Strategic Marketing Plan: Radiant Services Company Inc - Term Paper Example

Radiant Services Company Inc. Strategic Marketing Plan Introduction The objective of strategic management is to "exploit and create new and different opportunities for tomorrow." (David 2005:5) Further, according to David, strategic management implies the integration of various organisational functions like management, finance, manufacturing, R&D, marketing, and information systems. (2005:5) But business organizations do not operate in vacuum. External factors in the environment affect their performance. Minzberg et al. define strategy as "the pattern or plan that integrates an organisation's major goals, policies and action sequences into a cohesive whole." Further, "a well formulated strategy helps to marshal and allocate an organisation's resources into a unique and viable posture based on its relative internal competencies and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents." (1999:5). Therefore business strategy includes all activities a company undertakes to achieve its mission, marshal its resources to derive competitive advantage within a dynamic environment. Organizations, which can continuously anticipate, adapt and innovate to meet changing trends in the environment and customer expectations are said to have a vision. This vision, otherwise known as long term focus enables them to be continuously successful and deliver value to their stakeholders. Johnson et al. include two additional features, one, the long-term focus, the other, defining its scope, in their definition of strategy. They define strategy as "the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment and to fulfil stakeholder expectations" (2004:10). Radiant Services Company Inc. Radiant Services Company Inc. (RSC) is a taxation consultancy servicing individuals and business organizations by offering them advice all areas of taxation. Taxation planning is the company's main revenue earner accounting for 75% of the gross. RSC has a loyal customer base in a market that has seen constant but slowing growth rate in recent years. The company's main customer base comprises of mid to large-size organizations, which seek RSC's expertise on taxation and financial planning. RSC considers that its service offering of tax planning would help it build long-term relationships with its customers by making the company an indispensable integral part of management and financial planning. RSC's customers appreciate the value of taxation and financial planning and are cognizant of the lost opportunity costs if they do not seek expertise in these areas. Changes in the market dynamics like increased competition, simplification of tax laws, the advent of information technology solutions to complex problems pose a long term threat to the company especially because of high dependence on one area of financial consulting. The company realises the necessity to diversify to achieve stability and sustain growth in the dynamic environment. The company's customer base may be categorized into three categories. The first is the individual taxpayer category, which offers consistent revenues. Of this again 20% consists of customers who seek advice on tax planning and investment portfolios. The rest seek advice only tax planning. The second category comprises of organizations that employ less than forty employees. These organizations have annual sales in the range of $250,000 to $3,000,000, privately owned, mostly around San Francisco and are the fastest growing segment within RSC's customer base. RSC considers that it would be a profitable long-term strategy to hitch to these organizations and grow along with them. The third and most important segment for RSC's current revenues comprises the organizations that employ more than forty employees. They generate the highest revenues on 'per-hour' basis and seek the widest range of consultancy services from RSC in the areas of taxation and financial planning. Customers falling in this category gross yearly sales of over $3.2 million, widely owned function from more than one site and serve a national customer base. The services that RSC provides its customers help them gain in both substantial and insubstantial value. RSC helps its customers minimizing taxes and maximizing corporate wealth by proper taxation and financial planning. The company also helps customers understand complex taxation and legal procedures and adhere to state and federal tax laws. The issues which need consideration for designing a strategic marketing plan for RSC are: static taxation laws, information technology tools that simplified complex procedures, key customer growth and of course increased competition. While static taxation laws and the application of information technology tools help RSC maximize its efficiency they also reduce the company's billable hours and revenues. Opportunity areas and target markets RSC's great opportunity area is the growth of the company's key customer growth. By satisfying existing customers, converting them into loyal customers the company might hitch its wagon with its customers' growth. Kotler observes, "the key to customer retention is customer satisfaction." (2004:73) This is because satisfied and loyal customers bring in larger share of their expenditure, repeat business and referrals and give word-of-mouth publicity. It is far cheaper to delight and retain existing customers than to win new ones. The growth rate of RSC's combined target markets averaged 9.1% both because of the growth of its existing customer base and establishment or migration of others into the San Francisco area where the company operates. The growth rate is expected to remain constant in the foreseeable future. RSC offers taxation and financial planning services to individual and business clients as follows: Individuals: Taxation advising, planning, and preparation for individuals Business Clients Taxation advising, planning, and preparation Consulting services, including: Industry-specific taxation consulting At-risk taxation consulting Corporate-taxation consulting As we have seen earlier the company's important target markets are high net worth individuals desirous of seeking advice on tax planning and investment avenues, organization with less than forty employees which have a potential to grow and offer RSC a chance to grow with them and established organizations with more than forty employees that seek comprehensive business planning solutions. The following table summarizes RSC's target market projections: Potential Customers GR 2005 2006 2007 2008 2009 CAGR Large Business 8% 435,000 469,800 507,384 547,975 591,813 8.00% Growth Business 11% 342,000 379,620 421,378 467,730 519,180 11.00% Individual taxation 6% 380,000 402,800 426,968 452,586 479,741 6.00% Total 8.28% 1,157,000 1,252,220 1,355,730 1,468,291 1,590,734 8.28% Competition and environment The spread of computer literacy and the use of information technology tools to simplify complex procedures is a development that is gnawing into the market as individuals put these tools to file their own tax returns. The flip side of these developments is that the same technologies help RSC (as well as its competitors) to improve operating efficiencies. RSC's competitors include other similar companies, individual practitioners and licensed taxation consultants. There are two other companies comparable in size, staff, resources and capabilities operating in the San Francisco area and one of them is a national company. However the difference is in their focus and areas of specialization. The number of individual practitioners and licensed taxation consultants is growing. The demographics of the over-60 generation, which enjoys tax sops, and their growing wealth, offer a great opportunity area for RSC to tap into. Secondly the children of these ageing millionaires who inherit the wealth need the services of companies like RSC to integrate the inherited wealth into their own and still save on taxes. SWOT Analysis The following is a brief of the strengths, weaknesses, opportunities and threats of the company. However some of these features may be equally applicable to competitors and thus cancel each other out. Therefore in the ultimate analysis, the company's intangible assets like the reputation that it has built over the years, its brand equity and the faultless and timely service that it offers its customers can only be leveraged into competitive advantage. Strengths: The company has a core of competent and experienced CPAs but more importantly held in high esteem by the company's clientele. Highly experience staff that can churn out quality work and billable hours. State of the art information technology tools that enhance the company's efficiency. High customer retention providing consistent referrals and word of mouth publicity. Three of the CPAs, the company's rainmakers who bring in an estimated 65% new business every year. Weaknesses: Over dependence on routine taxation work for individual and business customers which fills the time and precludes diversification. Seasonality of business increases overheads in terms of staff salaries paid even during lean season. Attrition rate of aggressive and ambitious non-partner CPAs who move out in search of greener pastures. Customer perception of being too traditional causing new customers as an optional service provider. Senior staff members living in the past and unable to move with the times and therefore do not see the need to 'market' the company. Opportunities: Changing demographics in the vicinity including the addition of retired government servants. Increasing income levels of senior citizens who have aggressively saved for their 'rainy day' and in need of complex taxation and estate planning. Threats: Increased competition from sole-practitioners and new companies. Advances in information technology tools and at affordable lowered costs that minimizes the role of the CPA in tax preparation and book keeping. A general perception that companies like RSC help only in taxation related issues rather than as a valuable resource for broader business/financial planning issues. Gross simplification of state and federal tax laws, for e.g. flat income taxation reducing the company's billable hours and revenues. Marketing Strategy If the company were to seek growth in expanding business from current customers, and adding new customers both these categories seem to offer relatively low potential. Then the solution is in diversification. Fortunately the weaknesses the company has, it shares with its competitors and the threats the company faces are 'low'. The key issues the company has to address are to (a) retain its customer base by Customer Relationship Management, as customer loyalty reduces costs and improves profits (Piercy 2002:26-27); (b) be alert to focus on emerging customer base and (c) educating its staff to have a 'marketing orientation' irrespective of their functional area. In fact as a 'services marketing' organization the company's marketing strategy should be brand building by through Customer Relationship Management (CRM). According to Frain the marketing concept emphasizes "total organizational commitment to customer satisfaction and loyalty and to the long-run welfare of society as the motive forces for attaining organizational objectives." The key factors in the definition are customer satisfaction and loyalty. Frain writes abut a conference organized by the UK Semiconductor Manufacturers' Association (SMA) in association with The Times newspaper as an example of responsiveness to customer interests. In the B2B conference a large number of representatives of the electronic and electrical industry were asked three questions: 'Are we doing the things right' 'Is what we do what customers want' 'How can we improve dialogue and the way we operate' That was not all. A spokesman for the SMA said "We" (as semiconductor manufacturers) "can only be as successful as our customers and we'd like to see them challenge us, push us harder." The conference was intended to bring together chipmakers and chip-users to pool their skills and market knowledge for the benefit of the electronics industry as a whole. (Frain 1999 11-20). The following tips for customer retention have been adopted from Roche (2005) to suit the current context of 'services marketing': Customer learning curve: The process is to educate customers about the company's services offerings and once familiar with these work processes the customer is more likely to stay rather than seek a new service provider and start all over again. Process integration: Once with the customer's business processes integrated with those of the service provider, it would be difficult and expensive for the customer to disengage and seek another service provider all over again. Personalization: As the customers expect personalized service, it would make sense to allocate to them specified trained staff and specific CPA/s to handle the account. However the weakness of this system is that the firm will be dependent on the specific staff and in case the staff leaves the organisation for any reason will have to start all over again. Standardization of procedures: Standardization of office procedures improves efficiency; the way 'pack drill' facilitates the movement of the armed forces. Risk reduction: It might be better to explain the need for compliance with laws rather than 'cutting corners' to save dimes that might prove expensive later. The same applies to investment planning with persuading the customer to opt for safe investments havens with modest returns rather than 'high-yield' 'high-risk' returns. Loyalty programmes: Throwing in a small additional service without looking at 'billable hours' or some free investment advice thrown in as an incentive for loyal customers. Brand affinity: Linking one's brand with a specific community, for example to seek employees of a large organisation as customers or liasing with a website. Customer collaboration: Retain the customer's attention by constantly negotiating with value add-ons. For e.g. some customers may not be big revenue earners by themselves but may be good as referrals. Becoming a 'benchmark' for service: This comes only with long and hard service and continuously satisfying customers. Once a service provider achieves this status the company's business gains a momentum of its own and acts as an entry barrier for competitors. The first test for a good Customer Relationship Management programme is of course the quality of service the company offers. An organization has passed this test if a customer answers the following questions in the affirmative: Do they act in a professional manner Do they know who I am Do they remember my name Are they genuinely concerned about my best interest Will they actively support and defend their advice and counsel if needed Grayson et al. (1999) however have a word of caution regarding very high expectations from the relationship marketing. In their study of agency-client relationships in advertising agencies, they found that "relational factors (such as trust) are principal antecedents to positive relationship outcomes (e.g., Ganesan 1994; Morgan and Hunt 1994), empirical results do not always support this association." It is necessary to gauge how a customer values 'service' in order to be able to satisfy his needs. Yet, it appears the concept is seldom understood. (Anderson et al. 1998). An example to view this concept in more simple terms is: when a buyer asks for 0.5" drills what he actually need are 0.5" holes. While the 4Ps concept is widely accepted as a marketing concept for introductory marketing, in other cases especially in case of 'services marketing' Rafiq et al. (1995) advocate the concept of Booms and Bitner's 7Ps, which include participants, physical evidence and processes. The personnel of the organisation who play a role in the delivery of service occupy a key position in its delivery inasmuch as they are part of the product/service. The participants' concept also includes the customer, as it is the customer-service provider interaction that is the product/service. The physical evidence in the framework is the environment in which the service is provided and is a quite important determinant in its quality. In the instant case this refers to the ambience that the service provider creates when a customer visits as also the type and quality of interaction between them. The third P refers to the procedures or mechanisms of flow of activities in the service offering. The quality of this intangible offering depends on the experience of the customer, the attention, efficiency and alacrity with which the service provider offers solutions to the customer etc. According to Flur et al. (1997) the financial services market, which was largely defined by geography and regulation, is in for a major overhaul. The industry is beginning to be organised around " consumer needs and around underlying economics of products and their delivery." Although the author speaks mainly about distribution channels their applicability in the case of services market is in their availability at a convenient location for the customer. The accounting profession that offers taxation and financial planning services has been continuously evolving in response to challenges and regulations that change from time to time. The accountant is no longer a book keeper but a strategic management consultant because of intense competition, advances in information technology, saturation in the audit services market, pressure on audit service partners, globalisation and the ever changing regulatory environment. (Holtzman 2004) Conclusion The options for Radiant Services Co Inc. are retention of existing customers by delighting them, seek to grow along with companies that employ less than forty employees and diversify into other areas of the financial services market. Retaining/winning customer loyalty should be the company's major thrust area for long-term success. Bibliographic References: Anderson, James C.,andJames A. Narus.(1998) "Business Marketing: Understand What Customers Value."Harvard Business Review(Nov-Dec 1998):53(1).British Council Journals Database.Thomson Gale.British Council - India.14 Nov. 2006 . David, Fred R. (2005). Strategic Management: Concepts. (Eleventh Edition). New Jersey. Pearson Education Inc. Frain, John. (1999). Introduction to Marketing. (Fourth Edition). International Thomson Business Press. London. Flur, Dorlisa K.,Lenny T. Mendonca,andPatricia Nakache.(1997). "Personal financial services: a question of channels."The McKinsey Quarterlyn3(Summer 1997 n3):116(10).British Council Journals Database.Thomson Gale.British Council - India.14 Nov. 2006 . Grayson, Kent,andTina Ambler.(1996) "The dark side of long-term relationships in marketing services. (includes appendices)."Journal of Marketing Research36.1(Feb 1999):132(1).British Council Journals Database.Thomson Gale.British Council - India.14 Nov. 2006 . Johnson, Gerry and Scholes Kevan. (2004). Exploring Corporate Strategy. (Sixth Edition) Prentice Hall of India Private Ltd. New Delhi. Kotler, Philip. (2004). Marketing Management. (Eleventh Edition) Pearson Education (Singapore) Pte. Ltd., Indian Branch. New Delhi. Piercy, Nigel F., (2002). Market-Led Strategic Change. (Third Edition) Butterworth Heinemann. Oxford. Rafiq, Mohammed,andPervaiz K. Ahmed.(1995). "Using the 7Ps as a generic marketing mix: an exploratory survey of UK and European marketing academics. (B.H. Booms' and M.J. Bitner's 7Ps framework)."Marketing Intelligence & Planning13.n9(Sept 1995):4(12).British Council Journals Database.Thomson Gale.British Council - India.14 Nov. 2006. . Roche, Elizabeth. (2005) Analyze This: How to Strengthen Customer Exit Barriers. Customer Relationship Management. March 2005. URL: www.destinationCRM.com. Yair Holtzman. (2004). The transformation of the accounting profession in the United States: From information processing to strategic business advising. Journal of Management Development. (Dec 2004). Volume: 23 Issue: 10 Page: 949 - 961 http://www.emeraldinsight.com/10.1108/02621710410566856 Read More