Page 155 - Marketing Management

132 PART 3 CONNECTING WITH CUSTOMERS

Home Depot When Home Depot decided to expand into the contractor sup-
ply business, while also cutting costs and streamlining operations in 1,816 U.S. stores, it
replaced many full-time workers with part-timers who soon made up about 40 percent of
store staff. The chain’s ACS index of customer satisfaction dropped to the bottom among
major U.S. retailers, 11 points behind customer-friendly competitor Lowe’s, and its share
price slid 24 percent during the biggest home improvement boom in
U.S. history. To turn the company around, new management simplified
operations. Store managers were given three goals to achieve—
cleaner warehouses, stocked shelves, and top customer service. The
200+ e-mails sent from the corporate office on a typical Monday were
replaced with one—the rest of the information was made available
online. In a new practice called “power hours,” on weekdays from 10 AM
to 2 PM and all day Saturday and Sunday, employees were to do nothing
but serve customers. To make sure the new strategy stuck, performance
reviews were changed so store employees were evaluated almost
entirely on customer service. 40

Quality is clearly the key to value creation and customer satis-
faction. Total quality is everyone’s job, just as marketing is
everyone’s job. “Marketing Memo: Marketing and Total Quality”
outlines the role of marketing in maximizing total quality for
the firm.
Home Depot instituted a number
of changes in its operations to Maximizing Customer
improve customer service and
satisfaction.
Lifetime Value

Ultimately, marketing is the art of attracting and keeping profitable customers. Yet every company
loses money on some of its customers. The well-known 80–20 rule states that 80 percent or more of
the company’s profits come from the top 20 percent of its customers. Some cases may be more
extreme—the most profitable 20 percent of customers (on a per capita basis) may contribute as
much as 150 percent to 300 percent of profitability. The least profitable 10 percent to 20 percent, on
the other hand, can actually reduce profits between 50 percent to 200 percent per account, with the
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middle 60 percent to 70 percent breaking even. The implication is that a company could improve
its profits by “firing” its worst customers.

marketing
Memo Marketing and Total Quality

Marketers play several roles in helping their companies define and deliver • They stay in touch with customers after the sale to ensure they are, and
high-quality goods and services to target customers remain, satisfied.
• They correctly identify customers’ needs and requirements. • They gather customer ideas for product and service improvements
and convey them to the appropriate departments.
• They communicate customer expectations properly to product designers.
• They make sure customers’ orders are filled correctly and on time. When marketers do all this, they make substantial contributions to total
quality management and customer satisfaction, as well as to customer and
• They check that customers have received proper instructions, training, company profitability.
and technical assistance in the use of the product.