Department of Marketing ManagementCollege of Arts & Sciences

San Beda College

Bachelor of Science in Business AdministrationMajor in

Marketing and Corporate Communications

The Final Paper

The Age of Consumer Capitalism

Re – thinking Marketing

Philipp Gibran A. Cahilig 2CMChttp://philippgibrancahilig.wordpress.com

Prof. L. San JuanCourse Professor

March 23, 2010

Mendiola, Manila

The Age of Customer Capitalism

On the latest edition of Harvard Business Review, an article

titled “The Age of Customer Capitalism” by Roger Martin is both

thought-provoking and exciting because there are so many things

covered on this topic. I may be questioning how I could consider

such a topic exciting, but it truly is. I believe that the

content of this article is correct because of its impact to

consumers.

The ultimate focus of any process improvement endeavor must be

to ‘satisfy customers profitably’. Mr. Martin provides an

historical context for capitalism that begins in the early part

of the 20th century with a call for ‘professional’ business

management, then shifts in the 1970’s to a mandate for

‘shareholder value capitalism’: the premise that the primary

purpose of a corporation is to maximize shareholder wealth. This

is what I learned in consumer behavior, and what an entire

generation has been brought up to believe.

The Six Sigma methodology ran somewhat counter to the

‘maximize shareholder wealth’ philosophy, because it required the

improvement team to start with the Voice of the Customer and

establish effectiveness criteria before moving into efficiency

improvement. I saw the consistency and oneness of this article

when I began researching and reading the articles in the sales

organization, where the number one customer requirement was ‘on

time delivery’. The Age of Customer capitalism article claims

that we are on the verge of a new business era in which customer

value must be the top priority, with shareholder value as a sub-

tier deliverable. In this new era, business leaders would first

be rewarded on how well they met customer needs. I learned that

somewhat, this article is related to economics because this

article points out that to have your focus on providing customers

higher value seems obvious, but if you spend much time in

finance, you see that even the accounting principles that run the

business focus executives on shareholder value rather than

customers. It's time for wholesale change. The focus on the

customer is a step in the right direction.

It will also provide a valuable product or service to a

customer at a reasonable price and do the most good in the world

you can do. There's a recipe for a business that will likely

survive even the biggest economic downturn.

The big idea of this article is the time to discard the

popular belief that corporations must focus first and foremost on

maximizing value for shareholders. That idea is inherently, and

tragically, flawed.

The argument is it’s impossible to continually increase

shareholder value, because stock prices are driven by

shareholders’ expectations about the future, which cannot be

raised indefinitely.

What the data shows is that the focus on shareholder value

hasn’t done shareholders any favors. They have actually earned

lower returns since corporations adopted it as their guiding

principle.

If I would suggest a better approach, the thing would be, make

customer value the top priority.

Re Thinking Marketing

Again, I believe that this article is “correct” because the

article correctly identifies a fundamental shift in marketing

that custom publishers have benefited from over the past ten

years. This trend has resulted more than ten straight years of

increases in custom publishing spending by marketers while mass

media advertising has fallen dramatically. The secret that custom

publishing “gets” is that customers today expect to interact

deeply with companies, and with each other to shape the products

and services they consume. It is the customer who has the control

to determine whether a product is successful and no amount of

traditional advertising can change that.

In order to be successful, this article points out that companies

must shift their focus to building their long-term relationships

with their customers rather than trying to “influence or push”

customers to buy. It’s about understanding the complex needs of

customers, nurturing them, cultivating them and retaining them

for the long run. I do believe that smart marketers are shifting

from measuring product profitability to measuring customer

profitability. Just as importantly, traditional marketing goals

like brand equity and market share are being replaced by new

objectives like customer equity and customer lifetime value.

It points out customers, rather than product objectives have been

the core of custom publishing for more than a decade. The essence

of custom publishing has always been focused on building long-

term relationships between marketers and their customers. The

unique ability that custom content has enhances customer

relationships and increase lasting loyalty is the secret to

custom publishing’s successful growth. With the explosive growth

of digital delivery channels giving customers instantaneous

access to content as well as each other, custom content providers

will continue to flourish as more and more marketers shift from

pushing individual products to building long-term customer

relationships.

Companies have powerful technologies for understanding and

interacting with customers, yet most still depend on mass media

marketing to drive impersonal transactions.

These changes shift the firm’s focus from product

profitability to customer profitability, as measured by metrics

such as customer lifetime value and customer equity. This

organizational transformation will uproot entrenched interests

and so must be driven from the top.

Review of Related Literature and Studies

This Review of Related Literature supports the two articles

on how correct the two articles is, There are several articles

that supports and prove that the Age of Customer Capitalism and

Re thinking Marketing is CORRECT.

Maslow Hierarchy of Needs

I really see this as a significant inflection point in the

way companies treat customers. More importantly, how customers

look at companies.  The concierge analogy is really about

creating a team of people whose job it is to lean forward into

the world.  So, I would think about the significant model.

It’s their job (the company or firm’s job) to get out and engage

with their customers in every way that they can to anticipate the

problems that customers have and try and solve them.  You are not

just waiting for a customer to ask you about ‘Why did this break

and how can I get a new one.’ Now you’re out there and you’re

talking to your customers and you’re saying, “Have you tried

this?” “Have you tried that?” “Have you ever tried using our

products with this other product because that works pretty well?”

It’s really a different mindset, one that is much more about

leaning forward—I keep using this phrase—leaning forward into

your customer base, engaging with them, anticipating what it is

they need, finding out what it is that they want, and giving it

to them before they even ask. And that’s a very different way

about thinking about customer service.”

I would also think about the current economic downturn, the

Hierarchy of Customer Service becomes even more important.  As

companies scale back expenses, the temptation is to operate at

the first level of the pyramid where operational efficiencies are

easily measurable and cost control is the modus operandi.  This

type of “customer breakdown” is often easy to justify because the

value accrued from extra contact with customers isn’t visible in

the contact center thus, it more often falls to sales, marketing,

PR, and product development units.  The misunderstanding between

where value is created and where it’s measured in the enterprise

has been a problem for a while, but now customer choice and a

more frugal market will punish companies that operate at the

bottom of the hierarchy.   As wallets tighten and customers are

increasingly discriminating about who they spend their money

with, they are likely to seek out companies that are adding value

and operating at the top of the pyramid.

Theodore Levitt’s Marketing Myopia

During the past half century, marketers generally have

heeded Levitt's advice to avoid "marketing myopia" by focusing on

customers. The problem is that, the Firm’s argue that they

learned this lesson too well, resulting today in a new form of

marketing myopia, which also causes distortions in strategic

vision and can lead to business failure. The New Marketing Myopia

stems from three related phenomena, First of them is a single-

minded focus on the customer to the exclusion of other

stakeholders, Secondly, an overly narrow definition of the

customer and his/her needs; and lastly a failure to recognize the

changed societal context of business that necessitates addressing

multiple stakeholders. I have learned to illustrate these

phenomena and then offer a vision of marketing management as an

activity that engages multiple stakeholders in value creation,

suggesting that marketing can bring a particular expertise to

bear.

Rational Behavior and Economic Behavior

Rational behavior as defined by George Katona is a great

factor on how it can affect the decision of the consumer to buy.

Rational behavior can affect consumers because of some simple

principles. These principles are the principle of complete

information and foresight, the principle of complete mobility,

and the principle of pure competition. These principles affect

the decisions of the consumers because it will change their

motivation to buy.

According to the article of Katona in the study of rational

behavior, he defined it as a process of decision -making. It is

also related to the economic behavior and how it affects the

decision of the customer to buy. It talks about the behavior of

the customers when they are in the same situation. The question

is how they will buy and what they will do when they are in the

same situation.

Problem-solving behavior talks about on how they will make

an alternative of how they will make a decision on buying. It

talks about on how we will know what the choice of the customer.

It is important that we know what the next action of the

customer will be. For example, in studying the economic behavior

of the customers, we can see that if a customer saw that the

price of the product is too high for him or too expensive, it

will make his decision not to buy the product because of the high

priced product. The status of our economy is also important

because it can affect the decision of the consumers to buy.

Our buying behavior is very much influenced by our social

behavior, which in turn is mostly determined by hardwired

reflexes. That is what makes it so hard to predict what will sell

and what will not. We buy things because they make us look cool,

intelligent or well informed. We buy things because our ego

drives us to want to imitate others. We buy things even though we

know they are not good for us, and we do not buy things that are

proven to have a positive effect on our condition. We buy things

without the latest bells and whistles because we hate change. We

buy things because we want to belong.

When we buy things, we do not act as rational beings.

Sure, we buy things based on recommendations from others, and

avoid things that people bad mouth. But it goes further than

that, we buy things based on the behavior of the people who

bought the same product, and more importantly based on the

behavior of others who are observing the original buyers.

Measuring Hedonic & Utilitarian Sources of Consumer Attitude

The distinction between esthetic and utilitarian products or

value judgments does not appear to have been a concern to those

attitude theorists who have had major influence on consumer

researchers.

I learned that it is useful to make a distinction between

utilitarian and hedonic motives underlying consumption decisions.

These motives form two of the three aspects of attitudes toward

behavioral acts. Utilitarian aspect of an attitude toward a

behavior relates to usefulness, value, and wiseness of the

behavior as perceived by the consumer.

It is anticipated that the utilitarian and hedonic aspects

are normally positively correlated. For example, most cognitive

balance theories would predict that.

It is also hypothesized that the utilitarian and hedonic

aspects of attitudes together determine the third attitudinal

construct that I call the general aspect of an attitude. This

third aspect comes closest to the traditional notion of attitude.

It relates to the general pro or con orientation toward the

behavior. Is the behavior seen as good or bad, positive or

negative? The reason I do not conceptualize this general aspect

to be the sole or even the cent al part of the e- all attitude

construct is because I hypothesize that the hedonic ant/or the

utilitarian aspects have also a direct impact on behaviors. Their

impact is not totally mediated by the general this is especially

likely to be the case when the same behavior takes place under

different circumstances. The demands of the situation and the

mood of the individual affect the relative influences.

Rediscovering Market Segmentation by Yankelovich and Meer

As customer advocates, we know not everyone is predisposed to

act based on the customer intelligence we deliver to them. We

also know that external motivators like incentives based on

customer surveys are rarely effective. But we can convert most

people to taking self-motivated action on the intelligence we

provide them. The idea is that you only achieve action after

building awareness, understanding, and belief in the information

you are presenting. And the only way you can lead someone through

these stages is by having their trust.

Involve respected, trustworthy people from every key function

and department in the company. These people will find it much

easier to sell their colleagues on the importance of your

customer intelligence. And you will also get some key feedback to

make the information you gather more applicable to their

departments.

Show people proof that customer intelligence can help them

achieve their own goals.

Treat them like partners. You can learn as much from them as

they can from you.

Communicate clearly and effectively. There are a lot of good

ideas on our blog related to this topic.

Allow field tests. If someone doubts the usefulness or impact of

the information, devise a simple test or pilot program to help

prove it. This is not always possible, but it can often work if

you think creatively about it. Proper segmentation must come up

on this.

Projective Techniques in Marketing Research

Understanding motivation in the marketing of products and

services is obviously very important. Today’s research questions

have generated a need for a richer, deeper understanding of the

marketplace.

More and more we hear management asking research to clarify

today’s more savvy consumers’ practical wants and needs as well

as to unearth the emotional elements that drive them to brand

selection.

Most consumers, particularly in a testing environment, are

more comfortable expressing their socially acceptable, functional

and rational needs than their feelings, which may be judged by

others and themselves as impulsive, selfish, risky or wrong. In

psychological terms, people often censor unconscious needs and

motivations before allowing them to surface, in order to avoid

the discomfort or self-judgment experienced when these feelings

emerge.

This is unfortunate, as very often the driving forces in any

purchase strategy are based on these very same underlying

feelings and perceptions.

Projective Techniques are aimed at recovering the thoughts,

images and fantasies associated with motivation and our emotional

side in a manner which circumvents the censoring we all do to

preserve our self-esteem and avoid anxiety.

Qualitative and Quantitative methods in Market Research

Quantitative research is especially useful in product

development as a way of confirming findings through qualitative

research. For example, you may conduct customer visits or market

research and uncover some unmet needs. You may want to conduct a

survey of a wider group of customers to confirm your findings and

get more input on specific aspects, such as how important this

need is and the cost to the customer of not being able to

currently solve this problem.

Many inexperienced product managers have little if any

background in any sort of market research techniques. They may

rely on the standard techniques — usually surveys and focus

groups — whenever research needs to be conducted. Product

managers may not even realize that there are other methods

available or may not understand why you would use one method over

another.

To generalize, qualitative research is usually better for

exploring, understanding, and uncovering, while quantitative

research is generally better for confirming and clarifying.

If you are trying to discover unmet needs that consumers can

not articulate, there is no way that a survey asking respondents

to rank items from 1-10 will offer any insight.

However, that method would make sense if you re think have a

good idea about priorities for features and you want to get

confirmation from a large sample set.

Similarly, if you want to determine whether a market exists

for a new product idea and whether consumers would be willing to

pay for the product, a single focus group with 6 participants

will not provide the information you need. Instead, that would be

a useful approach to take if you are trying to understand

underlying issues, preferences, and factors that could be helpful

in defining a potential solution.

Consumer capitalism did not necessarily need to be experts

in conducting qualitative and quantitative research, though some

experience is certainly useful. More important, however, is that

product managers understand the fundamentals of both types of

research, their applications and their limitations.

It is related to The Age of Customer Capitalism because, In

order to boost the market, you need to research about your

customers.

Rethinking Marketing in Toyota Documents

It is very related in the two articles I’ve read because

it’s impact is great in customer capitalism. In capitalism, your

first responsibility should be to serve the customer. Now we have

news that Toyota was ecstatic because they conned the National

Highway Traffic Safety Administration over safety issues. They

even had projections how much money they saved by not properly

addressing brake problems.

In any business, if you take your eye off the ball of

serving the customer, the marketplace will teach you a lesson.

Toyota spent a generation building up brand equity and then their

internal corporate culture fouled it all up.

Toyota now must survive in the short-term by discounting.

You'll see special lease deals behind the scenes and offers of

zero-percent financing. Clark has typically spoken out against

leases, but when you can get a special manufacturer-subsidized

one like Toyota will have to do, they can be a real deal.

BIBLIOGRAPHY

Boddy:”Projective Techniques in Market Research”

Buskirk: “Chapter 4 and 5 of Why People Buy”

Court: “Evolving Role of the CMO”

Donoghue: “Projective Techniques in Consumer research”

Golafshani: “Understanding reliability & validity in qualitative

research”

Hussey and Hooley: “The diffusion of quantitative methods into

Marketing management”

Jick: “Mixing qualitative and quantitative methods”

Katona, George: “Rational behavior and economic behavior”

Levitt, Theodore: “Marketing Myopia”

Mathison: “Why Triangulate”

McKinsley: “Measuring the Hedonic & Utilitatrian Sources of

Consumer Attitudes”

McKinsley: “The Varieties of Consumption Experience”

Toyoda: “Toyota”

Vargo / Lush: “Evolving to a new dominant logic of marketing”

Vargo / Lush: “The Four service marketing myth”

Yankelovich, Daniel: “Rediscovering Market Segmentation

Yeager: “Innovative motivational”