Traditional marketing strategies fo

Traditional marketing strategies focus on obtaining successful exchanges, or transactions,
with customers to drive increases in revenue and profit. In this approach, termed
transactional marketing, companies are generally oriented toward short-term interaction
with their customers. The traditional marketing concept emphasizes accommodating
customers' needs and requirements, something few business organizations would
argue with. However, as practiced in many firms, the result is a focus on creating successful
individual transactions between a supplier and its customers. Further, the practice
of segmentation and target marketing generally results in rather large groupings of
customers, each having somewhat similar needs and requirements. In this approach to
marketing undifferentiated, differentiated, and niche strategies are common.
An undifferentiated strategy views all potential customers as if they are essentially
the same. While the organization may go through the process of segmentation, it
ultimately averages the customers' needs and then tries to design a product and
process that will meet the needs of the average customer. This allows the firm to
streamline its manufacturing, market distribution, logistics, and promotional efforts to
obtain cost efficiencies. For many years, Coca-Cola had only one cola product, Regular
Coke, which was intended to satisfy the needs of all cola drinkers. For many years
UPS followed a similar one-size-fits-all strategy in parcel delivery. Customers benefit
from low-cost operations but many may not be fully satisfied due to the supplier's inability
to satisfy unique requirements.
In a differentiated strategy, a firm targets multiple market segments, serving each
with a productJservice and market distribution process matched to more specifically
meet that segment's unique needs and requirements. Coca-Cola today offers Diet
Coke, Caffeine-free Coke, Cherry Coke, etc. When Federal Express entered the market
for parcel distribution, UPS responded by developing a capability to meet the
needs of shippers who required more rapid and controlled delivery. The result was different
offerings to different market segments. While a differentiated strategy increases
organizational complexity and cost, it allows a firm to accommodate more specifically
the requirements of different customer groups.
A niche strategy is frequently utilized by small firms or new companies that
choose to target one segment out of the overall market by offering very precise services.
In the soft drink industry, Jolt Cola exists for those few customers who desire
high sugar and high caffeine content. In parcel delivery, several small firms focus on
customers who require same-day delivery.
Paralleling the development of the supply chain management concept, there has
been a shift in philosophy regarding the nature of marketing strategy. This shift has
generally been acknowledged as relationship marketing. Relationship marketing focuses
on the development of long-term relations with key supply chain participants
such as end users, intermediate customers, and suppliers in an effort to develop and retain
long-term preference and loyalty. Relationship marketing is based on the realization
that in many industries it is more important to retain current customers and gain a
larger share of their purchases than it is to go out and attempt to attract new
customers. '
The ultimate in market segmentation and relationship marketing is to focus on the
individual customer. This approach, referred to as micromarketing or one-to-one marketing,
recognizes that each individual customer may indeed have unique requirements.
'Thomas 0. Jones and W. Earl Sasser, Jr.. "Why Satisfied Customers Defect," Hanard Brr.sin~,ss
Rrview. NovemberIDecember 1995, pp. 88-99.
Part I Iagistics in Suppl~ Chuin Managetnent
For example, although Wal*Mart and Target are both mass merchandisers, their requirements
in terms of how they desire to interact logistically with suppliers differ significantly.
A manufacturer who wants to do business with both of these major retailers
must adapt its logistical operations to the unique needs of each. The best way to ensure
long-term organizational success is to intensely research and then accommodate the
requirements of individual customer^.^ Such relationships may not be feasible with
every customer. It is also true that many customers may not desire this close relationship
with all suppliers. However, one-to-one relationships ean significantly reduce
transaction costs, better accommodate customer requirements, and move individual
transactions into a matter of routine.
There are four steps involved in implementing a one-to-one marketing program.
The first is to identify the individual customers for the company's products and services.
As simple as this may seem, many companies still tend to think in terms of
groups of customers rather than individual customers.
The second step is to differentiate the customers, both in terms of value to the organization
and in terms of their unique requirements. Clearly, all customers do not
represent the same potential sales volume or profitability. Successful one-to-one marketers
focus their efforts on those customers who represent the greatest potential return.
Understanding differential customer needs provides the foundation for customization
of products and services.
The third step involves the actual interaction with customers with the goal of improving
both cost-efficiency and effectiveness. For example, cost-efficiency might be
improved by automating routine interactions such as order placement or requests for
information. Effectiveness can be improved by understanding that each interaction
with a customer occurs in the context of all previous interactions.
Ultimately, one-to-one marketing is operationalized in the fourth step, customizing
the organization's behavior. The company must adapt some aspect of its behavior
to the customer's individually expressed needs. Whether it means customizing a manufactured
product or tailoring services, such as customer packaging or delivery, the
production andlor service end of the business must be able to deal with a particular
customer in an individual manner.3 Industry lnsight 3-1 describes how Square D, a
manufacturer of electrical equipment, has implemented relationship and one-to-one
marketing with its key customers.