Building Lasting Customer Loyalty - Essay Example

?Article Review The article Building Lasting Loyalty was a very interesting piece of literature. One of the first ments the mentioned about customer loyalty is that it is more expensive and time consuming to build loyalty with new customers than to create loyalty with your existing customers. The variable that drives customer loyalty the most is price. A company that has been able to build tremendous customer loyalty because they offer better price than the competition is Wal-Mart. A lot of customer supports private label brands because they offer greater value than national brands. The quality of the product is another important variable when a company is trying to build customer loyalty. Customers are willing to pay more for products of higher quality. Three additional variables that drive customer loyalty are location, selection, and service. Companies that are able to achieve customer loyalty obtain lower customer switching, increased profitability, and great word of mouth advertising. Six key elements of customer loyalty are: a) build on the foundation of a brand; b) use price to communicate a fair value; c) engage customers with great customer experience; d) recognize good customers; e) reciprocate customer loyalty; f) build intimate relationship with best customers (Bradner, 2007). If your customer has a business that offers items that your company uses it is a good idea to purchase from them to support the business of a client that is providing you with revenues. Marketers must pay close attention to their top customers to ensure customer retention of these key clients. Four types of loyalty tactics are price, experience, programmatic, and relationship loyalty. In the airline industry a company that has had success by offering low fares is RyanAir. Programmatic loyalty provides companies with discount and tcalled BK rewards that offers its customers a 5% credit towards the purchase of future food items. In the service industry having a good brand experience is very important to achieve a higher level of customer retention. Chapter 21 Summary The business world has become more interconnected than ever due to faster communication, transportation, and financial flows. The story of Red Bull is a great example of a company that was able to succeed in the foreign markets. Today Red Bull has penetrated over 100 countries worldwide. Corporations hold most of the wealth of the world. There are 200 companies that have more money than a quarter of the world’s countries. In 2003 international trade accounted for one-quarter of the U.S. GDP. A global industry is an industry in which the strategic positions of competitors of major geographic or national markets are affected by the overall global position. An example of a global industry is petroleum due to the fact that the majority of the automobile worldwide are powered by gasoline. A global firm is a firm that operates in more than one country. Five major decisions in international marketing are: 1) deciding whether to go abroad; 2) deciding which markets to enter; 3) deciding how to enter the market; 4) deciding on the marketing program; 5) deciding on the marketing organization. Many international markets offer opportunities to achieve higher profitability than the domestic market in which the companies operate. Expanding into international market allow companies to achieve economies of scale. It also helps companies reduce their dependency on one market. When a company gets attack by international competition a good strategic option is to counterattack by penetrating the domestic market of the international competition. Prior to penetrating a foreign location companies must identify the risk involved with the decision. The company might not understand the foreign nation business culture. The regulation of the country must be understood prior to establishing a presence in a location. For example the environmental laws of the country might impose additional cost the company was not incurring in its domestic marketplace. The four stages of the international process are: no regular export activities, export via independent representatives, establishment of one or more sales subsidiaries, and establishment of production facilities abroad. Companies have to identify their marketing objectives and policies prior to establishing an international strategy. A direct selling company that had great success in the international market is Amway. The firm has a presence in 80 countries worldwide. To successfully penetrate a developing market it requires a special set of skills and plans. It is important to adapt your product offering to the need of the foreign market. For example the car manufacturer Fiat developed a “third world car” called the Palio to serve the needs of poor communities. It is important to capitalize on the potential of a developing market by changing the conventional marketing practices to sell products and services more effectively. The American Automaker GM has had a lot of success with the booming Chinese marketplace. One of the most successful trade agreements is the European Union (EU) which was formed in 1957. Today the EU is one of the world’s largest single markets. The EU contains more than 454 million customers and accounts for 23% of the world’s exports. The common currency of the EU members is the Euro monetary system. The EU agreement offers tremendous trading opportunities for non-member nations, but it can also be consider a threat. The airline industry has been affected a lot by trade agreement considerations. A powerful trade agreement that was created in 1989 is NAFTA. The NAFTA is a free trade agreement between the United States, Canada, and Mexico. The MERCOSUL trade agreement is made up of four Latin American countries: Brazil, Argentina, Paraguay, and Uruguay. APEC is a trade agreement composed of 21 Pacific Rim countries. It is important to evaluate potential markets. Proximity is a factor that affects international decision. For a country located in Europe it is easier to penetrate a neighboring European country than to gain access to the Mexican marketplace. The five entry modes into foreign marketplaces are direct investment, joint ventures, licensing, direct exporting, and indirect exporting. Indirect exporting is the simplest strategy to implement. Indirect exporting requires the intervention of intermediaries. One of the cons of this strategy is that it has lower profit margins because the intermediary depletes the profits of the company. A strategy that a lot of marketers are using to achieve global penetration is the use of the internet. In 2010 the US ecommerce marketplace reached $153 billion. A licensing is a simple way to achieve entrance into a foreign marketplace. The licensor issues a license for a foreign company to use a manufacturing process, trademark, patent, or a trade secret for a royalty or fee. A joint venture is a company created between a domestic and foreign company in which they share profits and control. Direct investment involves creating a wholly owned subsidiary in the foreign company the firm entered. Three advantages of global marketing are lower marketing costs, power and scope, and consistency in brand image. Three cons of global marketing are difference in legal environment, differences in marketing institutions, and differences in administrative procedures. Different products do better than others in international markets. Straight extension involves introducing the product into the foreign marketplace without a change. Product adaption involves introduction the product into the foreign marketplace to meet local conditions or preferences. Product invention consists of creating something new. Backward reinvention is introducing earlier product forms that are well adapted to a foreign countries need. Some pricing problems associated with internationalization are price escalation, transfer pricing, dumping charges, and grey market. The customer perception of the country of origin affects the product acceptance in foreign markets. For example German products are known for their quality, while Chinese products are perceived as cheap and of low quality. Week Four Summary During week four I learned new marketing concepts that are going to help me in the future as a professional in business. I read two articles this week both of which dealt with customer loyalty. Achieving customer loyalty is an important goal for corporations because it enables companies to obtain higher revenue numbers. It is cheaper to achieve customer loyalty by retaining current customers than to attract new customers to a firm. One of the learning themes of the week was international marketing and the implications of achieving penetration into a new foreign market. During the team project I got a change to research the country of Canada. I learned a lot about the culture, customs, economy, political status, and regulation of Canada. The chapter that I summarize was chapter 21. I learned that the major foreign entry modes are indirect exporting, direct exporting, licensing, joint ventures, and wholly owned subsidiaries. Joint ventures are a good strategy to gain the acceptance of foreign governments. Prior to the entrance of China into the WTO in 2001 the only way for a foreign company to enter China was through the joint venture mechanism. References Bradner, L. (2007). Building Lasting Customer Loyalty. Forrester Research. Read More