Page 16 - Marketing the Basics 2nd

8 Marketing: the Basics
The second aim of marketing is to retain customers by continually meeting and surpassing the customer’s satisfaction with the product. Researchers have found that often as much as 80 per cent of a company’s revenue accrues from as few as 20 per cent of a company’s repeat customers. The luxury car manufacturer Lexus estimated the lifetime value of a satisfied customer was worth $1.17 million, or roughly 20 times the retail price of one car.
Something just doesn’t add up. Unless Toyota (the makers of Lexus) has managed to hide from securities regulators that they are a majority shareholder in a major oil company, the cost of spare parts and maintenance checks do not add up to $1.17 million. How then did Lexus come up with a figure so high?
It turns out that when a customer is satisfied with a product and when the opportunity presents itself that person is likely to tell her friends – who are often in the same socio-economic class – how pleased she is, a social phenomenon marketers call word-of- mouth marketing. Despite how much influence advertisers like to think they wield over customers, a personal endorsement plays a much larger role in a purchasing decision than any slick marketing campaign. Just take a look at Google as proof. With no formal advertising whatsoever, other than encouraging users to ‘spread the word’, their company has grown from a tiny start-up to the market leader in Internet search.
Back to our Lexus example, one satisfied customer’s glowing recommendation is literally worth a million dollars. There’s something else at work here. Why would someone choose to purchase a Lexus over another car company with a similar product? The value Lexus owners receive goes beyond the physical product. Clearly, the brand offers a set of benefits that extend far beyond the attributes of their product. We will take a closer look at brands later in the chapter but for now we will only state that those products that add meaning and experience truly differentiate themselves in the mind of customers.