The Customer

Kiran Kapur

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Introduction

(i)

Page

Introduction

About the Author (iv)

How to use this Guide (v)

Additional Study Resources (vi)

Section 1: Customer Context

Chapter 1: Commercial Organisations

1.1 Ownership and Finance 1

1.2 Owners, Shareholders, and Managers 7

1.3 Multinational, Transnational, International and Global Corporations 8

1.4 Small and Medium Enterprises (SMEs) and Micro Enterprises 9

1.5 The Effects of Company Size 9

1.6 B2B, B2C, Service and Retail Companies 11

1.7 Fulfilling the Needs of Organisations and Customers 12

Chapter 2: Not-For-Profit Organisations

2.1 The Not-For-Profit Sector 17

2.2 The Voluntary and Charity Sectors 18

2.3 Trade Unions 20

2.4 Professional Bodies 21

2.5 Educational Institutions 22

2.6 National and International Non-Governmental Organisations 24

2.7 Social Enterprises 24

2.8 Social versus Business Value Creation 25

2.9 Organisational Motives for Non-Profit Organisations 26

2.10 Stakeholders 27

2.11 Transparency and Ethical Practice 28

Chapter 3: Public Sector Organisations

3.1 Public Sector Organisations and the Role of Government 31

3.2 Government Administrative Departments, Offices and Agencies 32

3.3 Local Government 35

3.4 Education 36

3.5 Health 36

3.6 Police and Emergency Services 37

3.7 Aims, Objectives and Financial Motives 38

Introduction

(ii)

Chapter 4: The Importance of Customer Expectations

4.1 Customer Needs and Expectations 41

4.2 Customer Satisfaction 48

4.3 Customer Expectations 49

4.4 Models of Customer Satisfaction and Customer Expectations 49

4.5 Competitor Offers 52

4.6 Financial Consequences 52

Chapter 5: The Importance of Brands

5.1 Brands and Branding 55

5.2 Brand Characteristics, Promise and Loyalty 59

5.3 Brand Strategies 59

Chapter 6: Consumer Behaviour Theory and Customer Expectations

6.1 Expectation-Confirmation Theory 61

6.2 Cognitive Dissonance and Consonance 62

6.3 Neuromarketing 63

Section 2: Customer Experience

Chapter 7: The Components of Customer Experience

7.1 Definitions of Customer Experience 67

7.2 Moments of truth 69

7.3 Touchpoints 71

7.4 Customer Journey 74

7.5 Value Creation – The Experience Economy 75

7.6 Branded Customer Experience 77

Chapter 8: The Different Dimensions of Customer Experience

8.1 Customer Experience Frameworks 79

8.2 Customer Experience Designs 82

8.3 Customer Relationship Marketing

and Customer Experience Management 90

Chapter 9: Activities to Enhance the Customer Experience

9.1 The Role of Product/Service in Customer Experience 96

9.2 The Role of Price and Place in Customer Experience 100

9.3 People and Processes 104

9.4 The Role of the Promotional Mix in Enhancing Customer Value 111

Introduction

(iii)

Section 3: Measuring and Monitoring

Chapter 10: Measuring and Monitoring

10.1 Customer Satisfaction 120

10.2 Primary and Secondary Research Methods 124

10.3 The Relevance of Customer Feedback 133

10.4 The Importance of Monitoring 135

Chapter 11: Customer Experience Measures

11.1 Metrics and KPIs: Why They Matter and Who Needs to Know 137

11.2 Analysing Metrics 145

11.3 Recommending Improvements in Customer Experience 148

Index 151

Introduction

(iv)

About the Author

Kiran Kapur BA MPhil (Oxon) FCMC Chartered Marketer

Kiran has worked predominantly in Financial Services and has expertise in customer

relationship marketing and customer communications. As a consultant, she has worked as

project manager for companies including Liverpool Victoria, Barclays, London Life and

Cazenove.

She has taught a wide variety of courses at Cambridge Marketing College since 1999. She is

the Distance Learning & Overseas Course Director, with responsibility for the College’s

overseas expansion and a Fellow of the College. She has been a CIM examiner since 2004.

Her publications include the Assessing the Marketing Environment Study Guide published by

Pearson Education in 2009 and the Cambridge Marketing Handbook: Law for Marketers

published by Cambridge Marketing Press in 2015.

She is a trustee of Jimmy’s Cambridge, a charity for homeless people.

Introduction

(v)

How to Use this Guide

This Guide has been written specifically to provide an introduction to the key knowledge and

skills you need to understand the customer. It includes examples and activities to help

reinforce your learning, and recommended reading and website links for additional

information. We recommend that you work through the Guide from beginning to end

undertaking the exercises and supplementary reading included.

The Guide is part of a set, all written by professional marketers and tutors, designed to

provide clear and easy to read introductions to key marketing topics. The other Guides in this

set are: Marketing, Communications, and Digital Marketing.

Within the Guide you will find the following icons used:

This icon defines a key learning concept.

This icon identifies additional reading resources that can be used to gather extra

information or to reinforce learning about a particular concept.

This icon identifies tasks that are useful in widening your knowledge and applying

the concepts to your own organisation.

This icon identifies real-life examples that illustrate the key issues discussed.

This icon identifies websites with further information on the key issues discussed.

This icon identifies videos available online to reinforce your learning.

Introduction

(vi)

Additional Study Resources

This Guide has been designed to provide you with the core knowledge and skills you need to

understand the customer. However, marketing is a constantly changing discipline and in

order to be a first class marketer you must keep up-to-date with what is going on around

you. Consequently we strongly recommend that you read widely around the subject using

some of the following resources:

CMC Tutor Blog, Scoop.it! and YouTube Channel

CMC Tutor Blog: www.marketingcollege.com/blog

Scoop.it!: http://www.scoop.it/u/charles-nixon

YouTube Channel: www.youtube.com/channel/UC0_uEMPBTxuUr8hH1Ikl70w

Magazines and Journals

We strongly recommend that you read around the subject from the daily and weekly press

and marketing journals and widen your studies by looking at key trade magazines that serve

the industry. These include:

Ad Age www.adage.com

Cambridge Marketing Review www.marketingcollege.com/blog/cambridge-

marketing-review/

Campaign www.campaignlive.co.uk

Marketing www.marketingmagazine.co.uk

Marketing Week www.marketingweek.co.uk

Media Week www.mediaweek.co.uk

Cambridge Marketing Handbooks

Cambridge Marketing Handbooks: Digital Marketing, Distribution for Marketers, Law for

Marketers, Marketing Communications, Marketing Philosophy, Marketing Planning, Pricing for

Marketers, Product Marketing, Research for Marketers, Services Marketing, and Stakeholder

Marketing, 2015, Cambridge Marketing Press

Introduction

(vii)

Useful Websites

The Chartered Institute of Marketing

www.cim.co.uk CIM website with information and access to learning

support.

www.cim.co.uk/insight/tools-

and-templates/study-resources/

Direct access to information and support materials for all

levels of CIM qualification (available to CIM Members).

www.cim.co.uk/cuttingedge Weekly roundup of marketing news (available to CIM

members), awards and forthcoming marketing events.

www.cim.co.uk/insight/marketin

g-library-resources/

EBSCO, Emerald, iLibrary and more.

Publications on line

www.ft.com Extensive research resources across all industry sectors,

with links to more specialist reports. (Charges may apply).

www.economist.com Useful links and easily-searched archives of articles from

back issues of the magazine.

www.mad.co.uk Marketing Week magazine online.

www.brandrepublic.com Marketing magazine online.

Sources of useful information

www.esomar.org/ European Market Research Association.

www.asa.org.uk/asa/ Advertising Standards Association – useful for the Codes

of Practice.

www.marketresearch.org.uk The Market Research Society. Contains useful material on

the nature of research, choosing an agency, ethical

standards and codes of conduct for research practice.

www.statistics.gov.uk Detailed information on a variety of consumer

demographics from the Government Statistics Office.

www.data.gov.uk/publisher/ce

ntral-office-of-information

Government News.

www.quickmba.com/ Quick reference website for business models.

Wikipedia – A Note on its Use

Wikipedia is a good place to start any research on a new subject. Whilst content now goes

through some review to remove obvious errors of fact, the encyclopaedia is not definitive

and can be incorrect. Always check any information with a second source. Wikipedia is a

good source for other sources.

Introduction

(viii)

The Customer

SECTION 1

CUSTOMER CONTEXT

Chapter 1: Commercial Organisations

The Customer 1

Chapter 1: Commercial Organisations

The expected learning outcomes for this chapter are that you will understand the

different forms that commercial organisations can take, their specific characteristics, drivers,

goals and the role of marketing within them including:

Various legal types of ownership

Varying personal and financial motivations

The importance and behaviours of founders, managers and equity holders

The nature of multinational, transnational, global and international firms

How small and medium enterprises (SMEs) operate

The importance of micro enterprises

The differences between B2B, B2C, service and retail contexts

How marketing can fulfill the needs of organisations and their customers

Introduction

A key element of this topic is to be able to analyse the differences between organisations.

This unit looks at a wide variety of organisations and considers the differences between them.

Clearly, different organisations have different types of customer, and can require different

marketing messages. We will look at this in more detail as we consider each type of

organisation.

This chapter starts by considering the differences between organisation types. Chapter 2

looks at more specific organisations. Both chapters are UK biased and, if you are not based

in the UK, you need to think about how the organisations described relate to organisations in

your own country.

1.1 Ownership and Finance

In this section, we look at the different types of profit making companies and at the

differences between private sector companies, public listed companies, sole traders and

partnerships. We also consider the financial and personal motives for setting up these

organisations.

1.1.1 Private sector companies

When thinking of companies, we tend to think immediately of large corporations or small

family run businesses. These are private sector companies, that is businesses which are not

run or owned by governments.

Section 1: Customer Context

2 The Customer

Private companies can be large or small and can be formed in different ways. The two key

differences are:

a) how any profits made by the organisation are distributed; and

b) if there are any debts (called ‘liabilities’), who is responsible (liable) for paying them.

1.1.2 Sole traders

The simplest organisation is a sole trader, a business that is owned and run by one person. The

sole trader is the business.

There is no distinction between the business the sole trader does and the sole trader as an

individual: the business' assets are the sole trader’s assets, and so the business' debts are the

sole trader's debts.

There is no formality in becoming a sole trader; anyone can become one by simply

announcing that they are now a sole trader and telling the tax office. Records showing the

business income and expenses have to be kept.

Profits – any profit the sole trader makes belongs to the sole trader

Debts – the sole trader is personally liable to repay any debts, which means if the

business has high debts, the sole trader must sell his/her own assets (such as their

home and any personal savings) in order to repay the debts. Because of this personal

liability for debt, it can be hard for sole traders to borrow money

Management – the sole trader takes all the decisions on how to manage the business

Confusingly, sole traders can employ people. Employees are employed by the sole trader

directly.

The reasons that someone chooses to become a sole trader are varied. Some like the idea

of being their own boss, wanting to be self-directed in their work. Many like the simplicity of

starting up as a sole trader, without any complex arrangements to set up. Others start as a

sole trader as a first step to setting up the private company.

Because the sole trader takes the financial risks, s/he also takes any financial rewards from

the business. However, being personally liable for any debts and the lack of being able to

obtain external finance can lead to sole traders deciding to become limited companies

(discussed in Section 1.1.4).

1.1.3 Partnerships

A partnership is more formal than a sole trader. Each partner is self-employed but has an

agreement that they are working together. Usually, partners draw up a partnership

agreement. Partnerships may be as small as two people working together, or involve several

hundred professionals working together.

Chapter 1: Commercial Organisations

The Customer 3

Profits – the partners take a share of the profits

Debts – all partners are liable for any debts run up by other partners. So if two people

are partners, and one absconds with all the business profits, the remaining partner is

left to deal with the debts. This has led to partnerships becoming a less popular

business model. To meet this concern, in 2000, the Limited Liability Partnership Act

allowed some partnerships to limit the liability of any debts

Management – partners usually manage the business, though they can delegate

responsibilities to employees

Partners raise money for the business out of their own assets. 'Sleeping' partners contribute

money to the business but are not involved in running it.

Clearly a partnership requires trust between the partners. People choose to become partners

because they have control over the business but also have the other partner's expertise to

call upon. Partnerships can be as small as two people and as large as Linklaters, a global law

firm, with 447 practising partners across 20 countries (source: linklaters.com/whoweare).

1.1.4 Limited liability companies

These are very different to sole traders and partnerships. A Limited Company exists in its own

right: it is a separate legal entity, owned by shareholders. The company pays a salary to its

staff.

Profits – the company makes and receives any profits. Profits can be retained by the

company (for example to grow the business) or distributed as dividends to its

shareholders

Debts – any debts are taken out by the company, and it is the company's

responsibility to repay the debts. Shareholders are not liable for the company's debt,

unless they have guaranteed a loan for the company

There are two types of limited liability companies: private limited companies and public

limited companies (PLCs). The main difference is that a Private Limited Company (usually with

Limited or Ltd after their name) cannot offer shares to the public. It must have one director

who may also be a shareholder of the company. However, if the company goes out of

business, the shareholders may lose any money they have invested in the business.

Private Limited Companies give the owners more protection than sole traders and

partnerships. There are more legal requirements to set up the company. Owners may choose

to become limited companies if they want to have more protection or if they wish to raise

finance through loans from financial institutions which often prefer to lend to limited

company status, than sole traders.

Section 1: Customer Context

4 The Customer

A Public Limited Company (with PLC after their name) must have at least 2 directors and

offer at least £50,000 worth of shares to the public before it can trade. There are also some

differences in the way the companies are run. For example, a PLC must have a qualified

company secretary, must hold an AGM (annual general meeting) and comply with Stock

Exchange regulations.

Management – employees are employed by the company. A director or board of

directors makes the management decisions. Finance comes from the shareholders,

loans and any profits

Table 1.1 summarises the key characteristics and differences between the different types of

private companies.

Sole trader Partnership Private Limited

Company

Public Limited

Company

Example Plumber, business

consultant

Large legal and

accountancy

firms, such as

PWC

Cambridge

Marketing

College Limited

Tesco plc

Set up None Partnership

agreement

Register (be

incorporated) at

Companies

House

Register (be

incorporated) at

Companies

House

Ownership Owned by sole

trader

Owned by

partners

Owned by

shareholders

Owned by

shareholders

Profits Go to sole trader Go to partnership Go to company.

Distributed to

shareholders as

profits

Go to company.

Distributed to

shareholders as

profits

Liability

(debts)

Sole trader is

liable

Each partner is

liable

Company is

liable

Company is

liable

Records Tax return Tax return Accounts must

be filed at

Companies

House. Accounts

must be audited

annually

Accounts must

be filed at

Companies

House. Accounts

must be audited

annually

Chapter 1: Commercial Organisations

The Customer 5

Tax Register as self-

employed. Profits

taxed as income.

Register as self-

employed. Each

partner's profits

taxed individually

as income.

Liable for

corporation tax

Liable for

corporation tax

Other Limited Liability

Partnership Act

2000 allowed

partners to limit

their personal

liability

Must have a

qualified

company

secretary. Must

have offered

£50,000 share

capital to the

public before

trading

Table 1.1 Summary of private companies

Consider 4 different private companies that you know and work out whether they

are sole traders, partnerships, private limited companies or PLCs.

You should now be able to:

State the main forms of business ownership

Describe what a sole trader is

Describe what a partnership is

Explain the difference between a Ltd and a PLC

1.1.5 Franchises

We have looked at the four standard types of private company. However, there is another

private sector business type that we should consider – the franchise.

What do Domino's Pizza, McDonalds and Dyno-Rod have in common? They are all

franchises.

Section 1: Customer Context

6 The Customer

In the UK in 2013 (NatWest bfa Franchise Survey, 2013:

the franchising industry annual turnover was £13.7 billion

there were 930 franchisor brands operating; and

there were 39,000 franchisee outlets employing 561,000 people

Why franchise? Franchising can help to reduce the risks of starting a new business or

expanding an established one.

For companies wanting to expand, starting a new branch in a new area can be risky.

Operating in new locations requires controlling the new set-up, finding motivated staff and

premises.

For someone wishing to start their own business, there are the problems of getting their

business known and risks around getting the product and service offering right.

Franchising is a way of meeting these problems. The original business (franchisor) offers its

name or more usually its whole way of doing business to a franchisee. The franchisee pays a

fee and gets to trade as part of the business. The franchisee is usually highly motivated, the

franchisor has experience of the business, so both benefit.

There are two main types of franchise:

Product or trade name franchising – the franchisor owns the right to a name or

trademark which they sell to a franchisee

Business format franchising – the franchisor offers an entire package to the

franchisee, including continual business assistance, and a proven business format. In

return for a start-up fee and a percentage of turnover or profits, the franchisee buys

into a known company and gains ongoing business support. The franchisee reduces

the risks and costs associated with starting a completely new business. The franchisor's

company is able to grow, while reducing the risks of expansion

Chapter 1: Commercial Organisations

The Customer 7

Example Domino's Pizza, Dyno-Rod

Set up Franchisee buys into the franchise and both sign

a formal agreement

Ownership Franchisee owns their part of the franchise as

agreed with franchisor

Profits Retained by franchisee

Liabilities (debts) Set up fee and ongoing fee/proportion of profits

paid to franchisor

Table 1.2 Summary of franchising

Profits – retained by franchisee but a proportion may be paid to the franchisor

Debts – raising finance is usually up to the franchisee. The franchisee will pay fees to

the franchisor

Management – the franchisee must follow the business format laid down by the

franchisor. Finding and recruiting staff is the responsibility of the franchisee

1.2 Owners, Shareholders and Managers

We have seen that the ownership of commercial companies varies. For sole traders and

partnerships, the owner is the sole trader or the partners. For limited companies, there are

shareholders. Shareholders may or may not work for the company but they are the owners,

owning an element of the company (in shares).

A private company limited by shares is owned by the shareholders. Each shareholder has a

liability to the value of the shares issued to him/her. So, if a shareholder is given 100 shares at

an original value of £1, if the company fails, the shareholder is liable for £100.

Shareholders then collect a dividend on the shares, usually paid six monthly. The company's

annual accounts show how much profit the company has made and the company decides

how much of this profit to pay out as a dividend. The dividend is then divided up amongst

the shareholders depending on how many shares they own. In a small company, with only 2

equal shareholders, clearly each gets 50% of the dividend. In a large PLC, small shareholders

will get a tiny fraction.

A private company limited by guarantee does not have shareholders. It has members who

will back the company financially up to an agreed amount (that is the guarantee).

As the company owners, shareholders have rights such as voting and agreeing changes to

the company.

Section 1: Customer Context

8 The Customer

Directors of a limited company have legal responsibilities under UK law. These are:

Try to make the company a success, using your skills, experience and judgment

Make decisions for the benefit of the company, not yourself

Tell other shareholders if you might personally benefit from a transaction the

company makes

Keep company records and report changes to Companies House and HM Revenue

& Customs

Make sure the company’s accounts are a ‘true and fair view’ of the business’

finances

Managers are employed by the company and may or may not be shareholders. There is no

single accepted definition of what a manager does. A suggestion attributed to American

management consultant Mary Parker Follett is: "the art of getting things done through

people" and “management is what managers do”,

When looking at management, we can simplify these into 3 or 4 levels of management:

i. Supervisors, section leaders and foremen whose role requires supervision of workers

ii. Middle managers who are branch or department managers

iii. Senior managers who manage middle managers and set the direction and strategy of

their section of the company

iv. Board of directors who set the direction for the entire company

Of course the level and number of managers will depend on the size of the company. In a

small company, there may be one or two managers of the whole company. In a large

organisation, there may be many levels of management, each with different and graded

levels of influence and control

In the next section, we look at the largest corporations.

1.3 Multinational, Transnational, International and Global

Corporations

As the names suggest, all these types of companies operate over several countries. There is

no generally accepted definition of the difference between these. An international and

multinational corporate (MNC) may operate across just two countries with facilities in its

home country and at least one other.

Transnational corporations (TNCs) is the term used to describe global corporations. These are

businesses that have merged to create large conglomerates, operating across many

countries, often with a number of businesses.

Chapter 1: Commercial Organisations

The Customer 9

The Indian Company Tata Group (www.tata.com), operate across many countries

with a variety of brands, including:

Taj Hotels • Land Rover

Himalayan Water • Tetley

Bombay Brasserie • Manza Cars

Range Rover • Good Earth Tea

Jaguar • Nano Car

1.4 Small and Medium Enterprises (SMEs) and Micro Enterprises

At the other end of the scale of company size, we find micro enterprises and SMEs. The EU

provides the following definitions:

Micro Enterprises are the smallest businesses. The EU defines these as an enterprise

which employs fewer than 10 persons and whose annual turnover and/or annual

balance sheet total does not exceed EUR 2 million.

In developing countries, micro enterprises comprise the vast majority of the small

business sector. Here the micro enterprises can lack access to commercial banking,

so rely on micro-credit institutions.

A Small Enterprise is defined by the EU as an enterprise which employs fewer than 50

persons and whose annual turnover and/or annual balance sheet total does not

exceed EUR 10 million.

A Medium-Sized Enterprise is defined by the EU as an enterprise which employs fewer

than 250 persons and whose annual turnover does not exceed EUR 50 million or

whose annual balance-sheet total does not exceed EUR 43 million.

1.5 The Effects of Company Size

Big is not always better; being small is not automatically a problem. Both have advantages

and disadvantages. Consider the following comparison of small/medium enterprises (SMEs)

and large/global companies:

Section 1: Customer Context

10 The Customer

1.5.1 Small organisations

Advantages:

Lower overheads, no HQ, less staff costs, less internal communication costs

More flexible in making decisions, because it is less bureaucratic and has shorter

decision making chains

May be closer to the customer and offer a more personal service

Disadvantages:

Cannot take advantage of economies of scale, because of small size

Less access to finance; may have to rely on personal savings or bank loans. This can

constrain the opportunities to grow. It may make taking risks harder, as it can be

difficult to raise the capital.

1.5.2 Large/global organisations

Advantages:

Can exploit economies of scale in production, marketing and purchasing raw

materials

Access to finance is easier

Suppliers may be keen to supply larger firms to gain credibility for example, suppliers

are keen to supply large supermarket chains, despite the chains’ control on costs

Disadvantages:

Can have long chains for decision-making, which can make the organisation slow to

change

Can be harder to access information in a large company

Internal communications can be difficult, expensive and inefficient

Staff may run personal ‘fiefdoms’ sometimes concentrating on internal politics, rather

than the organisation’s overall benefit

Graded levels of responsibility can be motivating for staff to feel they are rising their

the organisation but can also mean that decisions can be hard to make or that staff

can be risk-adverse and be focussed on internal promotion

Chapter 1: Commercial Organisations

The Customer 11

1.6 B2B, B2C, Service and Retail Companies

These are definitions of companies based on their industry and type of customer.

B2C means Business to Consumer – the company is selling to consumers, that is, parts of the

public.

Products that are sold to consumers are often classified as durable goods, lasting

several years such as washing machines, computers and cars, or fast-moving consumer

goods (FMCGs). Examples of FMCG goods include Mars (chocolate bars), Persil (washing

powder), PG tips (tea), Huggies (nappies). Any product that is sold to a part of the public is

classified as B2C. Retail and service companies may also be B2C. So Thomas Cook sells

holidays (a service) to families, so is a B2C service company. It is worth noting that there are

different regulatory rules for selling and marketing products to consumers rather than to

businesses. The CAP Code makes a clear distinction between advertisements to consumers

and those to businesses. For more information on the CAP (Committee of Advertising

Practice) Rules, see the Cambridge Marketing College Handbook: Law for Marketers by

Kiran Kapur, 2015, Cambridge Marketing Press or visit: www.cap.org.uk.

B2B means Business to Business – the company is selling products to other companies.

Examples are office photocopiers, raw materials to a car manufacturer, corporate clothing,

and computer services.

Companies may often be both B2C and B2B. For example, Ford sells cars B2C via its

dealerships but also sells B2B via its fleet cars and commercial vehicles.

Services – these are “anything you cannot drop on your foot”. It is surprisingly difficult to find

a generally accepted definition of a ‘service’. Essentially, it is something that you hire or buy

that does not give you anything physical. So a lawyer and accountant offer professional

advice which is a service. A taxi-firm moves you from one place to another which is a

transport service.

Retail – retailers sell products or services to the end-user in shops, called ‘retail outlets’.

Retailers may sell one-type of product, such as food retailers, or offer a multitude of different

products such as department stores. Automated retail outlets are vending machines or

automated kiosks that allow the end-user to purchase a product from a machine that then

dispenses the product.

Section 1: Customer Context

12 The Customer

For more on products and services see:

The Cambridge Marketing Handbook: Product Marketing by Tony Wilson, Chapter 1, 2015,

Cambridge Marketing Press; and

The Cambridge Marketing Handbook: Services Marketing by Andrew Hatcher, Chapter 2,

2015, Cambridge Marketing Press

1.7 Fulfilling the Needs of Organisations and Customers

Marketing's role in all organisations is to understand the organisation's customer. This is

discussed further in Section 3.

This section covers elements of marketing that you will have found in other modules, such as

the Marketing topic. As a result, this is a high level overview of these topics. More details can

be found in the Marketing Guide and throughout there are suggestions for further reading in

the Cambridge Marketing Handbooks.

1.7.1 Organisation orientation

Orientation here means the way an entire organisation is focussed. A sales-led organisation

concentrates on selling what it produces. Examples include pension companies who create

a pension and then try to sell as many as possible. It is a ‘one-size fits all view’ or even a

‘company knows best’ approach. Targets within the company will be based on sales targets,

and sales people will be rewarded for reaching these targets. This is a common approach

when there is more demand than supply in a market – the customer has little choice if they

want a particular product or service, so the company can concentrate on trying to gain as

much of the market as possible.

The danger is that the company can become too focused on sales and ignore other

considerations, such as new competitors or substitute products. The company can then find

that it is very good at selling a product or service which has become out-dated or obsolete.

It can also become too focused on sales at the risk of signing up unsuitable customers. For

example, Wonga, a short-term personal loan company, had to write-off loans that were

made to customers who were unable to repay the loan. Had Wonga done the proper

checks, these customers would not have been offered loans.

Customers and governments are increasingly concerned about sales tactics used by some

companies and some industries.

Chapter 1: Commercial Organisations

The Customer 13

There are 6 large energy companies that dominate the UK home energy market.

Each has been hit by fines from the Government regulatory body, Ofgem, for misleading

customers when signing them up to new contracts.

EDF Energy, NPower, Scottish Power, Scottish and Southern Energy, E.ON and British Gas have

all been fined. This leads to consumer mistrust of the industry as well as damaging the

companies’ reputations.

A product-led organisation has a similar approach. It concentrates on creating products and

then creating a desire for those products in a marketplace. The company is focussed on

making superior products and then improving them over time. Many technology companies

operate in this way. They design a product and then tell the marketplace why the customer

should buy this. Companies that offer products that are new to the market may have to take

this approach. Technology firms argue that the customers don’t know why they need a

product, so need to be told.

Product-led companies run the risk of being too focused on the product and variations on

the product. They can improve the product quality at the risk of making the product too

expensive for the target market. The company may also offer a wide range of additional

items, thinking the customer wants more choice but risk making the product too

complicated for the target market. A product orientated company can focus so strongly on

product that other elements of the marketing mix, such as distribution or price, become

ignored or are considered of secondary importance to improving the product.

A customer-oriented company looks at what the customer wants and then designs products

and services around the customers’ wants and needs. Customer-oriented companies are

very clear about their customer segments – the types of customers that they wish to attract

and keep. Keeping customers is seen as important. This requires the company to understand

both their current customers and how their customers are changing, so researching

customers is seen as important.

Apple makes laptops, tablets and phones which are products. However, purchasing from an

Apple Store and the experience of using those products is designed with the customer’s

wants and needs in mind. This makes Apple a customer-oriented company as opposed to

some other technology firms who are designing products. Apple’s ‘simplicity by design’

approach contrasts with other firms selling as many additional items as possible, which can

confuse the customer.

Section 1: Customer Context

14 The Customer

Zipcar is a car club. Car clubs require customers to become a member, then they

can hire a car for a short period of time. The idea is not new, but ZipCar thought about what

put customers off using a car club and simplified the process.

Potential customers said that they were confused by the charges levied by car hire firms,

such as additional insurance and waiver of damage. Customers worried how a car share

scheme would work – did they have to go somewhere to collect keys, or to book the cars?

Zipcar then designed the process of booking, collecting and returning cars to be easy.

Membership gives the customer a keycard which will unlock the chosen zip car. The

company uses mobile phone booking and an easy membership process. Fuel, insurance,

mileage and congestion charges are included in the booking fee, to remove confusing

additional charges.

The entire process is designed to be simple for the customer.

www.zipcar.co.uk

Read more about product, sales and customer orientation in:

The Cambridge Marketing Handbook: Marketing Philosophy by Charles Nixon, 2015,

Cambridge Marketing Press

1.7.2 Customer value

Marketing adds value through understanding the needs of customers and adapting the

company offering (products or services) to meet those needs. Marketing is seen in many

organisations as a cost centre, yet it adds considerable value by observing and

understanding the market place. To do this, the marketing operation needs to be well-

informed and good at analysing trends.

Customer value is what a product or service is worth to a customer – it is not the same thing

as price or cost. By adopting a market orientation and understanding the needs and wants

of customers an organisation can add value to its products and services by developing

offerings which better meet their customers’ needs.

So in the Zipcar example, Zipcar researched what put potential customers off the idea of

using a car share service. They then designed the process to remove these perceived

hassles. The cost of membership covers the costs of this simplified design – as it has to include

the costs of insurance and other charges. Zipcar customers perceive the value of this

simplicity and so are willing to pay for the additional costs because it reduces other hassles –

such as owning a car in a city and finding places to park.

Chapter 1: Commercial Organisations

The Customer 15

In Apple Stores, a single sales person will explain the products, explain any options such as

training, then take the payment and help the customer with any product set up. The

simplicity of the purchase matches the user experience. This, plus Apple’s brand values,

create this customer value, for which the customer is prepared to pay a premium price.

To create this value, the company must understand the customers’ wants and needs, both in

the product performance and in other desires, such as a reduction in hassle. Time-poor

customers will often pay a premium price to have an easy experience. This knowledge of the

customer requires customer research which is then used to design both the product and also

the whole user experience. We will look at user experience and customer journeys in Section

2. This value then needs to be clearly communicated and this is most often done through the

brand value.

1.7.3 Brand value

A brand differentiates the product/service, aiding customer recognition and

loyalty.

A brand is defined as a name (IBM), symbol (the Nike swoosh), a sign (the MacDonald’s

golden arches), or design (Toblerone’s triangular shaped boxes). More importantly, a brand

symbolises an emotion or action: Kellogg’s conjures thoughts of breakfast, Virgin conjures

cool, innovative, and so on. These brands embody a customer value into the brand.

Brands have a value. Interbrand publishes a list of annual values of brands and in 2013, the

top global brand was Apple, worth over $98,000 million, Google was the second largest

brand, valued at over $93,000 million (Source: www.Interbrand.com).

We will look at brand and brand value in more detail in Chapter 5.

To find out more about customer value read Chapter 6 of the Cambridge

Marketing Handbook: Product Marketing by Tony Wilson, 2015, Cambridge Marketing Press.

1.7.4 Relationship marketing

The traditional view of marketing was that marketing focused on meeting customer needs

up to the point of the sale. Then marketers realised that repeat customers were important

and the concept of relationship marketing was created. Relationship marketing is defined as

attracting, maintaining, and enhancing customer relationships.

Section 1: Customer Context

16 The Customer

Huggies nappies estimated that whilst a single pack of disposable nappies costs

£4.99 for a small packet, a parent spends over £1,500 on nappies from birth to potty-training.

Huggies realised it needed to persuade customers to continue to buy Huggies nappies. By

thinking of the Lifetime Value (LTV) of the customer (over £1,500 per child), it was worth

investing in a relationship with the parent. Huggies pioneered the concept of a Bounty Bag,

given to new mothers before they left hospital with free nappies and vouchers for more.

THE CUSTOMER

INDEX

Index

The Customer 151

5M model ..................................................... 148

—B—

B2B ............. 1, 11, 26, 42-44, 67, 71, 86, 91-92,

98-99, 103, 115

B2C ................ 1, 11, 26, 44, 67, 71, 86, 97, 103

Brand touchpoint wheel ............................. 72

Brand value ................................................... 15

Brand value proposition ................. 55, 58, 67

Branded customer experience ..... 67, 77-78

Brands ................................................. 15, 55-59

—C—

Charity sector ........................................... 18-19

Co-creation ............................... 79, 85-87, 100

Cognitive dissonance...................... 61-63, 91

Commercial organisations ...................... 1-15

Commitment-trust theory ..................... 91, 93

Competitors ........................................... 68, 119

Complaints ......................... 123, 133, 137, 142

Compliments ............................................... 134

Consonance ..................................... 61-62, 91

Consumer behaviour .............................. 61-64

Crisis management ...................................... 53

Customer expectations ......................... 41-64

Customer experience design(s) .......... 79, 82

Customer experience management

(CEM) ............................................. 79-81, 90

Customer experience measures ............ 119,

137-149

Customer experience modelling ........ 79, 89

Customer feedback ............................ 81, 133

Customer interaction(s) ......... 70, 81, 95, 100

Customer journey ................................. 74, 148

Customer loyalty ................ 41, 47, 64, 78, 98,

109-110

Customer needs ................... 15, 41, 46-47, 53

Customer personality traits ................... 79, 87

Customer relationship management

(CRM) ......................................... 90, 120-121

Customer relationship marketing ........ 79, 90

Customer rights ............................................. 47

Customer satisfaction.................... 48-49, 120

Customer value ...................... 14-15, 111, 113

—D—

Decision-making process ..................... 41, 44

Decision-making unit (DMU) .......... 42, 44, 98

DRIP ............................................................... 111

—E—

Educational institutions ......................... 17, 22

Emergency services .......................... 31, 37-38

Emotional intelligence .................. 87, 95, 014

Employee satisfaction ......... 95, 109-111, 147

Employee talent ................................... 95, 111

Ethics ........................................... 17, 26, 28, 58

Expectation-confirmation theory .............. 61

Experience economy ............................. 75-76

—F—

Fishbone diagram ............................... 146-147

Franchises ........................................................ 6

—G—

Government departments .................... 36-37

—H—

Hiriko folding car .......................................... 97

—I—

Ishikawa, K. ........................................... 146-147

—K—

Kano model ............................................ 49, 51

Key Performance Indicators (KPIs) .................

137-138, 141-143, 145, 147

—L—

Ladder of loyalty ....... 44-45, 79, 91, 120, 144

Lean Six Sigma approach ..................... 79-80

Local government ................ 26, 31-32, 35-46

—M—

Measuring ............................................. 119-148

Index

152 The Customer

Mendelow's Matrix ....................................... 27

Metrics .................................................. 137, 145

Moments of truth ............................ 69-70, 148

Monitoring ............................................ 120-148

Multinational corporations ........................... 8

—N—

Net Promoter Score® ......................... 119-122

Non-governmental organisations ...... 17, 24,

33

Not-for-Profit organisations ............. 17-29, 42

—O—

Orientation(s) .......................................... 12, 14

—P—

Partnerships ..................................................... 3

People ............. 3, 50, 57, 62, 83, 95, 104, 108

Physical evidence ............48, 81, 95, 103-104

Place ........................................ 90, 95, 100, 102

Price ........................................... 83, 90, 95, 100

Private limited companies (Ltd) .............. 3, 5

Private sector ........................................... 1-2, 6

Process(es) ..................................... 95, 104-105

Product(s) ................. 6, 11, 58, 90, 95-96, 121

Professional bodies................................. 17, 21

Promotion............................................... 90, 111

Public limited companies (PLC) ............... 3-7

Public sector organisations .................... 31-39

—Q—

Quangos ........................................................ 33

—R—

Rainforest Café .................76-77, 89, 100, 147

RATER model ............................................ 51-52

Reichheld, F.F. ............... 95, 110, 120, 121-122

Relationship lifecycle model ...................... 79

Relationship marketing ............................... 90

Research ........................................70, 124, 131

Retail companies ......................................... 11

—S—

Self-service ..................................... 95, 106-107

Service companies ...................................... 11

Service profit chain (SPC) .................. 109-111

Service profit cycle .................... 110-111, 120

SERVQUAL model ................... 49-52, 145, 148

Shareholders ............................................... 3, 7

SMEs .............................................................. 1, 9

Social enterprises ............................. 17, 24, 26

Social networks/media .................. 48, 72, 86,

95, 112-113, 125

Social value creation ............................ 17, 25

Sole traders ........................................... 1-3, 5, 7

Staff ................... 10, 20, 59, 110, 125, 142, 147

Stakeholders ....................................... 27-28, 36

—T—

Touchpoints ..................................... 71-73, 148

Trade unions ............................................ 17, 20

—U—

User Generated Content (UGC) ...... 125-127

—V—

Value creation ........................................ 67, 75

Value proposition ...................... 95-96, 99-101

Voluntary sector ........................................... 18

—Z—

Zero moments of truth (ZMOT) ....... 71, 73, 75

Index