Marketing Strategy and Competitive Positioning pdf ebook

CHAPTER 13 COMPETING THROUGH SUPERIOR SERVICE AND CUSTOMER RELATIONSHIPS
year in Germany from its 95 stores, and the company was ranked bottom of all retailers in 
Germany in an annual customer satisfaction survey. Analysts blamed Walmart’s reluctance 
to adjust its retail model to the demands of German customers. In April 2001, the company 
announced it was scrapping its expansion plans in Germany and would not be launching 
the planned 50 new stores by the end of 2002. In 2006, after eight years of losses, Walmart 
beat a retreat from Germany, selling its stores to Metro, Germany’s leading retailer, losing 
$1 billion in the process. Walmart admitted it had completely misjudged German shopping 
tastes and habits. Being excellent at the wrong service is very expensive ( Piercy, 2009d ). 
Correspondingly, offering a low level of service to a customer group where service has 
a high impact on the outcomes desired (sales, retention, satisfaction) is also risky, unless 
a new market position can be defined and defended around a low-service offer. In many 
situations, an under-serviced position indicates the need to invest more in service level and 
quality. 
Increasingly, in harsh economic conditions and with more demanding customers, the 
conclusion is that we should think in terms of appropriate service and quality strategies, 
that match the most important needs of our target customers but also our ability to deliver. 
The diagram in Figure 13.3 may assist in looking at our competitors and their service-based 
positioning and how well they are doing, and comparing their performance to our own. 
Before reaching conclusions about what works and what does not, it is useful to examine 
the distribution and spread of service-based competition – is high customer satisfaction 
achieved through service and quality or other issues (and if so, which dimensions of service 
and quality or other issues); is low customer satisfaction associated with high or low service 
provision, or is there no clear relationship? Indeed, we might then look at which types of 
firms are doing best in market share and profitability terms. 
There is a danger that executives confuse customer satisfaction, customer loyalty and 
the goals of customer service. Unsurprisingly, the result is many unsatisfied customers, 
disloyal customers and criticisms of customer service delivery. What is worse is a failure to 
identify what levels of customer satisfaction, loyalty and service are needed to implement 
our marketing strategy with these customers. In some cases, the obvious conclusion from 
a company’s performance is that its strategy has failed because poor customer service is 
linked to low customer satisfaction and loyalty and a poor reputation, with adverse effects 
on its performance (sales, growth profitability). But in other cases, high performance may 
be driven by low service levels (typically coupled with lower prices and other benefits). 
Dealing effectively with the service/competitive positioning issue rests on understand-
ing what aspects of customer service are important to the customers who are important to 
us, and aligning service capabilities with these priorities. This relates to where a company 
wants to be in the market compared to competitors and the type of value to be offered to 
different customers. The risk is that not challenging assumptions about service and value 
means we provide services to customers who do not value them, or deny services to our 
target customers because we spread our efforts over all customers. The critical issue is align-
ment between service capabilities and delivery and marketing strategy.
13.3 
Relationship marketing 
In conventional efforts to improve the probability of retaining customers, many organisa-
tions have turned to the techniques and philosophy of relationship marketing. The focus 
of relationship marketing is on building bonds and ties between the organisation and its 
customers to improve feedback and ultimately enhance the prospects of customer loyalty. 
Figure 13.4 shows the classic ‘relationship marketing ladder’, originally developed by 
Payne et al. (1995) . The ladder shows a number of identifiable stages in relationship build-
ing. At the bottom of the ladder is the prospect, or the target customer. The initial emphasis 

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RELATIONSHIP MARKETING
will be to secure the prospect as a customer. To achieve this, marketing effort is concen-
trated on customer catching. Once the customer has been caught, however, the emphasis 
shifts to securing a longer-term, ongoing relationship. While a customer may be essentially 
nameless and have done business with the company once or only occasionally, a client is 
more individual and does business on a repeat basis. Clients may, however, be ambivalent 
or neutral towards the supplier company. Relationship marketing seeks to convert clients 
into becoming supporters – those who have positive feelings towards the supplier, and even 
advocates – those who may actively recommend the supplier to others. The top rung of 
the ladder is partner. At this level, the supplier and the customer are working together for 
mutual benefit. The focus of relationship marketing is moving customers up the ladder, 
finding ways of enhancing the value both parties get from the relationship.
Clearly, not all prospective customers will be equally worth the effort needed to move 
them up the ladder. Critical to a successful relationship marketing strategy is targeting 
customers of sufficient value (current or potential) to warrant the investment in creating 
a relationship with them. IBM, for example, has identified its top 1,000 customers and 
puts great effort into identifying their current and future needs. The firm has combined its 
customer relationship management processes with its opportunity management system and 
ranked these customers according to their estimated lifetime value to IBM. When a high-
ranking customer launches a big project with opportunities for IBM to tender, it is given 
highest priority across the organisation (Eisenstat et al., 2001).
Nonetheless, effective relationship marketing requires sound reasons for the relationship 
on both sides (see Figure 13.5). In some markets, such as rail travel, customers may not see 
advantages in becoming ‘partners’ and may prefer to stay at arm’s length from the supplier. 
One respondent filling in a customer satisfaction questionnaire on a train was overheard to 
say: ‘I wish I could go back to being just a passenger rather than a customer!’
Indeed, in some cases there may be an element of spuriousness about the relationship 
offering made by some companies. From the customers’ perspective, the British Airways 
relationship does not offer more seat room (unless, of course, one qualifies for an increas-
ingly rare upgrade), and the Sainsbury’s relationship does not offer much more than a bribe 
to come back next time. The only tangible aspect of the customers’ relationship with these 
companies seems to be becoming the target of large quantities of direct mail (Piercy, 2009a). 
These inappropriate and often ineffective approaches to relationship marketing can be the