The Extent to Which the Customer is Central to the Business of Subaru - Coursework Example

Centrality and Subaru There are many automobile manufacturers across the world and they each have a way of reaching consumers and customers. Many manufacturers hold focus groups to understand their customers better but they do not always listen to what the customer says that they need. Subaru is an exception to this rule because they listen to their customers and act on what they suggest. Organization Background Subaru began in 1968 when they brought out the 360. It was a practical, ultra-economical vehicle and in America 600 people bout it from this new company. They provided a vehicle that was engineer driven and they had extra safety features like front wheel drive. They produced several different cars in the 60s and 70s when America was willing to buy something new and they have become one of the most well known manufacturers since then ('History of Subaru'). Subaru made a systematic improvement in their vehicles and kept up with the pace of the times. Their vehicles come to the marketplace with superior workmanship and they offer fuel economy that is better than other mid-size SUVs. They also work to consistently move with the times and provide their customers with vehicles they can count on. The customer to be examined is the customer who purchases a Subaru vehicle who likes the line and continues to purchase them. This paper will examine how Subaru works directly with their customers and how they use this information to further their production. Subaru has always believed in the customer's right to say what they need and they create vehicles that the customer consistently says they want. Literature Review There are several studies that have been made about centrality in a variety of organizations. For the purpose of this researcher, "centrality" means building relationships with the customer. This means that the customer is put on center stage within the organization and they are listened to in a manner that makes sense. The company builds their product line around what customer's need and they take into consideration the needs, values and drive of the customer. Most companies know that in today's world they have to build relationships with their customers but they may not understand quite how to do it. Subaru is an example of someone who knew what to do and is making a difference. Soureli, Lewis, and Karantinou, (2008) studied centrality in buyer behavior for financial services. They found that the way to bring about buyers who will buy more than one product started with forming a relationship. They saw customer centrality as the way to make sure that customers stayed with the firm for a long time, they used the service often and they bought more business as they needed it (p. 2). They were particularly interested in those factors that made people cross-buy, i.e. having someone buy more products from the same vendor. They found that there were four key variables that made people cross buy: 1. Satisfaction -- the customer is satisfied with both the financial institution and the individual who they are purchasing from. 2. Perceived value -- the value that the individual sees in the product will also influence their loyalty and help to build a relationship with them. If the customer likes their bank they will continue to look for other products to purchase from them. 3. Trust -- if the customers felt they could trust the bank they were more apt to stay and allow the bank to sell other products. (Soureli, Lewis, and Karantinou, p. 5-6). Day, Shocker and Srivasta (2001) argue that consumers are not looking to purchase a particular product but they are expecting to have benefits from whatever product they purchase (p. 319). In Subaru's case they understood from their beginning that their competitors were selling a car but they were not appealing to the customer's need for value necessarily. Subaru sells "an experience" rather than a vehicle. They listened to their customers and they market all of their products to suit different customer need. This was not a decision to "please" the customer but more an adoption of a philosophy. Day et. al suggests that consumers already understand what they want because they have studied the competition. They rely on their own research and that of people they know. The challenge for organizations that do not look at their business from the importance of their customers is that they do not get to know their customers well enough to sell to them. Yilmez, Kirmani and Murthi (2008) speak to the centrality of using coupons with customers and how important it is to link them to something the customer wants. They suggest that co-promotions can be done if both businesses understand the customer they want to encourage. Customers look for products that are high in centrality and distinctive. They suggest that co-promotions must be done at a time of the year when the customer needs the specific item (p. 824). As an example, a co-promotion during Thanksgiving could work if the product has something to do with Thanksgiving. It is important to note that all of these researchers found that the company must understand that the customer is the most important aspect of their business and when they understand this information at the deepest level, they are able to form relationships easier. The definition of centrality in this context means that the customer is important. The more important they are made, the better the business can institute a relationship that lasts over time. Horn and Salvendy (2006) studied product creativity from the perspective of customers who purchased certain products. They found that there were six dimensions to what people saw as important. In their study centrality, importance and desire were the most important of all and that these can be used to produce customer satisfaction. Fuller and Lewis (2002) interviewed 50 small companies that had been established for at least three years. They wanted to discover the relationships that made the most significance in consumer buying. They found that many small businesses see relationships with their customers as long-term commitments. They found that "approaches to relationships, and any difference in [them] were a strategic part of the business (p. 321)." Subaru has always put the customer at the front of their business. Their philosophy is printed on their website: Subaru is a company-wide, customer focused corporate philosophy that puts Subaru customers first in all decision and actions. This perspective affects all of the company's programs including vehicle design and engineering, product quality, the improvement of the dealership environment, employee training, customer service and overall vehicle sales and service (Subaru Website, "Customer Service"). In looking at Subaru on a deeper level it is clear to see that they understand what their customers need. They created a customer service program to answer questions for their customers and they incorporated their assistance through emails, phone or through letters. All of these methods are equally looked at by qualified Subaru technicians rather than by an outsourced company. Baker (2000) wrote that "understanding buyer behavior is essential for developing consumer relationships" (p. 47). She suggests that in order to understand relationship marketing, marketers must understand buyer behavior first and must understand that this behavior is different for different markets. A company must understand that there is a process that happens as a consumer is making a decision to buy a product and that this decision can be made up of several factors that include culture, subculture, social class, friends and family. She defines these as micro and macro social influences. Values, beliefs and attitudes that consumers have are seen as macro social influences while family, friends and peers are the micro influences (Baker, p. 50). These influences will shape the attitudes and purchasing behavior that will create a stronger relationship with a customer or break the relationship. Subaru has taken these influences and created a situation where Subaru owners become a part of a large "family". The owners are kept informed about what they are doing through their "Drive" magazine. Subaru makes customer proud to won a Subaru and most are very happy about owning their vehicles. Another major area for customer centrality is in the area of retention. Many businesses focus on getting more and more customers into their pipeline and selling to them one time. These successful businesses are those that understand that good marketing is needed to keep customers over the long-term. A business must see the centrality of brining in and keeping customers. Many experts suggest that it is more expensive to get a new customer than it is to keep customers coming back. Payne (2000) quoted research findings that said "there is a high correlation between customer retention and profitability across a range of industries" (Payne, p. 110). He states that there is a ladder of customer loyalty and this included moving customers up the ladder to a point where they keep coming back. A company must "replace customer satisfaction with customer delight, by offering a quality or service that exceeds expectations (Payne, 110)". Brady (2009) suggests that the way to keep customers is to "understand what they need and give them what they want" (p. 1). It does not seem that this is a very good philosophy because they are not taking into consideration the fact that what they need and what they want may be two different issues. He does suggest that the business must offer what they say they will offer, they must communicate clearly and they must exceed the customer's expectations. This is what many researchers are saying about customer retention. As already stated, there are many issues a company must take into consideration when they want to make customers the most important aspect in their business. Another area that is important to centrality is understanding that there are often value differences. When a business is able to give more value to their customer they are involved with centrality. It is important for a business to find a way to differentiate themselves from their competition. In order to do this they must study not the competition, but the needs of the customers. Kotler and Armstrong (2008) point out that finding the differences mean that 'marketers must think through the customer's entire experience with the company's product or service (p. 204). This means that by looking at how the customer uses a product or service from beginning to end will help them create a stronger loyalty for their brand. The next step is to communicate these differences to the customer and find a very strong positioning strategy. Some companies are finding that the Internet poses a strong competition for them and allows a way to make sure that customers have a more regular opportunity to find and work with them. The Internet allows customers to find products and services 24 hours a day on every day of the year. This also allows them to look at more product choices and provides a way to compare this information (Kotler and Armstrong, p. 482). When a company is online it allows them to make stronger relationships with their customers. They can reach their markets easier and build trust more effectively. With the addition of social networking on sites like Twitter, Facebook and MySpace customers can make informed decisions more quickly than by going into a store. Some companies offer downloadable videos, Flash programs, pictures and audio so that the customer gets to know exactly what they are buying. This gives a very strong message to the customer and makes them understand their importance. Subaru and Centrality Subaru has gone to great lengths to show their loyalty and interest in their customers. They have a website that is user friendly and easy to navigate. They are involved in the communities where they are located and they have several projects they do each year. As an example, this year the Community Transitional School in Portland, Oregon received funding from Subaru and they are also featured in the current issue of "Drive" magazine. The magazine is full of information about a variety of topics that are of interest to many people in addition to the newest information on what Subaru is doing with their vehicles. It has many pictures and is eye catching so it is enjoyable to read and available online. In 2008, Carmichael Lynch and Subaru developed a marketing campaign that took them deeper into the feelings of centrality for their customers. They had two insight from their research: 1. Subaru owners have an outspoken passion and love for the brand. 2. Many consumers knew about Subaru but they had no "strong emotional opinion" of the brand ("Love" 2008). With this information in mind, they formed a campaign to put the car and the consumer at center stage more prominently than they had in the past. According to John Colasanti, CEO of Carmichael Lynch, "Subaru owners are 'experience seekers' -- they want to live bigger, more engaged lives. They choose Subaru as a conscious alternative to the mainstream. To them the car is the enable of that bigger life" ("Love" 2008). They used the them of love because of the phrase, "I love my Subaru" that they have found most associated with their brand. The Subaru campaign is a three tiered approach that is geared towards the heart, the brain and the wallet. They appeal to the heart with TV ads that show a scene with a Subaru owner and their relationship with their car. Each one uses a different Subaru vehicle along with a family scenario that shows the Subaru as a trusted and loved part of the family. They answer the question, "Why could this brand be for me?" To appeal to those people who are more thinkers, the Brain sequences are geared to answer the question, "Why is this the right vehicle for me now?" These spots are geared towards capturing people who are interested in adventure, confidence and power, and on having a great experience with the Subaru of choice. The Wallet segments of their marketing deal with the financial aspects and how much value the Subaru holds for the owner. ("Love" 2008). By using these marketing strategies Subaru has emerged as the only car dealership that is making a profit while others are losing money (Marquardt, 2009). Subaru has a smaller budget than many other vehicle manufacturers but they put the money towards their customer needs. Customer centrality means more than good customer service; it means that customers are made the most important aspect of marketing. Although this works for some industries it can be a detriment for others. Centrality is a philosophy that goes beyond 'the customer is always right' to a place of understanding that one must build a relationship with customers and give them value that will have them coming back for more of what the company offers. Subaru has shown that being totally customer focused has brought them profits that go beyond what other car manufacturers have experienced. They systematically created a marketing campaign that brought the consumer to them and made them stay. Using centrality as a philosophy paid off for them and the idea in this researcher's opinion, has no flaws. Subaru took time to plan their marketing edge and they totally understood their customer, This allowed them to understand how to keep them happy and keep the business moving forward. Centrality means making the customer more important than anything else in the business. It is almost like the idea of "build it and they will come." If the business takes the time to move forward by making the customer important, they customer will respond by becoming a very loyal aspect of the business. References Baker, S. 2000, Consumer buyer behavior. In Cranfield School of Management, Marketing Management, Marketing management: A relationship perspective. NY: St. Martin's Press. Pgs. 47-61. Brady, T. 2009. Customer retention. Fleet Owner 104(5). , 84-84. EBSCOhost Business Source Premier Database [AN: 40101233]. [Accessed 07 June 2009]. Day, G.S., Shocker, A.D., and Srivastava, R.K. (2001). 'Customer oriented approaches to identifying product markets. In Enis, B.M., Cox, K.K., and Mokwa, M.P. 1995. Marketing classics: A selection of influential articles. 8th Edition. NJ: Prentice Hall. pgs. 317-322. Fuller, T. and Lewis, J. 2002. 'Relationships mean everything.' A typology of small business relationship strategies in a reflexive context'. British Journal of Management. 13: 336-371. Horn, D., and Salvendy, G. 2006. Product creativity: conceptual model, measurement and characteristics. Theoretical Issues in Ergonomics Science 7(4): 395-412. EBSCOhost Business Search Premier [AN: 21460068]. [Accessed 08 June 2009]. 'History of Subaru'. 2003. Drive Magazine. [WWW]. Hurrem, Y., Kirmani, A. and Murthi, B. 2008. The effects of centrality and distinctiveness on the usage of co-promotions. Advances in Consumer Research-North American Conference Proceedings. 35: 834. EBSCO host Business Source Premier database. [AN: 35063933]. [Accessed 06 June 2009]. Kotler, P. and Armstrong, C. 2007. Principles of marketing. NY: Prentice Hall. 'Love. It's what makes a Subaru." 2008. Carmichael Lynch Advertising. [WWW] Read More