Page 164 - Marketing Management

CREATING LONG-TERM LOYALTY RELATIONSHIPS | CHAPTER 5 141

• Enhancing the growth potential of each customer through “share of wallet,” cross-selling, and
up-selling. 76 Sales from existing customers can be increased with new offerings and opportu-
nities. Harley-Davidson sells more than motorcycles and accessories like gloves, leather jackets,
helmets, and sunglasses. Its dealerships sell more than 3,000 items of clothing—some even have
fitting rooms. Licensed goods sold by others range from predictable items (shot glasses, cue
balls, and Zippo cigarette lighters) to the more surprising (cologne, dolls, and cell phones).
• Making low-profit customers more profitable or terminating them. To avoid the direct need
for termination, marketers can encourage unprofitable customers to buy more or in larger
quantities, forgo certain features or services, or pay higher amounts or fees. 77 Banks, phone
companies, and travel agencies all now charge for once-free services to ensure minimum rev-
enue levels. Firms can also discourage those with questionable profitability prospects.
Progressive Insurance screens customers and diverts the potentially unprofitable to competi-
78
tors. “Free” customers who pay little or nothing and are subsidized by paying customers—
as in print and online media, employment and dating services, and shopping malls—may still
create useful direct and indirect network effects, however, an important function. 79
• Focusing disproportionate effort on high-profit customers. The most profitable customers
can be treated in a special way. Thoughtful gestures such as birthday greetings, small gifts, or
invitations to special sports or arts events can send them a strong positive signal.

Building Loyalty

Creating a strong, tight connection to customers is the dream of any marketer and often the key to
long-term marketing success. Companies that want to form such bonds should heed some specific
considerations (see Figure 5.5). One set of researchers sees retention-building activities as
adding financial benefits, social benefits, or structural ties. 80 The following sections explain three
types of marketing activities companies are using to improve loyalty and retention.

INTERACTING WITH CUSTOMERS Listening to customers is crucial to customer
relationship management. Some companies have created an ongoing mechanism that keeps their
marketers permanently plugged in to frontline customer feedback.
• Deere & Company, which makes John Deere tractors and has a superb record of customer
loyalty—nearly 98 percent annual retention in some product areas—has used retired employees
to interview defectors and customers. 81
• Chicken of the Sea has 80,000 members in its Mermaid Club, a core-customer group that receives
special offers, health tips and articles, new product updates, and an informative e-newsletter. In
return, club members provide valuable feedback on what the company is doing and thinking of
doing. Feedback from club members has helped design the brand’s Web site, develop messages for
TV advertising, and craft the look and text on the packaging. 82
• Build-A-Bear Workshop uses a “Cub Advisory Board” as a feedback and decision-input body.
The board is made up of twenty 8- to 12-year-olds who review new-product ideas and give a
“paws up or down.” Many products in the stores are customer ideas. 83

But listening is only part of the story. It is also important to be a customer advocate and, as
84
much as possible, take the customers’ side and understand their point of view. USAA Insurance’s
legendary quality of service has led to the highest customer satisfaction in the industry. USAA sub-
scribers will often tell stories about how the company looks out for them, even counseling them not

|Fig. 5.5|
• Create superior products, services, and experiences for the target market.
• Get cross-departmental participation in planning and managing the customer satisfaction and retention process. Forming Strong
• Integrate the “Voice of the Customer” to capture their stated and unstated needs or requirements in all Customer Bonds
business decisions.
• Organize and make accessible a database of information on individual customer needs, preferences,
contacts, purchase frequency, and satisfaction.
• Make it easy for customers to reach appropriate company staff and express their needs,perceptions,and complaints.
• Assess the potential of frequency programs and club marketing programs.
• Run award programs recognizing outstanding employees.