Customer Loyalty

Manila Bulletin, December 20, 2010 | Go to article overview

Customer Loyalty


MANILA, Philippines - A prime marketing objective of most firms is to attract new customers, induce them to try out the product, and then convince them to stay on as repeat or loyal customers. I believe it was Peter Ducker who once said that the objective of a business is to create and satisfy a customer. Marketing theory thus considers the innovation-diffusion process, the five step process by which communication leads to the individual decisions: awareness, interest, evaluation, trial and adoption.

But after adoption comes the more difficult task of holding on to the customers. Thus was conceived the loyalty programs. These schemes are meant to bond customers to the company's products or services using additional incentives. Some of the well known customer loyalty schemes are the frequent flyer programs of the major airlines, the rewards program of credit cards, and more recently the freebies offered by credit card companies to customers achieving certain consumption levels.

By introducing such schemes, companies expect to maintain sales level, margins and profits, increase the loyalty and potential value of existing customers as well as induce cross-products buying by existing customer. Note that the objectives are both defensive and offensive. A defensive outcome is meant to protect the existing customer base while an offensive strategy is pre-emptive of competition or an attempt to secure first-mover advantage. Usually the desired outcomes refer to specific targets, i.e., heavy buyers or high net worth customers.

While customer loyalty programs can work, it should also be carefully designed lest it backfires. The concept may be correct, the objectives may be clear, but execution should not underestimate the intelligence of customers.

Let me illustrate this through a recent experience with the Globes Telecom loyalty program, specifically in relation to the I-Phone 4 which is exclusive to the firm.

This writer has been a long time Globe customer, over six (6) years, and I must say at the outset I have been a fairly satisfied client. My locked-in plan ended sometime in October this year and I was attracted by the I-Phone 4 which Globe recently launched and offered to loyalty customers like me. I did apply and waited for 2 months.

After a while, I started to wonder what has happened and made a series of follow-up calls and visits to various Globe centers. Imagine my consternation as I was informed repeatedly that the I-Phone 4 was unavailable, and this was during days when Globe had big one-page newspaper advertisements specifically on the I-Phone 4 plan. …

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