Customer Loyalty and Relationship Marketing, the Benefits Associated with a CLRM Program - Term Paper Example

Tale of Contents 1. 0 Introduction 2 1.1 Background Information 3 1.2 Aims and objectives 4 1.3 Scope 5 2.0 Customer Loyalty and Relationship Marketing 5 2.1 Literature-based Evidence 7 2.1.1 Managing Value through Loyalty Program 9 2.1.2 Customer Benefits and Sacrifices in the Value Equation 10 2.1.3 Benefit of Retaining Customers 10 2.2 Results 11 2.3 Existing Loyalty and Relationship Marketing Programs 13 2.3.1 Wal-Mart and Mercedes Benz Loyalty programs 13 3.0 Conclusion 14 4.0 Recommendation 15 References 16 Appendix 18 Customer Loyalty and Relationship Marketing’ 1. 0 Introduction The report is about a fictious MA-TO Company which deals with manufacturing and distribution of computer as well as aim at determining the benefit of a CLRM programme, and providing recommendations about a CLRM programme for the company. It has been widely agree by scholars in business field that it is indeed the customers that dictate the success of any organization. For that reason there are needs for organizations to ensure that they maintain a mutual and warm relationship with customers. Historically, both customer loyalty and relationship marketing have been employed in a number of organizations. A good number of organizations that have adopted relationship marketing as well as customer loyalty programs have been successful in business as well as going global. By definition relationship marketing include relationship with various stakeholders within and without the organization (Ndubisi 27). It is worth noting that this does not call for a buddy-buddy relationship but treating customers with other stakeholders but a process that takes time having connected events or stages. The approach entails customizing programs for customers categories usually aimed at providing them with varied kinds of promotions. With regards to customer loyalty, the kind of relationship between them and the organization that stresses on customer retention and satisfaction, instead of dominant focus on sales transactions is what helps in creating customer loyalty. The major approaches include satisfaction as well as retention. With satisfaction relationship marketing heavily depends on communication as well as acquiring the demands of the customers from the current customers that an organization has. This will be very beneficial to both the parties. Concerning retention, organization needs to adopt a variety of ways to ensure that the existing and new customers are retained (Dick & Basu 105). This will help the organization to have repeated business transaction with such customers an will openly be realized after the organization has in place strategies that will help it have plans in satisfying the demands of their customers above and beyond what the competitors are offering (Uncles 312). Previous studies have depicted that there is a link between loyalty and profits made by organizations. With such a reality the issue of customer satisfaction has been seen to be one important strategy and organization need to adopt and creatively balance with its ability to come up with loyal customers who will; ultimately help in retaining profitable customers. It is no doubt that focusing how to create customer loyalty will help create a long lasting association between the two parties will definitely brings value to customers. It is thus the central focus of this paper to critically analyze the benefits of CLRM and how it can be improved (Uncles et al. 302). 1.1 Background Information The hypothetical company; MA-TO Computers will be dealing with manufacturing and selling of computer as well as other related appliances. The strategies that are in place will help the organization grow globally. Among them include forming mergers with well established companies such as DELL and H-P. Similarly, we intend to grow by acquiring other businesses especially those dealing with supplying and distribution of finished products. For MA-TO to grow and maintain competitiveness one major part of the strategy that is a plus is the desire o attracts and maintains individuals of extraordinary talents. We also strive in training as well as developing talented workers. In order to attain the ultimate organizational goals and objectives, there are a number of principles that are followed. These include; following innovation and creativity where it leads by going after high quality products and services, retaining the value of creativity and innovation by creating projects within our organization and seek external assistance when necessary. Excelling in sales as well as marketing is a vital principle; this is arrived at by expanding innovative commercial capabilities to new consumers as well as geographical areas and managing mergers as well as acquisitions. Driving core values as a team through team building, cultural innovation, open sharing of information and having 360 degree (Morgan 28). The key components that will guide our strategy include focusing on people, seeking licensing deals, mergers and acquisition that will provide the best synergy, pursuing R& D kind of growth and finally building and nurturing the current existing business. The company’s mission statement is to be the most successful computer company in the world at delivering the best customer experience in markets. This is by going extra miles to meet customers’ expectations of high quality products and services, being in the lead in adopting technology, financial stability and encouraging accountability. Similarly, focusing on employees as well as ensuring that the environment is protected will help attain this (Uncles 314). 1.2 Aims and objectives The main objective guiding the report is to examine the benefits associated with a CLRM programme, and provide recommendations about a CLRM programme for the company. The aims of the report include; To establish the benefits of customer royalty relationship marketing To examine two companies that use loyalty programmes and discuss whether they are successful To find out the best ways a company can incorporate CLRM programmes. 1.3 Scope Just like any other study, there is need to set boundary or scope in which the report will cover. Based on the aims and objectives mention previously, there are a number of factors that will be critically examined. These include; the benefits of customer royalty relationship marketing, the best ways a company can incorporate CLRM programmes, customer benefits and sacrifices in the value equation, benefits of retaining customers and managing value through loyalty programs. With all this attributes, the report will be rich enough in bring out vital and intended issues regarding customer loyalty relationship marketing. It is worth noting that the findings of the report will definitely have a global application but with slight suitable adjustments (Ndubisi, 207). New companies as well as existing one will benefits from the recommendations established in this paper regarding CLRM programs. 2.0 Customer Loyalty and Relationship Marketing Relationship Marketing (RM) is a process of attracting, maintaining and enhancing relationship with customers and stakeholders and capable of terminating it when necessary, at a profit so that the objective that has been put across the parties involved can be achieved through mutual exchange and fulfillment of the promises (Rosenberg & Czepiel pg 47). Customer loyalty has no agreed upon definition. Otherwise, it can be a seen continuum commitment to do business with particular firm on an on going basis. Loyalty can be divided in to two dimensions. This is behavioral and altitude loyalty. Behavioral royalty is considered a measured frequency of purchase or the word of mouth that customers has over the business. While attitudinal loyalty is the feeling that the customers has that creates an attachment, psychological bonding and therefore forming a linkage to one provider. RM is considered an effective strategy for promoting loyalty and moving the customer’s ladder of loyalty. The main aim of Relationship Marketing is the bolstering of the already strong relationship and ensuring indifferent customers are converted to royal ones. Most of the businesses have advocated the use of RM as a key option in gaining customer loyalty. Through the financial services that the businesses offers to their customers especially in the banking sector, a relationship is considered as major factor to ensure that the customer loyalty is maintained. Nevertheless, relationship marketing cannot be directed to all the customers of a certain institution. It most cases it is required to be directed towards the most profitable areas. Therefore, if there is ineffective relationship in the marketing, there should be a key contributor and the service is required to be switched. Therefore, it is paramount for the institutions who are offering relationship in marketing to focus on the emotional tone of their interactions with customers and to understand of their customer’s behaviors (Storbacka, & Grönroos pg 32). In the recent past, there has been an increase in customer relationships studies in the academic and in professional marketing literature. This has shown that the customer retention rates and customer share category purchase are other important aspects of the customer relationship management. Therefore, according to Ulaga & Eggert pg 318, to ensure that the customer relationship metrics are maximized, many firms have taken into account the use of relationship marketing instruments and royalty programs or frequency reward program that has lately became a key marketing activity for a number of companies. Therefore, to ensure that the companies survive especially in their customer management strategy, they have to ensure that they use the element of the relationship marketing as an instrument to ensure loyalty program are put in place to make the company survive in the modern marketing. This can be seen that only the companies who build a relationship that is long term with the customers can be able to succeed. One of the most effective ways to make the dream a reality is to ensure that the customers are made loyal and consistent with all the relationship-marketing instruments and the loyalty programs that have been placed in the business. Therefore, loyalty program is required tom be designed and be implemented to ensure that the outstanding value is provided and the current members do not desire to switch brands that are currently offered or from the company that are in. 2.1 Literature-based Evidence Relation marketing has of late attracted a lot of attention in the marketing in the past decades. The importance that has been cited there in the process of the relationship marketing for the one who is providing the services are the many effects that are potentially encompassed on the customers relationship and their loyalty. According to Hougaard, he said this is a behavior that a company that adopt to establish, maintain and develop competitive and profitable customers relationship to the benefits of the both the parties. However Ravald and Gronroos referred this as a marketing strategy that involves activities that are directed towards establishing, developing and maintaining successful relationship in the exchange, where the relationship marketing shifts it focus in the ensuring that the long term customers are attracted and loyalty created among them to maintain a profitable mutual relationship (Venetis & Ghauri, Pg 1580). To ensure that relationship marketing happens, five variables are supposed to look at. These are the trust, satisfaction, commitment and value. The main aim of relationship marketing is to ensure that lifetime value for the customer is build to ensure that royalty for brand is created. This royalty will act as a barrier to shield the competition where customer satisfaction is incorporated to ensure that the customer is retained through repeated purchasing. The differences between relationship marketing and the traditional mass marketing is that it do not seek temporally increase in sale. It ensures that it creates customers brand value as it builds customers satisfaction and loyalty as permanent bond is build with the customers. The creation and maintenance of the brand has been in an increase in the company and has turned to be a more important aspect of building a competitive edge. These brand activities are creating a brand value. According to the definition that has been offered by the Ravald about value, it is evident that this is a concept that a customer receive after purchasing that helps in maintain them in the business through their satisfaction. The existence of the valuation that is in the customers due to the awareness that they have over a certain brand is important, as they perceive the brand to be quality than other. This makes them to be loyal to the company and the relationship marketing is strongly built. Through this, these customers are made to continue buying these brands and are therefore retained in the company. Therefore, this ensures that the value of the brad and the relationship marketing with the customers stands out. The concept of ensuring that the customers are satisfied is to ensure that the tendency of repurchasing in the same company and of the same products or service is recommended already (Wong & Sohal pg 37). Therefore, royal customers are seen to be the one who purchases and always recommend a certain products or service where he/she exhibits positive attitude towards these brand in the company. Therefore, it is evident that through increasing the brand value that enhances customer’s satisfaction, customers are made royal. 2.1.1 Managing Value through Loyalty Program The popularity of the customer loyalty program has led numerous companies to offer the leader in their fims offers loyalty programme that simply mimic the loyalty programme. Rather than providing a competitive advantage, this has simply created a competitive stalemate. This is due to the cost that is involved in the maintenance of the loyalty program. The management of the loyalty program allows the companies to build a new communication channels with their customers this is through natural language voice interface that is user friendly, simple and interactive to ensure that the communication is effective. Through this management, callers are capable of accessing, comparing, and redeeming royalty award and incentives at any time (Wong & Sohal pg 40). Through the management of loyalty that has been used by much company for example Ydilo, they ensure that they have the capacity of integrating smoothly all kinds of corporate systems to ensure that the gifts and updated information is easily accessed by their customers. This makes the customers to be always updated on the issue of the promotion and such conditions for redemption of stock and prices among other things. Through the usage of caller data in management of the loyalty program, the activities of the customers can be managed through identification and profile that ensure that their accumulated loyalty points and adjusted portfolio of suitable gifts and promotion is managed effectively. 2.1.2 Customer Benefits and Sacrifices in the Value Equation The management of the loyalty program on the customers has different effects. If retail business is considered, consumers patronize multiple outlets that confront an important issue that makes it an important issue to determine how great consumer expenditure will be. Therefore, the most important issue on this is to e sure that the lifetime f the consumer in the company s increased. This is done effectively by ensuring that the management of the loyalty program is done. Trough offering them rewards after purchasing a given amount of the products. Therefore, retailers are increasing using loyalty schemes as a part of their marketing mix. Therefore, through loyalty programs that are managed by the business, the customers are capable of get tangible and intangible benefits through repeatedly purchasing in the company. 2.1.3 Benefit of Retaining Customers A successful loyalty program can ensure that one have a huge impact in the customers purchasing habit. Therefore, retaining the customers for a long time possible has many benefits on the business of the industries. Therefore, the main aim of companies is to ensure that they obtain a lifetime that custom. Therefore, retention of the customer is always on their long-term objective because it offers the following benefits. The first benefit is that through the retention of the current customers in the business, the business will be able to expand, as they will act as a marketing channel (Venetis & Ghauri, Pg 1576). This is through recommending it to other people who they are close to and thus increasing ones customers. Loyal customers will never shy to try the company products even if they are new. The reason being that they have built confident on the business and they cannot be worried on the outcome. This makes the business to have a place that will enable it to try their products thus expanding their production. Customers will be able to willingly pay more incase of the adjustments of the prices of the business products or services. This is because they are loyal to you and has trust on the products that the company offers. This will make the company or the business to remain competitive on the market place incase of high prices of production. Loyal customers will enable the business to improve in terms of the quality, as they are capable of telling frankly the company about the problem their products have (Ulaga & Eggert pg 321). This is through the relationship that has been built on them over the years as they feel that they are apart of that business. The ultimate benefit of the whole process of having loyal customer is increased sales, increased market share as well as market dominance. 2.2 Results It is worth noting that out of the ten individuals targeted for the interview, 8 of them were willing to take it while two withdrew on during the process of interview. This thus represented 80% response rate. When asked if they were aware of the company’s loyalty program, 87.5% (7) of the respondent were of the view that they are aware. This is attributed to the fact that companies have engaged in an extensive advertisement as well as with the customers. When the interviewee was asked whether they have ever used the programs, majority of them said yes. This is represented by 75.0% (6). What this shows is that organizations have not only advertised their programs but have also ensured that they have called on their customers to have a test of the benefits linked with the whole idea. This can bee seen in the frequency in which the interviewee were using the programs within a period of one week. Out of those who completed the interviews, 2 reported to have enjoyed the services of the programs four times a week, 3 said that they use the program three times a week while the remaining 3 use the program two times in a week. When asked to elaborate on their frequency of using the program, the major view brought forth that I was able to capture is the value for their money they get with such programs. They felt that they were being treated right and offered high quality program and with such an appreciation from the companies they engage in business, their only way of saying thanks is to frequently buy from the same organization. The interviewees held that indeed the program was of tremendous significance to their wellbeing as well as the business itself. To them issues mentioned as benefits include feeling satisfied with the services, the views of customers are factored in while decision are arrived at by the companies, they feel the value of their money (Gordon, 99). On the side of the organization, it was pointed out that with loyal customers, there is reduced cost of doing business, there is improved profitability, satisfied customers translates to an organization retaining their customers hence able to thrive in the this competitive business world and more importantly, an organization is in a position to identify customers who are profitable or not. 87.5% of the interviewees strongly agreed that CLRM programs that are excellent contribute to a successful organization while only 12.5% agreed with the statement. On the same note the entire respondent agreed that loyal customers are more profitable to an organization as compared to non-loyal ones since they are cheap to serve and they frequently and repeatedly do business with a particular company. Concerning the negative attributes of CLRM programs, it was pointed out that it locks one not to be able to obtain goods from other organization despite the fact that they may be cheap. Additionally lack of active engagement of customers makes organizations come up with programs that are not suitable. 2.3 Existing Loyalty and Relationship Marketing Programs Loyalty and relationship marketing programs include marketing efforts that are structured that help reward, encourage loyal buying behavior that are aimed at benefiting the customers and more so the organization. The existing programs include loyalty cards, reward card, point cards or club cards. These help in identifying customers. 2.3.1 Wal-Mart and Mercedes Benz Loyalty programs Wal-Mart has been found to top loyalty index in U.S. this was attributed to lower prices used by the retail. It is worth noting that Wal-Mart’s grocery, personal care and departmental stores were reported to have high level of customer loyalty. The major attributes to the loyalty held by customer stems from excellent customer service, conducive store surroundings as well as a wide product selection. The major advantage with lower prices to win loyalty is that it helps an organization gain competitive advantage over their rival. However, one major problem with this approach is that it can make an organization make losses, capturing customers who are of the opinion that expensive is good is a challenge and maintaining this in the long-term might not be feasible. In the United States of America, Mercedes Benz has developed a new Mercedes Benz club loyalty reward program. Unlike the older one where members were entitled to gift cards of between 500 and 1500 U.S dollars which depended on location in which one bought the Benz, this new one entitled one to a cut off of 1000 U.S dollars in models of 2010, 2011 and 2012 purchased or leased from any authorized dealers. It is worth noting that this achieved only when one has been a member for a period of one year without relapse (Gordon, 19). 3.0 Conclusion This report cover important information related with loyalty program effectiveness, and its dimension like price, products and services quality. From the data that has been collected, some of the findings ahs been found to conclude the report. First, the customers think that the products are worth their money when the business provides an outstanding value on them. Otherwise providing outstanding value is not adequate to convert the customers to be loyal. However, satisfaction is provided when an outstanding value has been offered to the product. Otherwise, more factors are required to ensure that customers are loyal apart from products and services being worth their money. This makes the customers to feel satisfied through other issues apart from the money that they see their products worth. This means that the situation of the products being worthy their money is not always a direct cause of dissatisfaction. However, it is not always that the satisfied customer becomes a loyal customer. More convincing aspects are required to ensure that the customer become loyal. This is the reason why customer loyal management program is paramount. 4.0 Recommendation Before developing the strategies to be adopted, the company needs to first actively engage the potential customers so that it can be able to factor in their views. Building customer loyalty through membership, lower pricing as well as gift cards as well as points card will help the company to retain and satisfy the potential customers. References Dick, Alex. & Basu, Kelvin. "Customer loyalty: Toward an integrated framework," Journal of the Academy of Marketing Science, 22.2: 99-113, 1994. Print. Gordon, Ian. Relationship Marketing: New Strategies, Techniques and Technologies to Win the Customers You Want and Keep Them Forever. New York: John Wiley & Sons Publishers, 1999. Print Morgan, Ruth. "The Commitment-Trust Theory of Relationship Marketing," Journal of Marketing, 58.3: 20-38, 1994. Print Ndubisi, Oliver. "Relationship marketing and customer loyalty", Marketing Intelligence & Planning, 2007, 25.1: 98 – 106, 2007. Print Rosenberg, L. & Czepiel, A. "A Marketing Approach to Customer Retention", Journal of Consumer Marketing. 45.1 (1984): 45-51. Storbacka, Strandvik & C. Grönroos "Managing Customer Relationships for Profit: the Dynamics of Relationship Quality",International Journal of Service Industry Management, 5. 5. (1994): 21-38. Ulaga, W. & Eggert, A. "Relationship Value and Relationship Quality". European Journal of Marketing. 40. 3/4(2004) : 311-327. Uncles, Michael. "Customer loyalty and customer loyalty programs," Journal of Consumer Marketing, 20.4: 294-316, 2002. Print. Venetis, K. & Ghauri, P. "Service Quality and Customer Retention: Building Long-Term Relationships". European Journal of Marketing. 38. 11/12. (2004). 1577-1598. Wong, A. & Sohal, A. "An Examination of the Relationship Between Trust, Commitment and Relationship Quality". International Journal of Retail & Distribution Management. 30.1. (2002): 34-50. Appendix Interview guide Face sheet I would like to thank you for taking your time in meeting with me today. My name is [insert your name] a student and I would like to talk with you concerning the benefit of a CLRM programme. Specifically, based on the requirement for completion of my studies, I am to carry out a research as a partial fulfillment for the degree award. The information gathered will strictly be used for the intended purpose and nothing more, additionally the information will only be shared by the research team and I will ensure that you will not be identified as a respondent. Please remember that you do not have to talk about matters that you are not comfortable or prohibited by the organization ethics (code of conduct) and you may end the interview at your own discretion. The interview will take at most forty five minutes. Due to the fact that I do not want to miss points from your comments, I will tape the session. Consequently, I will also be taking short notes. Since we are on tape, I would like you to speak up in order for me not to miss your significant comments. Do you have questions on what I have explained? Are you willing to take part in this interview? ______________ ____________ _____________ Interviewee Witness Date Actual questions 1. Are you aware of loyalty programs? 2. Based on your response above, have you ever used these programs? 3. In your own opinion, how often have you been engaged in using the programs? Please elaborate by giving frequency in terms of weeks. 4. From your own observation what are the benefits associated with these programs? 5. Do you agree with these statements (strongly disagree, agree, don’t know, disagree or strongly disagree) (i) Loyal customers are more profitable than non-loyal ones (ii) Companies that have excellent CLRM programs are more successful? 6. Based on what you have experiences, are their any negative attributes linked with the company’s CLRM program? Post-interview (closing) Is there any additional comment? I will be analyzing the information you and other have provided and submit a draft to my examiner in the next four weeks. If you are interested, I will happily send you a copy of the draft for review if you are interested. Thank you indeed for your precious time. Read More