Davis & Associates - Strategic marketing

Item 1: Customer Retention: Another Perspective

New research from McKinsey ("Customer Retention is Not Enough") argues persuasively that:

A better appreciation of the underlying forces that influence customer loyalty - especially attitudes and changing needs - can help organisations develop targeted strategies to correct any "downward migration" in spending habits long before they defect. It can also help them influence upward migration earlier.

The McKinsey research(based on a two-year study of attitudes amongst 1,200 US households on companies in 16 industry sectors) contends that improving the management of migration as a whole, by focusing on both defections and small changes in customer spending, can have as much as 10 times more value than preventing defections alone.

Managing migration - from the satisfied customer who spends more, to the downward migrator who spends less, is the crucial next step in customer management.

Why?

Because many more customers change their spending behaviour than defect, with the former typically accounting for larger changes in value.

The study cites the example of a retail bank which lost about 5% of customers annually, taking with them 3% of the bank's total balances. By contrast, the 35% of customers who annually reduced their balances by significant amounts, cost the bank 24% of total balances, while the 35% who increased their balances lifted total balances by some 25%. This effect, the authors state, showed up in all 16 industries and was dominant in two-thirds of them.

Critically, the study identifies six customer segments built around two broad customer behaviours:

Loyalists: those who maintain or increase expenditure, and do so because they are: (a) emotionally attached to their current provider; (b)don't feel switching is worth the effort; (c) have rationally chosen it as the best option.

Downward Migrators: who have one of three reasons for less spending:(a) a change in lifestyle;(b)routinely reassess their options and find a better provider;(c)actively dissatisfied.

The research also identifies an "average behaviour pattern" that, while varying from company to company, holds true in an industry sector context and influences customer loyalty.It includes five structural factors:

1. How often purchases are made
2. The frequency of other types of interaction
3. The emotional / financial importance of the purchase
4. The degree of differentiation among competitor offerings
5. The ease of switching.

For a full version of the article see The McKinsey Quarterly, 2002, Number 2.

Item 2: The Tipping Point - A "Must Read" for all Marketers

The Tipping Point (Malcolm Gladwell, Abacus Books) is not a brand new publication - it was initially published in 2001. But it's central tenet - that the principles involved in the spread of epidemics can equally and effectively be applied to the spread of new ideas, trends etc - is compelling and fresh.

The book's title refers to the name given to the key moment in an epidemic when everything can change all at once - The Tipping Point.

It is a book that is challenging and highly readable, and one that is a must for all marketers interested in understanding and tracking how certain products and services take hold, while others don't.

One of the key concepts in the book is that in relation to the spread of ideas, trends (i.e. "social epidemics") there are three key types of people:

Connectors - those who have vast networks of people, and are diligent about maintaining contact with them (and, therefore, are especially effective in spreading ideas and information)

Mavens - those who research, collate and share their knowledge and expertise widely and do so in a spirit of generosity (and are thus powerful and credible "word of mouth" referrers and advocates)

Salespeople - those with the skills to persuade others when they are unconvinced of what they are hearing / reading (and are vital in tipping an idea, concept, product etc from the fringe into the mainstream).

Item 3: Davis and Associates growing profile in healthcare

Since 2000, Rhonda Smyth has consulted to Davis and Associates as a specialist healthcare marketing consultant, reflecting our growing work profile in the sector.

Rhonda is both a research scientist and qualified marketer, and has held marketing management and senior product marketing roles with Kodak, St.John of God Health Services and Baxter Healthcare.

In the past year, Rhonda has worked on a range of healthcare and health-based not-for-profit marketing and branding projects with Davis and Associates, including St.John of God Health Services, Sydney Adventist Hospital (The "San"), Baxter Healthcare and Multiple Sclerosis Society of Australia.

Item 4: What Makes a Good Marketer - Our Checklist

	Resilience: the ability to persevere in the face of corporate opposition and skepticism; to find alternative ways / channels to achieve desired outcomes/goals
	Creativity: in the thinking and execution behind brand and campaign executions; in sourcing new and different strategic alliances; in exploring alternative channels; in making the marketing dollar work hard and smart
	Broad Thinker/Broad Perspective: recognising the need to draw upon and marshal a diverse range of skills and experiences, both within an organisation and externally, to deliver desired business outcomes (e.g.IT,finance,HR,legal etc)
	Openness to Learning: inquisitiveness; open to continually learning new ideas and skills within the marketing discipline and in related disciplines - achieved through both formal/ informal means, academic/practical learning; willingness to consider a range of options and possibilities
	Passion: a genuine passion for the discipline of marketing; passionate about your customers; and passionate about one's beliefs and goals
	Intuitiveness: an intuitive understanding of what will work and what won't; an ability to read people and situations
	Good Communicator: the ability to engage both on an individual basis and with an audience; to articulate one's views and vision concisely and clearly
	Competency in Key Management Skills: financial management; interpersonal skills /people management; technology-literacy; communication - oral/written; legal/risk management(IP, privacy).

Item 5: New Business Wins - Major Brand Positioning Project for Multiple Sclerosis Society in Australia

One of Australia's most significant not-for-profit organisations, The Multiple Sclerosis Society in Australia, has appointed Davis and Associates to undertake a full strategic review of the Society's brand on a national basis.

The project involves external market research, spanning a cross-section of the Society's stakeholders and "customer" segments.

Item 6: In the News

Dianne Davis was quoted in the May issue of AFR BOSS Magazine on the topic of Marketing and CEOs.

Item 7: Chief Marketing Officers Forum and the Australian Institute of Company Directors

The Chief Marketing Officers Forum ("CMOF"), of which Davis and Associates is a founding member, is holding a joint CMOF / Australian Institute of Company Directors evening seminar in Sydney on 19 June on the topic of "Diversity in boardroom skills and thinking".

Minter Ellison are sponsors of the event.

Panel speakers include Carolyn Hewson, Chris Gillies, Geoff DeLacy and Peter Hanlon (Head of Marketing at Westpac).

For full details visit the AICD's website at www.companydirectors.com.au (see Events, NSW).

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