How can marketing planning contribute to a firm’s success in the market ?

The firm should firstly make a marketing planning, this planning Is a central plan to: Utilize
and integrate organization’s resources, Carry out organization’s mission, Achieve desired
goals and objectives.
It Determines the nature and future direction of each business unit. The firm should build
branding strategy that select the right combination of name, symbol, term, or design that
identifies a product. This strategy can help the firm target the consumers, it is also the
critical to production identification and the key factor in differentiating a product from its
competition. Also, differentiation creates differences in firm’s product offering that set it
apart from competing offerings. The firm should set its own specific positioning, creates a
mental image of product offering and its differentiating features in the minds of the target
market. Product differentiation refers to the process in which a company changes products
that are basically the same in order to convince consumers that they are different and thus
have different preferences. At the same time, in forming the elements of the product entity
or in the process of providing the product, the enterprise creates a particularity sufficiently
different from other similar products to attract buyers, thus leading to consumer preference
and loyalty. Therefore, product differentiation is of great significance to enterprises'
marketing activities. Also ， CRM is a business strategy of an enterprise. It organizes
enterprise resources effectively according to customer segmentation, cultivates customer-
centric business behaviors and implements customer-centric business processes, and uses
this as a means to improve the profitability, income and customer satisfaction of the
enterprise. In addition，In order to successfully implement supply chain management and
truly become a competitive weapon, we should abandon the traditional management idea
and regard various businesses within and among node enterprises as a whole functional
process to form an integrated supply chain management system. Through information,
manufacturing and modern management technology, the three elements related to human,
technology and management in the production and operation process of an enterprise are
organically integrated and optimized for operation. Moreover ， Enterprise culture is the
general term of enterprise personality consciousness and connotation, which can be
reflected by enterprise organizational behavior. Enterprise culture is the soul of the
enterprise and the inexhaustible power to promote the development of the enterprise. It
contains a very rich content, and its core is the spirit and values of the enterprise.
b. The strategic goal is the expectation of the main results of the enterprise's strategic
business activities. The establishment of strategic goals is the expansion and concretization
of enterprise purpose, and also the specific provisions of the level to be achieved for the
enterprise to carry out strategic business activities in the established strategic business
field. Evaluation and demonstration. After the strategic goal is drawn up, various experts
and related personnel should be organized to evaluate and demonstrate the proposed goal
program. Argumentation and evaluation should be conducted around whether the target
defense line is correct or not. We should focus on the research on whether the proposed
strategic goal is in line with the enterprise spirit, the overall interests and development
needs of the enterprise, and the external environment and future development needs.

How can customer-focused planning help a firm build customer-centric capabilities?

Example。

Define your target customers, and understand their needs across each stage of your
relationship lifecycle and their unique journeys as they interact with your company. Learn
how customers feel about interacting with your company by listening to them regularly,
acting on what you learn, and incorporating insights into decision making.

Customer analytics is a process by which data from customer behavior is used to help make
key business decisions via market segmentation and predictive analytics. This information
is used by businesses for direct marketing, site selection, and customer relationship
management. Marketing provides services in order to satisfy customers. With that in mind,
the productive system is considered from its beginning at the production level, to the end of
the cycle at the consumer. Customer analytics plays an important role in the prediction of
customer behavior.

Building relationships with customers is a way to increase customer lifetime value, improve
customer retention, and reduce marketing costs. Just a 5% increase in customer retention
can improve the profitability of a business up to 75%. Through relationship marketing,
businesses are able to establish strong bonds with their customers, leading to customers
who are more willing to engage, purchase, and advocate.

Customer satisfaction is a measurement of a customer’s attitude toward a product, a

service, or a brand. It’s usually measured by a customer satisfaction survey on a numerical
scale. Customer loyalty is a set of behaviors and attitudes that a customer exhibits that
demonstrate loyalty to a product, service, or brand, such as repeat purchases or choosing
the brand over a competitor.

The metrics assess customer relationships are Sales Calls,Sales Cycle Duration,Marketing
Campaign ROI,Cross-selling and Up-selling,Customer Retention Rate,Lifetime Customer
Value. Set and quantify your business goals.Define CRM strategies and tactics.Specify
corresponding CRM measures. Link business goals to strategies and define the appropriate
CRM metric.

The hotel industry, as a typical service industry, is undergoing profound changes in its
business philosophy under the impact of the new economic wave. If the local hotel industry
wants to have a foothold in the global business, it must take the concept of "customer focus"
as the hotel business. In the hotel industry, customer focus is to understand customers,
constantly meet their needs, improve their service quality and competitiveness, and then
obtain profits. In order to integrate the core customer information separately in sales,
marketing, finance, customer service, technology and other departments, hao hotel takes
the approach of core customer information input into consideration.  

In the actual operation of marriott hotel, the information provided by the customer
relationship management system can be well used by every employee. In addition, the
theory of customer relationship management can be well conveyed and instilled in every
employee in each department. Employees attach equal importance to the concept of
"customer focus". Customer relationship management safeguards include the improvement
of customer information database, customer information collection, collation, analysis,
feedback, customer tracking and customer care and satisfaction survey. Improving the
safeguards of customer relationship management will help marriott hotel to correctly grasp
the consumption psychology, timely understand the differentiated needs of customers, and
increase the satisfaction and loyalty of customers to the hotel. Through the information
provided by the customer relationship management system, we can provide personalized
services to customers, so that customers can feel valued. As a hotel manager, the
recognition of customers from a macro perspective can enable the manager to make better
decisions on hotel management policies. Customer tracking and customer care is an
effective way to prevent customer loss. Customer tracking helps the hotel to update
customer information in time and provide personalized services for customers to visit the
hotel again. Timely customer care strengthens the emotional connection between the hotel
and the customer, so that the customer can increase their satisfaction with the hotel and
avoid losing the customer to the competitor. Develop customer loyalty to the hotel. A
customer with high loyalty can bring more customers to the hotel through word of mouth
promotion and subtle relationship marketing.

How can environmental analysis help a firm develop effective marketing strategies?

a. PEST:

PEST analysis is a method used by strategic consultants to help enterprises evaluate the
external macro environment. It refers to the analysis of the macro environment. The
analysis of macro environmental factors will vary according to the characteristics and
operational needs of different industries and enterprises. Generally speaking, it is necessary
to analyze the four external environmental factors that influence the enterprise.
Political factors:
The political environment includes a country's social system, the nature of the ruling party,
the government's policies, policies, laws etc. Different countries have different social
natures, and different social systems have different restrictions and requirements on
organizational activities. Even if the same country with the same social system remains
unchanged, the government's policy characteristics and policy tendency's attitude and
influence on the organizational activities are constantly changing in different periods due to
the differences of the ruling party.
Economic factors：
The economic environment mainly includes two aspects: macro and micro.
Macroeconomic environment mainly refers to a country's population and its growth trend,
national income, gross national product and its changes, as well as the level and speed of
national economic development that can be reflected by these indicators.
Microeconomic environment mainly refers to the factors such as the income level,
consumption preference, saving situation and employment degree of consumers in the area
where the enterprise is located or serves. These factors directly determine the current and
future market size of enterprises.
Sociocultural Factors：
The social and cultural environment includes the residents of a country or region, such as
education level and cultural level, religious belief, customs and habits, aesthetic views,
values, etc. The level of culture will affect the demand level of residents. Different people
have different levels of acceptance of the product. For example, if a country has a high level
of national culture, then people are more likely to accept the product.
Technological Factors:
In addition to examining the development and changes of technological means directly
related to the activities of enterprises in their fields, the technological environment should
also be timely understood: Technology transfer and technology commercialization speed;
Patent and its protection, etc.
B．PORTER 5F
Customer analysis
Power of suppliers
An industry that produces goods requires raw materials. This leads to buyer-supplier
relationships between the industry and the firms that provide the raw materials. Depending
on where the power lies, suppliers may be able to exert an influence on the producing
industry. They may be able to dictate price and influence availability. A segment is
unattractive when an organization’s suppliers have the ability to:
 Increase prices without suffering from a decrease in volume
 Reduce the quantity supplied
 Organize in a formal or informal manner
 Compete in an environment with relatively few substitutes
 Provide a product/material that is a critical part of the end product or service
 Impose switching costs on their customers when they depart
 Integrate downstream by purchasing or controlling the distribution channels.
One example of this is DeBeers’ ability to wield influence within the diamond industry.
DeBeers’ high level of control over some of the most productive diamond mines in the
world gives them extreme power within the industry.

The best defense in mitigating the power of suppliers is to build win–win relationships with
suppliers or arrange to use multiple suppliers.

Competitor analysis

Rivalry

Firms strive to secure a competitive advantage over their rivals. The intensity of rivalry
varies within each industry and these differences can be important in the development of
strategy.

In pursuing an advantage over its rivals, a firm can choose from several competitive moves:

Changing prices

Improving product differentiation

Creatively using channels of distribution

Exploiting relationships with suppliers.

For example, the intensity of rivalry is increased by the following industry characteristics:

Numerous competitors that are particularly strong or aggressive that are competing for the
same customers and resources

Declining sales revenues and volumes resulting in slow market growth, creating the need to
actively fight for market share

High fixed costs result in an economy of scale effect

High storage costs or highly perishable products

Plant capacity is being added, over and above what is needed to meet demand

Low switching costs for buyers

Low levels of product differentiation

Strategic stakes are high when a firm is losing market position or has potential for great
gains
High exit barriers place a significant cost on abandoning the product

A diversity of rivals with different cultures, histories, and philosophies

An industry shakeout

When a rival acts in a way that elicits a counter-response by other firms

Competitors have high stakes – economic and other – and will battle to remain as a player
within the segment. These conditions will make competing within the industry more
challenging, commonly leading to frequent price wars, advertising battles, and the addition
of new products.

Substitute products

Porter’s Five Forces model refers to “substitute products” as those products that are
available in other industries that meet an identical or similar need for the end user. As more
substitutes become available and affordable, the demand becomes more elastic since
customers have more alternatives. Substitute products may limit the ability of firms within
an industry to raise prices and improve margins.

For example, the price of aluminum cans is constrained by the price of glass bottles, steel
cans, and plastic containers. These containers are substitutes, yet they are not rivals in the
same industries. A substitute product to the services offered by a CPA firm is accounting or
tax-based software – two very different industries that offer some of the same consumer
benefits.

The treat of substitutes often impacts price-based competition. There are other concerns in
assessing the threat of substitutes relating to technology. New technologies contribute to
competition though substitute products and services. Think of the impact wireless
technologies have had on traditional telephone service. Except in remote areas it is unlikely
that cable TV could compete with free broadcast TV from an antenna without the greater
diversity of entertainment that it affords the customer.Again, a segment is unattractive
when there are actual or potential substitutes for a product. 替代产品

Power of buyers

The power of buyers describes the impact customers have on an industry. When buyer
power is strong, the relationship to the producing industry becomes closer to what
economists term a monopsony. A Monopsony is a market where there are many suppliers
and one buyer. Under these market conditions, the buyer has the most influence in
determining the price. Few pure monopsonies actually exist, but there is often a connection
between an industry and buyers that determines where power lies.
The bargaining power of buyers increases when they have the ability to:

Be “organized” in some form with others providing similar products and services

Purchase a product that represents a significant fraction of the buyer’s costs

Buy a product that is undifferentiated

Incur low switching costs when they change vendors

Be price sensitive, with other options available

Integrate upstream, to purchase the providers of the goods.

To mitigate the power of buyers, sellers can seek to select buyers with less power to
negotiate, switch suppliers, or develop superior offers that strong buyers cannot refuse.

C ． It's an approach that a business takes to develop a unique product or service that
customers will find better than or in another way distinctive from products or services
offered by competitors. Differentiation strategy is a way for a business to distinguish itself
from the competition.

The customer- focus planning can build a great business fast and cement ties with every
possible ally and client. Take the high ground with brand positioning right away.

4. How should a firm use SWOT analysis in marketing planning?

In today's strategic planning report, SWOT analysis should be a well-known tool, including
analysis of enterprise Strengths, Weaknesses, Opportunities and Threats. SWOT analysis
can help enterprises to focus resources and actions on their strengths and where they have
the most opportunities. And let the enterprise's strategy become clear.

-environmental opportunities and threats：

With the rapid development of economy, science and technology and other aspects,
especially the acceleration of world economic globalization and integration process, the
establishment of global information network and diversification of consumer demand, the
environment for enterprises is more open and turbulent. The change has had a profound
impact on almost all businesses. Because of this, environmental analysis has become an
increasingly important corporate function.
Environmental trends fall into two broad categories: one represents environmental threats
and the other represents environmental opportunities. Environmental threat refers to the
challenge posed by an unfavorable development trend in the environment, which will lead
to the weakening of the company's competitive position if the company does not take
decisive strategic actions. Environmental opportunities are areas that are attractive to
corporate behavior, where the company will have a competitive advantage.
-Strengths and Weaknesses：
When two companies are in the same market or both of them have the ability to provide
products and services to the same customer group, if one of them has a higher win rate or
profit potential, then we believe that one company has a competitive advantage over the
other. In other words, competitive advantage refers to the ability of an enterprise to surpass
its competitors, which helps achieve its main goal -- profitability. But it's important to note:
competitive advantage doesn't have to be all about higher win rates, because sometimes
companies prefer to increase market share or reward managers or employees more.
In the process of maintaining competitive advantage, enterprises must deeply understand
their own resources and capabilities and take appropriate measures. Because once a
company has a competitive advantage in one aspect, it is bound to attract the attention of
competitors. Generally speaking, after a period of hard work, the company establishes a
certain competitive advantage; then it is in a position to maintain this competitive
advantage, and competitors begin to react gradually. Then, if competitors directly attack the
company's advantages, or adopt other more powerful strategies, this advantage will be
weakened.

-How can a firm maintain sustainable competitive advantage?

There are three key factors influencing the duration of enterprise competitive advantage:
 How long will it take to build on this strength?
 What are the advantages to be gained?
 How long will it take for competitors to respond forcefully?
If the enterprises analyze these three factors clearly, they will make clear their position in
the establishment and maintenance of competitive advantage.
Clearly, a company should not try to correct all of its weaknesses or discount its strengths.
The main question is whether a company should study whether it should limit itself to
opportunities that it already has, or whether it should acquire and develop some
advantages to find better opportunities. Sometimes companies grow slowly not because
their divisions lack an edge, but because they can't coordinate well. For example, at a large
electronics company, engineers look down on salespeople as "engineers who don't know
the technology". Salespeople, on the other hand, look down their noses at those in the
service sector as "salesmen who can't do business." Therefore, it is very important to
evaluate the working relationship of internal departments as an internal audit. Boston
consulting group argues that the winning company is the one that gains internal strengths,
not just core competencies. Each company must manage certain basic procedures, such as
new product development, raw material procurement, sales lead for orders, cash realization
of customer orders, time to solve customer problems, and so on. Each process creates value
and requires internal departments to work together. While each department can have a
core capability, managing these superior capability developments remains a challenge.
- WHAT IS BLUE OCEAN STRATEGY? EXAMPLE.
Firms develop strategic focus by developing a strategy that stands apart from the
competition. The blue ocean strategy focuses on expanding the non-competitive market
space and avoiding competition. This strategy creates and meets new needs, and it breaks
the law of reciprocal value and cost. At the same time, this strategy seeks differentiation and
low cost and integrates enterprise behavior into a system.
When the Curves women's fitness club entered the market in Texas state, the market was
already saturated, but the Curves caused an explosion of new fitness demand in the United
States, opening up a whole new huge market. Curves is a group of women who have a lot of
women who want to stay in shape but always fail. At that time, the American market was
full of traditional health clubs, with all fitness programs available. In fact, most women do
not go to the gym for those equipment and opportunities to meet men. Some non-
professional fitness women do not even want to meet men at the gym, so as to avoid the
ugly proud flesh. In fact, they prefer to exercise at home, because of the privacy and comfort
of the home. They go to the gym because it often relaxes themselves at home. Women can
talk to each other while working out at the Curves, and there are no mirrors around the gym
to keep obese women from looking at themselves in the mirror and feeling unweight. They
can't see themselves in the mirror, but instead focus on the feeling of sweating in the gym.
They are full of hope for fitness and weight loss and the joy of exercising. Besides, there are
no men staring at them around. And the Curves can often take just an hour or so to
complete a fitness program, saving customers time and minimizing the impact on their
work and chores. Also，by reducing unnecessary equipment and services and focusing on
common needs with some customers, the Curves cost more than three times as much as
traditional health clubs, which cost $100 a month, compared with $30 a month for the
Curves. The motto of the Curves is to enjoy the health benefits of exercise at the price of one
cup of coffee per day. The Curves are of moderate quality, neither too low nor too luxurious.
Its emergence broke people's understanding of fitness clubs, triggering another fitness
storm in the United States.

What is the incumbent’s curse? Example

A common perception in the field of innovation is that large, incumbent firms rarely
introduce radical product innovations. Such firms tend to solidify their market positions
with relatively incremental innovations. They may even turn away entrepreneurs who
come up with radical innovations, although they themselves had such entrepreneurial roots.
As a result, radical innovations tend to come from small firms, the outsiders. When it comes
to disruptive innovation, big companies are more active.
In fact, this phenomenon is very easy to understand. The real power of disruption comes
not from technology, but from superior user efficiency, especially one that satisfies the
mainstream market. The vanguard of a technology rollout is not necessarily a disruptive
business. Startups are generally good at being technology pioneers, focusing too much on
technical performance and only fitting early tech users. However, subversion requires the
transformation of technological advantages into efficiency that serves mainstream market
concerns. Large enterprises have resources, channels and user insights, so they have more
advantages in carrying out such disruptive transformation. In the LCD market, for example,
the technology pioneer is OptelInc, but samsung is the real disrupter. As a result, the
innovation inertia of large companies is greatly exaggerated, and they are far more likely to
disrupt other businesses than small ones.

How can a firm formulate effective marketing strategies and tactics based on

Demographic

Business owners are always looking for an edge in marketing products and services to
generate more revenue and profit margins. Demographics are a key factor in getting that
edge. The term demographics refers to a statistical analysis of people or a group. What that
really means to a business owner is that it enables they to find the group of people who fit
the mold of the ideal customer and learn the value of different segments of demographic
groups.

Demographics is the study of the traits of different groups for the purpose of targeting
marketing messages. Demographic groups include people of different races, political beliefs
or age groups. A thorough understanding of customer demographics is essential to
successful marketing efforts, because no product will appeal to everyone. If you have a clear
idea of the type of person most likely to use your products and services, then you can tailor
your marketing message, as well as your marketing medium, to appeal to precisely that type
of customer.

Marketing campaigns that appeal to specific demographics start by identifying a target

market. Your product may be specifically designed with a particular demographic in mind,
or you may learn from trial and error that it holds special appeal for a clearly defined age or
ethnic group. Whether your product's demographic appeal is intentional or accidental,
gathering detailed information about who is buying your products will help you to attract
similar customers in the future; customers who will likely purchase your offerings for many
of the same reasons.

Behavioral

Unlike direct marketing, where marketers send the same message to everyone, behavioral
marketing uses information about clients and sends the message to those who may be
interested. Behavioral marketing uses web analytics, computer apps, search history, IP
address for creating user profile of each customer. With this information available, targeted
content and ads are generated for interested users.

For instance, people who visit the travelling section of general news site, will see some
travel agency ads, low cost travel opportunity ads and as they browse to the other sections
of the website, they will start seeing more targeted ads.

Behavioral marketing uses customers’ behavior to shape an awesome marketing plan in a

way that is more effective and profitable.

In general, there are two types of behavioral targeting: network and onsite. For example
network behavioral targeting places an ad for renting apartments in real estate agency
websites, whereas the online behavioral targeting chooses which ads should be displayed to
customers based on their recent search history and their interests.

Understanding of customer

Many businesses fail in their marketing efforts by not following good practices like
retargeting, automated email marketing, reminding your visitors about abandoned carts,
leveraging lead gathering forms, A/B testing, using landing pages, or simply diving deeper
into social media advertising.

In the awareness stage, prospects may not even be aware of the problems they have. They
aren't aware of your brand, and they certainly aren't aware of the solution you have
available to them. They are just looking for answers, resources, education, research data,
opinions, and insight, with no special goal in mind.

In the evaluation stage, prospects are evaluating various choices available to them,
including your competitors. This is usually the time when they are doing heavy research on
whether or not your product or service is a good fit for them and a perfect time for content
that tells them exactly that.

Those that move through the evaluation stage are now presented with the ultimate decision
— to make a purchase or not. And with the help of appropriate content in the right time on
the right place, this decision will be easier to make.

Customer profiling

Customer profiling is a way to create a portrait of your customers to help you make design
decisions concerning your service. The customers are broken down into groups of
customers sharing similar goals and characteristics and each group is given a
representative with a photo, a name, and a description. A small group of customer profiles
or ‘personas’ are then used to make key design decisions with, e.g. “which of these features
will help Mary achieve her goals most easily?”

Unlike typical demographics or segmentation, differences in geography, income, status, etc.

do not necessarily split customers into different groups. For example, when looking to buy
the latest CD by The Kooks for a nephew, a 24 year old single mother of three living in the
south of England will use Amazon in the same way that a married 53 year old senior
executive living in the north of England would do. Their goal is the same, to buy a specific
CD online quickly and easily

Customer profiling should be undertaken to provide information and inform the project
team about the end users and/or customers to allow project decisions to be made from the
typical user’s perspective, or to assist the project team in making customer-centred design
decisions, which will result in a product or service that better meets the customer’s needs
and expectations, and is therefore more likely to succeed.

What is brand equity? What makes some brands more valuable than other ？

Brand equity is firm-centric view of a brand’s value. Marketing and financial value
associated with a brand’s position in the marketplace. Linked to the brand name awareness,
brand loyalty, and brand quality. Brand equity is intangible, with brand name as the core.
Secondly, brand equity influences consumer behavior, including purchase behavior and
response to marketing activities. It depends on the consumer, not the product.

If want to make some brands more valuable than others, Brand recognition is a unique
brand concept that brand strategists are eager to create or protect, which reflects what a
brand is and its implication to customers. The correct brand design will enable enterprises
to establish a good dependence relationship with consumers, obtain the recognition of
audiences, and create a century-old outstanding brand. Brand recognition helps build the
relationship between the brand and the customer by generating a valuable proposition,
including functional, emotional, or value self-representation benefits. Also ， brand should
set an unique positioning, Many brands can be remembered and stand out in the market,
down to their unique positioning for the brand, make the product in the time of the high
homogeneity and differentiation, can be in the minds of consumers to occupy a unique and
advantageous position, when consumer demand of the products or services, enterprise
brand can be chosen candidate brand class of consumers. The content of USP positioning
strategy is to search for the most unique part of the product features that best meet the
needs of consumers, based on the research on products and target consumers. For
example ， L 'oreal Paris contains France's fu rishan SPA mineral water, which locks in
moisture. In addition，Brand differentiation is to distinguish competitors in terms of brand
concept and personality when the market cannot accept excessive segmentation. For
example, Pepsi differentiates Coca Cola with "the choice of new generation", which is an
example of brand differentiation. Brand differentiation requires enterprises to make
necessary strategic transformation from terminal strategy to media strategy.
Moreover ， Brand awareness is a combination of brand recognition and brand
reappearance, which can be described by depth and breadth. The depth of brand awareness
refers to the possibility and difficulty of brand appearing in consumers' mind, which is
related to the possibility of brand being recalled or recognized. The width of brand
awareness refers to the number of specific purchase and use scenarios that can cause the
brand to appear in consumers' minds, which is related to various purchase and
consumption situations in which the concept of brand appears in the brain. A large number
of studies and theories on consumer brand awareness show that to improve consumers'
brand awareness, an effective brand recognition system can be developed and introduced
to increase consumers' opportunities to experience brand products and services, and more
effective advertising methods can be adopted. In fact, sometimes when consumers buy a
brand's products, they not only need to acquire a certain function of the product, but more
importantly, they want to express their value proposition and show their lifestyle through
the brand. If enterprises ignore this point in brand positioning and blindly emphasize
product attributes and functions, which cannot meet more psychological needs of
consumers, they will gradually be eliminated by the market.

How can CRM contribute to satisfactory customer experience ? Example

CRM, customer relationship management, refers to the use of CRM technology by

enterprises to manage relationships with customers. It aims to reduce sales cycles and cost
of sales, increase revenue, and find new markets and channels to expand the business by
improving customer value, satisfaction, profitability and loyalty. CRM is a business strategy
for selecting and managing valuable customers and their relationships. CRM requires a
customer-centric corporate culture to support effective marketing, sales and service
processes. For example ， As a typical service industry, airlines pay more attention to
customer relationship management CRM due to the serious homogeneity of their products
and the fierce competition. Customer relationship management CRM is based on the theory
of customer value. It helps airlines find the most valuable customers through five basic
processes of strategic positioning, customer acquisition, customer identification, customer
maintenance and customer recovery, so as to gain the most benefits for the airlines and
improve the core competitiveness of the company.

Air China implements CRM and establishes and improves hardware and software facilities
to make customers feel convenient and satisfied. It implements the frequent traveler
program to enable business customers to become intimate card members. And the
implementation of major customer plans to meet the needs of enterprise customers, mining
and locking VIP customers, and constantly inspire customers to fly.

What kinds of strategies and tactics can a company use to build customer loyalty?
Example

With the continuous progress of society, people's living standards and quality of life have
been greatly improved, and better requirements have been put forward for the quality of
products or services, which has increased the difficulty of enterprise marketing, and more
effective measures need to be taken to obtain customer satisfaction, so as to obtain loyal
customers.

The prior knowledge and information of the customer about the product or service is the
consumption experience. After each purchase, the customer will evaluate the product or
service. If it is a pleasant consumption experience, the customer will leave a good
impression on the product or service and gain a sense of satisfaction, thus increasing the
possibility that the customer will continue to choose the product or service in the next
purchase.

We know from the connotation of customer loyalty that customer loyalty includes
emotional loyalty, intention loyalty and behavioral loyalty, among which emotional loyalty
can play a decisive role in behavioral loyalty. The higher the loyalty, the greater the role of
emotional loyalty. For example, when making shopping selection, people tend to choose
products of their own nationality, relatives and friends. This is where emotional factors
come into play. Therefore, it is necessary to establish good information and emotional
communication in the marketing process. The better information and emotional
communication, the higher customer loyalty.

The founder of the wal-mart think that "the customer is god", in order to make customers
feel himself as "god" feeling, through the enough varieties, first-class product quality, low
price is the basic way to attract customers, but as is too common, wal-mart through
additional no extra pay, to further consolidate the customer the service, one of the
"customer in any wal-mart stores to buy any goods, can be returned to the store within one
month, and take back all payment for goods" this is very difficult, other retails are not dare
to follow this service, this strategy is enough to reassure customers at walmart shopping
and boost loyalty.

How can supplier partnerships contribute to the buyer firm’s creation of customer
value downstream?
The service profit chain is a chain which shows the relationship between the profit,
customer, employee and enterprise and consists of several links, trying to reveal
theoretically what the service enterprise profit is determined by. The service profit chain
can be vividly understood as a link that links "profitability, customer loyalty, employee
satisfaction and loyalty to productivity. It is a closed chain of circulatory effects, in which
the implementation quality of each link directly affects the subsequent links, and the
ultimate goal is to make the enterprise profitable. The service profit chain puts forward the
concept of "internal service quality of the company", which indicates that if the service
enterprise wants to better serve external customers, it must first be clearly defined as
"internal customers" -- the importance of service for all internal employees of the company.
For this reason, service enterprises must design effective service reward and incentive
system, and create a good working environment for employees, to meet the internal and
external needs of internal customers as much as possible.

For example，Hilton is famous for its excellent system culture, and many of its hotels fully
demonstrate the outstanding management culture of Hilton Hotel company. Hilton believes
that the development of the hotel depends on rules and regulations to ensure, with the
system to manage people, cultural edification people. Therefore, in the management system
of the whole Hilton company, a people-oriented management culture has been formed with
the system culture as the center. “Did you smile at the guests today?" It's a well-known
quote by Hilton. The smile service provided by Hilton Hotel shows the strong brand culture
of the company. And, the consumption form of hotel enterprise depends on service,
accordingly, the enterprise must promote the position of brand of all sorts of system
culture. In addition, Hilton will manage the files of each guest, recording the basic
information of each person, including personal name, telephone number and special
preferences of the guests. To establish a good CRM system. Hilton realizes that with the
growth of its brands, it needs a more scientific customer value assessment mechanism, a
more effective service and complaint tracking process, and a more efficient use of the
information collected to achieve the simultaneous growth of customer loyalty and profit.

In the buyer’s perspective, what are the key challenges in managing supplier
relationships? Examples

Agency problem：

There are different types of agency problems: Principal (buyer) cannot assess agents’
(supplier) ability prior to the contract. Principal is unable to evaluate agents’ performance
upon completion of tasks. Agent puts less than desirable level of effort into the work.

A widespread real-life example of the principal agent problem is the way companies are
owned and operated. The owners (principal) of a firm will elect a board of directors. The
board of directors monitor and guide the management team like C-Level executives (the
agents). More often than often, these agents will act in their own best interest. For example,
greenlighting a massive project that gives them more authority or prestige instead of
pursuing something else that could maximize shareholder value.

“Too Big To Fail” is another example of the principal-agent problem. The idea behind too big
to fail is that some companies become so significant and critical to the economy, that no
matter what they do, the government will bail them out.  This situation creates a moral
hazard, where the agents have no incentive to do the right thing since they know they won’t
be holding the blame at the end. This happened infamously during the Great Recession,
where the American government bailed out companies and banks like AIG and JPMorgan
Chase, two of which alone received nearly $100 billion in assistance from the federal
government.
The principal-agent problem is also an example of market failure. Market Failures occur
when there is a misallocation of resources, which results in distortions in the market. This
distortion creates an inefficiency in the market. There are four probable causes of market
failures; power abuse (a monopoly or monopsony, sole buyer of a factor of production),
improper or incomplete distribution of information, externalities and public goods.
A market failure occurs because the agent pursues his own self-interest rather than the
interest of the principal. This creates an inefficiency in the business.

Moral hazards：

Moral hazard is a situation in which one party to an agreement engages in risky behavior or
fails to act in good faith because it knows the other party bears the consequences of that
behavior. For example, a driver with an auto insurance policy that provides full coverage,
accident forgiveness, and no deductible may exercise less care while driving than someone
with no insurance or a less generous policy because the first driver knows the insurance
company, not him, pays 100% of the costs if he has an accident. In the business world,
common examples of moral hazard include government bailouts and salesperson
compensation.

The bailouts of AIG, General Motors, and others at taxpayers' expense presented a huge
moral hazard, as it sent a message to executives at large corporations that any fallout from
engaging in excessive risk to increase profits would be shouldered by someone other than
themselves. The Dodd-Frank Act of 2010 attempted to mitigate some of the moral hazard
inherent in too-big-to-fail corporations by forcing them to draw up concrete plans in
advance for how to proceed if they got into financial trouble and stipulating that, going
forward, companies would not be bailed out at the expense of taxpayers.

What are the core ideas and implications of service-profit chain for companies
The Service-Profit Chain is a theory and business model evolved by a group of researchers
from Harvard University in the nineties. It establishes relationships between profitability,
customer loyalty, employee satisfaction, loyalty, and productivity. Profit and growth are
stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction.
Satisfaction is largely influenced by the value of services provided to customers. Value is
created by satisfied, loyal, and productive employees. Employee satisfaction, in turn, results
primarily from high-quality support services and policies that enable employees to deliver
results to customers.

The service-profit chain establishes relationships between profitability, customer loyalty,

and employee satisfaction, loyalty, and productivity. The links in the chain (which should be
regarded as propositions) are as follows: Profit and growth are stimulated primarily by
customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely
influenced by the value of services provided to customers. Value is created by satisfied,
loyal, and productive employees. Employee satisfaction, in turn, results primarily from high-
quality support services and policies that enable employees to deliver results to customers.

Improving Service Profit Chain Levers

1. CREATE A CUSTOMER FEEDBACK LOOP

With the service profit chain, the ultimate measure is customer loyalty. To get there,
organizations should focus on creating satisfied customers by providing great value. This is
easy to understand, but of course not easy to do

2. CREATE AN EMPLOYEE FEEDBACK LOOP

Frontline employees are critical to a great customer experience. In the service profit chain,
this translates to empowering employees to do their jobs well and increasing their
motivation to provide great service. Similar to customer feedback loops, creating a feedback
loop for frontline employees is key to unearthing the problems that hurt productivity,
satisfaction and ultimately loyalty.

3. CREATE PROCESSES TO ACTION INPUT

Armed with great input and feedback, it’s important to have a good process in place that
biases action over analysis. Multiple studies show that a focus on implementing known
solutions has a bigger impact on customer satisfaction than analysis and focusing on bigger
issues. Coming up with ideas on how to improve customer satisfaction is not typically the
issue, the knowledge already exists within your organization. The bigger issue is that often
these ideas don’t progress because:The individual with the solution doesn’t have the
resources needed to implement it。

The origin of the problem and solution exists elsewhere in the organization。Many of small,
good ideas slip through the cracks and never get actioned。

The service-profit chain is also defined by a special kind of leadership. CEOs of exemplary
service companies emphasize the importance of each employee and customer. For these
CEOs, the focus on customers and employees is no empty slogan tailored to an annual
management meeting. For example, Herbert Kelleher, CEO of Southwest Airlines, can be
found aboard airplanes, on tarmacs, and in terminals, interacting with employees and
customers. Kelleher believes that hiring employees who have the right attitude is so
important that the hiring process takes on a “patina of spirituality.” In addition, he believes
that “anyone who looks at things solely in terms of factors that can easily be quantified is
missing the heart of business, which is people.” William Pollard, the chairman of
ServiceMaster, continually underscores the importance of “teacher-learner” managers, who
have what he calls “a servant’s heart.” And John McCoy, CEO of Banc One, stresses the
“uncommon partnership,” a system of support that provides maximum latitude to
individual bank presidents while supplying information systems and common
measurements of customer satisfaction and financial measures.

A closer look at each link reveals how the service-profit chain functions as a whole.

Customer Loyalty Drives Profitability and Growth。

To maximize profit, managers have pursued the Holy Grail of becoming number one or two
in their industries for nearly two decades. Recently, however, new measures of service
industries like software and banking suggest that customer loyalty is a more important
determinant of profit. (See Frederick F. Reichheld and W. Earl Sasser, Jr., “Zero Defections:
Quality Comes to Services,” HBR September–October 1990.) Reichheld and Sasser estimate
that a 5% increase in customer loyalty can produce profit increases from 25% to 85%. They
conclude that quality of market share, measured in terms of customer loyalty, deserves as
much attention as quantity of share. Banc One, based in Columbus, Ohio, has developed a
sophisticated system to track several factors involved in customer loyalty and satisfaction.
Once driven strictly by financial measures, Banc One now conducts quarterly measures of
customer retention; the number of services used by each customer, or depth of relationship;
and the level of customer satisfaction. The strategies derived from this information help
explain why Banc One has achieved a return on assets more than double that of its
competitors in recent years.

organizational practices and culture are conducive to service quality?

As a famous automobile brand with a history of 100 years, Benz has formed a core
enterprise spirit: fairness and responsibility. Mercedes Benz also strives for the upper
reaches by virtue of its strength in product quality, design and color variety, technical level,
marketing and after-sale service. "Responsible" refers to the practice of fulfilling one's
responsibility as a top brand not only for one's own economic interests, but also for the
social recognition, to become a model for similar companies to follow. It is a common
conscious awareness of German enterprises to attach importance to product quality and
pursue technical perfection. German values of loving technology, studying technology and
advocating technology have been deeply rooted in people's hearts and become a kind of
self-conscious behavior. German enterprises pay attention to customers, pay attention to
honest cooperation, establish a first-class service of the enterprise spirit.
Serving customers has always been at the heart of Mercedes' business. The change of
service awareness can capture the potential needs of customers. Simply speaking, the
company has thought of it for customers before they have thought of it. An important
project that Mercedes is undertaking is to improve the experience of car delivery and the
feeling of the exhibition hall, with the aim of improving the quality of sales and service.

In the survey, the company found that there is still a gap between their understanding of
customers and their actual needs. Customer satisfaction is not only in the material level, but
also in the spiritual level. For this reason, Mercedes trains dealers' management personnel
and builds corporate culture. The training not only lets sales staff know how to sell the car,
but also makes sales staff feel happy when selling the car. Only the working environment
that can make employees happy can make customers happy.