Podcast
Questions and Answers
In market-oriented management, what is the primary objective when managing for profitability?
In market-oriented management, what is the primary objective when managing for profitability?
- Focusing on long-term financial sustainability.
- Maximizing sales volume irrespective of cost. (correct)
- Prioritizing market share over profit margins.
- Achieving the highest possible quarterly revenue.
Which action would LEAST contribute to fostering a customer-centric focus throughout a business?
Which action would LEAST contribute to fostering a customer-centric focus throughout a business?
- Regularly soliciting and acting on customer feedback.
- Empowering employees to resolve customer issues independently.
- Implementing a strict, inflexible service protocol across all interactions. (correct)
- Designing products and services based on customer insights.
What is the most significant implication of neglecting competitor orientation in a dynamic market?
What is the most significant implication of neglecting competitor orientation in a dynamic market?
- Inability to anticipate and respond to competitive threats.
- Increased focus on internal innovations and efficiencies. (correct)
- Reduced operational costs due to lack of benchmarking.
- Enhanced brand loyalty due to perceived market leadership.
Why might a business choose to 'destroy marketing bureaucracy' as part of its market-oriented management strategy?
Why might a business choose to 'destroy marketing bureaucracy' as part of its market-oriented management strategy?
What is the most direct consequence of a company failing to measure and manage customer expectations effectively?
What is the most direct consequence of a company failing to measure and manage customer expectations effectively?
What critical element distinguishes the 'marketing concept' from a traditional sales-oriented approach?
What critical element distinguishes the 'marketing concept' from a traditional sales-oriented approach?
What implication can be drawn from the statistic that '40% of business leaders admit their organization doesn't know their customers well'?
What implication can be drawn from the statistic that '40% of business leaders admit their organization doesn't know their customers well'?
How does the American Marketing Association (AMA) define marketing?
How does the American Marketing Association (AMA) define marketing?
What is the fundamental premise behind the statement that 'the only constant thing is change' in the context of market orientation?
What is the fundamental premise behind the statement that 'the only constant thing is change' in the context of market orientation?
What is the primary advantage of cross-functional coordination in delivering customer satisfaction?
What is the primary advantage of cross-functional coordination in delivering customer satisfaction?
What is the MOST likely outcome of using a Customer Satisfaction Index (CSI) score of 72 without further qualitative analysis?
What is the MOST likely outcome of using a Customer Satisfaction Index (CSI) score of 72 without further qualitative analysis?
A company with a high Customer Retention rate (CR) MOST likely experiences which of the following?
A company with a high Customer Retention rate (CR) MOST likely experiences which of the following?
If a company's Customer Retention rate (CR) is 80%, what is the expected Customer Lifetime (N), assuming N = 1 / (1 - CR)?
If a company's Customer Retention rate (CR) is 80%, what is the expected Customer Lifetime (N), assuming N = 1 / (1 - CR)?
What is the MOST significant drawback of solely relying on Net Promoter Score (NPS) as a measure of customer satisfaction?
What is the MOST significant drawback of solely relying on Net Promoter Score (NPS) as a measure of customer satisfaction?
Which of these statements BEST reflects the relationship between customer satisfaction, loyalty, and lifetime value?
Which of these statements BEST reflects the relationship between customer satisfaction, loyalty, and lifetime value?
Imagine that a business's customer satisfaction declines. According to Figure 1-6 from the source material, this is most likely to result in:
Imagine that a business's customer satisfaction declines. According to Figure 1-6 from the source material, this is most likely to result in:
What is the MOST accurate interpretation of the formula for Customer Loyalty Index (CLI): CLI = (Customer Satisfaction) * (Customer Retention) * (Customer Recommendation)?
What is the MOST accurate interpretation of the formula for Customer Loyalty Index (CLI): CLI = (Customer Satisfaction) * (Customer Retention) * (Customer Recommendation)?
You want to calculate the annual value of satisfied customers. You know that their number of visits to your store per week is 2.5, their average purchase per visit is $6.72, and there are 52 weeks in a year. Which of these correctly applies the formula?
You want to calculate the annual value of satisfied customers. You know that their number of visits to your store per week is 2.5, their average purchase per visit is $6.72, and there are 52 weeks in a year. Which of these correctly applies the formula?
In the example provided, a cohort of 'highly satisfied customers' is compared to a cohort of 'satisfied customers', where a discount rate of 10% is applied. Given this rate, and information from the table, which of these options represents the most complete calculation of the total lifetime value?
In the example provided, a cohort of 'highly satisfied customers' is compared to a cohort of 'satisfied customers', where a discount rate of 10% is applied. Given this rate, and information from the table, which of these options represents the most complete calculation of the total lifetime value?
Imagine you're calculating the net present value of future cash flows, with a discount rate of 11%. If a cash flow of $100 is expected to be received three years from now, what discount factor should be applied to calculate its present value?
Imagine you're calculating the net present value of future cash flows, with a discount rate of 11%. If a cash flow of $100 is expected to be received three years from now, what discount factor should be applied to calculate its present value?
Dell computers enjoyed a 14% cost advantage and a 13% price premium in the mid-2000's, yet its stock lost half of its market value during this time. Which of the following concepts BEST explains this turn of events?
Dell computers enjoyed a 14% cost advantage and a 13% price premium in the mid-2000's, yet its stock lost half of its market value during this time. Which of the following concepts BEST explains this turn of events?
What is the MOST direct result of pressure for short-run results, when little or no focus is given to the customer?
What is the MOST direct result of pressure for short-run results, when little or no focus is given to the customer?
Imagine a business that boasts an extremely satisfied customer base. According to Figure 1-4, this would MOST directly translate into:
Imagine a business that boasts an extremely satisfied customer base. According to Figure 1-4, this would MOST directly translate into:
Refer to Figure 1-8 for the following question. Company X improved marketing efforts, leading to 75% customer retention. Which statement accurately represents net marketing contribution?
Refer to Figure 1-8 for the following question. Company X improved marketing efforts, leading to 75% customer retention. Which statement accurately represents net marketing contribution?
Refer to Figure 1-9 for the following question. Company Z improved marketing efforts, leading to a 5% improvement in customer retention. Which statement accurately represents net profit before taxes?
Refer to Figure 1-9 for the following question. Company Z improved marketing efforts, leading to a 5% improvement in customer retention. Which statement accurately represents net profit before taxes?
What is the primary focus area under 'Customer Focus', a pillar of market orientation?
What is the primary focus area under 'Customer Focus', a pillar of market orientation?
Which of the following actions exemplifies a business embracing a market-oriented approach, particularly in response to changing customer needs?
Which of the following actions exemplifies a business embracing a market-oriented approach, particularly in response to changing customer needs?
What is the overarching goal of a company when it 'defines marketing as market intelligence'?
What is the overarching goal of a company when it 'defines marketing as market intelligence'?
A company implements a new policy where employees are encouraged to directly engage with customers on social media and use that feedback to directly contribute to product development. Considering the three pillars of a market orientation, this is an example of:
A company implements a new policy where employees are encouraged to directly engage with customers on social media and use that feedback to directly contribute to product development. Considering the three pillars of a market orientation, this is an example of:
What is the most accurate description of 'strategic inertia' in the context of market-oriented management?
What is the most accurate description of 'strategic inertia' in the context of market-oriented management?
Jill Soltau served as CEO of JCPenney from 2018 to 2021. Based on your understanding of the challenges JCPenney was facing during that time, what would have been her MOST pressing strategic priority?
Jill Soltau served as CEO of JCPenney from 2018 to 2021. Based on your understanding of the challenges JCPenney was facing during that time, what would have been her MOST pressing strategic priority?
Marc Rosen has been the CEO of JCPenney since 2021, and formerly worked at Levi Strauss & Dockers. Given this background, what strategic direction is he MOST likely to pursue for JCPenney?
Marc Rosen has been the CEO of JCPenney since 2021, and formerly worked at Levi Strauss & Dockers. Given this background, what strategic direction is he MOST likely to pursue for JCPenney?
A business boasts a very satisfied customer segment. All other factors being equal, customer satisfaction will MOST directly result in:
A business boasts a very satisfied customer segment. All other factors being equal, customer satisfaction will MOST directly result in:
A hospital decides to survey patient satisfaction in a more rigorous way to get actionable data, beyond the simple NPS score. Given all you know, each of these is a rigorous means of collecting data EXCEPT FOR:
A hospital decides to survey patient satisfaction in a more rigorous way to get actionable data, beyond the simple NPS score. Given all you know, each of these is a rigorous means of collecting data EXCEPT FOR:
Flashcards
Customer Focus
Customer Focus
A business philosophy focused on meeting organizational objectives by understanding customer needs and delivering satisfaction.
Competitor Orientation
Competitor Orientation
Constantly monitoring competitor's moves, positioning, strategies to maintain an advantage.
Cross-Functional Coordination
Cross-Functional Coordination
Promoting internal communication and collaboration across departments to enhance customer satisfaction.
Marketing (AMA definition)
Marketing (AMA definition)
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Customer focus
Customer focus
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Customer listening
Customer listening
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Continuous Improvement
Continuous Improvement
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Manage for profitability
Manage for profitability
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Customer-defined quality
Customer-defined quality
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Customer Satisfaction Index (CSI)
Customer Satisfaction Index (CSI)
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Customer Retention (CR)
Customer Retention (CR)
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Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV)
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Customer Loyalty Index (CLI)
Customer Loyalty Index (CLI)
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Strategic Inertia
Strategic Inertia
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Why be Market-Oriented?
Why be Market-Oriented?
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Customer Exit.
Customer Exit.
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Guidelines for Market-Oriented Management
Guidelines for Market-Oriented Management
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Study Notes
- Home Assignment 0 (Student Profile) is due by 11:59 PM on Tuesday, September 3 (Week 2).
- Lecture 2 will discuss Market Orientation.
- Assigned reading is Chapter 1, "Market Orientation" from R. Best.
Learning Objectives
- To understand the characteristics and advantages of a market-oriented business.
- To define CSI, CR, LTV, and CLI, including how to calculate and interpret these metrics.
- To analyze the lessons from JCPenney's reinvention failures.
- To discuss whether NPS is a fad or a standard in marketing management.
Market-Oriented Management
- Follows the marketing concept as a main business philosophy.
- Marketing: Activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large, according to the AMA definition.
Guidelines for Market-Oriented Management
- Creating customer focus throughout the entire business
- Listening to the customer
- Defining and nurturing a distinctive competence
- Defining marketing as market intelligence
- Targeting customers precisely
- Managing for profitability instead of just sales volume
- Letting the customer define quality
- Measuring and managing customer expectations
- Building customer relationships and loyalty
- Committing to continuous improvement and innovation
- Managing both culture, strategy, and structure
- Growing with partners and alliances
- Destroy marketing bureaucracy.
Three Pillars of Market Orientation
- External orientation, customer focus, and synergy are the three pillars
- Customer Focus: Meeting organizational objectives by understanding customer needs and delivering customer satisfaction.
- Competitor Orientation: Continuous recognition of competitor's moves, positioning, strategies, and sources of advantage.
- Cross-Functional Coordination: Internal communication and collaboration across departments in delivering customer satisfaction.
Reasons for Businesses to Be Market-Oriented
- Constant change is the only constant
- Customers change in needs, demographics, lifestyle, and behavior.
- Competitors introduce new entrants and technologies.
- Environment experiences shifts economic, political, social, and technological environments.
- Intuiting for change: Sensing where the game is going and position to lead.
Insights from a 2018 Study
- Survey from the Institute for Corporate Productivity and the American Marketing Association with 1,333 business leaders and professionals worldwide
- 40% of business leaders and professionals admitted their organization doesn't know their customers well.
- 35% surveyed admitted their organization doesn't keep their word.
- Only 40% of companies are keeping the promises they make to their workers.
- Top companies are 3.5 times more likely to base promotion decisions, based on employees performing at customer-oriented activities.
- Top companies take advantage of customer feedback almost twice as much as lower-performing businesses
CSI: Measuring Customer Satisfaction
- 0: Very Dissatisfied
- 20: Moderately Dissatisfied
- 40: Somewhat Dissatisfied
- 60: Somewhat Satisfied
- 80: Moderately Satisfied
- 100: Very Satisfied
- Analysis needed what a CSI of 72 really means.
Article Discussion
- Corporate America knows consumers are struggling: Considering how the consumer 'state of being' impacts customer behavior.
- Marketers design products to appeal to consumers in light of their current state of being
American Customer Satisfaction Index (ACSI)
- A resource for measuring and tracking customer satisfaction across various industries.
- The website is located at https://www.theacsi.org/.
Customer Retention and Customer Lifetime
- Customer Retention (CR).
- CR = 1 - 1/N
- CR = 1 - ¼ = 0.75 or 75% is an example calculation.
- Customer Lifetime (N).
- N = 1/(1-CR)
- N = 1/(1-.75) = 4 years is an example calculation
Relationship
- Satisfaction → Loyalty → Lifetime Value ($)
Example of an LTV Calculation
- This example looks at behavior of satisfied vs. highly satisfied clients, and to conclude the lifetime value of each of these two groups of customers
- Proper discount rate coefficients are needed for an LTV (DR=10%).
- Calculation for Satisfied customers:
- Annual value = 2.5*$6.72*52 = $873.6
- Y1 = $873.6*.909 = $794.1
- Y2 = $873.6*.826 = $721.59
- Σ = Y1 + Y2 = $1,515.69
- Calculation for Highly Satisfied customers:
- Annual value = 3.6*$8.62*52 = $1,613.66
- Y1 = $1,613.66*.909 = $1,466.8
- Y2 = $1,613.66*.826 = $1,332.88
Measuring Customer Loyalty
- CLI (Customer Loyalty Index) = (Customer Satisfaction) * (Customer Retention) * (Customer Recommendation)
- All elements of the CLI equation are influential
- Example calculation: CLI = 70 * 0.6 * 0.1 = 0.42
Timeline of JCPenney Leadership
- Mike Ullman, Dec. 2004 - Oct. 2011
- Ron Johnson, Nov. 2011 - April 2013
- Mike Ullman, April 2013 - July 2015
- Marvin Ellison, Aug. 2015 - Oct. 2018
- Jill Soltau, Oct. 2018 - Nov. 2021
- Marc Rosen, Nov. 2021 - Present
- Marc Rosen was at Levi Strauss & Dockers before JCPenney
- Discuss JCPenny's future.
Article Discussion
- Look at changes in JCPenney's strategy with target markets and product selection.
- What is Marc Rosen's strategy, including the intended target market?
- A critical evaluation of Mr. Rosen's implemented action.
Market-Orientation
- Returns on a portfolio of 20 companies with the highest customer satisfaction ratings equals a 40% return
- A S&P 500-stock index equals a 13% return
- Returns exclude transaction costs, calculated for a 5-year period ending 2003.
The Rise and Demise of Dell
- Founded in 1984, the company grew to $56 Bln
- The business model allowed for 14% lower cost per PC vs competition, charging 13% more on average.
- Dell's stock crashed ~50% value between mid 2005 to mid 2006, from $42 to $22 per share
- Possibly happened due to strategic inertia.
No Market Orientation
- Pressure for Short-Run Results is placed on those with little or no customer focus
- Stagnant Shareholder Value
- Accounting Maneuvers Drive Financial Results
- Disappointing Profit Performance.
- High Cost of Marketing
- Unfocused Value Proposition leading to:
- Minimal Customer Satisfaction
- Little or No Customer Loyalty
- High Rate of Customer Turnover.
Customer Dissatisfaction and Customer Exit Rates
- Out of 100 dissatisfied customers:
- 75% Retained
- 4% Complain
- 25% Exit
- 96% Do Not Complain
- 5% Retained
- 95% Exit
- 91 Exit
- Each of 100 unhappy customers tell 8-10 people, making it difficult to retain existing customers.
Article Discussion
- The Dubious Management Fad (NPS)
- What is it?
- What are the disadvantages?
- What are the alternatives?
Factors That Mediate Marketing's Strategic Role
- The factors are:
- Competitive factors affecting a firm's market orientation
- Influence of different development stages across industries and global markets
- Strategic inertia
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Description
Explore market-oriented businesses, their characteristics, and advantages. Define and interpret Customer Satisfaction Index (CSI), Conversion Rate (CR), Lifetime Value (LTV), and Customer Lifetime Income (CLI). Analyze the JCPenney reinvention case and discuss Net Promoter Score (NPS).
