We now know that building Customer Loyalty is key to success in any organization.

The philosophy was first articulated by Fredreich Reicheld – who studied the relationship between three factors – customer satisfaction, customer loyalty and profits. (Bain & Company)

He stated several facts that seem glaringly clear now, but until then, had not been clearly stated.

Tom Peters, author of the seminal business bible – ‘In Search of Excellence’, described great management ideas as ” a blinding flash of the obvious” – because they’re so right, so simple and so obvious.

This is certainly true of Reicheld’s statements on Customer Loyalty. They are equally – extremely POWERFUL. With them – we have the key to success. Without them, we are left without a clear direction forward in competing within our marketplace. What Reicheld stated was “Customer loyalty appears to be the only way to achieve sustainably superior profits”.

He used as an example the life assurance business stating that a 5 per cent increase in customer retention has the effect of lowering costs per policy by 18 per cent – no small cost in any business.

The Customer Loyalty Goals

The more Customers we keep the more profits we make. Poor service, bad quality and deficient delivery are all factors that encourage some people to go.  To stay – they must like you. The bare minimum is ‘customer satisfied’ – expectations met.  This will not send customers away – but it will not keep them.

To keep the customer we must exceed expectations – deliver the extra special positive experience. A positive experience can involve ‘cheaper’ or ‘better quality’.  But the really powerful positive experiences involve feelings – of ‘personal touch’, ‘like’, ‘special’, ‘trust’, ‘ honest’, ‘straight’, ‘fair’ and so on.

And now things stop being ‘blindingly simple’ – because delivering  ‘likeable’ as a business strategy involves a complex system of interrelated KPIs, competencies, attitudes and behaviours – that actively drive a powerful ‘customer focussed culture’.

Learning from Success

What do successful Companies do? They accept the basic premise – customer retention is our business strategy.

Customers stay because they like you – they want to stay. To have our people deliver this ‘want to stay’ service – we need them to WANT TO keep the customer.  We need them to have the competencies to do that and be in an environment that motivates and empowers them.

Customer Focus involves adopting an overall strategy that will result in increased customer retention – e.g.

1. We will measure, report on and discuss that which is related to customer loyalty – number of defections, customer complaints, positive feedback from customers, focus group reports, feedback from customer care agents, complaint handling, cash collection etc.
2. We will manage the Customer Experience. We will study, report, learn from and take action on CRM data on the Customer Experience.
3. We will reward people, actions and behaviors that encourage high use of customer focused behavioral competencies or contribute positively to increased customer retention.
4. We will set targets, expectations, and definition of accountability based on customer focus attitudes, values, and competencies.
5. We will include customer focused core values and behavioral competencies in the job description of all – from MD downward.
6. We will recognize that leader behaviour is a fundamental determinant of follower motivation and success.
7. We will use customer focused skill building and creative problem solving as motivational tools for all our teams.

This Customer Focus Strategy must create an engine that will drive every individual within the Company. The pay back lies not only in increased retention, but in a huge surge of highly motivational drivers that, in turn, increase performance and drive towards success.

Introduction

Strategic management is an essential part of any successful business. However, the type of approach chosen depends on prevailing internal and external factors. Consequently, the essay will examine some these factors in relation to the strategic approach chosen.

Question 1

Description of Jet Blue Airline’s business model

Jet Blue’s Business model is a combination of two aspects. The first is that the company continually improves its product offering i.e. it is dynamic. At first, it marketed itself as a low cost Airline. However, with time, the company realized it could improve its image through good customer service and this has been a propelling factor for the Airline. The second aspect of Jet Blue’s business model is to operate with a lean staff base. They only have a small number of employees as they direct customers to deal with flight issues online. This lean business model has been the most important contributor to the company’s profitability. (Schienberg, 2006)

How the concept of improvisation is important to the Airline’s ability to compete

Jet Blue is a low cost Airline and cannot afford an extra team of in-flight kitchen employees. The company realized that offering food is an important segment of customer service. It improvised by substituting food with friendly attendants, personalized television sets and very comfortable seats. Besides this, the Airline’s leg space is adequate enough for it passengers.

Improvisation can also be seen by the fact that company conducts all its booking online. There is no need to employ extra staff to deal with the large numbers directly thus minimizing operating expenses. Additionally, the company deals with the extra workload by offering training and development. Therefore the company equips its staff members to deal with extra tasks and duties. This is also another form of improvisation. (Aguilar, 1997)

How Jet Blue ‘adaptively innovates’ and ‘consistently executes’

When Jet Blue Airline entered the US market, most critics and traditional Airlines thought that it would not last. They asserted that such carriers can only offer passengers low cost tickets but they could never match the quality of service that older carriers offered. However, Jet Blue proved its critics wrong. The company is able to offer some of the best in-flight services yet still tops the list as one of the most competitively priced Airlines in the industry. (Schienberg, 2006)

The company ‘adaptively innovates’ by ensuring that they stay ahead of the rest. This has been seen in the Airline’s service offering. In the year 2006, Jet Blue was rated as one of the most successful Airlines in terms of customer satisfaction. The survey was conducted by Aviation magazine; it rated Airlines based on the following; cost, courtesy, foods and beverages, check in and check out procedures, aircraft features, baggage handling and others. It was found that Jet Blue has consistently improved its ‘process’ factors over the years. The process factors include check in times and baggage handling. It has also been improving its customer service through its courteous and professional cabin crew. The factors were associated with traditional carriers but Jet Blue can proudly assert that it also offers the same.

Question 3

Schools of a social behavioral approach to strategy

The first school of a social behavioral approach to learning is based on societal norms within the business environment. Managers who adhere to this school of thought regard the issue of conformity as their most important factor. Another school revolves around the fact that behavior stimulates rewards. Consequently, if an organization and its employees perform a certain activity and realize that there are rewards for it, then they should adopt that activity. Another school of thought involves the individuals. Organizations are largely made up of specific individuals who may act according to their value systems. This eventually affects the image they portray of the company. Consequently, care should be taken when recruiting personnel in order to select the best representatives of the company. (Benfari, 1995)

Tools of strategy used in these schools

In the first school (i.e. the one involving the social dimension) utilizes issues such as supplier and customer relationships. The second aspect which revolves around behavior and rewards normally utilizes salary increments to motivate employees. The last school of thought normally involves the use of sound training and recruitment practices in order to ensure that the organization’s teams stays ahead of its competitors.

Differences between cultural and positioning schools

The cultural approach tends to encourage conformity while the positioning approach encourages innovation. Also, the cultural approach entails changing business processes to suit existing cultural processes. On the other hand, the positioning school involves implementation of good strategies regardless of prevailing business preferences.

Question 4

A contrast of the planning school’s approach and the entrepreneurial school’s approach

An entrepreneurial approach to strategy entails the employment of risk taking, innovation and proactive stances in business. On the other hand the planning school advocates for a more calculated approach. Entrepreneurs always want to introduce new products and be the first to engage in risky ventures. On the other hand, the planning school is more conservative in nature opting to follow earlier predictions made.

Extent of rule 9 recognition

The entrepreneurial approach adheres to this principle by constantly thinking outside the box. Entrepreneurs constantly want to outperform their competitors and they usually do this against the backdrop of a dynamic market. In order to achieve the latter targets, this school of thought requires that managers know where they are going. No business person can claim to be an entrepreneur when they do no have a clear vision of where they are going or how to get there. On the other hand, the planning school is quite exemplary in this regard. This approach employs a well laid out plan of action based on predicted factors about the future. The plan normally considers the long term goals and objectives of the organization and how to achieve them. Therefore, the planning school is exemplary when it comes to rule nine. (Brown & Weiner, 1995)

How each school prepares managers to deal with change at the business level

Entrepreneurial approach to strategy is quite appropriate when dealing with change. This because it is scenario based and decisions are made from the top down. Such a school of thought is highly applicable in a dynamic business environment because lower level management have direct contact with external business factors. Therefore, they are more equipped to handle change or pressure. On the other hand, the planning approach to strategy is suitable for stable environments. However, this approach also leaves some room for changing the business approach. This is because it entails measuring and evaluating changes. If results do not fall within the required standards, then the process is repeated.

Conclusion

Strategic management may be scenario based or plan based. The latter is more appropriate for stable environments while the entrepreneurial approach is more appropriate for dynamic business environments.

Reference:

Schienberg, J. (2006): Jet Blue continental tops in airline satisfaction, retrieved from http://money.cnn.com/quote/quote.html?symb=JBLU accessed on 25th June 2008

Brown, A. & Weiner, E. (1995); Supermanaging: How to harness change for personal and organizational success; New York: Mentor

Benfari, R.  (1995): Changing Management Styles; Lexington Books

Aguilar, F. (1997): Scanning business environments; Macmillan

Related Post:

Strategic Management Success

It is a real great feeling to be able to share additional affirmations of success in someone’s life or business. This month, In the spirit of continuing to celebrate success and sharing positive stories of success in what we do, I want to talk about Darek Potter and Harbor Engineering, Inc.

Darek Potter, P.E., Founder and President of Harbor Engineering, Inc. was referred to me during his first year in business. After we met, Darek made a very important decision that many business owners put off for years. Darek committed to developing a strategic plan and an Action Plan to direct and manage the growth of his civil engineering and landscape architecture business. Darek and his staff were involved in developing the strategic plan, which included a vision statement, a mission statement, a list of company core values and a list of short and long term goals. My role was as a facilitator, guide and business coach. Harbor Engineering, Inc. has experienced growth in number of employees and number of clients and continues to grow toward the established vision for the company. After 2004 ended, I asked Darek to share with me his thoughts on our strategic planning process and coaching and how the business performed. Here is what Darek said: Strategic Management Success

“Glenn’s ability to envision what is right for our Company and his assistance in developing our Strategic Plan has been extremely helpful in guiding our Company to where it is today.”

Darek Potter, P.E., President of Harbor Engineering, Inc.

My congratulations to Darek and his staff for a very successful year and special kudos for deciding to start thinking strategically the first year in business! And thank you Darek!

No matter how big or small your business is today or how many years you have been in business, you can still benefit from strategic thinking and planning. Strategic Management Success

I initially published my letter to Roy McDonald as a public warning to others, and I do feel that I have subsequently been able to be of some service to the people who have read my letter

and then emailed me or contacted me by phone. I receive on average about one email or phone

call per week either thanking me for the warning, or sharing a similar story of woe – normally

much sadder than my own!
>

I have indeed received three responses now from people who have attended the group and where

either they or their partners have ended up in psychiatric institutions! Most of these people

do not wish to have their names mentioned. They say that they are still afraid of what might

happen if they speak out! Even so, they have been courageous enough to allow me to publish

their stories anonymously.

One good lady by the name of Lyn has gone a step further. She is happy to see her story

published under her own name, and she is doing her best to fight back against this

organisation, determined to put a stop to the abuse that she sees taking place.

In recent years, there has been a movement in the field of management towards more objective, fact- and observation-based approaches. These include the balanced scorecard approach and other similar management schemes, which aim to extract from relevant data some conclusions and information to be used in making decisions. This is in contrast with previously formulated management systems, which were less grounded on actual observations, and which provided vaguer instructions and guidelines.

Having some sort of system for gathering data, processing it, and evaluating the resulting information has become one of the basic principles of most management practices today. This is logical because this would lead to the ability to make quantitative predictions, which are useful when trying to decide how to allocate resources or set up programs. When backed up by objective data, these predictions and the decisions based on them are quite reliable. The question then becomes, what aspects of performance should be measured, and how?

Metrics refer to the standards by which these various aspects may be measured. These are well-defined quantities that yield useful interpretations, and that can be actually observed and measured. Obviously, many possible metrics may be defined. But not all of these metrics would be that useful; it would depend on the particular organization and its situation.

Hence one of the most important management choices is selecting the proper set of relevant and practical metrics to actually use and keep track of. Not choosing enough metrics would result in too little data, while choosing too many might result in confusion from too much information. The key is to select only the most relevant metrics, such that there aren’t too many, but those that are there are enough to give the complete picture.

Some of the important metrics can be deduced from first principles. Management strategies can be developed by theorizing and speculating, hence coming up with various proposed aspects to be measured. Using this approach would have the benefit that the metrics are grounded on firm reasoning.

This speculative approach should be tempered, however, with a consideration for real world data and observations. Theoretical and hypothetical metric must still be tested as to their feasibility and actual effectiveness when predicting.

This is where visiting and participating in a metric forum may come in handy. By getting feedback and tips from other people in the field of management, one would be able to come to better conclusions.

A metric forum can also help in terms of evaluating the data itself, gathered using the selected metrics. Proper evaluation of metric data usually requires knowledge of how the various aspects (as measured by the metrics) interact. This is usually gained through experience. Newer managers may ask questions and get advice from more experienced people at the metric forum.

A metric forum is a valuable resource that should be taken advantage of. Within the online community, questions about the proper use, implementation, and evaluation of different business metrics may be discussed. With help from a good metric forum, using these metrics in management becomes much easier.