The High Price of Customer Satisfaction SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Sales & Marketing
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The High Price of Customer Satisfaction
This is an MIT Sloan Management Review article. "Satisfaction guaranteed or your money back"is a business promise made to consumers since 1875, when Montgomery Ward used it to differentiate his mail order catalog. It is now a vow many businesses make. However, the correlation between increasing customer satisfaction and increasing customer spending with your company is very weak, according to the authors. Their research finds that changes in customers'satisfaction levels explain less than 1% of variation in a company's share of category spending.Is customer satisfaction worth the cost? To find out, the authors investigated the relationship between customer satisfaction and business outcomes, gathering data from more than 100,000 consumers covering more than 300 brands. Although high customer satisfaction ratings are typically treated by managers as being universally good for business, the authors'findings indicate that the benefits are not nearly so clear-cut. There is a downside to continuously devoting resources to raise customer satisfaction levels. Managers are rarely able to accurately quantify the cost associated with increasing customer satisfaction scores (for example, from 8.7 to 9.1 on a 10-point scale), nor are they able to determine precisely what such an increase is actually worth. It turns out the return on these investments is often trivial or even negative. Knowing a customer's satisfaction level tells you little about how he or she will divide his or her spending among the different brands used. As a result, changes in customer satisfaction levels are unlikely to have a meaningful impact on the share of category spending customers allocate with your brand. Why? Single-brand loyalty, which was common in our parents'and grandparents'generations, has been replaced with loyalty to multiple brands in a category in many sectors. Because of this divided loyalty, more customers partially defect (in other words, they give more of their business to a competitor) than completely defect from a business or brand. As a result, improving customers'share of spending with your brand tends to represent a far greater opportunity than efforts to improve customer retention. kThe measure that really matters, according to the authors, isn't your percentage of delighted customers or promoters. What matters is the relative "rank"that your brand's satisfaction level represents vis-A?vis your competitors.
Authors :: Timothy Keiningham, Sunil Gupta, Lerzan Aksoy, Alexander Buoye
Swot Analysis of "The High Price of Customer Satisfaction" written by Timothy Keiningham, Sunil Gupta, Lerzan Aksoy, Alexander Buoye includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Satisfaction Customer facing as an external strategic factors. Some of the topics covered in The High Price of Customer Satisfaction case study are - Strategic Management Strategies, Marketing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the The High Price of Customer Satisfaction casestudy better are - – talent flight as more people leaving formal jobs, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, increasing energy prices, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing commodity prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of The High Price of Customer Satisfaction
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The High Price of Customer Satisfaction case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Satisfaction Customer, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Satisfaction Customer operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of The High Price of Customer Satisfaction can be done for the following purposes –
1. Strategic planning using facts provided in The High Price of Customer Satisfaction case study
2. Improving business portfolio management of Satisfaction Customer
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Satisfaction Customer
Strengths The High Price of Customer Satisfaction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Satisfaction Customer in The High Price of Customer Satisfaction Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Satisfaction Customer in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management
– Satisfaction Customer is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Satisfaction Customer is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Satisfaction Customer is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The High Price of Customer Satisfaction Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Satisfaction Customer is present in almost all the verticals within the industry. This has provided firm in The High Price of Customer Satisfaction case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Satisfaction Customer has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study The High Price of Customer Satisfaction - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Satisfaction Customer is one of the most innovative firm in sector. Manager in The High Price of Customer Satisfaction Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Satisfaction Customer has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Satisfaction Customer is one of the leading recruiters in the industry. Managers in the The High Price of Customer Satisfaction are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Satisfaction Customer has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Satisfaction Customer to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Operational resilience
– The operational resilience strategy in the The High Price of Customer Satisfaction Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Ability to lead change in Sales & Marketing field
– Satisfaction Customer is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Satisfaction Customer in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Satisfaction Customer has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in The High Price of Customer Satisfaction HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses The High Price of Customer Satisfaction | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The High Price of Customer Satisfaction are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Satisfaction Customer is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study The High Price of Customer Satisfaction can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Satisfaction Customer has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The High Price of Customer Satisfaction, in the dynamic environment Satisfaction Customer has struggled to respond to the nimble upstart competition. Satisfaction Customer has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Satisfaction Customer has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the The High Price of Customer Satisfaction HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Satisfaction Customer has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Satisfaction Customer has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Satisfaction Customer even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Need for greater diversity
– Satisfaction Customer has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Satisfaction Customer has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study The High Price of Customer Satisfaction, is just above the industry average. Satisfaction Customer needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Increasing silos among functional specialists
– The organizational structure of Satisfaction Customer is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Satisfaction Customer needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Satisfaction Customer to focus more on services rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, firm in the HBR case study The High Price of Customer Satisfaction has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Satisfaction Customer 's lucrative customers.
Opportunities The High Price of Customer Satisfaction | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study The High Price of Customer Satisfaction are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Satisfaction Customer can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Satisfaction Customer has opened avenues for new revenue streams for the organization in the industry. This can help Satisfaction Customer to build a more holistic ecosystem as suggested in the The High Price of Customer Satisfaction case study. Satisfaction Customer can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Satisfaction Customer can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Satisfaction Customer can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Satisfaction Customer can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The High Price of Customer Satisfaction suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Satisfaction Customer can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, The High Price of Customer Satisfaction, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Satisfaction Customer can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Satisfaction Customer in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Manufacturing automation
– Satisfaction Customer can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Satisfaction Customer to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Satisfaction Customer to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Satisfaction Customer can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Loyalty marketing
– Satisfaction Customer has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Satisfaction Customer is facing challenges because of the dominance of functional experts in the organization. The High Price of Customer Satisfaction case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Satisfaction Customer has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study The High Price of Customer Satisfaction - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Satisfaction Customer to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats The High Price of Customer Satisfaction External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The High Price of Customer Satisfaction are -
Increasing wage structure of Satisfaction Customer
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Satisfaction Customer.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The High Price of Customer Satisfaction, Satisfaction Customer may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Shortening product life cycle
– it is one of the major threat that Satisfaction Customer is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Satisfaction Customer in the Sales & Marketing sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Satisfaction Customer.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Regulatory challenges
– Satisfaction Customer needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Stagnating economy with rate increase
– Satisfaction Customer can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Satisfaction Customer demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Environmental challenges
– Satisfaction Customer needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Satisfaction Customer can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
High dependence on third party suppliers
– Satisfaction Customer high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Satisfaction Customer with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of The High Price of Customer Satisfaction Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study The High Price of Customer Satisfaction needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study The High Price of Customer Satisfaction is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study The High Price of Customer Satisfaction is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of The High Price of Customer Satisfaction is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Satisfaction Customer needs to make to build a sustainable competitive advantage.
