The Customer Loyalty and Relationship Marketing - Assignment Example

Customer Loyalty Letter of Transmittal Chief executive officer Linear Bus Services Dear Sir I have the honor to transmit herewith and to recommend for the implementation of Customer Loyalty and Relationship Marketing in the company which is being contemplated. This report is prepared by (INSERT NAME) and covers all the prerequisites involved in having customer loyalty and cultivating for relationship marketing for linear Bus Services The main purpose of this report is to master the processes and the benefits of having in place customer loyalty programs in order to encourage customer retention in the company. The report shoes the scope of works, details and the condition that will enhance a successful implementation of the program. I hope this report will merit your approval. Respectfully yours, (INSERT NAME) Executive Summary Relationship marketing has for along time been implemented in the business entities for its correlation with enhancement of customer loyalty. Relationship marketing becomes a success when customers are involved in the service offered, with substantial personal interaction, customer’s willingness to be engaged in relationship building activities which in the long run culminates to customer loyalty. Customer loyalty is very vital for the success of business organizations. attracting new customers is more expsensive that retaining the existing ones and therefore, increasing customer retention through secure relationhips between buyer and sellers if of great importance. In any bsuiness play field, competition has ever been dynamic. However, customer loyalfty has been the most effective way for securing firms profitability. There are very many companies who have employed these programs and have registered huge success. The rationale for relationship marketing is to enhance customer loyalty and customer retention and most of all in retaining a continuous relationship with customers. Consumer loyalty on the other hand is the strength of the relationship between an individual’s relative attitude and repeat patronage. Linear Buss service must therefore implement strategies related to Customer Loyalty and Relationship Marketing so as to ensure that, goals and objectives are captured with ease. Table of Contents 1.0 Introduction 3 1.1 Background Information 5 1.2 Aims 5 1.3 Scope 6 2.0 Customer Loyalty and Relationship Marketing 6 2.1 Literature-based Evidence 7 2.1.1 Managing Value through Loyalty Programs 7 2.1.2 Customer Benefits and Sacrifices in the Value Equation 8 2.1.3 Benefit of Retaining Customers 9 2.2 Survey Findings 10 2.2.1 Survey 10 2.3 Existing Loyalty and Relationship Marketing Programs 11 2.3.1 Existing Companies with CLRM 11 3.0 Conclusion 13 4.0 Recommendation 13 Bibliography 15 Appendix 1 17 1.0 Introduction Relationship marketing (RM) has been exonerated as one of the avenues that lead to mutual development benefits and valuable long term relationship with the customers and thus is said to enhance consumer loyalty. Relationship marketing works effectively when customers are involved amicably in the service offered, with substantial personal interaction, customer’s willingness to be engaged in relationship building activities (O’Malley & Tynan 2000). Puttting in place customer oriented RM programs that allows free flow of information betweeen Linear Coach Bus Service and customers do increase customer’s positive feeling towards their Transportation option, and this in the long run increases satisfaction and realtionship strength. On the other hand it has been agreed that, many times companies comeup with marketing strategy so that they can be able to stop loosing customers to competitors. However, the most influencial stratgey to stop consumer defections is the use of customer loyaty program. This is attributed to the fact that, in most cases these programs involves rewarding customers beacause of their repetative purchases. It is worth noting that, customer loyalty is very vital for the success of business organizations. Consequently, attracting new customers is more expsensive that retaining the existing ones and therefore, increasing customer retention through secure relationhips between buyer and sellers if of great importance. In any bsuiness play field, competition has ever been dynamic. However, customer loyalfty has been the most effective way for securing firms profitability (Reinartz and, Kumar 2002). Customer loyalty is solely dependant of the brand and this is what determines the customer retention and loyalty. A brand in this case is therefore a combination of functional and emotional values that promises a unique and commendable experience for the customers (de Chernatony, Cottam & Segal‐Horn 2006). the value created here therefore is solely attributed to relationship with the brand as percieved by the customer (Hennig‐Thurau, Gwinner & Gremler 2002). Conclusively, it is the customer who decides whether the relationship results to any value. This therefore calls for organizations to establish customer loyalty with a clear undertanding of what the potentail and the existsing customers expect for their relationship with Linear Coach bus service.cultivating a good relationship with the customers and having in place a customer loyalty program in our company will have substantial benefits in creating customer loyalty and in the long run increase profitability 1.1 Background Information Linear Coach Bus Service will be a transportation option which will be providing express services, tours, transfers, coach hire and bus charter for groups in every region in Australia. Its services will target all groups big or small and offer services that will create value in the transportation sector by applying ‘customer is King’ notion in every business. Linear will offer high quality services, operating in 24/7 basis and in 365 days a year. Our key thing will be expertise in offering these services in the road transport needs. The main aim of the firm is to offer high quality express services from Canberra and Sydney, Sydney Airport, South coast, Wollongong and even in Snowy mountains but with and aim to expand to every region in the entire region. This firm will be obligated to meeting its objective of offering reliable, cost effective and safer commuter service to all passengers without compromising on the quality 1.2 Aims The main aim of this report is to establish the importance of Customer loyalty programs and relationship management an organization 1.3 Scope This report is directed to giving a green light on the use of customer loyalty programs in Linear Bus Services Company. It acts as a report to recommend the use of these programs in the running of its operations in order to achieve the desired goals and objectives 2.0 Customer Loyalty and Relationship Marketing Relationship marketing is a strategy that is directed to attracting, maintain and enhance customer relationships. In other words, it creates mutual benefits and values geared towards meeting the objectives in business relationship of both suppliers and consumers. It other words, it entails establishing and maintaining relationships with customers and other stakeholder, at a profit so that the objectives of all parties can be met. To achieve this, there has to be a mutual exchange and fulfillment of promises. It is worth noting that, the rationale for relationship marketing is to enhance customer loyalty and customer retention and most of all in retaining a continuous relationship with customers. Consumer loyalty on the other hand is the strength of the relationship between an individual’s relative attitude and repeat patronage (Too, Souchon & Thirkell 2001). It is noteworthy that, loyal customers are less price sensitive, less expensive acquiring that having to harness new customers and this in the long run translates to more profits (Rowley 2005). In this case, customer loyalty will be demonstrated in opting for your services for transportation more frequently, sticking to our option and even word of mouth referrals by our customers (Ndubisi 2007). Additionally, customer loyalty can be informed of a certain attitude, behavior or even a combination of the two. As for the case of attitudinal loyalty an individual creates an attachment to a service or even the organization offering it, while behavioral touches a specific behavior like repeat purchases. The organization will have to be committed to creating customer loyalty in the whole of Australia. Having relationship marketing as a strategy in Linear Bus Services, will mean that the organization has to continually cultivate for a good relationship with the customers and have their feedback well taken care of to enhance satisfaction. Having customer royalty will mean that, the perceived risk and cost search are reduced and will mean that the consumers will adhere to the quality services the organization is offering to their satisfaction (Hunt, Arnett & Madhavaram 2006). To have customer loyalty therefore, there will be a need to work towards realizing trust between parties, liming and being informative. Our key issue is to offer transport solutions for customers from all walks of life. In this case, a service as well elaborated by Grzeskowiak and Sirgy (2007) will be activities which will be present in interactions between a customer and linear with an aim of having the problems of the client solves. A critical concentration on relationship marketing will mean that the company will be preparing an avenue for profits. This is attributed to the fact that, this strategy is customer oriented and concentrates on customer retention ad therefore it is less costly that acquisition and in the other hand, a by and by retention of customers can later translate to increased profits on the company. For instance there is a tendency in that, existing customers do purchase more than new customers and in most case, the dealings between them and the organization are very efficient. 2.1 Literature-based Evidence 2.1.1 Managing Value through Loyalty Programs There are competitors in this business who have been in it for a long time. However, managing value through loyalty programs will enable Linear Bus Service to be in a competitive advantage. A loyalty program that is out to enhance value for both the customer and the company will help in building strong relationship and in the long run help maximize profits. This being the case, loyalty programs enhance customer loyalty through an organized reward scheme based on a customer purchase history. These programs increase customer retention and provide more satisfaction and value to the involved customers (Bolton, Kannan & Bramlett 2000). The value involve in this case include, cash value which represents the reward as a proportion to spedn, choice redemption option which represent as a proportion of spend, aspiration value how much wants the rewards and convinince in the pariticpation in the program. For example, customers are very unlikely to aspire activelt to a straigth discount on purchanses for this has a higher aspirational value. 2.1.2 Customer Benefits and Sacrifices in the Value Equation When it comes to customer benefits, there are function forms that closely correlate to consumer value and perceived costs and even the entire perceived benefits (Kothandraman & Wilson 2001). In other words, value is the difference between perceived benefits and cost and values is the ration of benefits to costs. This can be expressed as follows Subtractive model: V=B-S Ratio model: V=B/S This being the case, B stands for customer perceived benefit elements which may be economic or non economic, and S is the customer perceived cost elements which may be price and non price (Desarbo, Jedidi & Sinha 2001). Customers concede values in several ways. For instance, value is low price, value is having what they want in the service, value is quality for they price paid or even value is what they get for what they give (Ulaga, 2001). Both the sacrifice which in this case is the give and the benefit which is the get aspects may include monetary or non monetary. In other words, the gain which is the acquisition of the product or service must outweigh the pain of acquisition which is represented by cost, service, and uncertainty in making the right choice, cost and wrong decisions (Payne & Holt 2001). Value must meet and even exceed the customer expectation not just on price. This being the case, linear bus will give a favorable environment where customers will fell valued and comfortable. It is also worth noting that, inn regard to building relationships, the value create in the exchange culminates to value in the relationship 2.1.3 Benefit of Retaining Customers Customer retention has its full share of benefits and therefore having it in the business operations is of great importance. For instance, maintaining high customer retention impacts directly the profitability for it reduces employee turnover which is an attribution to increased employee satisfaction experience for working in a well respected company. More over, in regard to customer retention, the following is recorded. Loyal customers have greater usage levels and are likely to be involved in more open to cross selling and are said to be less price sensitive. The Return on Investment record greater trends in customer retention than for the acquisition of new customers There are very high costs that are associated with attracting new customers than it is the case of keeping existing customers. Converting new customers takes more time, more efforts and even expenses than retaining current customers requires. It requires many new customers to restore the revenue lost when old customers are lost. Moreover even much more are required to generate the profits they used to generate. loyal customer refer new customers while having a high defection will mean that many more people will know why they are defecting. 2.2 Survey Findings 2.2.1 Survey A survey was conducted to determine the take of individual for customer loyalty programs. In this study, a survey was conducted on 5 men and 5 women between the ages of 20-45 for in most cases this are the people involved in work and other related transits. The study was out to determine several issues including their perception for loyalty programs. First they were asked of their familiarity with the loyalty programs, whether they use such programs, the benefits they reap form the same and if there is any negative issue they have ever perceived in the loyalty program they are associated with. In the survey it was clear that many people are aware of the loyalty programs which are offered by many companies but mostly by airline companies. Having that the program is offered by airlines in most cases, leaves them with no option that doing away with them for road transport is what they consistently use. Three people stated that, they have stuck with their opted transpiration companies just because of the loyalty program they are exposed to. For instance, one stated that, continuous purchase of tickets in Qantas airlines offers them a free return ticket in some instances. This creates value to them and they therefore stick to their options. Three people however stated that, they were once involved in a certain company which was offering a loyalty program where by on frequent purchase, one is entitled to getting free Lunch for two. However, this promise was not kept and thus they were disappointed by the program. 1 person however stated that he did not know of the existence of such programs. 2.3 Existing Loyalty and Relationship Marketing Programs 2.3.1 Existing Companies with CLRM There exist many successful companies in Australia and all over the world with exemplary loyalty and relationship marketing programs. Linear Coach Bus Service will from the onset set out to establish outstanding loyalty and relationship marketing programs similar to those adopted by the most successful companes. The management will be confident of acquiring a large base of loyal customers despite the competition in the transport sector since its program will be world class. It will strive to emulate and improve such programs for best results. The company is confident that in so doing, it will be able to grow tremendously and faster than many compnies before it that were reluctant to initiate such programs. One such company with a successful customer loyalty program is Westfarmers. It co-founded a customer loyalty program, flybuys, together with Shell and National Australia Bank. Over the years, flybuys has grown to be the leading customer loyalty reward program in Australia. Points are issued to cardholders whenever they purchase any Westfarmers’ brand which inlude foods, fuel and wines. Additional points are given to those cardholders who purchase goods using the Banks credit card. Rewards to card holders include flights, accommodation,entertainment and meals. Others include conversion of points to cash when purchasing Westfarmers brands and issuance of gift cards (Stegemann 2002). Another company with a successful customer loyalty program is Emirate Airways. It is one of the leading airways in the world and its growth over the recent years has been phenomenal. It customer loyalty program has been touted as one of the major contributors to its growth. Its loyalty program is known as Emirates Skywards Frequent frequent Flyer Programme. It offers Blue, Silver and Gold as its levels of membership. Points are awarded per mile flown depending on the class with business class fliers getting 50% more than those of econmy class while first class fliers get double the points. Advancement is per the points accrued. Silver card holders receive 1.25 points while gold card holder receive 1.5 points more than the blu card holders. Silver and gold card holders are also allowed extra baggage. Emirates has also partnered with several airline where points are jointly accrued (Skywards Team 2008) Advantages of these customer loyalty reward programs by these companie are profound and with far-reaching advantages. They have helped them retain customers and passengers, improve sales and revenue and develop a lasting relationship with their customers while also wining their trust. It has also made marketing and advertising easier for them as they start with the cardholders who are their existing customers. There is also a reduction in advertising costs translating to huge profits. They are key to business growth and help increase the length that a customer has with the business, consequently making them view the business as the best despite the competiton that exists. There are also demerits that come with loyalty programs. The obvious one is reduced profits as the process is all about discounts. Secondly, customers may be put off by excessive advertisement of the program in an attempt to woo them. There is also the risk that the value of the brand may diminish in case the loyalty program is used ineffectively or when a customers’ bonuses in the program are not rewarded . (Grahame & Mark 1997) 3.0 Conclusion In conclusion, Linear Coach Bus service wishes to adopt a customer loyalty and relationship model that will enable it reap maximum benefits possible while also maintaining excellent customer satisfaction levels. The model will involve the issuance of customer loyalty cards. Points will be awarded cumulatively as per the number of trips made using our buses. The points will be redeemable once they reach a certain threshold for free trips or shopping vouchers at malls with which the bus company will partner. Customer trust will be maintained in order to retain the existing customers while also gaining others. In response to findings, the terms and conditions of the reward model will be adhered to so as not to lose esteemed customers. In the light of some customers being unaware of the existence of such models, the company will engage in an advertising campaign to enlighten the potential customers on the model. Lifetime cards will be issued to those who consistently travel using the company’s fleet for ten years in order to make them have a lasting relationship with the company and view it as their own. The company will also from time to time engage risk analysts in order to help mitigate the inherent risks for such a program and also to ensure that its costs do not encroach into the company’s profits to an extent that may make it financially unsustainable. 4.0 Recommendation Linear Bus Services has to implement customer loyalty and relationship marketing in order to be in line with the aims and the objectives of the entire business. The main aim is to harness customer loyalty which will culminate to customer retention which in the long run will mean increased profits. The main strategy to start with is to reward repetitive purchasing clients with giving them free ticket for their every fourth journey. In this case, they will have to travel for free in their 4, 8, and 12 and in that sequence, of every journey with Linear. Secondly, after a continuous use of the services for three months, the company will offer a holiday for two in a five star hotel for a whole weekend for the customers who frequent their service. Finally, when ever, there are referrals, then the customer who referred the new customer will be entitled to a 30% discount in all their tickets with the company. When this is employed, then the company will in the long run increase the market share as well as retain the existing customers and also attract new ones. Bibliography Bolton, Ruth N, Kannan, P., K and Bramlett M., D . (2000). 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(2002). , "Understanding relationship marketing outcomes: an integration of relational benefits and relationship quality",. Journal of Service Research, Vol. 4 No.3, , 230‐247. Hunt, S. D., Arnett, D. B., & Madhavaram, S. (2006). The explanatory foundations of relationship marketing theory. Journal of Business & Industrial Marketing, 21(2) , 72-87. Kothandraman, P. & Wilson, D.T. (2001). “The future of competition – value creating networks”. Industrial Marketing Management, Vol. 30, , 379-389. Ndubisi, N. O. (2007). Relationship marketing and customer loyalty. Marketing Intelligence & Planning 25(1) , 98-106. O’Malley, L. and Tynan, C. (2000). ”Relationship Marketing in Consumer Markets. Rhetoric or Reality? . European Journal of Marketing, Vol. 34 No. 7, , 797-815. Payne, Adrian & Holt, Sue. (2001). Diagnosing Customer Value: Integrating the Value Processes and Relationship Marketing. British Journal of Management, Vol.12, . , 159-182. Reinartz, W. J., Kumar, V. ( 2002). "The mismanagement of customer loyalty". Harvard Business Review, Vol. 80 No. 7 , 86‐94. Rowley, J. (2005). The four Cs of customer loyalty. Marketing Intelligence & Planning, 23(6 , 574-581. Stegemann, N. (2002). Loyalty Programs in Australia: Who Is In Bed With who? . 8-14. Too, L. H. Y., Souchon, A. L., & Thirkell, P. C. (2001). Relationship marketing and customer loyalty in a retail setting: A dyadic exploration. Journal of Marketing Management, 17, , 287-. Ulaga, W. (2001). Customer Value in Business Markets. Industrial Marketing Management, 30, , 315-319. .. Appendix 1 Are you aware of a loyalty program? participants 1 2 3 4 5 6 7 8 9 10 Response yes yes yes yes no yes no yes yes Do they use a loyalty program? participants 1 2 3 4 5 6 7 8 9 10 Response yes no no no yes no no yes yes no How often and what benefits do they gain? participants 1 2 3 4 5 6 7 8 9 10 Response Often on airline rarely rarely Often on airline rarely rarely rarely Often on airline rarely rarely Any negative points about the program . participants 1 2 3 4 5 6 7 8 9 10 Response yes no no yes no no no no no no Read More