Chapter 7

Customer focus
Customer focus is a business philosophy that places the customer at the center of all business
development and management decisions. It is a marketing approach also, that involves products and
services to be developed around consumer’s preferences. Difference between traditional marketing and
RM is in the way customers are perceived and valued. Traditional marketing stands accused of treating
customers as pawns in a competitive game. By its very nature, this ‘market focused’ approach is seen to
concentrate on increasing market share and emphasizing short- term profitability .RM, in contrast, focuses
not on what we can do to our customer but on what we can do for our customer and what we can do
with our customer, to ensure customer satisfaction. The aim is to treat our customers as valued partners,
to establish their needs and develop their loyalty through quality service.

Customer focus motivation

The development of relational strategies may be seen, in part, as a recognition that the balance of power
has shifted from producer to consumer and that many of the strategies of the past are no longer
appropriate. Buyers of today are more knowledgeable, less naïve than in the past. If the core product or
service offering leaves little scope for competitive advantage then competitive advantage must be found
elsewhere. To this end the development of a ‘relationship’ with your customer may be the most effective
way of building something unique and sustainable that your competitor will find difficult to replicate. The
realization of the importance of the customer-focused approach in service marketing, over and above the
market focus, was a major factor in further promoting the relationship marketing concept.

Customer service and RM

From the earliest days of relationship marketing research, customer service has been regarded as a core
component in the RM process. Christopher et al. (1991, p. 4) saw relationship marketing as the unifying
concept that brought the individual concepts of customer service, quality and marketing together. It was
their judgement that one of the biggest challenges to an organization was to bring these three critical
areas into closer alignment Christopher et al. suggest that customer service, quality and marketing

work in harmony with:

■ customer service levels being determined by research-based measurement of customer needs and
competitor performance, and in recognition of the needs of different market segments;

■ quality being determined from the perspective of the customer based on regular research and
monitoring;

■ the total quality concept influencing the process elements associated with the marketing concept.
Traditional marketing, they suggest conceived these three elements as independent ‘rather like spotlights
shining on a stage and beaming light, often of different intensity at different points on a stage’. The task
facing the organization, they suggest, is to bring about an alignment of the three ‘beams’ so that the
impact upon the customer is more effective. Their conviction was that the point of overlap best describes
what RM is all about

Customer service, therefore, can be seen as playing an important role in the realization of RM strategies.
Its influence at the macro level is complemented by its importance at the micro level of individual
relationships and interactions. At this end of the scale customer service may be seen as being concerned
with the building of relationships (Clark, 2000, p. 213) through the management of an ongoing sequence
of episodes. These episodes, it is suggested, require analysis on an episode by episode basis as well as at
the long-term relationship level to establish the success or otherwise of customer service strategies. The
influence of customer service at the macro and micro levels emphasizes that, although RM takes a holistic
view of relationships, it should not ignore the importance of the constituent parts.

Building customer relationships

Relationships rarely develop overnight. Relationships evolve, sometimes over a great amount of time.
During this period customers may be seen to move through stages of development. Dwyer et al. identified
five general phases through which relationships evolve with each phase representing a major transition
in how parties regard one another (see Figure 7.3). This model may apply to both business-to consumer
and business-to-business relationships and there is likely to be considerable variation in the length of each
stage dependent on the type and purpose of the relationship. The phases are:
■ awareness;■ exploration;■ expansion;■ commitment;■ dissolution.

Awareness refers to one party’s recognition that the other party is ‘a feasible exchange party’. Interaction
has yet to take place but there may be considerable ‘positioning’ and ‘posturing’ to enhance each other’s
attractiveness.

Exploration This refers to the ‘search and trial period’ in the relational exchange. It is in this phase that
potential relational partners consider the ‘obligations, benefits and burdens’ of the relationship. Trial
purchases may be made but ‘the exploratory relationship is very fragile in the sense that minimal
investment and interdependence make for simple termination’ (Dwyer et al., 1987, p. 16). The exploration
phase is conceptualized in five self-explanatory subprocesses:

■ attraction (i.e. why is this likely to be a worthwhile relationship?);

■ communication and bargaining;

■ development and exercise of power;

■ norm development

■ expectation development (i.e. what do we want from the relationship?).

Expansion

Expansion refers to the continual increase in benefits obtained by the exchange partners and their
increasing interdependence. The critical distinction between this and the previous phase is that ‘the
rudiments of trust and joint satisfaction established in the exploration stage now lead to increased risk-
taking’

Commitment

Commitment refers to the implicit or explicit pledge, made by the partners, to continue the relationship.
At this stage the benefits include the ‘certainty’ developed from mutually anticipated roles and goals, the
‘efficiency’ established as a result of bargaining and the ‘effectiveness’ that comes from trust.

Customer/supplier dissolution or exit

Although many RM models imply continual customer development these fail to acknowledge that some
relationships will be terminated.5 In the real world there is always the possibility of dissolution of, or ‘exit’
from, a relationship.

If the concept of relationship breakdown is examined more closely it may be seen

to include three distinct types:

■ dissolution;

■ customer exit;

■ supplier withdrawal.
Dissolution suggests some form of agreed separation. This can be either where both parties
agree that it would be in their best interests to go their separate ways or where one party (usually
the more powerful of the two) forms this view and the other acquiesces.

Customer exit is where the customer decides to end the relationship. Unlike dissolution, the
supplier has little input into the final decision although they may use argument or incentives in
an attempt to prevent it. Exit may be most prevalent where competition is high and many
alternative sources of supply exist.

As the phrase implies, supplier withdrawal is where the separation is at the instigation of the
supplier. In our earlier definition of relationship marketing it was suggested that terminating
relationships was part of the RM marketing process (see Chapter 2). Without doubt, some (many,
perhaps, in certain industries or companies) customers are definite loss-makers. Supplier
withdrawal or termination, as we noted previously, may be managed in two ways. The first is
‘customer de-selection’ or ‘adverse selection’ and customer database to reduce unprofitable
customers.
Description of factors in complex return on relationship model
Perceived service quality: Customer’s cognitive evaluation of the service across episodes compared with
some explicit or implicit comparison standard.

Perceived sacrifice: Perceived sacrifices (e.g. price, physical effort) across all service episodes in the
relationship compared with some explicit or implicit comparison standard.

Perceived value: Service quality compared with perceived sacrifice.

Customer satisfaction: Customer’s cognitive and affective evaluation based on the personal experiences
across all service episodes within the relationship.

Customer commitment: The parties’ intentions to act and their attitude towards interacting with each
other; high relationship value will affect commitment positively.

Relationship strength: Measured both as purchase behaviour and as communication behaviour (word of
mouth, complaints). Loyalty (repetitive purchase behaviour), which is based also on positive commitment
by the customer, indicates a stronger relationship .The bonds between the customer and the service
supplier also affect the behaviour.

Bonds: Exit barriers that tie the customer to the service provider and maintain the relationship. These are
legal, economic, technological, geographical, time, knowledge, social, cultural, ideological and
psychological bonds.

Critical episodes: Episodes that are of critical importance for the continuation of the relationship.
Episodes can be critical based on the size of the values exchanged during the episode compared with the
parties’ resources and based on the experiences during the episode.

Patronage concentration: The share of a customer’s cash-flow in a certain industry in which the customer
chooses to concentrate on one provider.

Relationship longevity: The length of the relationship.

Episode configuration: The episode types and number of each type that occur over time in the
relationship between a provider and a customer.

Relationship revenue: The total revenue generated from a customer relationship during a fiscal year.

Relationship costs: The total cost incurred from serving a customer relationship – including direct and
indirect costs – during a fiscal year.

Relationship profitability: Relationship revenue minus relationship costs.

 CHAPTER 08

Internal marketing
Internal marketing is based on the idea that customers’ attitudes toward a company are based on
their entire experience with that company, and not just their experience with the company’s
products. Any time a customer interacts with an employee, it affects their overall satisfaction.
Everyone from a sales clerk to an over-the-phone tech support specialist helps to shape that
customer's experience. Therefore, customer satisfaction is deeply dependent on the performance
of a company's staff.
For example, Apple has a unique organizational culture that emphasizes innovation, creativity, and
expertise. In order to promote this culture, they are highly selective when they recruit employees
and extremely thorough when they train them. Apple realizes that the best way to promote the
image of their brand is for every employee, particularly the ones who work with customers, to
accurately represent that image. Anyone who has been to an Apple store knows that the employees
are experts in the products they sell and are willing to answer an endless number of questions.
They are smart, accessible, and knowledgeable, positively reflecting the company as a whole
Internal marketing, in the general sense, is seen to describe ‘any form of marketing within the
organization which focuses attention on the internal activities that need to be changed in
order that marketing plans can be implemented. It can be broadly interpreted as those activities
that improve internal communications and customer consciousness among employees, and the link
between hose activities and external marketplace performance.
Internal marketing focuses on the three-core value-adding activities:
# Innovation, effective processes and customer support, and building networks which design in
quality

Customer–employee interface
Recognition of the importance of the employee–customer interface has, in large part, promoted
interest in internal marketing. Research suggests that the quality of relation- ships a company has
with its customers is largely determined by how employees at the front line make customers
feel .It is also suggested that where the customer–supplier interface is more immediate, the internal
climate has a strong impact upon employee satisfaction and customer retention .Contact employees
are one of the means of communication with customers through which it expresses its business
orientation.
Internal marketing is a holistic concept

Internal marketing is perceived as a holistic approach to the business in general but to HRM and
marketing in particular. As internal interactions inevitably occur between departments in
organizations, organizational dynamics are of particular relevance to both the service products and
service delivery .Indeed, it is perceived as so important to the success of an operation proposes
that marketing in the future should be presented and taught from this holistic perspective and be
truly integrated with other functions of the firm. In practical terms this would encompass HRM
policies designed to attract, select, train, motivate, direct, evaluate and reward personnel. Indeed,
extend this influence to other parts of the organization by breaking down the traditional functional
barriers that exist in many companies. so this is a change from ‘marketing management’ to
‘marketing-orientated company management’.

Internal marketing benefits

 Internal marketing focuses on the three-core value-adding activities, innovation, effective
processes and customer support, and builds networks which design in quality
 It involves retaining customer-conscious employees and the development of employee
empowerment to better satisfy the needs of the customer. Internal partnerships reflect the
belief that if management wants its employees to deliver an outstanding level of service
to customers, then it must be prepared to do a great deal for its employees
 Internal marketing, therefore, is seen as a requirement for the successful imple mentation
of the internal partnership concept and, ultimately, of RM.
 the goal is to promote the development of the new culture, to persuade employees that it is
sensible to buy into the new vision and to motivate them to develop and implement RM
strategies. In this way internal marketing partnerships become a core business philosophy
rather than solely the preserve of the marketing department.
Human resources in organization

Over the past few decades, firms have begun to recognize that, more often than not, the limiting
factor to their success is far more predicated on the availability of satisfactory skilled people than
the availability of other resources such as capital or raw materials. Studies on the major concerns
of managers back up the importance of internal resources. They show employee communication
and involvement, the redesign of business processes and the importance of the perceived
relationship between employees and customer satisfaction as being top of managers’ hit-lists.

Nowhere is the importance of human assets more evident than in service operations, many of which
can no longer be valued on the basis of their physical assets but on the basis of ‘intellectual capital’.
This intellectual capital, according to Gummesson (1999, p. 190) comes in two types:
■ individual capital;
■ structural capital.
Individual capital
Individual capital covers the employees and their qualities, including knowledge, skills and
motivation, plus the individual’s network of relationships inside and outside the company.
Structural capital
Structural capital, as we have noted previously (see Chapter 3), is the embedded knowledge
inseparable from its environment and which does not evaporate when an employee leaves. This
includes established relationships, the climate and culture, systems, contracts, image and branding.
Core competencies, based on specific knowledge, reside in the organization’s staff and the systems
that it has developed (Doyle, 1995, p. 28). As the success of ‘individual capital’ development has
the potential to enhance ‘structural capital’, maintaining the former is crucial. The firm has a
responsibility, therefore, to develop company-specific skills and to motivate its staff to harness
these skills energetically to deliver superior value to the customer

Teamwork
one of the key factors contributing to any discrepancy between service quality specifications and
the actual service delivered is poor teamwork. It is the existence of ‘functional silos’ that are seen
to act independently and with little coordination that is frequently the major cause both of
disagreement and ‘non-goal congruence. Many companies have centralized marketing and sales
staff, who might be called ‘full-time marketers. These employees do not, however, represent all
the marketers and salespeople the firm has at its disposal has coined the phrase ‘part-time
marketers’ (PTM)
Employee influence on customers

Contractors: Contractors have frequent or periodic customer contact and are heavily involved
with ‘conventional’ marketing activities, including sales and customer service roles. They should
be well versed in the company’s marketing strategy, well trained and motivated to serve the
customer on a day-to-day basis. They should be recruited based on their potential to respond to
customer needs and evaluated and rewarded on this basis.
Modifiers: Modifiers, while not directly involved with conventional marketing activities, have
frequent customer contact. This group includes receptionists, accounting staff, delivery personnel,
etc. Modifiers should have a clear view of the organisation’s marketing strategy and the part they
play in it. They should be trained in the development of customer relationship skills and monitored
and evaluated on this basis.
Influencers: Influencers are involved with elements of conventional marketing, but they have
infrequent personal contact. They are, however, very much part of the implementation of the
organisation’s marketing strategy. Roles include research and development, market research, etc.
A major skill to be nurtured here is ‘customer responsiveness’. Influencers should be evaluated
and rewarded according to customer-orientated performance standards. Opportunities to meet
customers in a programmed way may be also be valuable.
Isolateds : Although these employees have neither regular contact with customers nor regular
input into conventional marketing activities, their performance could affect successful fulfilment
of the company’s marketing strategy. Included in this category, for example, are staff members
from personnel and data processing departments. The appropriate attention should be given to
maximising the impact of their activities on marketing strategy and they should be rewarded
accordingly
Organizational climate and organizational culture:
The climate and culture of an organisation are dependent on how the employees view that
organisation and its goals (Hogg et al., 1998, p. 881). In particular, they affect both how the
individual perceives his or her role within the organisation and how those roles relate to the wider
operation of the organisation with its environment. Internal marketing and the development of
internal partnerships suggest the creation of an organisational climate where cross-functional
quality improvements can be sponsored and worked upon by the people whose job processes are
involved.
• climate: the policies and practices that characterize the organization (and, in turn, reflect
its cultural beliefs).
• culture: the deep-seated, unwritten system of shared values and norms within the
organization

Empowerment
Empowerment lies at the heart of the relationship-based company. An important driver towards
empowerment strategies came from the difficulty of non-homogeneity of delivery in service
markets and the need for speedy decision-making at the customer interface. According to Bowen
and Lawler the more enduring the relationship, and the more important it is in the service package,
the stronger the case for empowerment. The firm must be able to create an intra-organisational
environment in which employees are flexible and prepared to take decisions without referring back
to management. Empowerment, however, appears to have been the second-choice solution. In the
1970s, in a bid to overcome the non-homogeneity difficulty, companies (e.g., McDonald’s) took a
‘productionline’ approach to services. Through duplication of activities, simplification of tasks
and clear divisions of labour, companies were able to keep organisational control and produce
efficient, low-cost, high-volume service operations with satisfied customers. This system would
appear to work well in highly repetitive and relatively simple operations (e.g. fast food outlets or
FMCG retailers). It is, however, one of the oft-repeated social criticisms of the move from
manufacturing economies to service-led economies that skilled jobs are being replaced by low-
paid and little-skilled service operations. In general, however,it is the rules and lines of authority
which most restrict the innate personal skills of employees being fully (and satisfactorily) realised.
Empowerment, therefore, according to Tom Peters, is necessary to ‘dehumiliate’ work by
eliminating those policies and procedures of the organisation that demean and belittle human
dignity.
Operationalizing empowerment
Bowen and Lawler (ibid.) define ‘empowerment’ as the sharing, with front-line employees, of
four organisational ingredients that in process services and many product industries would be in
the hands of senior managers. These are:
1. information about organisational performance;
2. rewards based on organisational performance;
[Link] that enables employees to understand and contribute to organisational
performance;
4. power to make decisions that influence organisational direction and performance.

There has to be investment in proper customer-focused staff training to enhance such different
skills as industry knowledge, customer service, communications, presentation and teamwork.
When managers in organisations establish policies, procedures and behaviour that show concern
for the organisation’s customers they are, according to Schneider ‘service enthusiasts. This
contrasts strongly with managers interested simply in systems maintenance and routine adherence
to uniform operating guidelines and procedures .

Empowerment benefits and cautions

Empowerment has a number of perceived benefits. According to Bowen and Lawler (1992, pp.
32–3), it results in:

1. quicker online response to customers’ needs during service delivery;

2. quicker online response to dissatisfied customers during service recovery;
3. employees feeling better about their jobs and themselves;
4. employees interacting with customers with more warmth and enthusiasm;
5. empowered employees being a great source of service ideas;
6. great ‘word of mouth’ advertising and customer retention.
The development of internal strategies requires a three-stage approach:

1. The organization has to demonstrate a commitment to the security and development of its
employees that ranks at least equal to that of its shareholders.
2. The organization has to create a structure where functional barriers are torn down. It will
have ‘flatter’ organizational levels, empowerment for front-line staff and will focus efforts
on the three core value-adding processes of operations, customer support and innovation.
3. Top management must then provide leadership by reinforcing these values and offering a
vision of what the organization will become.

Reynoso and Moores suggest that implementing an internal customer approach involves a number
of processes. These include the creation of internal awareness, the identification of internal
customers and suppliers, the identification of the expectations of the former, the communication
of those expectations to internal suppliers and the development of a measure of internal customer
satisfaction and feedback mechanisms. The danger inherent in all of these proposals is that internal
marketing may be limited in what it contributes to the wider issues of organizational culture as it
all too often defaults to an internal communications exercise.