Marketers have traditionally focused on a company’s sales, market share,
and margin to set its objectives and judge its performance. But gains in
market share, while desirable, need further examination. Did you gain
the right or wrong kinds of customers? Are they the staying or the
switching kind? Are you “buying” share or “earning” it? Are you gaining
a greater share of a shrinking market? Consider the following:
grew his share of the vacuum tube market when he should
have pursued the transistor market.
• Jack Welch said when he retired from GE that he had been
wrong about needing to be number one or two in every business
because “it leads management teams to define their markets
narrowly . . . and has caused GE to miss opportunities
and growth.”
Focusing on margins can also be misleading. U.S. automakers
resisted making good small cars because the margins were small. The
Japanese went after this market knowing that they could capture the
hearts of new young customers who would eventually buy larger
Japanese cars.
Your company needs a whole set of additional measures to set
its goals and gauge its performance (see box).
Your company must set more specific performance goals and
measures for different marketing areas. For service support, you can
use “on-time, first-time fix” to know the percentage of times the service
person arrived on time and fixed the product perfectly. For order fulfillment, you can measure the percentage of “orders filled completely
and accurately.”
Every company must set appropriate incentives for the achievement
of different goals. Companies must avoid setting incentives that
create short-term profit but long-term customer loss. Paying automobile
salespeople a commission leads them to manipulate the customer
in order to make the sale. Stockbrokers on commission have
an incentive to churn the customer’s holdings. Insurance claims representatives
try to pay as little as possible. Telemarketers are paid for
speed over service and this can hurt long term relationship building.
Incentive systems must be carefully monitored to avoid abuse.