Case Study Description of Why Customer Participation Matters
This is an MIT Sloan Management Review article. Most managers know that listening to customers makes good business sense. Businesses have much to gain from actively seeking and encouraging customer participation, which the authors define as getting customers to provide constructive suggestions and share their ideas on how to shape product and service offerings. Yet many companies only pay lip service to this idea.Rather than encouraging customers to share their views about the company and its products with managers, the authors found, companies tend to focus on encouraging customers to take part in spreading positive word of mouth. Yet word of mouth is only one type of voluntary behavior that customers engage in. Moreover, it indicates only what people on the outside are saying, not how companies can improve their offerings or what customers may be looking for. The authors, who conducted surveys of customers as well as interviews and roundtable discussions with senior executives in a variety of industries, found that both customer word of mouth and customer- to-business interactions are associated with a customer's propensity to buy more of a company's products and services. While not all satisfied customers become repeat buyers, encouraging them to provide feedback and suggestions helps tie them more closely to the business. Companies can even recapture defecting customers simply by contacting them and encouraging them to participate. In addition, customer-to-business interaction is often more malleable than customer-to-customer word of mouth and more readily within the control of management. In a study of customers of a global bank, the authors found that customers who purchased the most were individuals who participated and engaged in much word-of-mouth behavior. High participation/ high word-of-mouth customers were the most loyal and attached to the brand; customers who did not participate tended to be the least valuable, the least loyal and the least attached to the organization regardless of whether they spread positive word of mouth. The implications of the findings are that fostering customer participation can be very valuable and that companies are better off emphasizing customer participation over word of mouth (as opposed to the reverse), because it creates more customer "stickiness"(as in greater attachment and commitment). Nevertheless, the authors say, the two approaches should be seen as two sides of a coin, working both internally and externally to build financial value for companies.
Authors :: Omar Merlo, Andreas B. Eisingerich, Seigyoung Auh
Swot Analysis of "Why Customer Participation Matters" written by Omar Merlo, Andreas B. Eisingerich, Seigyoung Auh includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Mouth Word facing as an external strategic factors. Some of the topics covered in Why Customer Participation Matters case study are - Strategic Management Strategies, and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Why Customer Participation Matters casestudy better are - – increasing government debt because of Covid-19 spendings, there is backlash against globalization, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Why Customer Participation Matters
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Why Customer Participation Matters case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Mouth Word, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Mouth Word 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 Why Customer Participation Matters can be done for the following purposes –
1. Strategic planning using facts provided in Why Customer Participation Matters case study
2. Improving business portfolio management of Mouth Word
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 Mouth Word
Strengths Why Customer Participation Matters | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Mouth Word in Why Customer Participation Matters Harvard Business Review case study are -
Successful track record of launching new products
– Mouth Word has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Mouth Word has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– Mouth Word 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 Why Customer Participation Matters HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Mouth Word has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Mouth Word to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Sales & Marketing field
– Mouth Word 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 Mouth Word in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Mouth Word 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 Why Customer Participation Matters - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Mouth Word is present in almost all the verticals within the industry. This has provided firm in Why Customer Participation Matters 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.
Operational resilience
– The operational resilience strategy in the Why Customer Participation Matters 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.
Analytics focus
– Mouth Word is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Omar Merlo, Andreas B. Eisingerich, Seigyoung Auh can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Mouth Word 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.
Learning organization
- Mouth Word 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 Mouth Word is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Why Customer Participation Matters Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Mouth Word in the sector have low bargaining power. Why Customer Participation Matters has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Mouth Word to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– Mouth Word is one of the leading recruiters in the industry. Managers in the Why Customer Participation Matters are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Why Customer Participation Matters | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Why Customer Participation Matters are -
Products dominated business model
– Even though Mouth Word has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Why Customer Participation Matters should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners
– Because of the regulatory requirements, Omar Merlo, Andreas B. Eisingerich, Seigyoung Auh suggests that, Mouth Word is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Lack of clear differentiation of Mouth Word products
– To increase the profitability and margins on the products, Mouth Word needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Mouth Word 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.
Slow decision making process
– As mentioned earlier in the report, Mouth Word 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. Mouth Word 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Mouth Word supply chain. Even after few cautionary changes mentioned in the HBR case study - Why Customer Participation Matters, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Mouth Word vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, firm in the HBR case study Why Customer Participation Matters 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 Mouth Word 's lucrative customers.
Aligning sales with marketing
– It come across in the case study Why Customer Participation Matters that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Why Customer Participation Matters can leverage the sales team experience to cultivate customer relationships as Mouth Word is planning to shift buying processes online.
High cash cycle compare to competitors
Mouth Word has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Mouth Word 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.
Increasing silos among functional specialists
– The organizational structure of Mouth Word is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Mouth Word needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Mouth Word to focus more on services rather than just following the product oriented approach.
Opportunities Why Customer Participation Matters | 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 Why Customer Participation Matters are -
Manufacturing automation
– Mouth Word 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Mouth Word is facing challenges because of the dominance of functional experts in the organization. Why Customer Participation Matters 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Mouth Word 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, Why Customer Participation Matters, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Mouth Word can use these opportunities to build new business models that can help the communities that Mouth Word operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Mouth Word to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Leveraging digital technologies
– Mouth Word can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
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. Mouth Word can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Mouth Word can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Mouth Word 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 Mouth Word to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Mouth Word can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Why Customer Participation Matters 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.
Building a culture of innovation
– managers at Mouth Word can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Mouth Word can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Mouth Word 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.
Threats Why Customer Participation Matters External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Why Customer Participation Matters are -
Shortening product life cycle
– it is one of the major threat that Mouth Word is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Mouth Word in the Sales & Marketing sector and impact the bottomline of the organization.
Regulatory challenges
– Mouth Word 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Mouth Word in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Mouth Word needs to understand the core reasons impacting the Sales & Marketing industry. This will help it in building a better workplace.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Why Customer Participation Matters, Mouth Word 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Mouth Word with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Mouth Word 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.
Environmental challenges
– Mouth Word 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. Mouth Word can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Mouth Word can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Mouth Word.
Weighted SWOT Analysis of Why Customer Participation Matters 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 Why Customer Participation Matters 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 Why Customer Participation Matters 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 Why Customer Participation Matters 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 Why Customer Participation Matters 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 Mouth Word needs to make to build a sustainable competitive advantage.
