Database Marketing (WHO)

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Ch 10: Customer Acquisition and Relation…

Customer Acquisition and RelationshipManagement

A pharmacist talking to a customer about a medication.

Dmitry Kalinovsky/iStock/Thinkstock

Patronage by loyal customers yields 65 percent of a typical business' volume. —American Management Association

Learning Outcomes

After reading this chapter, you should be able to do the following:

· Identify how organizational growth is best achieved by an HCO, and state the effect of the product life cycle onan organization's revenues.

· Discuss several approaches that an HCO can use to attract new customers, or patients.

· Delineate the premises upon which customer relationship management is based.

· Explain the advantages of database marketing, and identify ways for an organization to use a marketingdatabase.

· Provide examples of how an HCO can effectively manage real and virtual customer interactions.

Introduction

This chapter focuses on how to attract and keep patients through understanding and meeting their needs. The long-term success of an HCOdepends on its ability to attract new patients and turn them into loyal customers who not only return for needed services, but recommendthe HCO's services to others. This is especially important because of the nature of the life cycle for products and services, from theirintroduction to their decline. Attracting new customers and keeping existing ones involves interacting internally and externally with patients,analyzing data on current patients, and managing real and virtual interactions with patients. Managing relationships with patients helps toensure that patients stay informed and feel connected to the HCO through its internal and external customer relationship efforts.

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Pre Test Ch 10: Customer Acquisition an…

This is a self-assessment and will not affect your grade. You may only take this pre-test once.

Test Ch 10: Customer Acquisition and Relationship Management

Top of Form

1. Organizational growth is best achieved through a strong marketing plan that bolsters the life cycles of the organization's products or services.

· a. FALSE

· b. TRUE

2. Because consumers prefer a voice-to-voice or face-to-face recommendation of a service, creating an online presence does little to attract new clients.

· a. FALSE

· b. TRUE

3. Chief marketing officers rate customer experience as more important than new services or products, branding, or identifying organizational needs.

· a. FALSE

· b. TRUE

4. Customer Relationship Management (CRM) is based on the premise that good customers are loyal and will remain loyal.

· a. FALSE

· b. TRUE

5. Database marketing is an organizational process that is product-research driven.

· a. TRUE

· b. FALSE

Finish

Bottom of Form

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10.1 Organizational Growth

10.1 Organizational Growth

Most organizations have growth as a basic goal. Growth means an increase in revenue and a greater impact on the communities served.Growth also creates opportunities for staff to advance and take on new responsibilities. While many activities can help an HCO grow, themost important is the development of an effective marketing plan to provide a consistent platform for the organization's visibility and tobrand the HCO as an attractive option for medical services. The development of an effective marketing plan was stressed in Chapter 8 as abasic marketing need for an HCO: that is, to inform new and existing customers of the organization's services and to persuade them tocontinue using or to try using these services.

Product/Service Life Cycles

Like people, products and services have a life cycle. The term product life cycle refers to the stages that a product or service goes throughfrom the time it is introduced until it is taken off the market or "dies." The stages of the product life cycle, illustrated in Figure 10.1, usuallyinclude the following descriptions:

· Introduction—The stage of researching, developing, and launching the product or service.

· Growth—The stage when revenues are increasing at a fast rate.

· Maturity—The stage when revenues peak, and the rate of growth slows down.

· Decline—The final stage of the life cycle, when revenues start to decline.

For example, a pharmaceutical manufacturer introduces a new cholesterol drug, and it is promoted by sales reps and possibly promoteddirectly to consumers during the product's introduction stage. As more and more physicians prescribe the drug, sales grow at a fast pace,and the drug enters the growth stage. As time passes, sales begin to slow as the drug reaches the maturity stage. Then, newer drugs areintroduced, and sales of the older drug start to decline. In an attempt to maintain sales of the older product, the manufacturer may decideto sell the older product as an OTC drug, but at a much lower price than when it was a prescription drug.

Of course, not all products reach the final stage and may instead continue to stay at the maturity stage for a long period of time. Regardless,attracting and keeping new customers is critical because of the nature of how products evolve from their conception to extinction. Whenthe revenues produced by the product or service begin to decline, so do profits. To boost or maintain revenues requires keeping existingcustomers, but also attracting new ones.

Figure 10.1: Product/service life cycle

Some products stay in the maturity phase for a long time. Other products movequickly through the cycle.

Figure depicts the four stages of the product life cycle relative to revenue (y-axis) and time (x-axis). The four sequential stages are introduction, growth, maturity, and decline. Revenue increases over time, peaking during maturity. Then revenue begins to decline.

Source: Adapted from Product Life Cycle Stages at http://productlifecyclestages.com/

Individual Adoption Stages

A critical element in attracting new customers is to understand the stages that individual consumers move through when adopting a newproduct as it moves through the product life cycle. These stages, shown in Table 10.1, are referred to as the individual adoption stages. Ofcourse, promotional messages must be aligned with these stages to carry the consumer through them. In the introductory stage,promotional messages must inform potential customers of the offering. In the growth stage, promotional messages must encouragepotential customers to use that specific offering, or product, rather than competing products. At the maturity stage of the product,customers are reminded of the product to build repeat usage and referrals. Thus, messages stressing the firm's competitive advantage mustbe developed to answer consumers' questions at a given stage in the individual adoption process and to reflect the nature of the product ata given time during its life cycle.

Table 10.1: Individual adoption stages and information needs
Stage in Individual Adoption Process	Questions Consumers Want Answered
1. Awareness: Consumer first learns of the product,service, or organization.	Who are you? What are you all about? What do you do?
0. Interest: Consumer is stimulated to get moreinformation about the product or service.	Why would anyone use your services? What benefits would they get?
0. Evaluation: Consumer considers whether to trythe product or service.	Why should I buy your organization'sservices?
0. Trial: Consumer tries the product or service.	Will it really deliver those claimed benefits? Can I risk trying the service?
0. Adoption: Consumer decides to use the productor service, becoming "your" customer or patient.	Did I make the right decision?
0. Repeat: Consumer may reevaluate his or herdecision to continue using the product or service.	Should I continue to use the same serviceprovider or are there better alternatives?

Consumers will be at various stages in their individual adoption process of a product and will have varying levels of knowledge andexperience. Therefore, a variety of promotional messages, conveying different types of information about the product, service, ororganization, is usually necessary to communicate effectively to them. While most consumers are concerned about the benefits receivedfrom a product, some are interested in the detailed information that produces those benefits. Such detailed information should be availableto consumers who request it.

Information from the marketing plan's consumer analysis is vital in making communications decisions on promotional message content.The needs and motives of consumers become the center of such content decisions. If time and money permit, promotional messages shouldbe tested before use, and measures indicative of consumer responses to those promotional messages should be evaluated in the decision-making process to finalize the message content.

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10.2 Attracting New Customers

10.2 Attracting New Customers

New customers, or patients, can be attracted to an HCO in several different ways, some at a relatively low cost. One source has identifiedfour low-cost approaches (Guerrero, 2013), which follow:

1. Create an online presence with a website because people search for information, and sometimes ratings, online.

2. Use social media to create a profile of your business and to get feedback. Using social media increases visibility and presence, andshows potential patients you are up-to-date.

3. Increase community involvement, which is an age-old technique, but it works. Clubs, churches, speaking engagements, and so forth allincrease name recognition and awareness.

4. Make it easy for patients to contact you. This can be done by creating a link on your website for customer contact or by using text,tweets, and email.

Some hospitals have started using animated videos to attract new patients. These videos can be linked from your website, or emails can besent to provide links to videos on YouTube. This allows potential and existing patients to view the videos at their leisure and provides aninteresting interface, which can serve to present useful information (PRWeb, 2012).

Another approach for increasing patients/revenues is to offer additional services. Dr. Clint Long of Long Eye Clinic in Sherman, Texas is aboard-certified ophthalmologist who has added new services to his practice to attract new patients and increase revenues from existingpatients. The clinic offers BOTOX® Cosmetic, a proven prescription medicine that is injected into muscles to temporarily improve the look ofmoderate-to-severe frown lines between the eyebrows in patients from age 18 to 65. The clinic also offers CO2 laser treatment for skinrejuvenation. This treatment can help diminish brown spots and wrinkles while firming and toning facial skin.

LONG VISION CENTER: DR. CLINT LONG

Long Vision Center in Sherman, Texas cares about your vision. In fact we believe that it is very precious, and Dr. Long ishere to make sure you have superior quality eye care. Here at Long Vision Center, we provide general eye care, medicaleye care, surgical eye care, laser eye care, as well as Botox Cosmetic, Laser Skin Re-surfacing, and Lasik to patients inSherman, Texas and the surrounding North Texas area.

Dr. Clint Long, a State of Texas Board Certified Licensed Ophthalmologist, performs general eye examinations foreyeglasses and contact lenses, examinations for cataract and cataract surgery, lens implants, corneal surgery andtransplants, diagnosis and treatment of dry eyes, laser vision correction & surgery such as LASIK, diagnosis, medical,laser and surgical treatment of glaucoma and provide eye examinations and laser treatment for diabetic retinopathy andtreatment for age related macular degeneration.

Source: http://www.longvisioncenter.com/ Retrieved November 13, 2013 (continued)

While Dr. Long's initial interest was in helping patients with skin issues around the eyes, he soon learned that patients also wanted thetreatments for other areas of their face. His investment in additional training and certification in those procedures has paid off through anexpanded customer base and increased revenues (Long Vision Center, 2013).

Patient referrals are a cost-effective way of getting new patients. However, patient referrals, like other aspects of a marketing plan, must bemanaged. This means evaluating the process of new-patient referrals; that is, who is referring new patients, how is this information beingobtained and kept, and how are new patients treated by staff and made to feel welcome and valued.

Many doctors will actually set up an appointment for a patient with another doctor and have the referred doctor's office confirm theappointment. A record of each of these referrals should be maintained and the referring doctor thanked for the referral. A short note orcall can show appreciation and lead to more referrals.

The cross-selling of services within a clinic is a valuable tool for referrals. Cross-selling means referring patients to other doctors orservices offered by the clinic. It is important that each doctor be aware of the services and qualifications of other medical staff at the clinicand continually reminded of the need to cross-sell, because it works both ways: I refer someone to you, and you refer someone to me.

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10.3 Customer Relationship Management

10.3 Customer Relationship Management

In addition to attracting new patients, HCOs must effectively manage their existing customers to support long-term profitability. Customerrelationship management (CRM) further analyzes a targeted segment by addressing each customer's potential for profitability. CRM isbased on the following four premises:

1. Customers are a key asset of the organization.

2. Customers vary in their preferences and behaviors and their value to the organization.

3. Understanding customer needs, preferences, and behavior can improve a customer's value.

4. Relationships with customers must be managed.

While many companies have operated on the premise that the best customers are loyal ones and have focused on segmentation byfrequency of purchase, traditional loyalty programs have neglected to analyze their profitability (Mason & Young, 2003). Instead of focusingon loyalty alone, CRM goes one step further in finding ways to measure the company's "cost" to maintain that customer relationship. Manycompanies now offer software for CRM programs, which, if implemented appropriately, can provide a competitive edge for an organization(Kotler, 2003). These software programs involve the use of database marketing, which will be discussed in the next section.

The All About Smiles dental practice in Durant, Oklahoma has learned to use several approaches to CRM. At All About Smiles, CRM beginswith new patients at the front desk, where they are greeted by office staff and made to feel welcome and appreciated. Everyone else's job isto ensure that customer appreciation continues throughout the whole treatment and payment process. The office layout is unusual fordental practices. For example, the Egypt room has murals of pyramids; the Jamaica room has scenes of beaches and palm trees; and a gameroom complete with PAC-MAN® entertains the younger patients.

New patients are asked for their email addresses and mobile phone numbers so they can be sent reminders of their next appointment andalso have an opportunity to evaluate the services through an online survey, which is sent to patients a few days after their dental visit. Emailreminders are sent the day before the upcoming appointment, and text messages are sent the day of the appointment and two hours beforethe appointment time. Patients can opt out of both of these contact methods and request phone calls instead, if they prefer that type ofreminder. The office manager reports that the texts sent on the day of the appointment have significantly reduced the number of no-shows.

ALL ABOUT SMILES DENTISTRY, DURANT, OKLAHOMA

At All About Smiles Dentistry, we value our patient relationships, making it our priority to deliver gentle compassionatecare that you deserve from a dentist in Durant. We work hard to make you feel at ease by providing exceptional patientcare in a relaxed, convenient atmosphere. We strive to develop lifelong relationships with our patients by combining thelatest dental technology with a professional and compassionate staff. The result is a beau-tiful, healthy smile that lasts alifetime.

We also believe that patients should have sufficient information to make educated deci-sions about their oral health,treatment options and choice of dentist in Durant. You'll find all of this important information on our website, includingdirections to our Durant office, service descriptions, patient forms, patient education resources and more.

Not only are we a leading dentist in Durant, we are a full-service practice providing for all of your dental needs. Ourservices include:

· General Dentistry

· Teeth Whitening

· Crowns

· Preventive Care

· Periodontal Exams

· View a Complete List of our Dental Services

Should you ever need additional information about our practice, we are always available to answer your questions. Letus care for your entire family! We look forward to meeting you.

Source: http://www.durantsmiles.com/ Retrieved November 13, 2013

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10.4 Database Marketing

10.4 Database Marketing

True database marketing creates customer intelligence that contributes to the development of profitable customer relationships. Databasemarketing is an organizational process that is customer research driven. The information base is dynamic and evolving, preferably withtwo-way dialog with the customer (Berry & Linoff, 2000). It is a measure of the importance of creating and maintaining a good database ofmarket information that Business Week devoted the cover story of its September 5, 1994 issue to the subject of database marketing, calling it"one of the biggest changes in marketing since ‘new and improved'" (Bloomberg Businessweek, 1994, para 5). Since that time, the conceptof database marketing, coupled with new technologies, has grown to the point that a new generation of marketing professionals has beencreated. Basic information on age, gender, lifestyle, occupation, and so forth can easily be captured by HCOs through additions to theregular patient forms filled out annually or by new patients. This information must then be entered into a software program by staff or anoutside marketing agency. The data can then be analyzed for commonalities and trends.

Advantages of Database Marketing

The new generation of database marketing professionals offer skills in four primary areas: (a) secondary data acquisition, includinganalysis of the value of lists; (b) database-building, including the understanding of computer hardware and software; (c) target marketing,including maximizing database record use; and (d) one-to-one marketing, which involves managing and refining the targeting process tocustomize contacts for every customer (Kotler, 2003). The popularity of database marketing is grounded in the belief that marketingplanning begins by understanding the customer—his or her buying and consumption patterns, location, interest, and other aspects ofbuying behavior discernible from databases—and then formulating plans that attempt to weave the firm's product or service into theconsumer's pattern of behavior. The basic idea behind the use of databases is this: If that is what the consumer is doing, how can we makeconsumers want to do that more often and with our product? This approach to satisfying customers adheres to the belief that the bestindicator of future behavior is past behavior. Thus, if American Express® sees its card frequently used by a cardholder to purchase worksof art, then it assumes an advertisement for artworks in that cardholder's monthly bill will generate a better response than it would with acardholder who uses the card for travel in the Caribbean (and receives advertisements for travel specials to that region). In fact, bymonitoring card members' shopping, travel, and eating patterns, plus the economic and weather patterns in which they live, the databasemay trigger an ad to be sent to someone who has traveled in the past to warmer climates during a particularly inclement winter month, in acalculated effort to strike while the iron is hot.

If an HCO learns that more and more patients are accessing its website before a visit, then ensuring that the website is up-to-date, and thatlinks to departments and services are all working, is an essential part of the use of data mining, which is discussed in the next subsection.Patient forms can simply ask about visiting the website and any additional information patients would like to be able to access on thewebsite. Patients can also be asked whether they want to receive email or text updates of changes to the website.

Data Collection and Manipulation

The process of data collection and manipulation, which allows such powerful tactical marketing actions to occur, consists of several steps:

1. Consumer action. The process begins with the consumer taking some form of action—they use a coupon, fill out a warranty card, makea purchase, enter a sweepstakes, place a toll-free call to request information, fill out a business reply card, order from a catalog, and soforth. This behavior is combined with other information in public records to identify a broad profile of each consumer in the database.

2. Digesting the data. Sophisticated statistical techniques are used to merge data on the consumer into a coherent, consolidated database.Other software allows the marketer to "drill down" into the data to reveal patterns of behavior for classes of customers.

3. Profiling the ideal customer. Neural networks that "learn" from the data are used to identify a model consumer, that is, the commoncharacteristics held by the high-volume customer. This allows the marketer to find customers or potential customers who share thosecharacteristics in common with the high-volume customer.

4. Using the knowledge. This data can be used in many ways: to determine who gets which sales promotions, to develop attributes fornew products or services with a targeted list of customers for new-product introduction announcements, to tailor ad messages andtarget them by customer groups, and so forth.

5. Sharing data with channel members. For consumer package-goods marketers, it is possible to merge the manufacturer's database(described in item 2 of this numbered list) with an individual store's scanner data to help plan local promotional mailings, fine-tuneshelf displays, and design store layouts (Berry, 1994).

Modern technology has made it possible for marketers to do extensive searches through a large database, essentially mining the data. Datamining is the process of sorting through the data to find hidden patterns, potential trends, and correlations between customers or within asingle customer's data. Data mining is predominantly accomplished through mathematical and statistical processes and is typically doneusing software developed for this purpose (Mason & Young, 2003). However, great care must be used in healthcare-related data miningbecause of the privacy concerns of patients and the need to safeguard access to patients' medical information.

While modern technology, including neural network software and parallel processor hardware, makes the use of such database marketingpossible, it is old-fashioned objectives that drive the interest in databases. Marketers seek to know their customers so well that they cananticipate their needs and provide them with desired products and services before the customers themselves know what they want. This isrelationship marketing, which is now at its most efficient evolutionary stage. Computer technology allows the marketer to acquireknowledge of the purchasing habits of millions of individual customers and to weave relationships with them by anticipating their needsand informing them of need-satisfying products specifically suited to their situation. By successfully weaving these relationships, themarketer makes it inconvenient or costly for the customer to switch to a competitor.

Using the Data

To some degree, the marketing plans of companies actively engaged in database marketing are driven by the desire to maximize the use oftheir databases and the technology that allows the manipulation of those databases. In other words, the ability to use the database incertain ways means that those uses will become the implementation of the marketing plan (that is, the marketing plan conforms to fit thetechnology available). This is not necessarily an inappropriate or backward approach to marketing, as long as marketers do not lose sight ofthis fact: The ultimate goal of any technology usage or marketing plan objective is to identify how an organization can gain a competitiveadvantage in satisfying customer needs and wants.

Jackson and Wang (1994) have identified 15 ways to use a marketing database. These uses of a marketing database are described in depthin their book and are listed as follows to illustrate the spectrum of possibilities for the use of databases in data-based marketing planning:

1. Identify your best customers.

2. Develop new customers.

3. Deliver a message consistent with product usage.

4. Reinforce consumer purchase decisions.

5. Cross-sell and complementary sell products.

6. Apply three-tiered communications.

7. Improve delivery of sales promotion.

8. Refine the marketing process.

9. Increase the effectiveness of distribution channel marketing.

10. Maintain equity.

11. Establish a management resource.

12. Take advantage of stealth communications.

13. Conduct customer, product, and marketing research.

14. Personalize customer service.

15. Provide program synergy and integration.

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10.5 Managing Real and Virtual Customer …

10.5 Managing Real and Virtual Customer Interactions

Patients develop a service script in each healthcare setting. A service script is the expected sequence of events and outcomes for thatparticular setting. When the actual experience departs from the script, the patient may be uncomfortable (Solomon, 2013). For example, adental patient may expect a visit to the dentist to include reading out-of-date magazines in the waiting room, experiencing pain while acavity is filled, and hearing the high-pitched sound of the drill. This may not be perceived as a pleasant experience, but it is, traditionally, thepatient's expectation.

A problem now faced by many HCOs is that patients gather information from social media outlets before contacting a healthcare provider(Kane, Fichman, Gallaugher, & Glaser, 2009). The information gleaned from the Internet and social media sites determines, at least in part,the patient's service script. A new dental patient can search the Internet or interact with friends on a site such as Facebook to find a dentistwho has a big-screen TV in the waiting room, guarantees little or no pain, and uses a quieter laser drill. This information dramatically altersthe patient's expectations of the dental appointment. Several popular healthcare social media sites are listed in Table 10.2.

Table 10.2: Healthcare social media sites
Website	Purpose
PatientsLikeMe.com DailyStrength.org	Allows patients to share real-world health experiences tohelp themselves and other patients.
angieslist.com healthgrades.com RateMDs.com	All of these allow patients to rate healthcare providers.
CaringBridge.org	Helps people who have significant health problems connectwith friends and family, making the experience easier.
Sermo.com	Exclusively for MDs and DOs to post observations andquestions about puzzling cases.

The following subsections will discuss the use of social media by patients, the management of online community relations, gaps in expectedand delivered service, and service recovery.

Social Media in Healthcare

Sixty million people in the United States read or contribute to blogs, wikis, and/or social networks about healthcare (Kane et al., 2009).Often, social media is the first place patients search for information concerning specific illnesses or recommended healthcare providers.This use of social media provides opportunities as well as possible pitfalls for HCOs and individual healthcare providers.

The opportunities offered by social media include the ability for the HCO to communicate its mission, vision, and products or services aswell as health education. HCOs also can use social media to advertise and post patient testimonials. Finally, social media can be used tomanage customer experiences by helping to create realistic service scripts.

The biggest challenge for any organization involved in social media is the ability to control the conversation (Forbes Insights, 2013). Threatsto a firm's reputation may be internal or external. Internally, a disgruntled employee may post information damaging to an organization,such as protected health information about a patient. Even an act of kindness may be damaging to an organization. For example, a nursemay post a request on Facebook for her friends and family to keep a particular hospitalized patient in their thoughts and prayers.Depending on the amount of information revealed by the post, patient confidentiality may have been breached.

Controlling the external conversation is more difficult. Online communities spontaneously appear, often with different contributors takingthe lead. Further, as patients, the participants are free to discuss personal medical information without violating privacy law (Kane et al.,2009). This allows the participants to be very specific about their experiences with an HCO or a healthcare practitioner. Often, the HCOcannot respond to such posts without violating patient confidentiality. Nonetheless, it is imperative that HCOs have personnel whoconstantly monitor and respond to social media conversations—both positive and negative. Elements of a social media policy are outlinedin Table 10.3.

Table 10.3: Social media policy

Develop a Formal Social Media Policy

· Activate network settings so only designated staff can access social media.

· Define inappropriate use of social media and ramifications for policy violations.

· Encourage employees to report the inappropriate use of social media by others.

Monitor External and Internal Online Communication

· Use Google Alerts, Twitter Keyword Tool, and other tools to monitor online communications.

· Deputize employees to augment the team's efforts for internal communication.

Engage Online Communities

· Create compelling social media.

· Use online community leaders, such as well-known bloggers and journalists, to ensure that yourmessage is understood.

· Communicate internally—marketing to employees unifies the organization's message.

Act as First Responders

· React quickly to negative comments, but use a team trained in public relations triage.

· Acknowledge legitimate criticism and mistakes.

· Respond forcefully to unfounded rumors.

· Do not engage every online community—pick and choose those with which you want to beassociated.

Managing Customer Service

In a recent survey, more than 300 chief marketing officers (CMOs) from a broad array of industries, including healthcare, reported thatcustomer experience was their most important priority. Customer experience was viewed as more important than new products orservices, branding, or need identification. Interestingly, pricing, as a concern, came in last. To achieve an outcome of excellent customerexperience, CMOs believe that marketing, strategy, finance, information technology, and social medial need to all collaborate. As the CMO ofone pharmaceutical company stated, "We don't have a silo-driven culture at all. We are highly integrated across sales, marketing, R&D, andfinance" (Forbes Insights, 2013, p. 8).

As noted earlier in this section, social media now drives the service script, or customer expectations, of the healthcare experience. Thedifference between the service expected and the customer's perceived service quality is known as the service gap, and the management ofthis difference is known as gap analysis (Loudon, Stevens, & Wrenn, 2005). Management needs to constantly monitor customer serviceexpectations and the customer's perceived service quality. Actual gaps in service need to be addressed by the appropriate personnel. Forexample, a stand-alone urgent care center may advertise a no-waiting policy. However, patients actually experience a 15- to 20-minute wait,and they perceive that wait to be much longer. In this case, the person in charge of the promotional message can close the service gap byadvertising "short wait times."

Frontline employees, such as admissions clerks, receptionists, and triage nurses, are also in a position to manage service gaps. Frontlineemployees, as well as other personnel who initially interact with the patient, are the first experience the patient has with the HCO and, in thepatient's mind, these employees represent the HCO. Thus, part of the employee's job is to communicate a favorable impression of theorganization to the patient.

In addition, the frontline employee who initially engages the patient also has valuable information that can be used to manage patientexpectations. For example, an emergency room admissions clerk can communicate the expected wait time to a patient. Then, the triagenurse can explain the steps that will be taken to care for the patient's illness or injury, and provide some information about what the patientcan expect the emergency room doctor's examination to include.

However, even in the best of organizations, service failures will occur—those instances when customer expectations clearly were not met.While some patients who experience a service failure will not complain and not return, others will complain. How those complaints arehandled is crucial to patient retention for the HCO. Once a service failure is identified, the lowest-level employee possible needs to beempowered to resolve the problem. For example, frontline employees at The Ritz-Carlton® hotels, including desk clerks and housekeepers,have $2,000 dollars per year to use to satisfy customer complaints (Kotler, Bowen, & Makens, 2014). Once the service failure has beenaddressed, management needs to analyze the failure, look for trends within the organization for that type of failure, integrate informationabout service failure into operational planning, and follow up with customers or patients to support continuing good relations (Kotler,2003).

Interestingly, service failure can be an opportunity to strengthen patient relationships. In one study, customers who experienced a servicefailure but felt the organization had successfully resolved the situation were found to be more loyal than the customers who had neverexperienced a service failure. This is known as the service recovery paradox (McCollough, 2009). Therefore, it is crucial that managementconstantly anticipates and attempts to control customer service expectations, analyzes service gaps, and has effective policies in place forservice recovery.

Using a Marketing Agency

Given the increased use of technology and the need to find new ways to attract and keep patients, contracting with a marketing agencymay be a solution for an HCO as a means to outsource many of its marketing activities. For large organizations that have a marketingadministrator, the use of an external supplier to handle event planning and other marketing activities avoids the need to hire additionalstaff, and it may be a more cost-effective solution for the organization. For a smaller organization, outsourcing the marketing operations ofa busy medical practice allows physicians and staff to concentrate on serving patients and the marketing specialist to design, update, andmanage the marketing side of the business.

Website design, patient surveys, social media, blogs, and so forth can all be outsourced to marketing agencies that specialize in healthcaremarketing. Not only do these agencies bring their marketing expertise to the organization but also their knowledge and experience withother healthcare clients, enabling the HCO to find and use what is new but also what is tried and true in marketing services in its industry.

For example, DiD is a boutique healthcare communications agency in Pennsylvania. This agency's Services content on its website explainsthat "Healthcare marketing is about finding the right mix of what's new with what's tried and true. We excel at creating integratedcampaigns. Our insights and honed healthcare instincts keep us ahead of the pack. We shorten the distance between insight, idea, andexecution. Simply put, we don't waste time chasing our tails" (DiD, 2013, Services, para. 1). This agency offers a complete line of services forhealthcare marketing, including strategy (research, analytics, and measurement); planning (brand positioning, trends, and marketing); andcreative (print, video, digital, mobile apps, and social media) services (DiD, 2013).

It is important for an organization to select the right marketing agency for its marketing needs. An organization needs to decide whether itsprimary target market is patients or other HCOs, and then find a marketing agency that focuses on healthcare marketing. One source hassuggested evaluating the following criteria when selecting a marketing agency:

1. The agency's knowledge of legislation

2. The agency's use of its expertise in their own business

3. The agency's references, and how they will bill you (Fawcett, 2013)

The criteria should include an agency that the organization can build a relationship with—an agency that understands the organization andhas the expertise to perform tasks effectively and efficiently. The agency should share, with the organization, the metrics for assessing aclient's results, which will determine how well the marketing activities performed by the agency for that client are working.

Website Design

In today's digital world, it is extremely important to have an effective website. An increasing number of consumers are using the Internet tosearch for health information and healthcare providers. This is especially true of younger consumers. The following list offers severalsuggestions for creating an effective website design (Clow & Stevens, 2009):

1. Decide on the objective of the website. The objective dictates how the website will be designed. Possible objectives include thefollowing:

a. E-commerce; that is, selling services over the Internet

a. Information for clients or patients

a. Means for clients or patients to contact the organization

a. Public relations communication tool

a. Advertisement of services

1. Hire a professional web designer. It will be worth the money.

1. Make the site user-friendly. Use the language of the target audience, not technical jargon.

1. Use photos, which speak louder than words.

1. Create an easy-to-follow menu.

1. Include FAQ as a topic to provide ready responses for the end user.

1. Promote benefits, not attributes.

1. Have easy-to-find contact information.

1. Keep the site simple so that it will load quickly. If videos and lots of photos are used, then put those on page links so the front page willnot be slow in loading.

1. Consider creating links or advertisements on other websites that are related to the organization or that would be a good source forreferrals, such as municipal and local chamber of commerce websites.

1. Use a URL that is easy to remember, but connected to the name of the organization's service. Do not use a strange URL that no one canremember or that has nothing to do with the organization's professional service(s).

1. Test the website and every link on the website before it is promoted or launched. The technical problems that marred the launch ofthe federal government website for the Affordable Care Act's healthcare exchange marketplace was an embarrassment to the U.S.government, and initially limited the website's purpose to provide consumer access to the selection of health insurance coverage andenrollment in a health plan in a federally facilitated marketplace.

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Summary & Resources

customer relationship management (CRM)

Summary & Resources

Chapter Summary

In this chapter, we discussed how to attract new customers to an HCO and a private healthcare practice. Also discussed were the productlife cycle and the stages consumers go through in choosing a product or service. Social media can be used to attract new customers as wellas to manage customer expectations and help with customer retention. Key to determining consumer behavior is database marketing,which is the process of data collection and analysis concerning consumer actions. Finally, HCOs may handle advertising and social media in-house or hire an outside marketing agency; there are pros and cons to both approaches.

Key Points

1. Attracting new customers or patients is important for both HCOs and healthcare practitioners in private practice. Growth meansincreases in revenues and a greater impact on the communities served by the organization. Growth is best achieved with an effectivemarketing plan that provides a consistent platform for the organization to be visible and an attractive option for medical services.

2. The term product life cycle refers to the stages a product or service goes through from the time it is introduced until it is removed fromthe market or dies. The stages of the product life cycle are introduction, growth, maturity, and decline. In the introduction and growthstages, revenues increase quickly as there is little competition. As competitors enter the market, products or services advance to thematurity stage of the life cycle, and revenues begin to flatten. In the decline stage, new products or services replace old ones andrevenues decrease. The goal of marketers is to keep a product or service in the maturity stage for as long as possible.

3. Organizations must effectively manage existing customers to support long-term profitability. Customer relationship management(CRM) analyzes a targeted segment by addressing each customer's potential for profitability. CRM is based on four premises: (a)customers are a key asset of the organization; (b) customers vary in their preferences and behaviors and their value to theorganization; (c) understanding customer needs, preferences, and behavior can improve their value to the organization; and, (d)relationships with customers must be managed.

4. Database marketing creates customer intelligence, which contributes to the development of profitable customer relationships. Withdatabase marketing, marketing professionals use data collected from consumer activity to better understand consumption patterns,locations, interests, and other aspects of buying behavior. The basic idea behind the use of databases is this: If that is what theconsumer is doing, how can we make them want to do that more often and with our product? The process of data collection consistsof four steps. First, customer action is collected (credit card purchases, website visits, etc.). Next, the data collected from consumers isanalyzed, using sophisticated statistical techniques. Third, neural networks "learn" from the data and identify the model customer.Finally, the knowledge gleaned is used for targeting customers with promotions and information that are tailored to their interests andbehaviors.

5. Consumers interact with an HCO both in person, as patients or consumers of products, or online through websites and social media.Often, the customer's first interaction with the HCO is online, and it is at this point that the HCO is in a position to manage customerexpectations and educate patients about products and services offered. The biggest challenge when dealing with patients online lies inthe HCO's ability to control the conversation. Information posted by people other than the HCO's designated employees may bemisleading, false, or defamatory.

6. Eventually, patients will interact with the HCO or healthcare practitioner in person. As with online interactions, healthcare employeesneed to manage patient expectations and educate patients about processes in which they are about to become involved. In anyorganization, there will be service failures where patients clearly did not receive the promised care or did not receive the care in atimely fashion. This difference between service expectations and actual service delivery is known as the service gap. HCOs need tohave procedures in place to satisfy and retain patients for the future consumption of their products and services.

7. As previously noted, the first interaction a potential patient has with an HCO is often through the HCO's website. Thus, it is extremelyimportant for an HCO to have an effective website that is easy to navigate and provides information helpful to the patient. This chapterlists twelve considerations for creating an effective website. The two most important considerations for an HCO are deciding on theobjective of the website (drive customers to call the HCO, educate patients, build image, and so forth) and hiring a professional webdesigner.

Chapter 10 Flashcards

Key Terms

Click on each key term to see the definition.

frontline employees

healthcare social media sites

individual adoption stages

marketing agency

service gap

service script

social media policy

website design

Critical Thinking Questions

1. Explain the product life cycle concept. How does the need to attract new customers influence promotional messages about a productduring the stages of its life cycle?

2. How would an organization go about establishing a CRM process?

3. Why do most promotional media used by an HCO try to drive the patient or potential patient to that HCO's website?