The relationship between profitability and loyalty seems to be much weaker than expected and also weaker than the proponents of customer loyalty programs claim(‘The Mismanagement of Customer Loyalty’ (2002). According to this paper of Reinartz, Werner and V. Kumar, there’s is no evidence to suggest that loyal customers necessarily are cheaper to serve, less price sensitive or are effective in bringing in new business. So, in light of their findings many companies have to reevaluate the way they manage customer loyalty programs. Companies have to find ways to measure the relationship between loyalty and profitability. Hereafter the company can place their customers into the Choosing a Loyalty Strategy Matrix, to apply strategies to the different segments.
Concluding the article, there is no one right way to make loyalty profitable! An example of a company that is tries to achieve loyal and profitable customers in a good way, we think, is Agradi(www.agradi.nl).
More and more companies go one step further than just delivering a service by staging experiences. In other words, “an experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates a memorable event”. Moreover, an experience is, first, inherently personal existing only in the mind of an individual, secondly, no two people can have the same experience, and lastly, it is interacting between the staged event and the individual’s state of mind.
The Four Realms of an Experience
The video above bring us to the next point, which is the four realms of an experience. The First Crush Winery combines all four realms. They give their customers the opportunity to taste the wine (entertainment), to visit the winery (esthetic), to learn more about winery (educational), and to participate in the winemaking process (Escapist). First Crush uses all four realms of an experience bringing them at the sweet spot, which means the customer engage as well as in passive as in active participation, but also, absorption and immersion of information (theme) takes place.
Principles of Designing Memorable Experience
Part of the experience economy are the five principles of designing memorable experience. Since all customers perceive experience in a different way, designing an experience can be tricky. However, the following principle can give companies guidelines how to come close to a positive and memorable experience for their customers.
As we learned in session 6, the definition of a supply chain is: “A set of entities involved in design of new products, procuring raw materials, transforming them into products, and delivering them to the end customer.” So in fact it is the entire process of the design of a product, the manufacturing of a product and the delivery of the manufactured product to the customer.
The marketing value systems involve all activities that create and deliver value to the end customer. Some activities are internal to the firm, some are undertaken by others.
The traditional retail model consists of a few steps:
1. Standardized products are manufactured in a central place
2. After production the goods are shipped to warehouse or distribution center
3. The goods are distributed to retail shops
4. Consumers go to the shop and buy the product
5. Consumers store the product or use the product directly
In the E-business, the role of the consumer starts earlier. As we learned throughout this course, the customer can get active in the value creation process e.g. creation of his/her own product. Apart from that, the customer is able to order the products online. So, in fact, the E-business intervenes between the traditional flow of goods. In case companies expand their traditional retail model through selling their products on the internet, we call them brick and click. Website/webshops with no history as an existing company are called pure clicks. Benefits of such a system are immediate access, channel integration, personalized distribution and huge assortments. There can be differences in the distribution after the online order e.g. domino’s delivers the products from the near closest retailer whereas beren eetcafe delivers it from one central place.
To illustrate the importance of a demand driven supply chain, we found an example of a company which stresses why it is important to shift to such a new supply chain (“Procter & Gamble: Building a Smarter Supply Chain” 2002). Procter & Gamble realized that to remain profitable, consumer products manufacturers must find ways to optimize the performance of their supply chains. They realized they needed a consumer-driven supply network to stay ahead in the consumer packaged goods industry.