Chapter 4: Business-Level Strategy 113recognized for the quality of information it maintains about its customers, the services
it renders, and its ability to anticipate customers’ needs. Using the information it has,
Amazon tries to serve what it believes are the unique needs of each customer; and it has
a strong reputation for being able to do this successfully.^21
As we discuss next, firms’ relationships with customers are characterized by three
dimensions. Companies such as Acer Inc. and Amazon understand these dimensions and
manage their relationships with customers in light of them.
4-1b Reach, Richness, and Affiliation
The reach dimension of relationships with customers is concerned with the firm’s access
and connection to customers. In general, firms seek to extend their reach, adding
customers in the process of doing so.
Reach is an especially critical dimension for social networking sites such as Facebook
and MySpace in that the value these firms create for users is to connect them with others.
Traffic to MySpace has been declining in recent years; at the same time, the number of
Facebook users has been dramatically increasing in the United States and abroad. Reach
is also important to Netflix, Inc. Although its user base is still growing in the United
States, its growth rate has slowed. However, streaming video customers in foreign mar-
kets grew faster than expected. When this was announced, their stock price increased
16 percent in after-hours trading. Netflix plans to expand to over 200 countries by 2017,
up from its 50 in 2014.^22
Richness, the second dimension of firms’ relationships with customers, is concerned
with the depth and detail of the two-way flow of information between the firm and
the customer. The potential of the richness dimension to help the firm establish a
competitive advantage in its relationship with customers leads many firms to offer
online services in order to better manage information exchanges with their customers.
Broader and deeper information-based exchanges allow firms to better understand
their customers and their needs. Such exchanges also enable customers to become
more knowledgeable about how the firm can satisfy them. Internet technology and
e-commerce transactions have substantially reduced the costs of meaningful informa-
tion exchanges with current and potential customers. As we have noted, Amazon is a
leader in using the Internet to build relationships with customers. In fact, it bills itself
as the most “customer-centric company” on earth. Amazon and other firms use rich
information from customers to help them develop innovative new products that better
satisfy customers’ needs.^23
Affiliation, the third dimension, is concerned with facilitating useful interactions
with customers. Viewing the world through the customer’s eyes and constantly seeking
ways to create more value for the customer have positive effects in terms of affilia-
tion.^24 This approach enhances customer satisfaction and produces fewer customer
complaints. In fact, for services, customers often do not complain when dissatis-
fied; instead they simply go to competitors for their service needs, although a firm’s
strong brand can mitigate the switching.^25 Tesco, the largest retail grocer in the United
Kingdom, as well as other firms have changed the title of its lead marketing officer
to “Chief Customer Officer.” This suggests the importance of the customer to most
businesses, especially those focused on consumers. Likewise, because of data available
through digitization, firms have a tremendous amount of individual customer data,
and this data-gathering trend is growing, allowing firms to customize their products
and services.^26
As we discuss next, effectively managing customer relationships (along the dimen-
sions of reach, richness, and affiliation) helps the firm answer questions related to the
issues of who, what, and how.