Loyalty Program: CRM in Media Company

Jakub
Member

Posted 20-Aug-2004 01:52 AM
Hello,
here is my first post in CRMGuru Think Tank, so I would like to say hallo to all participants.
I decided to start this topic, because for a long time I am looking for any tip abouts loyalty programs in companies like mine.
This is major satellite platform in the country. Our customers have to pay monthly or yearly subscriptions for our service. They sign the agreement for at least 12 months. In that case it hard to say about repurchasing the product (only after one year period).
We've made many researches among subs of what are the most desirable discounts/profits they are looking for and obvoiously the pointed money discounts, which is not possible because of ARPU.
I am looking for you opinions (especially Gurus'), maybe tips, links etc. But most of all I would like to discuss about above matter.
Best regards,
Jakub

Jim Barnes, CRMGuru Panelist
Advisory Board
Member
Picture of Jim Barnes, CRMGuru Panelist

Posted 30-Aug-2004 05:08 AM
Hello Jakub

I agree that customer loyalty can be a troublesome issue, particularly in a technology-based company where competitive advantage may appeare difficult to achieve. I think it may be helpful if we step back and take a hard look at what loyalty really is.

Incentive\based "loyalty" progams do not drive true loyalty; at best, they achieve repeat buying that is driven by the rewards to be gained. Similarly, price discounting does not achieve loyalty, merely short-term sales increases which last only until someone else drops the price further. These are typically used where companies have no real product advantage and where the customer perceives them all to be the same.

What we are crying out for is some way to differentiate the company (not the product) in such a way that the customer feels a true sense of loyalty. This is achieved through superior customer service, through anticipating customer needs, by being responsive,and by helping in whatever way we can to allow our customers to be more successful and to achieve THEIR goals.

This is not an easy road to go down as it often requires a change in thinking and discipline and commitment that must be shared across the company to delivering a superior level of service. Trying to gain a competitive product advantage in a technology industry is often futile. Customers will remain loyal to those companies who can deliver a superior level of technical and personal service and who appear to be genuinely committed to their customers' success.

Jim Barnes
CRMguru panel member

Jim Barnes specializes in Customer Strategy as a member of the CRMGuru Advisory Board. For more information, please visit Barnes Marketing Associates.

Graham Hill
Guru
Member

Posted 30-Aug-2004 07:48 AM
Jakub

As Jim points out, this is a complex equation. It partly depends upon what you want to achieve with your 'loyalty programme', partly upon your customers' needs and partly upon your competitors' own offerings.

Whilst I agree with Jim that the emotional loyalty of your customers is the ultimate strategy, research by Veronica Liljander and others suggests that only a minority of customers (say 5-10%) will ever achieve this state in your industry. Loyalty programmes and offers only play a relatively small role for these committed customers.

However, the vast majority of your customers will only achieve a state of transactional loyalty to your company; where they stay because it makes economic sense to do so, or because the switching costs of moving elsewhere are too high for them to be bothered. Research by Peter Verhoef and others suggests that loyalty programmes and various types of offers DO make a difference in providing incremantal value to these types of customers.

I don't think there is any one right answer to your question. It all depends upon so many things!

Being more customer-oriented in its broadest sense (providing it is profitably done) is a good general strategy that can work for many customers, but it will not develop emotional loyalty with the majority of them, particularly in highly competitive industries like yours. On the other hand, loyalty programmes, various types of offers and other tactical marketing instruments do have a major role to play in influencing the majority of customers' choices about what they buy, but as Jim says, they will never build competitor-proof emotional loyalty.

You probably need elements of both to succeed, rather than an outright emphasis on one or the other. Try and develop your customer-orientation as your longer-term strategy for those customers who are susceptible, and use tactical marketing instruments to influence decions for those who aren't so susceptible.

Graham Hill
Independent Management Consultant

Jakub
Member

Posted 16-Dec-2004 06:58 AM
Jim, Graham,

Thank you very much for your answers. The things you pointed are crucial in industries and companies like mine, but I cannot say ... implemented in everyday "life". I mean mainly about: customer centricity strategies. Well, customers don't help us either. As I wrote before, "old" customers look forward for price discounts. I know that such benefits doesn't give back true and long term loyalty (that's why I started this topic, to—possibly—find some other solutions :-) ).

Let me clarify more the situation. The company has—I can say—pretty high level of service, both programming and customer. The call centre is the main way of communication (inbound and outbound) and it's judged very high by subscribers (researches). Company is more oriented for sales than retention, that's why we provide aggressive (ie. half price for 2 months) sales promotions for prospects, which—at the same time—frustrating current subscribers.

Because of customer service we anually lower churn rate but it still is high. We have to work hard on this topic and every time check it's levels. The propable incentive program should help us with it. This will work in segments of "fragile" subscribers, but there is also quite big group os good, valuable subscribers, which receives almost nothing from us.

The other topic is a fact of signing an agreement forcing subscribers to use our service at least 12 months. In this case I cannot say about repurchasing the product. After one year they can leave the service.

That is more or less our current situation.

Some concidered strategies:

1. Build anti-churn strategy, but with benefits less then reward one (point no. 2) and obligation to sign next 12 months agreement.

2. Reward program—for the best subscribers—for tenure and money spent. The highest benefits.

Of course, I would like to use benefits other than discount, but subs ask for that (In loyalty marketing and CRM, we have to to fulfill cutomer needs, don't we ? ;-) )

Regards

Jakub