Marketing Principles Learning Outcome 1 (1.2.2) Costs

1.2.2 The business costs of being marketing orientated

The business costs of being marketing orientated

The business costs of being marketing orientated

For organisations to thoroughly understand the customer and the competitive environment they must invest heavily in some key activities.

They need also to put in place complex customer retention processes and customer service policies.

So, there are a great many tangible costs involved in the strategic choice of customer-orientation.

Cost #1: The marketing budget

  •  Market Research               Tracking market and competitor changes
  •  Customer Research          Understanding their needs, wants and fears 
  •  Market Testing                   Ensuring that products/services meet market demands
  •  Product Testing                 Ensuring products meet customer expectations

As these activities are part of a continuous process, they are not one-off costs. This means that the financial commitment is a long-term, on-going need to keep the business supplied with vital information.

Cost #2: The price of quality

  •  Quality testing                   Investment in physical and human resources
  •  Quality control systems   Meeting or exceeding customer expectations

Cost #3: The cost of customer service

  •  Employee Training            So that people are committed to customer satisfaction
  •  CRM systems                     Customer relationship management e.g. digital call handling
  •  Human Resources             Cost of extra staff needed to meet service quality standards

Cost #4: Customer loyalty

  •  Loyalty programmes         The cost of customer reward programmes e.g. discount cards

So an organisation will consider the costs of being customer-focused and calculate the benefits against the investment. They need to be able to evaluate the return on their investment (ROI)

Click on this image to learn more about how organisations maximise the ROI from customer service:



The cost of a customer

One of the assessments that helps businesses to evaluate the ROI is a cost-benefit analysis.

This involves putting a monetary value to the expenditure and to the benefit and then calculating the difference between the two.

Many businesses can calculate the value of a customer and can therefore consider how much they can afford to invest in order to recruit and keep that customer loyal over time.

Click anywhere on this image to learn more about the cost of winning or losing a customer