Loyalty Program for BHP Billiton Company - Case Study Example

Benefits of loyalty Programs Name Course Tutor Date Individual Research Report Executive Summary This report explores the CRM through a loyalty program for BHP Billiton Company, Which is known for an outstanding record in Corporate Social Responsibility (CSR) (BHP Billiton, 2014). This report will also review the benefit of loyalty program, the management of loyalty programmes and customer perceptions. BHP Billiton is an Australian multinational company dealing in mining, metals, and petroleum. This company was established 1885 in Melbourne, Australia, and today ranked as world largest mining company, while being third largest based on market capitalization. Currently, this company ranked as the best in terms of corporate social responsibility. BHP Billiton is a participant in Voluntary Principles on Human and Security Rights. In 2011, the company top management reached an agreement to contribute A$10 million to finance the set up of two energy institutions the Institute for Sustainable Resources in London and the Energy Policy Institute in Adelaide (BHP Billiton, 2014). Table of Contents Individual Research Report 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Literature Review 4 2.1 The benefit of loyalty programs 5 2.1.1 Redeemable rewards, loyalty and discount points 5 2.1.2 Non-monetary rewards 6 2.1.3 Customer loyalty joint ventures and partnerships 8 2.2 The management of loyalty programs 8 2.3 Customer perceptions; trust, value and program adoption 11 3.0 Survey Methodology 11 3.2 Sample Selection 12 4.1 Expected Service-Perceived Service Gap 13 4.2 Reliability 14 4.3 Responsiveness 14 5.0 Recommendations 15 6.0 Conclusion 15 7.0 References 16 1.0 Introduction It is critical for marketing department to increase to profitably of an organization and it must be capable of measuring and demonstrating its contribution to revenues, in spite of a common delusion that marketing practices is a cost centre, and not profit centre (Cook, 2002). However, time are changing and marketplace is also changing; consumers are turning out to be more demanding, while competition is turning out to be more strong. According to Goldstein (2009, p.11), marketers are finding it hard to satisfy customer needs, and have to invest more in research and development to understand customer needs and also to be able to differentiate their products from their competitors. However, this is not enough, and marketers have to devise new ways to retain existing customers and also attract new ones (Bogomolova, Romaniuk & Sharp, 2009, p74). Therefore, this report explores the Customer relationship management (CRM) through a loyalty programme which BHP Billiton Company uses, the benefit of loyalty programme and perceptions of customers towards such program. 2.0 Literature Review Today, the business environment has changed tremendously not like it used to be 30 years ago. Customer needs and wants are some many and difficult to satisfy (Goldstein, 2009, p11). Organizations must not just be seen to provide basic goods and making profit, but must also be involved in social and cultural activities that affect the human race. Similarly, they must also develop retention programs for the existing and new customers. According to Kotler & Keller, (2006), the most significant component of customer retention is the integration of loyalty programs into normal business practices of an organization. Some organizations such as BHP Billiton Company have boosted their customer attraction and retention through effective corporate social responsibility. It believes that business is not only earning its profit but also responding to social factors affecting the society. After all, the business operates within a society. An effective program must be simple to introduce, maintain, sustain and well managed to deliver immense and outstanding benefits to the organization (Cook, 2002). It should also have the power to change a business into a consumer-centric profit machine. The number of businesses adopting loyalty programs has increased greatly in 2013, though some initiates are raising the bar higher for others in the mining sector industry. Through creativity, charity, and general effectiveness, these organizations are improving customer loyalty to the roof by providing fantastic means to reward and thank their customers (Goldstein, 2009, p.13). Some of these loyalty programs that BHP Billiton Company ought to introduce include redeemable rewards, loyalty and discount points, Non-monetary rewards, and customer loyalty joint ventures and partnerships. 2.1 The benefit of loyalty programs 2.1.1 Redeemable rewards, loyalty and discount points This refers to special “points system “that is extended to the consumer. This approach follows that the more the purchases a customer dose the more the points he or she earns. These points can be redeemed later for free discounts, promotions and even goods. It is important for BHP Billiton to reward your client in a professional manner by stimulating their passion for creating and collecting the emotional affinity to the company’s brand. This builds a perception of additional value leading to extra purchases, improved sales and profits. BHP Billiton Company for instance can create a card from their petroleum product to indicate how much a particular purchase when he comes to buy and how many times he the person purchase in a month. The amount of money spent on the product can represent redeemable rewards while how many times one purchases determines the degree of discount one gets. This form of loyalty program is beneficial in that it creates a perception to the customer that company provide both the quality and additional quantity at the same time (Zeithaml &Bitner, 2009). Similarly, the company is benefiting from the fact that customer purchases frequently to win both redeemable rewards and discount points. For BHP Billiton Company, it can provide special “points” approach in which the more consumers purchased, the more points being allocated to their accounts. The points can therefore be redeemed in order to get free goods, services, discounts, and free promotions with involved business (Zeithaml &Bitner, 2009). This approach works effectively, can be simply automated and is ideal to keep consumer returning back to BHP Billiton Company to do with them. 2.1.2 Non-monetary rewards This consists of the rewards that are intended for loyal customers with related extra perks to their major line of business. Some of the rewards include providing the capability for the client to promote their products on the website of the organization, offer trainings and provide free delivery of products (Zeithaml &Bitner, 2009). Business motivators consist of both monetary and non-monetary rewards. Non-monetary rewards can be diverse whilst having the same influence on attracting and retaining loyalty. The form of rewards, especially allowing your customers to advice is beneficial since it helps them cut cost of advertising. It also sends a message BHP Billiton Company still means well to them and still wants to do business with them. BHP Billiton Company can also encourage free delivery goods for dedicated customers. Most customers will equate such rewards because most of them help the business reduce expenses thus increasing its revenue. For instance, BHP Billiton Company deliver for one of its customers these petroleum product for free, that means the customer will not need to add transportation into its expenditures. BHP Billiton Company can also provide training or fund for training in other countries. According to Moloney (2006), this encourages expertise and experience in customers. The training reward is of high value to customers just like monetary rewards because at the end of the day, the customer will have acquired knowledge on new ways of doing business. During the trainings, the customer may take picture which will serve as a reminder and will want more of such activities. Vacation travel for customers offers picture and memories. Monetary awards can also do this to some extent, but just when a plaque, certificate etc., is offered as a physical indication by Billiton Company. Goldstein (2009) argues that in the situation of a non-cash enticement, the reward itself is a physical indicator. The utility of getting non-cash reward is increased by visibility of such reward and the nonexistence of social values against debating them. This loyalty program creates very strong ties with customers in whom most customers do not forget to cash in their reward values and also more than happy to conduct repeated purchases at BHP Billiton Company since they offer such programs. 2.1.3 Customer loyalty joint ventures and partnerships This particular form of alliance ventures and corporations allows the tremendous benefits to customers in areas where they are facing challenges of market access. According to Moloney (2006) such schemes are very effective in improving customer retention levels. They can also be used in winning back lapsed clients and customers. Strategic partnerships for the customer loyalty, has been extremely useful for consumer retention and BHP Billiton Company growth. Fully understanding its customer’s daily lifestyle and their buying process have helped BHP Billiton Company determine which organization is an ideal fit as a business partner. BHP Billiton has a big partner base with organizations such as Rio Pinto and Mitsubishi. The primary objective with a joint venture or partnership is to employ these organizations help BHP Billiton spread the message concerning the company provisions in a positive manner. If the company shares similar target markets, then BHP Billiton should also be able conduct the same for either Rio Pinto or Mitsubishi. All through the centuries the most dominant marketing instrument has remained referrals or marketing by the word of mouth. When BHP Billiton wants to partner with other companies this is what the top management want them to perform for you. It should not just be similar as a listing; the referral should hold some weight. 2.2 The management of loyalty programs It is well known that it assumes more time and resources to obtain new customers compared to keeping the existing ones. Numerous businesses understand this reality and rather a few are surprised by it. Marketing experts estimate that frequent customers purchases can generate 5 to 15 times profits for the organization as opposed to one time or first time customers alone (Goldstein, 2009, p.15). It is therefore significant for BHP Billiton to comprehend that for consumer, it is frequently a challenge to discover merchant whom they can trust and the moment first time purchaser has good experience – they will be is eager to come for more purchases. BHP Billiton can as well provide loyalty Management tools required to create effective loyalty program, formulated for both business and individual customers. Managing loyalty programs start by hiring qualified marketing team (Goldstein, 2009, p.18). Meaning the marketing department must have competent and experience markets who understands consumer behaviors and changes. To maintain and sustain a high degree of customer pleasure, program employees, and customers can be simply engaged through the integrated marketing geo-located promotion actions and offer mentioned above for rewarding the outstanding customers (Moloney, 2006). An effective means for BHP Billiton to entice customers and manage their support is to provide them with individualized rewards on the basis of what mean well to them. By providing various forms of rewards to various groups of consumers, BHP Billiton set itself apart and gives individuals a reason to maintain coming back for their products. The person in charge of these loyalty programs must be accountable for them. Sometimes individual employees tend to squander such rewards for themselves or even the officer in charge colludes with his relatives to get such incentives (Goldstein, 2009, p.23). This act is unethical because, integrity, fairness and honesty are not reflected. In this case, the company will suffer a loss the both in creating customer base and in monetary terms. Stieb (2006, p. 16) argues loyalty programs must be capable of producing measurable results of effectiveness and success. People charged with management must also focus on the outstanding customers which BHP Billiton already has; if not the company will lose the existing customers and even fails to attract new customers. Technology has changed the way of doing business, therefore BHP Billiton must embrace it to its entirety. In perspective of customer rewards, these incentives have to be integrated into the BHP Billiton IT system to avoid loss and even problem of integrity. The company must have all information of its customers and what is repeatedly purchased; whether it is petroleum, gas or minerals. In this way, the company will also know which products need more of marketing through rewards (Piskar & Faganel, 2009). BHP Billiton operates in an industry which directly affects the social lives of people in society. The company deals in minerals and petroleum products which emit greenhouse gasses which are harmful and cause global warming. The company collective emissions from 2010 have been approximated at 7,605 MtCO2e, which is 0.51% of total global emissions (Goldenberg 2013). This makes BHP Billiton 19th biggest business polluter. BHP Billiton management claims that 10% of the emissions are from their direct operations, whilst 90% comes from products traded by the organization (Goldenberg 2013). Some customers tend to look at such issues and may not like companies with bad reputation and far social life is concerned. In fact operations cause diseases like asthma. As such, customer loyalty should management cans also extend to how the company manages its production process (Davenport, Harris & Kohli, 2001). BHP Billiton must design comprehensive mechanism of controlling its air and noise pollution so as to build a positive image to its customers. Some customer may look at the program as corporate social responsibilities since pollution affects their social lives (Heede, 2014, p.232). BHP Billiton top management has to design credit cards which are unique and identifiable with company in which the customers can redeem their points and claim for rewards. When something is identifiable with the company customers perceive themselves as unique and in different class. This creates a notion that BHP Billiton creates and satisfies customer value proposition. Davenport, Harris & Kohli (2001) argue that managing loyalty needs not only imply that the process should be transparent and flowing, it also means the marketing managers recognize the ever changing customer’s needs. In doing that. the organization ought to set adequate funds for research and development so that effective rewards can be developed. 2.3 Customer perceptions; trust, value and program adoption In today’s competitive marketing environment, every organization must create a strategy how to satisfy customer perceptions (Stieb, 2006, p.12). Marketing is one thing and fulfill the perception and expectations is another. How BHP Billiton is a determination of the company’s long term success. Perceptions, (trust, value and program adoption) can only be formed by means of’ consumer assessment of the service quality offered by BHP Billiton and whether they these customers contented with the general services. Zeithaml and Bitner (2003) claims that since perceptions might shift after a while, hence it is essential for BHP Billiton to continually evaluate customer perceptions 3.0 Survey Methodology The marketing department must be financed to conduct survey seeking the opinions of the customers about their perception of BHP Billiton’s products and services. For that matter, the marketing department can employ both qualitative and quantitative methods in this research. Questionnaires can be issued randomly to a sample pollution selected around Melbourne staff to collect the primary data. Lages & Fernandes (2005, p.1569) maintain that the questionnaire must be tested with at least ten respondents to know its effectiveness, before changes can be suggested by these respondents. 3.1 Sample Design The key objective in survey is to measure customer. The survey design that can be employed to gather primary data is the SERVQUAL questionnaires. The questionnaire comprising of 20 statements of service perception characteristics categorized into five dimensions service quality that can be focused on. Participants can be asked present the ratings of trust, value and loyalty program adoption on the presented statements based the perception. The statements to be used in this survey can be rated through a five-point Likert scale, with 1 showing STRONGLY AGREE; 2 AGREE; 3 NEUTRAL; 4 DISAGREE; and 5, STRONGLY DISAGREE. Hence, the variation got from subtracting the trust and value scores from the program adoption scores will show the gap in customer perception and option at BHP Billiton Company. 3.2 Sample Selection A sample of 120 customers can be selected from BHP Billiton Company in Melbourne area for the survey. The Non-probability sampling ought to be used in the survey for picking the research respondents. Applying Non-Probability, also called convenient sampling. It enables the marketer to establish and distribute questionnaires to individuals who have in the past and presently purchasing at BHP Billiton Company which the study focuses on. This form of survey will provide the marketer convenience and help in avoiding higher study costs in that every entity of this population will not have a known and nonzero probability of being integrated in this study (Zeithaml &Bitner, 2009). However, just those consumers that had experienced the loyalty program and other service with the BHP Billiton Company and who would be willing to take part in the study can form the research sample. 4.0 Discussion Data can be analyzed by quantifying participants’ answers of their degree of agreement with the set statements used to assess customers’ perception of loyalty programs, value and trust and service quality BHP Billiton Company in Melbourne area. The degree of service quality perceptions can be quantified though calculation the average scores of every statement. The scores received from calculation of averages for value and trust was subtracted from the scores obtained from adoption on every statement. The results of the research could present very critical insights with regard to the problem statement which is “customer’s perceptions is normally projected to be consistent with satisfactory degree of service quality of an organization (Davenport, Harris & Kohli, 2001, p.65). As tested before, the results could show demonstrated that consumers had higher perception in customer trust, value and program adoption at BHP Billiton Company. The result can then be categorized customer perception gaps, reliability and responsiveness. 4.1 Expected Service-Perceived Service Gap The average value and trust scores could be constantly near 1, in which 1 on the used five-point scale in the questionnaire will a strongly agree answer. Cook (2002, p.3), argues that customers have turned out to be educated, sophisticated, informed and confident; as such, they hold high perceptions of kind of service they would like to get. As consumers become more responsive of better service quality, their perception increases (Cook, 2002, p.6). The service perception obtained by consumers is highly reliant on the kind of expectation they hold (Cook, 2002, p14). Average scores of perceptions could be around 2, in which 2 indicates moderate agreement answer, hence leading to pessimistic gaps in every statement. 4.2 Reliability According to Lages & Fernandes (2005, p. 1563) reliability is the continuity of the performance and loyalty of an organization’s performance. The reliability measurement could have the higher gaps scores. Customers’ perception levels may differ in this measurement based on which service characteristic will be assessed. However, on every statement in this framework, the expectation surpassed their perception loyalty program of BHP Billiton Company. An expectation for company which provides the product and carry out the service within the period they pledged to do so can also be included in the questions. 4.3 Responsiveness “Variations in the ‘purchase experience’ between companies are frequently as significant to consumers as the disparities in physical (DeGregor, 2011). Consumers’ expectation surpasses their perception in every statement under responsiveness framework Guyen & Mutum, 2012, p.404). The basis on why staff’ responsiveness normally lacks is because companies frequently concentrates on the hard skills training. This comprises of training in areas of the technical skills, administrations and product knowledge, whilst not focusing on the significance of positive approach and attitude in customer service (Cook, 2002, p.12). Such cases are what leads to employees divert rewards meant for the customer loyalty programs to themselves. 5.0 Recommendations Retailers, including BHP Billiton Company in Australia, must manage customer perception and expectations. The research has demonstrated and that managing customer loyalty is very important customers and that customer normally hold high perception and expectations of quality product and service in BHP Billiton Company. Thus BHP Billiton Company and other mining companies need to enhance in their product and service attributes which reflect big gaps between consumers their perception, trust, value and expectations. With other competition shaping up the industry and companies using almost BHP Billiton Company should come up able flexible enough to differentiate there customer loyalty programs from other companies. Consumers usually have high perception and expectation when participating on the loyalty. In a nutshell, they would want to win the rewards. Therefore, the company should create loyalty program that is reliable, consistenct with their service delivery, and not just promising rewards which they do not deliver in the purported program. This also applies to the officers who intend to squander to themselves and even to their relatives. Employees and management must always be willing and prepared to help customers and remain polite in when explaining the process of reward redeeming. Identifying elements which bring the gap would assist BHP Billiton Company match consumers’ expectation and perception in the service delivery. 6.0 Conclusion From the study findings, this report can conclude that consumers’ perception and expectation of service quality are higher with regards to service quality in BHP Billiton Company, thus this proves their adoption of loyalty programs to help improve their customer retention strategy. Consumers hold high service quality expectations which if not fulfilled by BHP Billiton Company, could lead to customer frustration and losing consumers to their competitors. The products and services offered by BHP Billiton Company could though, be perceived at the satisfactory level that is the lowest degree of service the customers will be able accept without being discontented. The research therefore concludes that for any BHP Billiton Company to improve customer perception, expectation, value and loyalty there loyalty program must be unique and consistent with customer needs. 7.0 References BHP Billiton (2014). Official Website. Retrieved 22nd April 2014 from from http://www.bhpbilliton.com/home/Pages/default.aspx Bogomolova, S., Romaniuk, J. & Sharp, A. (2009). Quantifying the extent of temporal decay in service quality ratings. International Journal of Market Research. 51, 71-91. Cook, S. (2002). Customer Care. How to Create and Effective Customer Focus. 4th Edition. 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