–James L. Heskett
The illustration below represents a typical marketing budget. As
you can see, only a small fraction of the entire budget is devoted to
maintaining loyal customers.
Most companies today don't work very hard at developing a
relationship with a long-term customer. They focus nearly all their energy and
money on getting new customers. They promise low, introductory rates and
sign-up incentives, and, of course, they spend millions on marketing and
advertising and lose money on bad debts.
The reward structure within the company is geared almost
exclusively to luring new customers. The biggest incentives often go to
employees who bring in new customers, not to those employees who work hard at
keeping loyal internal and external customers satisfied.
Marketing budgets like these are driven by the misconception
that if you want to make a profit, you must increase market share. This
traditional marketing approach focuses on the four Ps—product, price,
promotional activity, and "place" (distribution channels)—and leads
to the misguided concept that any customer is a good customer.
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