ABSTRACT

One of the fundamental principles of marketing is that an organisation can enhance its performance by ensuring that it responds to and satisfi es customer needs. This simple idea is at the heart of the service-profi t chain as outlined in the previous chapter. In the long run businesses that fail to deliver customer satisfaction go out of business. Thus, there should be no contradiction between seeking to align the interests of owners and consumers. Problems often seem to occur when attempts are made to satisfy the short-term needs of one group to the detriment of the other. For example, a company might seek to achieve above trend profi t growth by a combination of price increases with cost reductions on the input side (e.g., reducing the number of staff, using less well trained staff). Product margins might receive a short-term boost but competitors and consumers will gradually fi gure out what is happening and customer defection will occur. On the other hand, a company that is favouring customer preferences for higher quality at lower prices can be expected to achieve short-term growth in market share but will jeopardise the business’s long-term viability if profi tability is eroded in the process.