Should You Punish or Reward Current Customers? SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Should You Punish or Reward Current Customers?
This is an MIT Sloan Management Review article. Is it better to reward existing customers for loyalty -or spend your marketing dollars on attracting new ones? Many companies face that management dilemma, and expert opinions on the subject conflict. The authors argue that the answer to that question depends on how fluid customer preferences are in a market and to what degree some of a company's customers are much more valuable than others. In markets where consumer preferences are highly fluid and where the highest-value customers are much more valuable than others, companies should focus on rewarding their best existing customers. Examples of industries in which this is the case include airlines and car rentals. However, if either or both of those two characteristics -customer shopping flexibility and concentrations in customer value -is not in place, then companies should focus on offering their best prices to new customers. When identifying high-value customers, it's important to remember that revenues and profits may not necessarily be correlated. The authors note that it is not only possible that high-volume customers are not as valuable as they seem, but, in some settings, they may be downright unprofitable. For example, at one bank with which one of the authors worked, about 50% of customers contributed negatively to profits. The authors suggest several approaches to addressing the problem of unprofitable customers, including customer education and selectively increasing prices to those customers.
Swot Analysis of "Should You Punish or Reward Current Customers?" written by Jiwoong Shin, K. Sudhir includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Customers Authors facing as an external strategic factors. Some of the topics covered in Should You Punish or Reward Current Customers? case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Should You Punish or Reward Current Customers? casestudy better are - – increasing energy prices, cloud computing is disrupting traditional business models, geopolitical disruptions, wage bills are increasing, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , increasing transportation and logistics costs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Should You Punish or Reward Current Customers?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Should You Punish or Reward Current Customers? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Customers Authors, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Customers Authors 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 Should You Punish or Reward Current Customers? can be done for the following purposes –
1. Strategic planning using facts provided in Should You Punish or Reward Current Customers? case study
2. Improving business portfolio management of Customers Authors
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Customers Authors
Strengths Should You Punish or Reward Current Customers? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Customers Authors in Should You Punish or Reward Current Customers? Harvard Business Review case study are -
High switching costs
– The high switching costs that Customers Authors 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.
Analytics focus
– Customers Authors 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 Jiwoong Shin, K. Sudhir 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.
Innovation driven organization
– Customers Authors is one of the most innovative firm in sector. Manager in Should You Punish or Reward Current Customers? Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Superior customer experience
– The customer experience strategy of Customers Authors in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Customers Authors 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 Should You Punish or Reward Current Customers? HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Customers Authors 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 Customers Authors is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Should You Punish or Reward Current Customers? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Customers Authors 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 Should You Punish or Reward Current Customers? - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Leadership & Managing People industry
– Should You Punish or Reward Current Customers? firm has clearly differentiated products in the market place. This has enabled Customers Authors to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Customers Authors to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Should You Punish or Reward Current Customers? 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.
Low bargaining power of suppliers
– Suppliers of Customers Authors in the sector have low bargaining power. Should You Punish or Reward Current Customers? has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Customers Authors to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Customers Authors has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Customers Authors to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Customers Authors is present in almost all the verticals within the industry. This has provided firm in Should You Punish or Reward Current Customers? 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.
Weaknesses Should You Punish or Reward Current Customers? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Should You Punish or Reward Current Customers? are -
Workers concerns about automation
– As automation is fast increasing in the segment, Customers Authors needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As Should You Punish or Reward Current Customers? HBR case study mentions - Customers Authors takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
No frontier risks strategy
– After analyzing the HBR case study Should You Punish or Reward Current Customers?, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Aligning sales with marketing
– It come across in the case study Should You Punish or Reward Current Customers? 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 Should You Punish or Reward Current Customers? can leverage the sales team experience to cultivate customer relationships as Customers Authors is planning to shift buying processes online.
Products dominated business model
– Even though Customers Authors 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 - Should You Punish or Reward Current Customers? should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Customers Authors products
– To increase the profitability and margins on the products, Customers Authors 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 Customers Authors 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Jiwoong Shin, K. Sudhir suggests that, Customers Authors 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.
Increasing silos among functional specialists
– The organizational structure of Customers Authors is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Customers Authors needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Customers Authors to focus more on services rather than just following the product oriented approach.
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 Customers Authors supply chain. Even after few cautionary changes mentioned in the HBR case study - Should You Punish or Reward Current Customers?, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Customers Authors vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Customers Authors is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Should You Punish or Reward Current Customers? can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Should You Punish or Reward Current Customers? | 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 Should You Punish or Reward Current Customers? are -
Better consumer reach
– The expansion of the 5G network will help Customers Authors to increase its market reach. Customers Authors will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Customers Authors 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. Customers Authors 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Customers Authors 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.
Creating value in data economy
– The success of analytics program of Customers Authors has opened avenues for new revenue streams for the organization in the industry. This can help Customers Authors to build a more holistic ecosystem as suggested in the Should You Punish or Reward Current Customers? case study. Customers Authors can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Customers Authors can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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.
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. Customers Authors can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Customers Authors can develop new processes and procedures in Leadership & Managing People 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Customers Authors 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 Customers Authors to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Customers Authors 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 Leadership & Managing People segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Customers Authors can use these opportunities to build new business models that can help the communities that Customers Authors operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Loyalty marketing
– Customers Authors 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Customers Authors in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Customers Authors to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Should You Punish or Reward Current Customers? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Should You Punish or Reward Current Customers? are -
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.
High dependence on third party suppliers
– Customers Authors 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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Customers Authors can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Customers Authors 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. Customers Authors can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Customers Authors in the Leadership & Managing People industry. The Leadership & Managing People 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.
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 Customers Authors in the Leadership & Managing People sector and impact the bottomline of the organization.
Regulatory challenges
– Customers Authors 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 Leadership & Managing People industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Customers Authors can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Should You Punish or Reward Current Customers? .
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 Customers Authors.
Stagnating economy with rate increase
– Customers Authors 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 Customers Authors 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.
Technology acceleration in Forth Industrial Revolution
– Customers Authors has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Customers Authors needs to keep up with the evolution of technology in the Leadership & Managing People sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Customers Authors 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 Should You Punish or Reward Current Customers? 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 Should You Punish or Reward Current Customers? 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 Should You Punish or Reward Current Customers? 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 Should You Punish or Reward Current Customers? 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 Should You Punish or Reward Current Customers? 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 Customers Authors needs to make to build a sustainable competitive advantage.