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 - – geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, technology disruption,
increasing household debt because of falling income levels, increasing energy prices, 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 -
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Customers Authors are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Customers Authors digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Customers Authors has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Successful track record of launching new products
– Customers Authors has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Customers Authors 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.
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.
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.
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.
Organizational Resilience of Customers Authors
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Customers Authors does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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 -
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.
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 operating costs
– Compare to the competitors, firm in the HBR case study Should You Punish or Reward Current Customers? 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 Customers Authors 's lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Should You Punish or Reward Current Customers?, in the dynamic environment Customers Authors has struggled to respond to the nimble upstart competition. Customers Authors has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Interest costs
– Compare to the competition, Customers Authors 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.
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.
Need for greater diversity
– Customers Authors 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.
High cash cycle compare to competitors
Customers Authors 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.
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.
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.
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 -
Buying journey improvements
– Customers Authors can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Should You Punish or Reward Current Customers? 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Customers Authors 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, 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Customers Authors can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 Customers Authors 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Customers Authors 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, Should You Punish or Reward Current Customers?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
Leveraging digital technologies
– Customers Authors 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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Should You Punish or Reward Current Customers?, Customers Authors may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
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 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.
Shortening product life cycle
– it is one of the major threat that Customers Authors is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Customers Authors
– 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 Customers Authors.
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.
