5 Managing a market-led organisation
5.1 Managing relationships
You should now understand that markets and the customers within them are the responsibility of all managers within an organisation. An organisation needs to identify what will create extra value for its customers, and design a value-driven operating system that will concentrate all its efforts on producing it. This process of going to market involves the organisation in managing the relationships between itself and its customers and competitors, and also in the co-ordination of the organisation's inter-functional activities.
This section investigates the importance of managing these key relationships to the overall success of the organisation.
To become a market leader in the 21st century, an organisation has to progress from ‘marketing department marketing’ to a value-driven culture that incorporates market orientation throughout the business. Doyle (1998) explains that the move from a marketing plan to a market culture involves managing relationships that are beyond the control of the marketing department. These relationships are key to adding value to the firm's product/service offering and, ultimately, to the success of the company (I'm using success here rather than profitability because, as I have discussed, there are some organisations that do not have profit-making objectives).
You have probably heard the term ‘relationship marketing’, which has emerged as common terminology in the 1990s. It has been used to describe everything from the handful of loyalty cards in your credit card case and the monthly sales call of the office supply salesperson, to the unsolicited junk mail that falls through your letterbox. It has evolved from the vast expansion of customer profiling data (lifestyle and census data), financial data, and to the increasing power and speed of data processing and transmission. Using technology to link huge collections of electronic point-of-sale (EPOS) data gives organisations the ability to speak one-to-one with their customers and suppliers. Natasha Murrell, global Internet site manager for British Airways, explains:
We are aiming for a one-on-one interaction with our customers and you can't do that if your information is stored in pots which are remote and inconsistent. We used to have six or seven global databases, but now we have one, from which we can provide a consistent customer experience.
However, relationship marketing is much more than this. The concept has grown from studies of industrial and service marketing of the 1980s and focuses on managing a series of ‘network interactions’ that create long-term customer relationships. Piercy (1997) identifies four such relationships to be considered when managing market-led organisations.
He identifies the key relationship-marketing issue as the refocusing of marketing effort: moving activities away from a marketing mix that creates a series of one-off transactions, to managing a complex network of relationships involved in the production of the whole consumer offering. The following table contrasts these two types of marketing.
|Transactional marketing||Relationship marketing|
|Focuses on single sales||Focuses on customer retention|
|Oriented to product features||Oriented to customer value|
|Short timescales||Long timescales|
|Little emphasis on customer service||High customer service emphasis|
|Limited customer commitment||High customer commitment|
|Moderate customer contact||High customer contact|
|Quality is primarily the concern of the production/service department||Quality is the concern of all|
The four key relationships identified by Piercy occur in both manufacturing and business organisations, and include networks of business systems, supply chains and virtual networks all working together to create the value proposition for the customer.
Suppliers, shareholders, customers and employees are not rivals for the battle for profits – they are partners, and will be more successful once they learn to work together.
(Egan and Thomas, 1998)
Example 6 Royal Mail
If you live in the UK, you probably use the services of Royal Mail. Although you don't see much of Royal Mail's activities other than the familiar red vans on the road and the postman at your door, the scale of operations is enormous. Identifying the key relationships is vital to the smooth running of its services. The letter service handles 76 million letters a day, collected at 210,000 points and feeding into 26 million delivery points in the UK alone. As you can imagine, the logistics chain offers plenty of scope for things to go wrong. A mail delivery is collected, taken to one of 74 outward mail centres, distributed via a network of 55 trains, 37 aircraft and 7500 long-distance lorries, and passed through a network of mail centres, local distributors and eventually delivered to the customer's door.