Loyalty programs in customer relationship management

Loyalty Programs in CRM for Time Warner Cable

Time Warner Cable continually faces the challenge of reducing churn of its customer base while also gaining new customers, needing to balance each as part of their ongoing customer relationship management (CRM) and loyalty strategies.

It is recommended that Time Warner initiate a new customer loyalty program to first reduce churn of existing customers, second increase the profitability of existing customers by offering them up-sell promotions, and third significantly increase lifetime customer value (LCV) across all segments. These three objectives are often found in customer loyalty programs for services, and are also relied on for creating more predictability to profits as well (Ou, Shih, Chen, Wang, 2011).

The two components of the loyalty program will reward customers who have been with Time Warner over a decade with Platinum status, which gives them access to many first-run movies on premium channels. The second component will be a point system for new customers to entice them to bundle in their cable TV, phone and Internet together for a price break of 30% for the first year and 50% the second year. These newer customers can also accumulate points to being Platinum as well. Successful customer loyalty programs change behavior daily through feedback and the ability of customers to monitor their own progress, motivating them to change their habits over time (Murthi, Steffes, Rasheed, 2011). What is critical during this time period of any customer loyalty program is staying true to the initial goals of the customer loyalty efforts, in effect keeping the promise made to the customers to begin with (Murthi, Steffes, Rasheed, 2011). It is also this area of authenticity, transparency and trust that is critically important for the credibility of companies to be maintained as they complete loyalty programs (Norton, Pine, 2009).

The two most common objections to customer loyalty programs is that the metrics are often inflated (Bagchi, Li, 2011) and the costs are exceptionally high given the returns (Ou, Shih, Chen, Wang, 2011). One excellent way to cut through the inflated metrics is to have customers actually define their level of sat5isfaction with the programs at an experiential level using SERVQUAL or any other number of research methodologies and programs (Norton, Pine, 2009). It is also critically important to have the metrics of participation coordinated with the financial metrics to ensure a high level of accountability is achieved and auditability of results as well (Murthi, Steffes, Rasheed, 2011). Often the most vocal opponents of any customer loyalty program point to the lack of traceability back to sales results and program development leading to actual sales and profits (Murthi, Steffes, Rasheed, 2011). It is best to anchor these two attributes together and have complete transparency and authenticity about what is going on in the customer loyalty program to ensure its success (Norton, Pine, 2009).