1. Read the text and find the answers to the questions provided below. Text b Customer orientation

A firm in the market economy survives by producing goods that people are willing and able to buy. Consequently, ascertaining consumer demand is vital for a firm's future viability and even existence as a going concern. Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally, there are three ways of doing this: the customer-driven approach, the market change identification approach and the product innovation approach.

In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Constructive criticism helps marketers adapt offerings to meet changing customer needs.Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no reason to spend R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.

A formal approach to this customer-focused marketing is known as SIVA (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus. The SIVA Model provides a demand/customer-centric alternative to the well-known 4Ps supply side model (product, price, placement, promotion) of marketing management.

Product	→	Solution
Promotion	→	Information
Price	→	Value
Place (Distribution)	→	Access

If any of the 4Ps were problematic or were not in the marketing factor of the business, the business could be in trouble and so other companies may appear in the surroundings of the company, so the consumer demand on its products will decrease.

In this sense, a firm's marketing department is often seen as of prime importance within the functional level of an organization. Information from an organization's marketing department would be used to guide the actions of other departments within the firm. As an example, a marketing department could ascertain (via marketing research) that consumers desired a new type of product, or a new usage for an existing product. With this in mind, the marketing department would inform the R&D department to create a prototype of a product/service based on consumers' new desires.

The production department would then start to manufacture the product, while the marketing department would focus on the promotion, distribution, pricing, etc. of the product. Additionally, a firm's finance department would be consulted, with respect to securing appropriate funding for the development, production and promotion of the product.

Today, to implement customer orientation, one-to-one marketing is widely used. It is also known as Customer Relationship Management or CRM, and is based on the idea of treating different customers differently. Companies in all industries today are faced with the double problems of declining customer loyalty and shrinking profit margins. One-to-one marketing strategies enable companies to create long-term, mutually beneficial relationships with customers. These result in greater customer loyalty and improved margins.

‘One-to-one organizations create a customer feedback loop in which they say, ‘I know you. You tell me what you want. I’ll make it - and I’ll remember next time.’ We call this process a learning relationship, and it has four basic implementation steps (IDIC):

• IDENTIFY your customers at all points of contact.

• DIFFERENTIATE between your customers based on their individual needs and value to your organization.

• INTERACT with your customers in a two-way dialogue.

• CUSTOMIZE or TAILOR some aspect of your products or services based on what you learn from your customers.’

CRM technology supports a CRM strategy by gathering, storing and analysing customer data. Front office systems, such as call centres or loyalty cards, gather information directly from clients, which is then stored and processed in a back office system called a database or data warehouse. (A data warehouse contains information from different databases.) Back office systems make it possible for a company to follow sales and fulfill orders.

The marketing department can use software tools to mine the data (analyse the data) stored in the data warehouse. Data mining reveals patterns in customer behaviour. For example, fathers have a tendency to buy branded food products, whilst mothers prefer private labels. Relationship marketers can then tailor or customize their marketing efforts towards the customer. With CRM technology, mass customization is possible. This means that each customer will receive slightly different offers and discounts.

Consumer protection groups or watchdogs are concerned about the gathering and storing of large quantities of customer information. A company should protect its customers’ privacy. Customers may wish to keep their purchases confidential, or secret. Most companies have a privacy policy. They promise not to disclose customer data by revealing it to other people, or to share customer records with other companies. Companies encrypt the information, changing it into a secret code. This ensures that it is not available to people outside the company, and so prevents accidental disclosure of information.

1. How can a firm survive in the market economy?

2. What does customer focus imply?

3. What helps marketers meet changing customer needs?

4. What is SIVA? What does it provide?

5. What does the marketing department do in this sense?

6. What functions do other departments perform?

7. What is Customer Relationship management?

8. What is IDIC?

9. What can you say about mining and gathering information?

10. Why is it important for firms to protect customer’s privacy?