Problem Solution: Smith Systems Consulting

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Problem Solution: Smith Systems Consulting

In today's highly competitive markets customer retention is important to the success of all companies because of the high costs associated with attracting new customers versus the much lower ones to retain existing customers. Gaining new customers can cost five times more than what it costs to satisfy and retain current customers. Companies have to work very hard to get satisfied customers to switch away from their existing product or service providers. This is reflected in the fact that depending on the industry a 5 percent decrease in the customer defection rate can raise profits by 25 percent to 85 percent. Additionally the customer profit rate is likely to rise over the life of the retained customer (Kotler & Keller, 2006).

Smith Systems Consulting (SSC) is a company in transition and needs new strategies to not only attract new customers but also to retain both new and old customers. SSC needs effective customer acquisition and retention strategies because its market is becoming crowded with competition and such strategies will be helpful to the company in attracting and retaining the new large accounts which it needs to stay competitive and which it has not been thus far successful in retaining.

This solution paper will attempt to devise effective customer acquisition and retention strategies for SSC by evaluating relevant customer psychographics as well as the company's customer retention strategies by putting them through the 9-Step problem solving model. The paper will also explore the use of market research to help SSC make correct and timely decisions in developing future positioning and segmentation strategies that will help it continually create value for its customers in today's highly competitive markets.

Situation Analysis

Issue and Opportunity Identification

SSC is a business to business web and business application services provider which is facing several issue in a tightening market. The company can turn these issues to corresponding opportunities if it applies the appropriate marketing principles.

One issue is that SSC has not kept profitability records for each of its clients. Here SSC has the opportunity to improve its internal record keeping system to include producing profitability records for each of its clients in order to improve its market intelligence. Today companies store their information in various databases organized by categories such as customer, product, and salesperson and then combine the data from the different databases. This data is then made easily accessible to decision makers and available to hired statistical analysts who can skillfully mine the data and gather fresh insights into useful information such as neglected client segments, and recent client trends. The client information can be cross-referenced with product and salesperson information to produce deeper insights such as individual client profitability. To efficiently and effectively manage all this information, many companies are now using business integration software (Kotler & Keller, 2006).

Another issue is that SSC is finding it more difficult to attract and retain the larger accounts that it needs to keep the company profitable. In this case the company has the opportunity to build its brand equity. "Brand equity is the customer's subjective and intangible assessment of the brand, above and beyond its objectively perceived value. The sub-drivers of brand equity are customer brand awareness, customer attitude toward the brand, and customer perception of brand ethics. Companies use advertising, public relations, and other communication tools to affect these sub-drivers" (Kotler & Keller, 2006).

A third issue is that SSC is not certain which of the services it provides produce the most value for its customers, and the most profitability for the company . Here SSC has the opportunity to segment its target market. Market segmentation is massing prospective customers into groups, or segments, that have shared needs and will respond roughly in the same way to a marketing stimulus. Ideally SSC can use market segmentation to set apart the segments on which it will concentrate its effort. These will be called its target market segments and once identified SSC can then create one or more marketing programs to reach them (Kerin, Hartley, Berkowitz, & Rudelius, 2006).

SSC's targeting decision will establish how many customer groups the company will serve. The company can choose one or a few segments or pursue an exhaustive coverage of its overall market if it targets the majority of the segments. A positioning strategy, which is a specialized and targeted marketing effort, can then be focused on each target that management decides to serve (Cravens & Piercy, 2003).

Another salient issue for SSC is that the company has not defined its ideal target market but has the opportunity to do so. After segmenting the market, SSC must next decide which segments hold the greatest potential for bringing profit to the company. These segments will then become the company's target markets. SSC can create a service offering for each chosen target market. Each offering can then be positioned in the minds of the target clients as providing some key benefits that suit the clients' needs (Kotler & Keller, 2006).

Finally, SSC's advertising and marketing are having difficulty reaching the larger long term clients the company needs to remain profitable despite the fact that SSC has invested considerable resources and efforts in these areas. SSC can turn this issue into an opportunity by exploring new ways to reach both existing clients and new prospective clients through devising informed branding strategies that create awareness of its brand.

Brand awareness is consumers' ability to notice and pay attention to a particular brand in enough detail so that they will recognize or remember it when it comes time to make purchasing decisions. Brand awareness builds a foundation for establishing brand loyalty and brand equity (Kotler & Keller, 2006).

Brand awareness is only truly effective if it is successful in creating positive experiences for customers which they associate with the brand. Such experiences help customers build an emotional bond with the brand that will in turn enable the brand owner to build a relationship with the customer that results in loyalty. Brand awareness is really only a first step toward building the kind of relationship with customers that inspires loyalty. True customer loyalty happens because customers have good experiences with a brand of which they have become aware.

SSC needs effective branding strategies because its market is becoming crowded with competition and successful branding strategies will make the company stand out in that crowded field. This will be helpful to the company in attracting and retaining new larger accounts which it needs to stay competitive and which it has not been thus far successful in retaining. SSC also needs to rethink its branding strategy because the brand identity is too closely identified with the company's founder who maybe leaving the organization soon.

Stakeholder Perspectives/Ethical Dilemmas

There are several groups of stakeholders at SSC. In general these groups are all working toward the same goals and although their values do not necessarily conflict they do differ in their details.

The first group is the Finance & Accounting Manager and the accounting department at SSC. This group is concerned with accountability. They want to make certain company resources are not wasted and that the company receives an appropriate return on investment in both of these areas.

Another group at SSC is the Customer Service Manager of customer service and the customer service team. This group is concerned with retaining existing customers. Their values are about fairness and respect for customers who have been there for the company.

The Customer Service Manager of sales and the COO comprise another stakeholder group at SSC. This group is concerned with focusing on selling new accounts and penetrating deeper into existing accounts. Their values also revolve around fairness and respect as they believe all customers are equally valuable.

The Director of Marketing and the marketing department are also a stakeholder group at SSC. This group believes they need to evaluate their marketplace, the trends and the competition. Their values are about helping the company succeed through applying marketing processes.

Last but not least of SSC's stakeholders are the company's customers. This group expects SSC to handle their company networks, applications and web sites with efficiency, honesty and integrity. Their interests encompass accountability, fairness, respect, integrity, and honesty.

Problem Statement

In the face of growing competition, ineffective marketing practices, and a retiring founder threatening its success in the marketplace, SSC has the opportunity to make comprehensive changes in its marketing strategy. These changes will include devising an effective brand strategy and customer acquisition and retention plan that will ensure not only the retention of SSC's current client base but also make SSC competitive enough to acquire and retain the new larger accounts that will ensure its future growth and success.

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