Question

Many managers view the purpose of business as making a profit, whereas some view the purpose as being able to create and maintain a customer. Explain how these alternative viewpoints could affect a company’s interactions with its customers. Use examples to illustrate your answer. If a manager views the purpose as being able to create and maintain a customer, does this mean that the manager is not concerned with profits?

Answer 1

This is an excellent topic for class discussion.

• Profit is a requisite for any for profit business, but it should not be the purpose of the business. When profit becomes the purpose of the business, managers tend to take a short-term view and try to maximize profits in the short term. For example, when a hotel can sell out, managers might deny travel agent business. But the business from these travel agents may be needed in the future and such action can alienate the agents.

• A business should target customers that will create value for the business by targeting customers that the business can serve profitability. If it concentrates on serving these customers well and provides a product that is profitable to the company, profits will flow. It is not essential to make a profit on every transaction. Therefore, customer satisfaction and maintaining a customer’s long-term value is more important and can be more beneficial to long-term profit gains.

 

This topic prompts valuable class discussion: While profit is necessary, it shouldn't overshadow long-term customer value and satisfaction.