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CHAPTER 1 SUPPLEMENTARY MATERIAL Example for Retail Transformation For example 10 000 square foot Dylan s Candy Bar in New York City features a Tootsie Roll topiary a wall of Pez dispensers ten pound chocolate bars and old candy ads on T V screens throughout the store Store owners estimate that customers spend more than 34 minutes in the store and average 18 per receipt far more time and money than is spent in the usual candy store or candy section of a larger store Chuck Salter Mom Look Cool Fast Company November 2003 p 47 Example for Disintermediation Amazon is taking disintermediation further by featuring some goods in distinct stores or categories Four stores so far are gourmet food sporting goods jewelry and watches These stores collect items from other merchants occasionally alongside goods already sold by Amazon The senior VP of Omaha Steaks which is one of the larger names in Amazon s gourmet food store says If you want to buy a boar filet or a tomato sauce that s only available in the Northeast suddenly you have access to a variety of small companies that are well known in a region but who have no way to get a deal with Kroger or Wal Mart This actually disintermediates to use a word you haven t heard in a while Bob Tedeschi E Commerce Report The returns are early but the new categories of stores on A are showing signs of promise The New York Times December 22 2003 p C7 Marketing Memo A CSR Checklist If a business case is to be advanced for corporate social responsibility CSR initiatives the organizational fit with any given rationale requires close scrutiny Here are some of the questions that should be asked by a company planning to develop a more socially responsible version of an existing project How likely is it that these improvements would be in advance of a regulatory requirement to be instituted in this industry There might be advantages from developing and launching the product ahead of a change in regulations How responsive is the company s customer base to CSR Would customers be willing to pay more for the new product If the firm s customer base is CSR responsive but unwilling to pay more would the improvement provide a sustainable advantage relative to competitors Could it easily be copied Adapted from N Craig Smith Corporate Social Responsibility Whether or How California Management Review 45 4 p 52 CHAPTER 2 SUPPLEMENTARY MATERIAL Examples for Marketing Strategy Implementation Marketing strategy also requires a clear understanding of how marketing works Take Johnson Intel is diversifying and spreading its energies among several emerging markets and technologies including 32 and 64 bit microprocessors and mobile device chip sets Sources David L Margulius Paul Otellini and Wayne Rash Intel turns 35 Now what InfoWorld July 21 2003 p 51 1 Amy Barrett Staying on Top Business Week May 5 2003 pp 60 68 4 Figure Cheerios Cost Breakdown Costs as percentage of total sales Data Source UBS Warburg Kim Cross Fill It to the Brim Business 2 0 March 6 2001 pp 36 38 Advertising 6 Labor 5 Shipping keeping house for show instead of comfort is over and giving up taste for nutrition is no longer acceptable 6 Stress hard to beat e g more people claim that they are concerned about getting enough rest 7 Reciprocity is the way to go e g more people agree that Everybody should feel free to do their own thing 8 Me 2 e g people express need to live in a world that is built by me not by you Yankelovich maintains that the decade drivers for the 2000 s will primarily come from baby boomers and Generation X ers Baby boomers born between 1946 and 1964 will be driven by four factors adventure fueled by a sense of youthfulness smarts fueled by a sense of empowerment and willingness to accept change intergenerational support caring for younger and older often in nontraditional arrangements and retreading embracing early retirement with a second career or phase of their work life Generation X ers born between 1965 and 1976 will be driven by three factors redefining the good life highly motivated to improve their economic 7 well being and remain in control new rituals returning to traditional values but with a tolerant mind set and active lifestyle and cutting and pasting balancing work play sleep family etc Source Yankelovich conference presentation 8 MARKETING INSIGHT SMART CARDS AND ELECTRONIC DEVICES WILL REVOLUTIONIZE PAYMENT Today many people make their payments with credit or debit cards from Visa Mastercharge American Express and other card issuers In the United States alone consumers have over 1 billion credit cards Each card has a magnetic strip containing a limited amount of information Some years ago telephone companies started to issue prepaid phone cards which stored a specified amount of value and could be inserted into slots in public phones to make phone calls Consumers benefited by not needing coins when making a phone call The issuers benefited by investing the prepaid money into earning assets Smart cards have moved beyond such single use prepaid cards Smart cards carry a computer chip that can store up to 32 kilobytes of data They have the advantage of housing data on the card s chip with no need to access the store s computer in a time consuming dial up connection Many applications can be loyalty based A cardholder pays for his coffee by putting his smart card in his favorite coffee shop s smart card reader and a slip comes out saying that this coffee is his twentieth cup and therefore free A cardholder uses his smart card to pay for his dress shirt purchase at a favorite department store and a slip comes out offering a 20 percent discount on any ties that he buys Smart cards mean that consumers no longer need to carry multiple cards and can use them for both online and off line shopping Consumers can install a smart card reader that enables them to make secure online purchases from home They insert the smart card into the reader type in their password and complete the transaction Smart cards can even be used for low cost purchases such as fast food vending machine and public transportation purchases The use of smart cards is growing fast particularly in Asia and Europe In Germany over 70 million smart cards serve as identification and payment methods for health insurance holders Consumers in England and France use smart cards to decipher scrambled television signals from subscription services In America American Express had issued 6 million of its smart equipped Blue cards by 2001 and Visa had issued 1 5 million smart cards An alternative to the smart card is the use of cellular phones or Palm like appliances to send an infrared signal to complete a transaction The consumer pays a restaurant bill by clicking the appliance in the direction of the restaurant s terminal thus transferring funds from his or her bank account to the restaurant s bank account or the consumer approaches a Coke vending machine clicks a Palm and a Coke drops out Sources Patricia Sabatini Getting Smarter for Years All In One Smart Cards Have Been on the Horizon Pittsburgh Post Gazette July 1 2001 Europeans Prove Themselves Adept with Smart Cards Associated Press February 2 2001 Visa Issued 42m Smart Cards Worldwide New Straits Times April 13 2001 CHAPTER 5 SUPPLEMENTARY MATERIAL 9 QVC It s important to note that companies who don t offer goods so closely tied to their brand as Harleys can do more harm than good in upselling That s the view of home shopping giant QVC John Hunter QVC s senior VP of customer service says that At QVC we run the opposite way from customer relationship management companies that want to teach us how to sell a screwdriver to someone who bought a diamond ring Although cross selling and upselling can be appropriate and effective under the right conditions we ve found that maximizing the sale generally doesn t help to achieve customer loyalty and repeat purchases Building trust and consistency in consumer relationships is the key to success in the retail business QVC never upsells more than 15 percent of its customers in a given month never makes more than one offer a month to a customer and offers only products that are related to what the customer is buying Source John Hunter I Want My QVC Want customers trust John Hunter QVC s senior VP of customer service advises using technology to build long term relationships not to maximize today s sales CIO June 1 2003 pp 42 44 Ameritrade The discount brokerage service Ameritrade provides detailed information to its customers which helps to create strong bonds It provides customized alerts to the device of the customer s choice detailing stock movements and analysts recommendations The company s Web site permits online trading and provides access to a variety of research tools Ameritrade developed an investing tutorial called Darwin that it offered free on CD ROM to its customers Customers responded to this new focus on their needs Ameritrade grew from fewer than 100 000 accounts in 1997 to 2 9 million in 2003 10 Source Rebecca Buckman Ameritrade Unveils Index That Tracks Customer Trends Wall Street Journal December 2 1999 For a contrast see Susan Stellin For Many Online Companies Customer Service Is Hardly a Priority New York Times February 19 2001 Nintendo Worldwide leader and innovator in creating interactive entertainment Nintendo Co Ltd of Japan is universally recognized for its deep and loyal fan base Now the company has re designed its N Web site to feature a three tiered loyalty program that rewards three different types of players for their site participation with exclusive news and insider information at the same time that it solicits useful feedback All visitors to the site can become MyNintendo Members who receive email surveys and e newsletters By registering at least one Nintendo product MyNintendo Members become Nsiders and get access to hidden game content cheat codes and other valuable information By participating frequently at the Nsider level the most dedicated customers are admitted into the inner circle of fans Sages These influencers receive premium content moderate forums and even get to preview new Nintendo games Source Nintendo Rewards Its Customers with New Loyalty Program Three Tiered Online Program Lets Nintendo Customers Voices Be heard Business Wire December 10 2003 11 MARKETING INSIGHT THE NUMBER ONE NUMBER YOU NEED TO GROW It took two years of research to figure out that a single survey question can in fact serve as a useful predictor of growth But that question isn t about customer satisfaction or even loyalty Rather it s about customers willingness to recommend a product or service to someone else In fact in most of the industries that I studied the percentage of customers who were enthusiastic enough to refer a friend or colleague correlated directly with differences in growth rates among competitors In short a customer feedback program should be viewed not as market research but as an operating management tool Consider Enterprise Rent A Car By concentrating solely on those most enthusiastic about their car rental experience Enterprise focused on a key driver of profitable growth customers who would not only return to rent again but also recommend Enterprise to their friends However it took Enterprise a while to learn this vital fact Its initial effort to track customer loyalty yielded a long unwieldy research questionnaire one that included the pet questions of everyone involved in drafting the survey It captured average service quality on a regional basis interesting but useless since managers needed to see scores for each individual branch to establish clear accountability Over time the sample was expanded to provide this information And the number of questions on the survey was sharply reduced which simplified the collating of answers and allowed the company to post monthly branch level results almost as soon as they were collected 12 The company then began examining the relationships between customer responses and actual purchases and referrals This is when Enterprise learned the value of enthusiasts Customers who gave the highest rating to their rental experience were three times more likely to rent again than those who gave Enterprise the second highest grade When a customer reported a neutral or negative experience marking him as a potential detractor the interviewer requested permission to immediately forward this information to the branch manager who was trained to apologize identify the root cause of the problem and resolve it The measurement system cost more than 4 million per year but Enterprise made such significant progress in building customer loyalty that management considers it one of the company s best investments Yet despite the system s success CEO Andy Taylor felt something was missing Branch scores were not improving quickly enough and a big gap continued to separate the worst and best performing regions Taylor s assessment We needed a greater sense of urgency The management team decided that field managers would not be eligible for promotion unless their branch or group of branches matched or exceeded the company s average scores That s a pretty radical idea when you think about it giving customers in effect veto power over managerial pay raises and promotions The rigorous implementation of this simple system had a clear impact on business As the survey scores rose so did Enterprises s growth relative to its competition Taylor cites the linking of customer feedback to employee rewards as one of the most important reasons Enterprise has continued to grow even as the business became bigger and arguably more mature 13 For a measure to be practical operational and reliable that is for it to determine the percentage of net promoters among customers and allow managers to act on it the process and results need to be owned and accepted by all of the business functions And all the people in the organization must know which customers they are responsible for The path to sustainable profitable growth begins with creating more promoters and fewer detractors and making the net promoter number the percentage of customers who are promoters of a brand or company minus the percentage who are detractors transparent throughout the organization This number is the one number you need to grow It s that simple and that profound Source Adapted from Frederick K Reichheld The One Number You Need to Grow Harvard Business Review December 2003 pp 46 54 14 MARKETING MEMO CRM MARKETING GUIDELINES A transaction marketer is interested in securing a current transaction and maximizing his margin A CRM marketer is interested in building a long term relationship that produces satisfaction for the customer and profitability for the company The CRM marketer hopes to understand each customer well enough to be able to make the right offer at the right time using the right channel s The CRM marketer makes offerings based on the customer s profitability purchasing behavior channel preference profile propensities and privacy preferences The CRM marketer does not treat customers equally but appropriately 15 MARKETING MEMO PRINCIPLES OF CUSTOMER LOYALTY Frederick Reichheld maintains that even though high loyalty companies may be diverse they have several things in common exemplary leaders who are committed to engendering and retaining loyalty and relationship strategies based on the following principles Preach what you practice It s not enough to have the right values You must clarify them and hammer them home to customers employees suppliers and shareholders through your words and deeds Play to win win If you are to build loyalty not only must your competitors lose Your partners must win Be picky At high loyalty companies membership is a privilege Clarify the difference between loyalty and tenure Keep it simple In a complex world people need small teams to simplify responsibility and accountability They also need simple rules to guide their decision making Reward the results Save your best deals for your most loyal customers and save your best opportunities for your most loyal employees and partners Listen hard talk straight Visit call centers Internet chat rooms and anywhere else customers offer feedback Make it safe for employees to offer candid criticism Survey employees Explain what you ve learned and communicate the actions that will be taken 16 Source Frederick F Reichheld Lead for Loyalty Harvard Business Review July August 2001 76 84 CHAPTER 6 SUPPLEMENTARY MATERIAL The Direct Marketing Association has taken a strong stand on marketing to children on the Internet For its guidelines see Marketing Insight Internet Ethics for Targeting Kids MARKETING INSIGHT INTERNET ETHICS FOR TARGETING KIDS As the Internet emerged as a major source for marketing sales and distribution of products and services during the 1990s concern grew about millions of children who had on line access by the end of the decade The Children s Online Privacy Protection Act COPPA which took effect in April 2002 specifically protects the privacy of children under the age of 13 by requesting parental consent for the collection or use of any personal information The main requirements of the Act that a website operator must comply with include 1 Incorporation of a detailed privacy policy that describes the information collected from its users 2 Acquisition of a verifiable parental consent prior to collection of personal information from a child under the age of 13 3 Disclosure to parents of any information collected on their children by the website 4 A right to revoke consent and have information deleted 17 5 Limited collection of personal information when a child participates in online games and contests 6 A general requirement to protect the confidentiality security and integrity of any personal information that is collected online from children Congress intent in passing the Act was to increase parental involvement in childr
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