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Shattering Myths in Marketing
by Vinay Joshi

Myth 1 : A business should invest more money in finding new customer than further developing current ones.

Current customers are generally worth five times more than new customers. The heavy focus on new customers might make sense if the probability of attracting new customers is considerably greater than holding a current customer. Across a range of product categories, the cost of holding a current customer is often only 25% of the cost of winning a new one.

Myth 2 : Big customers are the best customers.

Big customers may not be profitable customers. They often demand the lowest price and the highest level of service and they usually obtain both as they are VVIP customers.

Myth 3 : Sales people know a great deal about their customers.

Sales people only ask what they think they need to know to obtain orders or prescriptions. They do not probe into the customer's challenge, tactics or strategy. The reason sales people don't dig out marketing information is that companies do not reward them for doing so.

Myth 4 : The best salespeople are those who have long-standing personal relationships with customers.

Theory is that sales people should cultivate close personal relationships with customers. We trust our friends, and trust is the biggest element in the buyer-seller realtionship. The problem comes when friendship becomes more important than problem-solving. Having too close a relationship may be a liability, because people may be taken for granted.

Myth 5 : 100% customer satisfaction is a profitable objective.

Pleasing customers is something every business must do. But one question has to be asked - what is the relationship between customer satisfaction and profitability? The answer : Less-than-perfect service can be profitable, because average customer satisfaction level is about 82%, but the marketing man who improves it to 90% blows away competitors. However the money required to move from 95% to 100% is enormous relative to benefits. Customer satisfaction increases sales & profit upto a point, but as the cost of making customers happy moves beyond 92%, it begins to erode profits.

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