Tag Archives: Loyalty

Articles

Creating customer loyalty through service customization

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Many firms see service customization as a powerful tool, but this application is not well understood yet. The paper (Coelho & Henseler, 2012) developed a model of customer relationship outcomes of service customization and the efficacy of service customization. The main idea about differentiation is to identify profitable market segments and to design products and services that satisfy that segment. Now, the more popular form of differentiation among firms is that of customization; firm’s offering tailored to meet the heterogeneous customers’ needs, aims at satisfying as many needs as possible for each individual customer and an answer to the shifting nature of customer demand for greater variety, more features, and higher quality in products as well as services. Developments in computing power have offered these possibilities and companies will keep investing in these technologies because of the strong need for information.

The methodology used in this paper are two large-scale studies in different service industries based on the European Customer Satisfaction Index framework and applied PLS path modeling to test this model. Customization is a big plus for firms because it increases their service quality, customer satisfaction and with that customer loyalty toward a service provider. It investigates the simultaneous effects of service customization on customer loyalty and other relationships variables and offers new insights relatively to the nature and size of customization effects. The paper found that this customization has both direct and mediated effects on customer loyalty. These findings and service customization is a great instrument for relationship marketing which depends on customer satisfaction and customer trust. Service providers can use this paper’s findings and thus, service customization as an effective instrument for achieving not only higher customer satisfaction, but also higher customer loyalty. Service customization is most effective for companies that have deficits in satisfying their customers, while at the same time their customer relationships are characterized by a high level of trust and could help managers to decide upon resource allocation to enhance customer loyalty.

A business example can be found in the banking industry. By introducing non-banking products or services, banks can cater to customer lifestyles and needs. For example, ‘’banks have begun to offer insurance on items such as mobile phones, travel insurance, identity theft protection and premier event access’’ (zafin.com). Banks can explore lifestyle bundles with Internet services in association with a, for example, home loan. By allowing customers to customize their experiences through various channels, and by allowing banks to offer suitable products and services based on customer data, a bank could create customer stickiness and retention.

Business Case

Loyalty through Social Networks

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Due to the drastic transformation in the media landscape Social Media has surfaced and has become widespread as it is growing rapidly in the last couple of years, totaling the number of active social media as of January 2015 to account for 2.08 billion worldwide according to Statista.com. Businesses’ accelerating investments in Social Media, especially in in Facebook, is the status quo right now. Yet, a lot of firms still do not perceive social networks to be a vehicle for gaining customer loyalty. These companies perceive social networks to be a source for generating brand awareness.

A different view was added to this discussion of Social Media by researchers Gamboa & Goncalves (2014), who did a case study on Zara and their use of Social Media as a source towards building and enhancing customer relations. On the social network site Facebook, Zara classes in their respective category of fashion brands, as having one of the largest number and most valuable fans. This study showed that companies could increase customer loyalty through building upon important factors such as trust, customer satisfaction, perceived value, and commitment. Fans as well as non-fans of brand on Facebook were used in this research and it showed that relations are more improved for Facebook fans of the brand compared to the non-Facebook fans, showing that the most important cause of loyalty is customer satisfaction, as seen in Table 1 below.

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(Table 1: Gamboa & Goncalves , 2012, p.714)

Personal Relationship Focus

For businesses, the greatest task is forming a personal relationship with the consumer, similar to the interaction of them with their friends on Facebook. A company’s Facebook brand page must be a “place” where consumers can dialogue with the brand as well as be part of a community. The old-school era of only focusing on commercial goals has ended, as the important of a relational context is a definite requisite for companies to survive in Web 2.0.

Customer satisfaction is crucial

Businesses that desire to attain customer loyalty must have a priority in seeking customer satisfaction. Customer satisfaction is the most important driver with the most positive (direct and indirect) effect on fans’ loyalty. The social network site, Facebook is a communication channel that can increase consumers being more satisfied, and as a result of this, can create deeper client-brand relationships. However, as customer satisfaction is an outcome of the consumer being fulfilled of created expectations, brands on the social networking site should be quick and transparant in answering their Facebook fans’ questions. The most crucial element is frequent interaction as well as maintaining an active and dynamic presence on this platform.

Tools and practices

Being dynamic and interactive with fans are essentials in making consumers come back, trust a brand, and be satisfied. Creating content (such as quizzes or poll questions) that encourages fans’ active behavior is also essential, and it can also serve as a mean to gaining knowledge about customers’ opinions regarding the brand.

  • Facebook to serve as a stand-alone tool. Customer questions or critiques should receive answers very quickly. When consumers are forced to use other methods to come in contact with the company, it will increase customer dissatisfaction.
  • Content relevance of the brand page is important. Only sharing brand advertisements or internal information not be effective. Content sharing such as news, funny updates, suggestions suggestions for the weekend or holidays are great ways to achieve engagement.
  • Identify target group and their interests. Specifically targeting consumers while sharing content will increase customer satisfaction, trust, and commitment.
  • Create exclusive content. Such as games or applications for Facebook fans. Consumers love campaigns that propose advantages to them and posting exclusive content via Facebook will create alertness of the Facebook Fans to the brand page and as a result they will become loyal.
  • Always be professional, yet never boring. Brans will lose fans if they consistently post advertisements, post too much, too few or post irrelevant information.

Brands can communicate with consumers by by integrating Facebook into their marketing strategy. The expectancy is that Facebook will maintain and even increase its effect by 26%. In this current landscape of web 2.0 and social media with substantial growth margins, businesses should start being very active on Facebook by maximizing the benefits of it and by captivating brand loyalty in the online world.

Reference: Gamboa, A. M., & Gonçalves, H. M. (2014). Customer loyalty through social networks: Lessons from Zara on Facebook. Business Horizons, 57(6), 709-717.

Articles, Business Case, News

H&M’s Digital Move

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Hennes & Mauritz, better known as H&M, is a Swedish multinational retail clothing company that most probably does not need an introduction. It was founded in 1947 and is still very successful worldwide, mainly due to putting all of its customers central. H&M’s online presence in terms of a web shop, a smartphone application, and several social media accounts plays a major role in H&M’s success, as this has enabled H&M to continuously observe and interact with its customers. The 31st of March, H&M will come with something new to take its customer relationships to the next level. Namely, it will introduce a digital customer loyalty program in the Netherlands. This will make the Netherlands the second country in the world with a H&M loyalty program. According to the country manager of H&M in the Netherlands, this move is now made in order to capitalize on the relatively high amount of online orders of customers in the Netherlands.

The past years loyalty programs have become more and more digitalized. The non-digital loyalty programs involved getting stamps for every €5 spent. They evolved into digital loyalty programs with member cards that had to be scanned after every purchase in order to receive loyalty points. Currently, there are loyalty cards that have to be connected to an online account to collect customer demographics information. Clearly, loyalty cards came into existence to bind customers to a certain business. Over the years this mindset has changed, and at this time businesses primarily want to have as much relevant customer information as possible to be able to better adapt their products and deals to their customers.

H&M is taking a slightly different but more advanced approach with its loyalty program ‘H&M Club’, by integrating a customer loyalty card in the H&M application. Joining the club is free, and when one has joined the club, he or she will receive one point for every euro spent, in addition to 50 free “welcome points”. The points can be redeemed for weekly changing discounts, but more importantly, these points can also be exchanged for access to exclusive events. Customers are given the opportunity to attend designer events in cities such as New York or Paris, be present during H&M photoshoots, or get a guided tour at H&M’s headquarter in Stockholm. This method has been selected because it is more sustainable not to have an actual member card, but the main reason is that customers are demanding more and more engagement and transparency from H&M.

H&M’s loyalty program seems to be a promising addition to H&M’s existing business model, especially since it offers its customers the opportunity to increasingly engage with the brand. The free welcome points give the customers a head start which may lead to a greater use of the program, as the rewards become easier to reach. Furthermore, points can be redeemed in different quantities, depending on the chosen deal. Moreover, the discounts and events offered by the H&M Club are most likely treats that customers would not spend their own money on and can lead to customers buying things that they would not have considered buying before. The previously mentioned components of the H&M Club have been cited by scholars as important levers of loyalty (Nunes & Drèze, 2006). Based on this and H&M’s long-term success, its loyalty program is likely to succeed.

Sources:

http://about.hm.com/

http://www.glamour.nl/fashion/nieuws/artikel/punten-sparen-bij-de-h-m-club-2451

http://www.metronieuws.nl/mode/2015/03/punten-sparen-bij-hm

http://www.telegraaf.nl/vrouw/mode/23837046/__HM_lanceert_digitale_klantenkaart__.html

Nunes, J.C., & Drèze, X. (2006) Your Loyalty Program Is Betraying You. Harvard Business Review, 84(4), 124.

Articles, Business Case, News

Customer information and promotions: Quid pro quo

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Ahold is an international retailer that operates supermarket chains in various countries, amongst which Albert Heijn (Netherlands) and Giant Food Stores (United States), in which they implemented BonusCard programs, respectively introduced in 1998 and 2000. Both cards are required to receive discounts, but while the AH card can be kept anonymous, Giant card holders have to reregister their card, giving their full name and home address every fall, to avoid deactivation. It appears that the amount of personal information required in these programs is directly related to the discounts that can be obtained. The more information is required, the more discounts are awarded.

GiantCard_small

Whereas in US, customers’ privacy concern seems relatively low when the BonusCard was just introduced it faced active protests. These ranged from mass e-mailings to Giants then CEO, to online BonusCard swaps where people could exchange their cards’ barcodes. This probably has to do with the many advantages of the card, which does not only give discounts but which through the A+ school rewards program also donates 1% of the total purchase price of each customer to a school of their choice. On top of that, the card also gives significant discounts on gas, up to $2.20 discount per gallon (which amounts to a 60% discount) at Shell.

The Albert Heijn’s customers received the BonusCard with more suspicion. Of the 10 million new BonusCards that were handed out since bonuskaartOctober 2013, only 2.5 million were activated online. Each customer receives discount if they have a card, but if they link this to their e-mail address they can also view the groceries they have purchased in the past, which of these are on promotion, and receive personalized promotions. Entering further personal details is not required.

Continue reading Customer information and promotions: Quid pro quo →

Articles, Opinion

Will 2013 be the year of the loyalty programs?

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Yesterday group 4 presented the idea how to stay in touch with customers. There are many articles about customer loyalty, brand communities i.e.. The most remarkable thing, what I already mentioned in the presentation, is that the costs of loyal customers are not lower then the costs of new customers. Loyal customers wanted to be rewarded for the loyalty to a brand or a company.

The rewarding of loyal customers is not by definition an extra discount. The rewarding of loyal customers can also be an email with useful tips how to, for instance a grocery shop, combine different ingredients to make a delicious ‘midia’ (Greek food). This is needed to improve and maintain the customer relationship with a company or brand. Continue reading Will 2013 be the year of the loyalty programs? →