Customer Loyalty Programs Loyalty Programs

Customer Loyalty Programs

Loyalty Programs

There are specific intersections of products and segments in any company where the relationships with customers in specific areas are so valuable they must be managed closely, while other products, are commodity-like, and don't require nearly the effort to keep customers. Marketers face this dichotomy. Often the customer lifetime value is very high yet the strategies to retain and grow loyalty over time have become more unfocused and non-existent as the metric of customer lifetime value is sporadically measured at best (Johnson, Leger, 1999). The greater the differentiating value to a customer and the need for continual service updates, as is the case with cars, high-end boats, motor homes, expensive electronic products and systems, the greater the lifetime value of a customer based on lifetime service revenue potential (Marshall, 2010). Products that have a potential revenue stream from services are much more critical for creating customer relationships around (Johnson, Leger, 1999).

Conversely, attempting to create customer loyalty around a product that is commodity-like, with many substitutes and customers only shop on price and availability would be a waste of time (Harari, 1999). These products would be so undifferentiated that the advertising expense and market positioning would make the expense in customer loyalty programs not worth it. Additional products in this category include generic products and services that are so undifferentiated and offer little in the way of value between one source and another, that the costs associated with each loyalty program outweigh the value. Each product or service area in a company needs to be make these tradeoffs on customer loyalty.

Part II: Present ONE marketing problem and compare a high-tech vs. low-tech approach to solving it. For instance, you can automate your marketing research - or you can use depth interviews as a low-tech solution. When is each approach appropriate?

The marketing problem of introducing a new product often causes companies much headache and challenges in capturing the revenue from their latest innovations. When a new product introduction is being managed through direct distribution channels and dealers, the challenges become even more complex, as there is often a lag time in communication about new features, pricing and functionality (Andritsos, Tang, 2010). The high tech approach to managing new product introductions is to create an online password-protected website, often called a portal, and quickly upload and share all information about the new product introduction this way. This approach assumes that members of the sales force both for the company and for the direct sales channels will actually log in and use the data presented. It also assumes that all members of the channel have Internet access as well.

The low-tech approach is more time-consuming and expensive, yet it does make the new product introduction very memorable. This approach involves sending out product introduction packages overnight, calling each distributor, dealer and salesperson to make sure they got it, and explaining it to them. This approach is very costly and can also suffer from information lag times if the products change rapidly.