Case Buy Now Pay Later Does It Work the Same Way for Computers and Cars

In October 2002, IBM introduced a new financing plan called Total Usage Financing, designed to stimulate spending for its on-demand computing services from cash-strapped businesses. The plan spread the cost of technology purchases over several months and included a revolving line of credit. Like a pitch from a car manufacturer, IBM announced a "triple zero" financing package, that offered large and mid-sized businesses zero down, zero payments, and zero interest until 2003.

Other technology companies followed suit. The same month, Microsoft unveiled a new program that allowed small businesses to take out loans to finance software purchases. It also launched a special 24-month zero-percent financing promotion targeting customers of Microsoft's Business Solutions division, which sells enterprise resource planning and customer relationship management software.

In November 2003, Hewlett-Packard introduced a program offering a 3-month deferral on any large purchase, including hardware, software, and services.

Question 1: What are the opportunities and threats of such policies?

Question 2: In which case can supply trigger demand?

The danger of these three approaches is clear. They focus on the company and forget that the sales exchange involves two parties. Without customers to purchase products, there is no justification for production. On the contrary, the marketing philosophy centers on the customer;it emphasizes that the key worth of a product lies in the value that it provides to the user. A company that concentrates too much on the physical attributes of a product, its logistics, or financial profit risks forgetting that the customer purchases a product only as a means to resolve or address a problem.

This customer orientation involves all the departments of a company, because customer satisfaction on all levels, from the product design to its (after-sale) maintenance, is the final measure of success for the company, as well as its long-term promise of success.

Being tuned in to customers in order to satisfy them better is more than a philosophy. It is a discipline that requires an organized and responsive company, not to mention everyone's involvement. All members of the organization, from researchers to CEOs, including switchboard operators and production workers, are involved and responsible for the quality of customer relations.

When the company's organization is turned upside down, the customer becomes the sturdy base of a long-lasting exchange relation between the company and its customers (see Figure 1.2). This management philosophy was made popular by Jan Carlzon, as CEO of Scandinavian Airlines (SAS) in the beginning of the 1980s. As SAS was losing money while facing a bigger competitor, Carlzon asserted that the company had lost its focus on

Customers

Customers

Customers

Customers

Figure 1.2 Marketing state of mind: the inverted pyramid.

customers' needs: management was placing too much attention on the technicalities of flying airplanes and not enough on the quality of the customers' experiences.

Carlzon said, "We used to think our biggest assets were aircraft, overhaul stations, and technical resources. But we have only one real asset, and that is a satisfied customer prepared to come back to SAS and pay for our costs once more. That's why assets in our balance sheet should show the number of satisfied customers who flew SAS during the year and not the number of airplanes that are not worth one single cent as long as there is no secondhand market in the world for used aircraft and nobody wants to pay for a flight in those airplanes" [8].

His philosophy has not lost its validity and has survived other short-lived management theories. In the high-tech sector, companies such as Cisco, Dell, DoCoMo, Microsoft, or Nokia have been giving customers the attention they deserve for a long time. These companies have built their own success on this state-of-mind marketing.

Continue reading here: The physical and virtual value chain model

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