Marketing_Daycare

A(1): Introduction Stars Childcare is a comprehensive childcare facility caring for babies, toddlers and children from 0 – 12 years of age based in Vancouver, Canada (Stars, 2012). Shala Monfred, owner and manager of Stars, states that Stars facility is focused on attracting the upper middle to high income families where both parents are earning a living in the household (Personal Communication, December 1, 2012). Professional care for children is comparable to having a mortgage or paying rent – it is not inexpensive. Those who can afford and who want to have their children cared for tend to be families where both parents work and are unable to attend to their children during working hours. Stars began in 1989 in the basement of a loving mother’s home (who just so happens to be my mother) who did not want to leave her child in a childcare in an unknown country. Shala began Early Childhood Education courses toward a diploma as well as attended other workshops, seminars and courses in child behavior management (Stars, 2012). Over time, Shala gained word-of-mouth reputation and years of experience in child caregiving (Personal Communication, December 1, 2012). The level of ‘love’ and specialized care created at Stars is what separates it from the rest of the childcares. Vicky says “The childcare is licensed and it is in my view a hidden gem in the world of childcares” (Stars, 2012). Stars became a licensed facility in 1994 and moved to a new spacious location in 1996 until today – still running strong (Personal Communication, December 1, 2012). In the last two decades, the number of licensed childcare facilities in Canada nearly doubled. This expansion was mostly attributable to the increase in the demand for childcare services. Higher employment rates for mothers and an increase in children aged 4 and under were the cause. Stars has adapted to these changes to ensure they maintain a competitive edge to continuously attract and retain clients (Personal Communication, December 1, 2012). This analysis delves into Relationship Marketing and how it has affected Stars in the past, present and future. Relationship Marketing is a term in marketing philosophy that focuses on building long-term relationships with customers, suppliers, distributors and other key stakeholders to satisfy mutual needs (Solomon, Stuart, Smith and Sirsi, 2005 p. 16). The concept of relationship marketing views marketing as a whole process of building meaningful, long-term relationships with stakeholders who are integral to the value creation process. Relationship Marketing has in recent years emerged as such an integral piece of marketing that it is often referred to as the fifth ‘P’ in the ‘4P’s’ concept as PEOPLE. People are at the core of every type of business. Maintaining open channels of communication, honest, trustworthy relationships is the key to maintaining a successful business. Development of Relationship Marketing The development of Relationship Marketing varies among different types of businesses. In light of a childcare facility, the key stakeholders include the staff, the parents, the children and the greater community at large. Many things affect the development and maintenance of Relationship Marketing throughout the time continuum. One thing that should be noted is that Relationship Marketing does not begin or end somewhere but is rather an ongoing process that needs to be maintained, nourished and not forgotten once things seem to be running smoothly. Taking good care of children, especially during infancy, is one of the paramount responsibilities of adults who chose to become parents. Regardless of whether the child is your own or if you are simply taking care of a child as part of a profession, the quality of that care is of vital importance by societal standards. Stars has shown their understanding of the “important association between a small increase in customer retention and a larger improvement in profitability” (Baines, 2011). A small increase in customer retention can be achieved by understanding market patterns and analyzing how they change over time. For example, Stars recently realized that new young parents make more use of the internet as a means of developing an initial relationship with any business and, namely, a childcare facility. To accommodate this, Stars invested heavily in a brand new website tailored to the new young parent who is accustomed to searching for things on the internet. Beginning at the point a parent comes to interview the childcare facility, if Stars is successful in developing a relationship with the parent customer, they will enjoy the large improvement in profitability Baines discusses in his book (2011). The importance of building relationships with their customer base is of very high value and they must use marketing tools to develop those relationships. Over time, these relationships have been built on and nurtured by trust. Trust and reliance in business relationships is the driving factor for the success of any business. Stefanos Mouzas, Stephan Henneberg and Peter Naudé (2007) emphasize three significant facets of trust in exchange relationships: “(1) trust in another party is considered as belief or sentiment that the other party will act benevolently; (2) one cannot enforce the other party to fulfil its obligations; and (3) trust involves a degree of dependency.” The difference between trust and reliance in business relationships is of vital importance. The parents at Stars rely on the Childcare facility to give their children proper care, love, education and comfort. In order for this reliance to sprout there has to be underlying trust. Trustworthiness is ascribed to a reciprocity that is motivated by character or trust and reliance (Mouzas, Henneberg & Naudé, 2007). The foundation of Stars is trust. The employees at Stars try very hard to develop and maintain this attribute from the parents because once this erodes it is very hard to gain back. It is the result of multiple interactions and experiences that the parent as well as the child has inside and outside of the childcare facility. If the parent feels that the child does not trust the facility, the parent in turn will not trust the facility. The focus of Stars on Relationship Marketing and the maintenance of trust and an open line of communication lies heavily in the hands of the employees as well as the interactions among the parents themselves. According to Mouzas, Henneberg & Naudé (2007), Trust is based on beliefs, sentiments, attitude, morality, emotions, inter-personal, commitment, dependency, vulnerability, risk, voluntary and unenforceable measures. Stars has to work hard each day to maintain each of these facets with their parents, the children attending the childcare facility and also the society at large who has a pulling impact on the views of others outside of the childcare facility who are not direct stakeholders. There are certain exchange types that Jüttner and Wehrli (1994) identify, namely restricted exchanges (direct, restricted exchange types involving just buyer and seller), generalized exchanges (indirect exchange types involving at least three parties) and complex exchange types that further enlarge the system perspective. This highlights an interdependency between parties which exemplifies the childcare industry. Their effects on the total web of exchanges are also considered. If there is a positive relationship between the child and employees at Stars, this further translates into a good relationship with the parents and at large a good relationship with the society as a whole which personifies the web of exchanges between all stakeholders. The majority of interactions Stars childcare facility has is B2C transactions. B2B happen much less often and only on an ad-hoc basis. For example, there are childcare licensing facilities that need to come perform an annual evaluation for the facility. Stars needs to ensure they maintain a positive and problem-free relationship with these alternate business partners. They need to also ensure that if a problem does arise it is immediately resolved so as not to fall outside of the standard guidelines of running a childcare facility. The B2B and B2C relationships are the same in the light of the fact that a mutual trust must be maintained. The business partner for Stars childcare (the childcare licensing facilities) must be based on some trust because the annual evaluation only happens once per year and the licensing facility must be certain that Stars is running at par (or exceeding par) throughout the rest of the 364 days of the year. Sometimes these site visits are random and sometimes they are planned but they are always within a range (Personal Communications, December 1, 2012). The B2C relationships, as described previously, are based heavily on trust as well. The parents must feel calm and at ease with leaving their most precious gift in the hands of (initially) complete strangers. The differences between B2C vs. B2B are the frequency of interactions. The B2B interactions for Stars are always running in the background but are not as physical and day-to-day as the B2C interactions they have. Customer relationships, both domestic and overseas, have become more easily identifiable with Stars’ new website (www.starschildcare.ca). On their website they have enabled an IP Address locater that allows them to track from which countries they are being viewed. They recently also invested in Google Ads which lists them as the first search item when the term “daycare” is entered into the search box (Personal Communications, December 1, 2012). This, coupled with word-of-mouth and the international culture of both the owner and employees of Stars make it (on a very small scale) a potential platform for overseas customer relationships. Although most of Stars’ focus is on the physically very close domestic market (often within a 5KM radius from the facility) – there is potential for overseas customer relationships especially with the newly implemented website that allowed them to be viewable by the world. The likelihood of actually developing an overseas clientele is slim to none due to the nature of the business. However, the information is widely available and could entire overseas relationships to develop when they eventually become domestic (for example, overseas parents seeking local childcare facilities for which they would like to place their children upon moving to the local area). The only influence that relationships with other stakeholders have on the development on Stars’ ability to maintain good relationships with existing customers is the word-of-mouth effect. Childcare facilities run mainly on respectable recommendations. For example, if the society at large (i.e. licensing facilities) is not particularly fond of Stars, then the referral rate for the childcare falls dramatically. If other customers (parents) are not happy with the services provided for their children, the same effect occurs. Stars needs to ensure they tie all loose ends and encourage feedback to better themselves continuously in order to have a good relationship with all of their stakeholders because inevitably they are all interlinked and when one relationship suffers, so too does the others (either in the short term and more so in the long term). Annika Ravald and Christian Grönroos (1996) demonstrate that the value customers receive from a product or a service lies in the ratio between perceived benefits and perceived sacrifice. If the parent feels that they are sacrificing much more than they are receiving, this causes a gap between their overall perceived value of the service. Childcare services are very pricey and sometimes this creates a bitterness in parents that Stars cannot easily cope with (Personal Communications, December 1, 2012). One way that Stars helps to overcome this is through interviews held at a private date to discuss the finances. Although the price is set at the get-go, sometimes Stars will make exceptions and put parents on payment plans or reduce some months or charge the children on a per day basis as opposed to an entire month. The only disadvantages of building long-term relationships with customers at Stars only come into play when the child reaches 12 years of age. At this point, no matter how much effort, time, and nurturing is invested into the B2C relationship with a child/parent customer, the child cannot be a part of the childcare facility anymore (by law). In this sense, Stars childcare facility has a type of diminishing returns (unless the parents of the existing above-age children have children again and require childcare services). Other than this very vivid fact, there is only positive outcomes of developing and maintaining long-term relationships with customers. Even if they do not have further children of their own, the positive relationship will translate to equally positive word-of-mouth referrals to peers. A(2): Issues and Developments Affecting Stars’ Relationships in the Future The emergence of new ways to educate children has always been a struggle for Stars. It is very costly to keep up to date with all the new modes and methods on how to “best” raise children. The introduction of Montessori teachings initially hindered Stars’ growth but soon thereafter it was replaced with a new method of learning called Bright Start (Personal Communications, December 1, 2012). The different ranges of pricing available for childcare facilities (licensed vs. unlicensed) are of major concern to Stars. Pricing is strongly linked to relationship management (Solomon, Stuart, Smith and Sirsi, 2005 p. 295). Higher prices (like a childcare facility) often have sufficient margins to support closer and more responsive relationships with customers. As mentioned previously, childcare is a very expensive service to pay for. It is often a major consideration for young parents who are just starting their family lives and multitude of responsibilities that come with it. As the economy gets more rough these financial issues are magnified and are to the detriment of Stars. As mentioned previously, Stars has engaged in personalized payment plans for some parents. But there is a pitfall here as these options are not given to everyone and there is no real basis of who they are and are not given to (other than whoever complains) and this is not an equitable approach. Customer loyalty may be affected upon the knowledge of such an agreement between Stars and another parent. Stars needs to ensure that there is a fair process made available to all parents and not just to those who voice their concerns. Financial times are rough and do not seem to be headed toward the right direction. If Stars wants to maintain its relationships with loyal customers, their policies and practices must be open and clear to all – regardless of their financial position. This is referred to as relationship selling where “a form of personal selling in which the salesperson seeks to develop a mutually satisfying relationship with the consumer so they can work tougher to satisfy each other’s needs (Solomon, Stuart, Smith and Sirsi, 2005 p. 447). In today’s professional world, a salesperson is more likely to practice relationship selling to develop a mutually satisfying relationship with the customer. It involves winning (attaining them), keeping (delivering what was promised) and developing (satisfying them to be counted on for future business) customers. Stars focuses heavily on developing their customers because they are more often than not long-term (to a maximum of 12 years, and potentially more children thereafter). Peter Turnbull, David Ford, Malcolm Cunningham (1996) highlight some competitiveness and interaction strategies. The posit that there is a “set of give strategic options used by British firms to enter markets” (Turnbull, Ford and Cunningham, 1996). These include: 1) Technical innovativeness 2) Availability and supply security 3) Low prices competitiveness 4) Product adaptation 5) Total conformity as a second supplier Stars must take each of the 5 above-noted steps into consideration in their day to day dealings with their B2C relationships. This will give them the competitive edge they need in a market filled with childcare facilities. They need to stand out and provide that ‘extra’ mile the parents are longing for. B: Tools Chosen to Build Customer Loyalty and Their Effectiveness Shala (the owner) and her workers go the ‘extra mile’ for each and every one of their little customers. To begin, here is an excerpt from a testimonial available on their website that gives a bit of an insight to the degree of customer loyalty present at Stars: “The employees at Stars Childcare are great. I trust them 100% with my children. The kids enjoy being there. It’s not just a daycare, it’s a second home for the kids. Our family considers Shala a family member. She’s very thoughtful and caring, teaches the kids what’s right and wrong. I told her she can’t retire till the kids have all grown up! I highly recommend her.” http://starschildcare.ca/testimonials Shala and her team provide food for the children each and every day. Customer Service is the number one asset that Stars holds. Value creation is the key to developing innovative service offerings and concepts. One way that Stars demonstrates this behavior is through incremental service innovation which is described as “a value creation strategy in which services are developed to provide extra value” (Baines, Fill and Page, 2011 p. 307). Clients of Stars are always pleasantly surprised at the level of attention and care provided. The rules are always flexible and where help is needed, it is provided, no matter how complex the situation (Personal Communication, December 1, 2012). Stars knows that as long as they go this extra mile, their clients are kept happy and customer loyalty (which translates to long-term profits) is ensured (Personal Communication, December 1, 2012). Of course, there is always room for improvement. One way is to make all of the special offerings and help they provide to be transparent. It is very much dealt with on an ad-hoc basis at the moment but that is due mostly to the fact that it is an in-home facility with no stringent policies and practices around the way each customer is handled. This is not particularly fair to each customer as they may see others as being ‘favored’ over themselves. Also, it is a difficult industry not to let your feelings or true emotions show – when you like a child (for whatever reason that may be) you may act towards them a bit more favorable without any conscious thought. I have myself seen this occur at the daycare both with the owner as well as the workers. This needs to change. Every single child must be dealt with equitably and every single parent must also be dealt with fairly. There is no room for favoritism. Inevitably, however, this does occur and will be a severe recommendation for Stars to improve on. The very nature of Relationship Marketing is “attracting, maintaining and – in multi-service organizations (like Stars) – enhancing customer relationships” (Eiriz and Wilson, 2006). Stars needs to work on enhancing their customer relationships by providing fair and equitable resources and special offers/discounts to all parents and not to just a select few (Personal Communications, December 1, 2012). “Loyalty programs are facing mounting pressure concerning their use as a facilitator of specific customer information and potential to discriminate against ‘non-member’ customers because of greater marketing resources allocations shifted toward selective customers.” (Lacey and Sneath, 2006). This is the root of the problem at Stars in light of customer loyalty. It is based on a foundation that is not equitable and this needs to change immediately. The managerial implications are to maintain customer loyalty programs but to ensure that the application of equity theory is applied so that customers’ perceptions of distributive equity can be strengthened by enhanced value propositions made available through these programs. If procedures used to determine enhanced value propositions are based on some sort of actual and tangible criteria, that are unbiased and impartially delivered and consistent with everyone else, all customers are left in a more satisfied state (Lacey and Sneath, 2006). Stars Childcare is a commitment-based company as Janis Dietz described (1999). Commitment-based companies include TOTAL company involvement in customer retention. Some of the steps that commitment-based companies take include active internal communication and listening; strategic improvement, staff continuous learning; visible and involved senior management; customer segmentation/fragmentation and individual support; hands-on research/communication; regular direct customer contact by all levels; customer partnership; formal customer research; full service complaint gathering, evaluation, and responsiveness; customer and competitive data used as a foundation for improvement; and internal and external customer teams (Dietz, 1999). Stars childcare does an epic performance on each of these steps (based on my own experience in the childcare over the past 20 years). If one takes a look at the reviews written on the website, it gives a good insight into the level of love and care that the owner and workers engage in in order to develop, and more importantly, maintain customer loyalty. Customer loyalty is said to be the only method that is proven to be directly linked to profitability – which is the ultimate goal of the smallest to the largest organizations (Dietz, 1999). Conclusion The economic benefit resulting from the introduction and implementation of relationship marketing can be related to transaction costs reducing with long-term relationships (in the case of parents who are having financial troubles). Also, market research should be conducted more efficiently to determine the real values that parents are seeking as these are always changing. Data collection and processing will help Relationship Marketing by providing a basis for facilitation of individualized exchange processes while keeping in mind the equity for all customers (Ravald and Grönroos, 1996). I wish all the future success for Stars! Most importantly, I will be using newfound Marketing knowledge to help my mother succeed in the ever-changing childcare facility industry. 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