is very inconsistent.
A one-to-one process of direct marketing is required since the model deals with the customer on an individual basis.

F.1.iii. Customer Retention System

The difficulties of the customer defection require that the earlier identification proved to be strategically necessary. But then, even if the defecting customer could be identified with some accuracy, the customer retention system needs to be managed. Accuracy of the transaction model must be balanced in the sense that what type of error is permitted in the system. This would help to decide whether to identify too many customers or too few customers.

Valuing the customer requires the firm to decide whether it is worth to direct the marketing approach to that particular customer. Using a computer based retention system to automatically identify the deviated customer and automatically chose the appropriate marketing approach for the customer. A monitoring process needs to be developed in order to find any discrepancies in the system as well as to improve the retention rate.

F.1.iv. Implications

Some of the implications of the transactional segmentation is that the firm must respect the privacy issues relating to the customer information, shifts in marketing research and the importance of speed to detect the defecting customer earlier and automatically chose the appropriate direct marketing response.

Finally, transactional segmentation requires a one-to-one marketing approach as opposed to group based marketing approach. The perception that segments of groups of individual possessing common characteristics no longer holds.

F.2. ASIAN PERSPECTIVE

In the region, Reader Digest Asia is one of companies that practice transactional segmentation. The Singapore-regionally based publisher maintains a database of its individual purchasers. Each new buyer to its product will be given an identification/account number. And, each subsequent purchase by the individual will be tracked and recorded. Once they identify a trend that the customer seems want to stop purchasing its products, it will intensify promotion focus to that individual, personally. The companies give out attractive brochures, tempting contests, and even attractive tokens in order to encourage the person to continue buying its products.

In a sense, Reader’s Digest has shown the possibilities for firms in the region in applying transactional segmentation in their marketing efforts.

Appendices

*Appendix*	*Subject*	*Page*
1	Marketing Concept Versus Production Concept	1
2	Customer Value & Satisfaction	2
3	Value Chain	3-4
4	Value Delivery Network	5
5	The Process Of Determining Customer Defection Rate & Classes of Customers	6
6	Relationship Marketing Versus Traditional Marketing	7
7	Market Orientation - Definition	8
8	Studies In The Barriers Of Developing Market Orientation	9-10
9	People Focused Model Of Developing Market Orientation	11
10	Internal Marketing	12
11	Developing & Sustaining Market Orientation – Implications	13
12	Gillette, An Overview	14-15
13	Gillette, A Brief Background	16
14	Gillette, Marketing Issues & Problems	17
15	Gillette, Situational Analysis	18-19
16	Gillette, Marketing Strategies	20-22

Bibliographies

H.1. PRINTED SOURCES

Boone, L.E., Kurtz, D.L. (2002) “Contemporary Marketing 2002” Harcourt College Publishers, Orlando

Dolan, R.J., (1990) “Strategic Marketing Management” Harvard Business School, Boston.

Fornell, Claes and Birger Wernerfelt. (1987), “Defensive Marketing Strategy By Customer Complaint Management: A Theoritical Analysis” Journal of Marketing Research, (Nov), 337-46.

Kotler, P., Ang, S.W., Leong, S.M., and Tan, C.T. (1999) “Marketing Management, An Asian Perspective”, 2^nd Ed., Prentice Hall, Singapore.

Kotler, P. (1999) “Kotler On Marketing” The Free Press, USA.

Lubin, Paul C. (1992), “Keeping The Bank Customer Satisfied”, Banker’s Monthly, (June), 25-6.

Leong, S.M., Ang, S.H., Tan, C.T. (2001) “Marketing In A New Asia” McGraw Hill, Singapore.

Penncault Jr., W.D., McCarthy, E.J. (1999)“Basic Marketing, A Global Managerial Approach” 13^th Ed., USA.

Quelch, J.A., Ang, S.W., Leong, S.M.,Tan, C.T. (2000) “Strategic Marketing Cases For 21^st Century Asia” Prentice Hall, Singapore.

Sasser, W. Earl, Jr. and Frederick F. Reichheld. (1990), “Zero Defections: Quality Comes To Services” Harvard Business Review, (September-October), 105-11.

Strauss, S.D. (2002) “The Big Idea, How Business Innovations Get Great Idea To Market” Dearborn Trade Publishing, USA

H.2. INTERNET SOURCES

www.gillette.com

www.fortune.com

[1] Refer to Appendix 1 : Marketing Concept vs. Production Concept

[4] Refer to Appendix 4: Value Delivery Network

[5] According to Fornell, Claes and Birger Wernerfelt studies

[6] Refer to Appendix 6 : relationship Marketing and Traditional Marketing

[7] Refer to Appendix 7 : Market Orientation Definition

[8] Refer to Appendix 8 : Studies In Market Orientation

[9] Refer to Appendix 9 : People Focused Model of Developing Market Orientation

[10] Refer to Appendix 10 : Internal Marketing

[11] Refer to Appendix 11 : Implications On Market Orientation Studies

[12] Leong, S.M., Ang, S.H., Tan, C.T.(2001) “Marketing In A New Asia” (p.292)

[14] Refer to Appendix 12 & 13 : Gillette, Overview & Brief Background

[15] Refer to Appendix 15 : Situational Analysis

[17] Refer to Appendix 16 : Marketing Strategies

[18] Lubin, Paul C. (1992), “Keeping The Bank Customer Satisfied”, Banker’s Monthly, (June), 25-6