Marketing driven growth and decline

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Kim Warren Kim strategydynamics.
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Marketing driven growth and decline

Post by Kim Warren Kim strategydynamics. »

Posted by ""Kim Warren"" <Kim@strategydynamics.com>
In the talk last week in Boston, I suggested that reinforcing feedback
managers often identify between marketing and customers can only
generate growth, not decline. [ ^Customers -> ^revenue ->
^marketing-spend > ^Customers ]. I claimed that this structure could not
give rise to decline, since there is no mechanism for customers to be
lost.

Several people who spoke to me afterwards were concerned by this
suggestion, pointing out that marketing spend can also prevent customers
being lost. I would like to check I have not got this wrong, so here's
the reasoning ...

First, to complete the loop above properly, we should add 'customers won
per period' [since stocks can only be changed by way of their flows]. To
reflect marketing's impact on reducing customer losses, then, we would
have to add a separate flow of 'customers lost per period', which
implies we have two loops, not one.

I don't think we can safely merge these two flows [gains and losses]
into a single flow of 'net customers won'. The two audiences are
generally somewhat different - current customers have experience of our
product/service, while potential customers do not, so each group will be
affected differently by any marketing we do. There's also a big
difference between winning 100 customers on the one hand, and winning
1000 + losing 900 on the other hand, so if this might be going on, we
really need it to be explicit.

Secondly, I am not sure it is common for customers to be lost *because*
they were not marketed to. Customers leave a supplier for other reasons,
such as price, quality problems, competitors' efforts and so on. So for
marketing to reduce customer losses, we would have to include these
other causal factors, which are not within the feedback loop.

.. or have I got something wrong ?

Kim
Posted by ""Kim Warren"" <Kim@strategydynamics.com>
posting date Mon, 25 Jul 2005 13:01:05 +0100
John Voyer voyer usm.maine.edu
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Marketing driven growth and decline

Post by John Voyer voyer usm.maine.edu »

Posted by John Voyer <voyer@usm.maine.edu>
I tend to think that Kim is correct on this, assuming that by
""marketing"" we mean advertising and promotion.

Advertising and promotion are such weak connections to buyers (or
potential buyers) when compared to the actual experience of shopping or
otherwise dealing with a supplier. It's hard to imagine that someone
who's had a bad experience with a supplier would be induced to stay
because she/he watched a compelling television commercial or saw a nice
full-page ad in a magazine. The bad experience would be much more
salient than the advertisements.

Now, if by ""marketing"" we mean all 4 ""P's"" of marketing--promotion but
also product, price and distribution--then I agree with Kim's critics.
One can certainly envision a company letting its products obsolesce, its
pricing wander, and its distribution system decay. In those instances,
it would be important to do ""marketing spend"" to keep those functions
strong. Otherwise, customers WOULD be lost.

So maybe the issue here is partly semantic or conceptual, related to
what we mean by ""marketing.""



John J. Voyer, Ph.D.
Interim Dean and
Professor of Business Administration
School of Business
University of Southern Maine
96 Falmouth St.
Box 9300
Portland, ME 04104-9300

voyer@usm.maine.ede
Posted by John Voyer <voyer@usm.maine.edu>
posting date Tue, 26 Jul 2005 10:36:08 -0400
Matzaball50 aol.com
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Marketing driven growth and decline

Post by Matzaball50 aol.com »

Posted by Matzaball50@aol.com

Hi Kim,

I'm sorry I missed the conference, your presentation sounds interesting.

First, I don't see where 'right' or 'wrong' enters into the picture here.

I'm not entirely clear on what purpose your model was aimed at.

In the loop you mentioned here 'growth' can actually 'kill' you. There is a
very old joke in the micro-computer industry.

When TI was trying to sell its TI-99 the competition was fierce, so we all
used to say that TI was losing money on every sale, but they would make it up
in volume.

Of course TI was eventually forced out of the micro market.

I think the loop as stated seems solid. The real question in my mind is
whether the loop actually represents the real world, and I don't think it does.

With success comes competition, and with competition comes a reduction, not
necessarily in sales volume, but in profitability. So I would replace
'revenue', which I believe is meaningless, with 'profitability'.

Second, you make a very big assumption that you are involved in a zero-sum
game of 'winning' and 'losing' customers. Why that assumption?

Just my two cents.

regards,

Marc
Posted by Matzaball50@aol.com
posting date Tue, 26 Jul 2005 20:11:52 EDT
John Gunkler jgunkler sprintmail
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Marketing driven growth and decline

Post by John Gunkler jgunkler sprintmail »

Posted by ""John Gunkler"" <jgunkler@sprintmail.com>
Kim, let me describe a situation I encountered that may, in fact, be a case
of customers lost due to lack of marketing.

Years ago we studied a business forms printing company and discovered, much
to everyone's surprise, that their most experienced (and ""best"" by almost
every other measure) salespeople were the ones most liable to lose business
to competitors. When we looked into this we found that the experienced
salespeople were really effective in expediting orders and doing many small
favors for their clients -- but they had been doing these things so long
that they (and their customers) took it for granted. Most importantly, the
salespeople no longer mentioned to their clients when they did them these
favors!

Thus, when competitors came around and promised ""we'll take better care of
you; we'll do this, that, and this (all the things that my client company's
salespeople were already doing)"" their customers said, ""Wow! You'll do all
that for us, at the same price? We'll switch and give you a chance.""

We fixed the problem by helping the experienced salespeople remember to
discuss with (""market"" to??) their customers all the little extras they were
doing for them, on a regular basis. In fact, we created a simple report (a
marketing piece) that the salespeople sent their customers.

If this could happen in this way, could it happen in others?

Another possible example: In Japan, automobile salespeople keep in regular
touch with all the customers who bought cars from them, starting with the
moment the customers take delivery. They believe that the best way to
prevent customers from buying a vehicle elsewhere (in 2-8 years) is to
continue to market to them all along the way.

Also, I believe there may be some fairly good market research showing that
(a) maintaining a good relationship between salesperson and customer does
have a major effect on customer loyalty; (b) marketing does have an impact
on ""likelihood of repurchase"" (or ""repurchase intentions."")

Hope that helps a bit.


John
Posted by ""John Gunkler"" <jgunkler@sprintmail.com>
posting date Tue, 26 Jul 2005 16:37:02 -0500
Finn Jackson finn.jackson tangle
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Marketing driven growth and decline

Post by Finn Jackson finn.jackson tangle »

Posted by ""Finn Jackson"" <finn.jackson@tangley.com>
Kim's query raises a number of points. I will take them in reverse order.

FIRST: ""I am not sure it is common for customers to be lost *because* they
were not marketed to. Customers leave a supplier for other reasons, such as
price, quality problems, competitors' efforts and so on.""

Absolutely right. But what is the difference between leaving ""because they
were not marketed to"", and leaving ""because competitors marketed more""?
Every time I buy the 'special offer' I show that not being marketed to by
the other products/services has affected my buying decision.

Customers leave suppliers for a variety of reasons. To me the importance of
""marketing"" within that mix is a continuum, which depends on the specific
product/service, the specific customer, and what you mean by ""marketing"".


SECOND: ""I don't think we can safely merge these two flows [gains and
losses] into a single flow of 'net customers won'. The two audiences are
generally somewhat different - current customers have experience of our
product/service, while potential customers do not, so each group will be
affected differently by any marketing we do.""

Again, correct. But again it is more complicated than that. ""Customers"" are
not in fact a homogenous group either. Marketing segments them into
different groups: ABC1s, or ""empty nesters"", ""DINKYs"", and so on.
Our product/service and our marketing will both appeal differently to
different groups. So even the apparently simple flow of ""customers won per
period"" is actually made up of the combined flows from each group.
If it is OK to aggregate these different flows into the single flow of ""net
customers won"", why is it not OK to merge gains and losses into a single
flow. Again, in my view, it is a question of degree: what level of
difference is significant for the particular situation?


FINALLY, to return to the original question/hypothesis: ""feedback ...between
marketing and customers can only generate growth, not decline. [
^Customers -> ^revenue -> ^marketing-spend > ^Customers ] ...this structure
could not give rise to decline, since there is no mechanism for customers to
be lost.""

As a first approximation, yes. Within the model as stated, there is no
mechanism for customers to be lost.
But the model as stated is an approximation, for the reasons stated above.
And even within this model, if I am subjected to too much of the wrong sort
of advertising, day after day, then I am likely to become so sick of the
product/service that I will gladly take my budget elsewhere.

So, as a first approximation I agree with Kim. But I think that how far that
first approximation holds will depend on the details of the specific
situation, as described above.


Finn Jackson
finn.jackson@tangley.com
Posted by ""Finn Jackson"" <finn.jackson@tangley.com>
posting date Tue, 26 Jul 2005 18:39:49 +0100
ybarlas boun.edu.tr
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Marketing driven growth and decline

Post by ybarlas boun.edu.tr »

Posted by ybarlas@boun.edu.tr
In a bit more simplified form, Kim asks if the
customers-revenues-marketing-added customers-customers loop can ever cause a
decline.
Kim then states that this would be impossible, that a SECOND loop would be
necessary for decline.
I will submit that this characterization is incorrect, that a second loop is
not
necessary.
Before I explain, allow me to cast the question in an even simpler and abstract
form:
A stock S grows by an inflow i=fract*S, fract>0 constant. The same stock has a
CONSTANT outflow K.
Question: depending on different values of fract, S0 and K, what are the
possible dynamics of S? Can S ever decay? or collapse?
(In this abstract form, S stands for Kim's customers and the positive inflow
loop stands for market-driven growth loop. There is then a constant number of
customers lost per month. So only a single loop structure)

I would invite you to take a pencil and paper and guess the expected behaviors.
(Without calculus or formal simulation). I use this method often in my SD
classes and more importantly to learn myself.

thanks and cheers,
Yaman Barlas
Posted by ybarlas@boun.edu.tr
posting date Tue, 26 Jul 2005 19:55:25 +0300
Richard Stevenson richard cognit
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Marketing driven growth and decline

Post by Richard Stevenson richard cognit »

Posted by Richard Stevenson <richard@cognitus.co.uk>
Kim's basic proposition that the simple reinforcing loop [ ^Customers
-> ^revenue -> ^marketing-spend > ^Customers ] can only produce growth
and not decline is clearly true - but that's because it's only a part
of a ""story"" and the growth loop has no real meaning on its own. For
example Forrester's famous market growth model includes three loops - a
growth loop, a side-effect loop (that causes customer loss through
declining customer service), and a ""response"" loop (capacity addition)
that supports the growth loop.

Kim also proposes that ""customers"" are a stock and that the activities
of winning and losing (retaining) customers are clearly different and
therefore should usually be modelled as separate flows. That's usually
true but specific circumstances and temporal perspectives should
determine the appropriate modelling approach.

For example, in the grocery market many people have a choice of many
stores and their immediate choice is governed by factors such as
location, choice, availability, quality and price. They may shop
around - and so they exist as ""customers"" only for the few minutes that
they are in a particular store. Next time they could go elsewhere - it
doesn't necessarily mean they have been lost, nor won, except on a very
short time horizon. Marketing will usually have a very short term
effect and so it may not make much sense to regard customers as a
stock, at least for purposes of strategic modelling. As potential
customers, of course.

Conversely I have been a customer of the same bank for many years and
it would take a lot to shift me - even for a more appealing offer that
was being aggressively marketed. It's nothing to do with ""loyalty"",
nor marketing - it's simply that moving is just too much trouble. And
even if I did shift, I probably wouldn't do so regularly.

In between these extremes there is a huge variety of customer
behaviours that are influenced by a wide variety of factors including
(but certainly not limited) to sales and marketing. So every case must
be considered on its merits and with proper regard to the circumstances
in which the model is developed. I doubt that it's possible to propose
a general model of customer behaviour.

Richard Stevenson
Cognitus Ltd
High Mill Farm
Markington
Harrogate
HG3 3NR
UK
Posted by Richard Stevenson <richard@cognitus.co.uk>
posting date Tue, 26 Jul 2005 19:18:27 +0100
geoff coyle geoff.coyle btintern
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Marketing driven growth and decline

Post by geoff coyle geoff.coyle btintern »

Posted by ""geoff coyle"" <geoff.coyle@btinternet.com>

I think that there are three extra factors that need to be taken into
account in Kim's reasoning.

The first is that customers are lost in any case - they die, move away, or
are seduced by the competition. That can be represented by a half-life
concept such that:

Rate_of_ loss_of_customers=customers/customer_retention_time.

The second it that there must be an effect of diminishing returns in that if

rate_of_winning_customers=marketing_spend/cost_per_customer

then cost_per_customer might well be a decreasing function of the number of
customers. If marketing_spend stops or decreases, customers will decline via
the first mechanism.

So, while his loop a postulated cannot produce decline, it is too simple a
model as these two factors now produce a three-loop system.

The third factor, which has been debated here before, it this idea of
customers_won_per_period. That might be an output variable calculated for
display (what DYNAMO used to call a supplementary variable) but it is not
the dynamic variable that will produce change in an SD model. This is the
old argument about the meaning of dt and its confusion with TIMESTEP, a
notion that really belongs to discrete event simulation, where TIMESTEP has
real meaning and may, indeed, be a stochastic variable.

If we go back to

rate_of_winning_customers=marketing_spend/cost_per_customer

then rate_of_winning_customers might have dimension of [people/month],
marketing_spend might be[£/month] and cost_per_customer is [£/people], and
that is dimensionally valid. dt, which has no real meaning and is simply a
device to get the model to run on the computer, might be 0.25 [month] and
the stock equations, which are the accountants in an SD model, will keep
everything in balance (though a mass-balance equation will be a valuable
check).

Regards,

Geoff

Visiting Professor of Strategic Analysis,
University of Bath
Posted by ""geoff coyle"" <geoff.coyle@btinternet.com>
posting date Wed, 27 Jul 2005 11:03:27 +0100
Kim Warren Kim strategydynamics.
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Marketing driven growth and decline

Post by Kim Warren Kim strategydynamics. »

Posted by ""Kim Warren"" <Kim@strategydynamics.com>
Thanks Yaman for correcting that error in my initial message - I'm very
red-faced about that.

Could I respond to some of the other points, but just emphasise that the
point I was making in Boston is simply that this single reinforcing
loop, on its own, can *only* grow, and not collapse as is often implied
- and the only way to get decline is if something else is going on, like
adding Yaman's constant outflow. The mental experiment we were asking
our newcomer executive audience to consider was [1] what happens if
there is an initial increase in customers ... revenues rise, marketing
increases and customers start to escalate, then [2] what happens if
there is an initial *decrease* in customers ... current revenues drop,
marketing is cut, but still brings in *some* more customers, so the
customer growth immediately restarts.

The point of making this point was to suggest that people who come
across feedback pictures for the first time simply can't guesstimate
behaviour from even our most simple picture .. which makes it pretty
hard for them to capture with much accuracy their mental models of their
situations.

Richard raises good points about the original market growth model, with
its -ve loop on the outflow - although such an outflow must be driven by
something. Marc and John Voyer both point out there are many more
reasons, too, why customers might leave.Finn raises some other important
issues concerning marketing-driven customer growth and loss too. Again,
these have to be added to the basic loop that the new-comer-manager is
trying to understand.

I see Richard's point about customers not always being a very dynamic
stock, as in the case of bank accounts. For the fast-moving goods cases,
I believe market research generally suggests the existence of two main
groups .. those consumers who include a brand in their portfolio of
preferred choices [so they appear to be won and lost on every occasion]
and those who favour a particular brand. Marketing may have short-term
effects of encouraging immediate purchase, especially for the disloyal
group, but also pushes people into and between these states over longer
time-scales. Lars Finskud at Vanguard Strategy knows much more about
this than me .. www.vanguardstrategy.com.

Finally, Bob Eberlein reminded me that in many cases, it is not the
stock of customers at all that drives revenue, but the flow. Durable
products are the obvious case - when a customer buys a Whirlpool washer,
s/he delivers revenue by flowing into the stock of Whirlpool's
'installed base' .. and in this case it will likely be a very long time
before this customer becomes a repeat purchaser, and if it *isn't* a
long time, then they are probably lost any way.

The question put to me in Boston was ""Surely you can get reinforcing
collapse if a loss of customers initiates a cut in marketing spend,
which leads to more loss of customers, so your reinforcing feedback
*can* both escalate and collapse."" This adds to Yaman's point about a
*constant* outflow being enough to create collapse when added to a
reinforcing growth loop that is not sufficiently strong. To make
declining marketing spend reinforce this collapse, I think we'd need a
different loop .. e.g. competitors take a fixed number of customers from
us, but our marketing spend holds on to a fraction of those who would
otherwise have left. Then, the fewer customers we have, the less
marketing we can do to hold on to the rest, and the faster they leave
and so on. John Gunkler's post offers a great real-world example of this
I have put these together in the model at
http://www.gsdoffice.co.uk/dl/0507S_SD_ ... losses.zip
[anyone without the MyStrategy software can get the free reader at
www.strategydynamics.com/download_reader]

For more complex CLDs, too, I wonder if in just about every case
collapse *must* be driven by different feedback loops than escalation,
simply because the stuff leaving the stock is distinct from the stuff
entering it, and therefore subject to different influences.

thanks everyone - Kim
Posted by ""Kim Warren"" <Kim@strategydynamics.com>
posting date Thu, 28 Jul 2005 11:48:48 +0100
R.M.Mooy telecom.tno.nl
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Marketing driven growth and decline

Post by R.M.Mooy telecom.tno.nl »

Posted by <R.M.Mooy@telecom.tno.nl>
For those of you interested in modeling Customer Choice: take a look at
the 2003 SD Conference article ""Why Customers Choose Your Product: a
System Dynamics Approach to Customer Choice Modeling"" by G.J.Valk and
myself.
Our model makes a distinction between customers who have and those that
have not chosen to be a client of a certain company. Also, thresholds
are taken into account (""it's too much trouble to switch banks"").

Major challenges in this field of study are:
* determining the causal effects present;
* incorporating 'soft' concepts such as loyalty;
* incorporating the many factors that usually play a role in customer
choice;
* gathering good data on the behaviour of customers;
* distinguishing between different consumer groups with different
properties;
* capturing events and factors that seem unimportant but can make a big
difference (say, the effect of the saleswoman's smile);

If anyone has available more research on this subject, I would certainly
be interested.

Rutger Mooy
TNO, Netherlands
Posted by <R.M.Mooy@telecom.tno.nl>
posting date Wed, 27 Jul 2005 13:38:13 +0200
John Gunkler jgunkler sprintmail
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Marketing driven growth and decline

Post by John Gunkler jgunkler sprintmail »

Posted by ""John Gunkler"" <jgunkler@sprintmail.com>
Rutger, Kim, et al.

You might want to take a look at Bradley Gale's book, ""Managing Customer
Value"" for data from the PIMS Project (Profit Impact of Marketing
Strategies) -- which has a database of more than 3000 companies. He makes a
persuasive case that ""relative perceived market value"" captures most of
causal factors behind marketing's impact on purchasing behavior.

Here's a quick primer:

Value = ""bang for the buck"" (i.e., benefit (what Gale unfortunately calls
""quality"") divided by cost)

But customers do not buy based on (objectively defined) value, rather they
buy based on their perceptions of value, so we need:

Market Perceived Value (MPV) = Market Perceived Benefit / Market Perceived
Cost

Finally, we customers have choices, and we evaluate them (he has some
persuasive data that this is so) based on comparing our perception of each
option's value with our perception of other options' values. So, we
actually need to know:

Relative Market Perceived Value = Relative Market Perceived Benefit /
Relative Market Perceived Cost

The Relative MPV number is a dimensionless index that ranges above and below
1.0 (which is the average of all perceived value within the market of
interest.)

Finally, the Relative Market Perceived Benefit and Cost numbers are a
combination of perceptions of a number of ""benefit"" and ""cost"" factors that
are unique to each market and each product or service -- and they are not
necessarily self evident (nor evident to the marketing companies!) For
example, for health care clinics, some of the most important ""cost"" factors
are such things as: distance from home or work, convenience of parking, how
easy it is to navigate within the clinic, how politely patients are treated
on the telephone, how easy it is to get an appointment, etc.

I played around with an ithink model of Relative MPV a couple of years ago.
If anyone is interested, we might discuss offline.


John
Posted by ""John Gunkler"" <jgunkler@sprintmail.com>
posting date Thu, 28 Jul 2005 13:57:06 -0500
ybarlas boun.edu.tr
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Marketing driven growth and decline

Post by ybarlas boun.edu.tr »

Posted by ybarlas@boun.edu.tr
Dear Kim;
First, I apologize if my message gave an unintended of 'error-correcting
teacher'impression.
Reading your nice explanation (parts pasted below), I see that my goal was
actually very well aligned with yours: that we are poor in guesstimating
dynamics of even simple structures. And you are right; the point of my
'correction' was that one did not need a second loop for potential crash.
So I hope that you may use my example in some of your own lectures and
seminars.
You first discuss the fact that a constant inflow and constant outflow stock
can either grow or decline linearly (or stay constant). Then you proceed: lets
now assume that the inflow is proportional to the stock, constituting a + loop.
What behaviors do you expect? Most people mention expon growth, a few people
state 'expon decay or linear decay under some conditions'. But only a small
minority ever mentions 'possible exponential crash'. (Which is the case if the
initial i=fract*S0<K).
I think this an example of counter intuitive dynamics of even simplest systems.
(In 'real' terms, you may ask: Assume a population multiplies in proportion to
its level and that there is a constant outflow of individuals -like emigration.
It is quite rare to guestimate for the audience that this population could
experience an exponential collapse, having only a single growth loop).
Thank you very much for this instructive discussion and all the best,

Yaman Barlas
Posted by ybarlas@boun.edu.tr
posting date Thu, 28 Jul 2005 18:36:33 +0300
Bill Braun bbraun hlthsys.com
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Marketing driven growth and decline

Post by Bill Braun bbraun hlthsys.com »

Posted by Bill Braun <bbraun@hlthsys.com>
At 06:26 AM 7/26/2005 -0400, Kim Warren wrote:

>>Secondly, I am not sure it is common for customers to be lost *because*
>>they were not marketed to. Customers leave a supplier for other reasons,
>>such as price, quality problems, competitors' efforts and so on. So for
>>marketing to reduce customer losses, we would have to include these
>>other causal factors, which are not within the feedback loop.


Kim asks about losing customers as a function of not marketing.

My background is in healthcare, where demand tends to be episodic and where
there can be significant gaps between episodes. Here in town, the Cleveland
Clinic (Ohio, USA) pursues two broad avenues of marketing, brand and
product. The former is to maintain a position in the minds of potential
consumers, and the latter to attract them at the time of actual need.

I've had two relatively major procedures about two years apart. Using that
time frame as an example, could we not conceive of this as a repeating
marketing cycle? Brand marketing keeps the Clinic in mind, product
marketing lets me know I can be treated there for a specific reason at a
specific time, then brand marketing continues to keep the Clinic in mind,
then product marketing lets me know the other procedure can be done there.

Was I a potential customer once or twice? With such delays between actual
need, my ""loyalty"" to the Clinic could be eroded by losing my sense of
connection. Even ignoring the active marketing of competitors, the
possibility that I could be lost as a [future, potential] customer for lack
of marketing seems to be relevant. In this case, brand marketing maintains
my attention even when there is no specific clinical reason to be paying
attention.

I'm not sure this is exactly addresses the point, but it seems to me that
it at least flirts with the idea of losing customers for lack of marketing,
in other words, some decay rate that, for lack of a balancing loop (i.e.,
marketing), erodes a customer's connection to the product and/or producer.

Bill Braun
Posted by Bill Braun <bbraun@hlthsys.com>
posting date Thu, 28 Jul 2005 07:38:19 -0500
Kim Warren Kim strategydynamics.
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Marketing driven growth and decline

Post by Kim Warren Kim strategydynamics. »

Posted by ""Kim Warren"" <Kim@strategydynamics.com>
Hi Bill, I guess this is an interesting case of the 'choice pipeline' in
action. The day after your first event, presumably you were 'loyal' [if
something else had gone wrong you would be straight back there -
assuming thye did OK for you?]. A bit later, you might have been
disloyal - you would perhaps have favoured them for any other problem,
but perhaps gone elsewhere. A bit later, you would have still understood
them, but perhaps been easily persuaded to go elsewhere .. and so on. It
sounds from your story like you never slipped out of the 'disloyal' box.
I wonder if the reason you 'slipped away' was lack of need .. had they
gone marketing at you in the interim period, you would perhaps not have
been too keen to go in for a procedure you didn't need !?

The beauty of this choice pipeline is that it reflects what customers
actually report about their feelings and behaviour towards products and
suppliers [business-to-business, as well as consumer], and it enables
you to be very precise about any specific marketing or sales tactic, and
the overal strategy.

Kim
Posted by ""Kim Warren"" <Kim@strategydynamics.com>
posting date Fri, 29 Jul 2005 14:39:16 +0100
Kim Warren Kim strategydynamics.
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Marketing driven growth and decline

Post by Kim Warren Kim strategydynamics. »

Posted by ""Kim Warren"" <Kim@strategydynamics.com>
this was a very interesting note indeed Yaman, as I had forgotten about
that particular exercise [it's one John Morecroft did to me way back
when] .. I've given it some more thought, and it's really intriguing -
not so much a case of 'self-reinforcing collapse' as 'self-reinforcing
inability to *resist* collapse' .. since if the inflow were not
happening, the stock would collapse at its ultimate rate from the start.

the population case is a particularly vivid example - we have problems
in several parts of the UK where children are being born and growing up,
but constantly leaving the region as they reach adulthood, and yes the
population is collapsing.

Kim
Posted by ""Kim Warren"" <Kim@strategydynamics.com>
posting date Fri, 29 Jul 2005 14:31:45 +0100
ybarlas boun.edu.tr
Junior Member
Posts: 4
Joined: Fri Mar 29, 2002 3:39 am

Marketing driven growth and decline

Post by ybarlas boun.edu.tr »

Posted by ybarlas@boun.edu.tr
Yes Kim, and another important 'managerial policy lesson' to me is the
following: With a weak constant inflow, the output pattern is a linear decay.
Now if we do not like this and introduce a positive feedback loop at the
inflow, then the output dynamics may become even less desirable - an
exponentially collapsing behavior (if the + loop is not strong enough).
best,
Yaman Barlas
Posted by ybarlas@boun.edu.tr
posting date Tue, 2 Aug 2005 11:04:19 +0300
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