Building Customer Loyalty Programs - Essay Example

Building Loyalty Programs Introduction With the present of globalisation and the development of shared market across the world, it is very important for brands to have recognition and be accepted as a part of the local scenery as much as any small business would be (Harker and Esan, 2006). While this situation is often the one marketing executives strive for, it is often found that customers have different relationships with different brands and it is the strongest relationship between company and client which survives even when the product quality has suffered or the competition has offered a better alternative (Tenser, 2006). An understanding of these relationships and an understanding of how customer loyalty to a brand can be increased is essential for marketing managers as well as other executives who are connected with a company. In fact, marketing which builds customer loyalty and increases the importance of the brand for the customer is more than simply adding value to a product or increasing the number of services offered by a company. Essentially, it is the process of relationship marketing which helps in connecting the business to its customers in unique ways which can not be easily replicated by the competition. In this essay a detailed examination is made of one such company i.e. Mazda and its operations for increasing the loyalty of business customers for the company through relationship marketing. What is Relationship Marketing? To keep the buyer/seller relationship alive, relationship marketing becomes essential. This does not mean that the company should be ‘best friends’ with the client, rather it signifies the idea that a company should use a marketing system in which the marketing stress is placed on creating a long term relationship with customers which comes with the promise of repeat business rather than individual sales (Stone & Woodcock, 1995). This process involves a perceptive understanding of the client’s needs as the customers go through their lifecycle with the company and the satisfaction of those needs as the customer experiences them. As the customer’s needs are satisfied, s/he will become more loyal to the brand. Moreover, such programs are more important for the socially upscale segment of the market where satisfaction and personal relationships become very important (Ulfelder, 2003). Relationship marketing is based on the concepts of marketing but it uses cross functional teams that cut across various departments in a company to provide excellent and complete services to the clients. Rather than have the client go to different locations to get the pricing, service, promotions and other elements of the marketing mix, the entire marketing process can be handled by a team which comprises of various members of the company to provide multiple points of contact for customer groups (Peck et. al., 1999). Therefore relationship marketing is also considered to be a system which is similar to customer relationship management. This is done because the focus is on satisfying the needs of the customer and improving loyalty rather than the needs or requirements of the company. The Product and the Lifecycle In such a process, the product and the product lifecycle take differing positions of importance since different types and elements of marketing must be used as the customer and the product itself goes through various phases of maturity. Since the topic of relationship marketing is quite vast, it has been successfully applied to everything from consumable food items (Normandy & Sanders, 2004) to high end luxury cars (Stone et. al. 1996). While a chocolate might have a smaller life as a product, a good car remains with the buyer for several years if not several decades yet the idea of relationship marketing remains the same i.e. the continual satisfaction of the needs of the customer as the relationship expands and builds upon solid foundations (Cohen, 2004). Relationship Marketing at Mazda The product offered by Mazda is for a specific section of the business market since Mazda is pushing the system of fleet sales under which all the cars operated by a company come from a single dealer and a single manufacturer. This is a not a recent undertaking for Mazda since their customer support and business services centres have been active for many years. However, the personal service and the relationship which is to be established between the business, the dealer and the manufacturer is something which is very new in the competitive car industry (Cochran, 2006). The steps taken by Mazda represent the best elements of B2B relationship management where the origins of relationship marketing come from (Stone & Woodcock, 1995). Instead of merely attracting businesses and clients to the company, Mazda is looking for loyalty based relationship and to make sure that their customer’s business fleet replacement plans do not turn into automobile manufacturer change plans. While both short and longer term marketing related plans could be used in this situation (Parvatiyar & Sheth, 2001), Mazda is taking a long term approach to loyalty with corporate clients with the addition of fleet service contracts and replacement parts plan for cars and trucks bought by their clients at discount rates which offer significant financial advantages to their business clients (Mazda, 2005). Business to Business Fundamentally, once a business customer has decided to switch its fleet to Mazda or to establish a new fleet of cars from a Mazda dealership, the company steps in with personal service levels which are very important for the sake of loyalty. For fleet customers, Mazda offers a special customer relationship counter as well as lounge facilities for business customers at the dealership where business clients are provided internet access and plasma screens while their cars are being serviced or just taken for a quick wash (Mazda, 2005). Such relationships and amenities provided to the business clients are important for the company since they help retain clients (Harker and Esan, 2006). Retention becomes essential in a market where the buyer has a significant number of choices available to them and this is certainly applicable in the automobile industry where every major company produces cars for nearly every segment (Tenser, 2006). For example, Toyota or Honda could easily supply the same types of cars, trucks, vans, runabouts and luxury models that are produced by Mazda therefore the selection decision remains with the client rather than the producer or dealer. Ongoing Service, Ongoing Relationship Additionally, as Mazda offers a product where there is an ongoing need for service based on the mileage done by the car, the concept of remaining loyal to one company is enforced since good service will mean continued business while bad service could end up losing the company a lot of money (Mercer, 1996). There is also the need for the replacement of worn out parts as well as replacement cars when the customer feels that one or more of the cars in a fleet have lived out their usefulness. The combination of defensive and offensive loyalty related plays made by Mazda have firmly established their system of relationship marketing since Fornell and Wernerfet (1987) confirmed that these two systems are necessary for any marketing campaign. In defensive terms, Mazda is providing their clients with top quality service as well as business amenities which would be very acceptable to clients coming from SMEs. These defensive tactics would reduce the chances of customers going away to other companies by giving them something more that the competition (Lindsay, 2006). The offensive strategy for Mazda is simply to offer a comparison of how well they and their dealers treat business customers as compared to other companies offering similar services. This combination of defensive and offensive marketing makes up the marketing mix which is the basis of the business customer loyalty plan which Mazda thinks would be most appealing to its customers. Mazda’s Offer Given that the services include seven working days for car servicing and free car washes for the life of the car, quite a few businesses would be interested in such positions for their fleet. This means that Mazda accepts the customer’s schedule to be the primary mover for the service requirements for their cars rather than to make the customers accept Mazda’s or the dealers’ terms for when the cars could be serviced or repaired (Mazda, 2005). Mazda declare service, especially personalised service to be very important for their SME business customers by saying: “Personal service, the introduction of innovative business concepts and the ability to ensure service, maintenance and repair work is retained within franchises are all crucial to corporate sales success, with Mazda aiming to expand relations with small and medium enterprises (Mazda, 2005, Pg. 1).” Of course such a declaration certainly means that companies like Mazda have to keep their word when it comes to service expectations of the clients. Without meeting and exceeding the customers’ expectations time after time, the company can not expect retention figures to be where they should be (Egan, 2001). The loyal relationship between the targeted SME and the company itself can be sustained if the customer gets additional value from the relationship (Parvatiyar & Sheth, 2001). Most of the cars manufactured today can be serviced at nearly the same level from any licensed automobile workshop. Therefore unless Mazda provides additional benefits to their clients, they could easily take their business elsewhere (Cochran, 2006). Loyalty and Customer Retention Since the cost of retaining a customer is far lower than the cost of creating new markets (Stone & Woodcock, 1995), loyalty initiatives make quite a bit of sense. By retaining customers and by continuing a relationship with the client at the point of sale, a business customer can be continually offered additional incentives to bring more customers to the company or to make personal purchases beyond the purchase they have made for their company (Cochran, 2006). In realistic terms, a company only has to acquire one business customer to sell several units of their and they would be losing money if they do not try to do the same. Additionally, companies like to keep loyalty based relationships with business interests since such customers would be less likely to switch to other brands once they have established and accepted a certain standard of service. A satisfied and loyal customer also increases the word of mouth value for the company (Egan, 2001); this can be very helpful when the company faces PR related difficulties since with good service and loyal buyers it would certainly be able to counter any problems in the public sphere. Creating Additional Business For example, with long term customers who have a good relationship with the company, Mazda will find it easier to sell them other equipment which a company might not be interested in otherwise (Harker and Esan, 2006). For instance, Mazda also makes industrial and specialist equipment which could be very useful for a company working in the construction business. Given that a company has a loyal relationship with Mazda as the supplier and service provider for their cars, they would need less convincing to buy construction equipment or heavy trucks from Mazda if their experiences have been positive. Even in terms of servicing the clients and the automobiles purchased by them, Mazda would be at an advantage since regular customers are cheaper to handle than those who have walked in for the first time (Little & Marandi, 2003). This is because due to the relationship established with long time customers, such customers are intimately familiar with the ordering or servicing system and would not need to be walked through the process or to be educated in using support systems. While this advantage is difficult to advertise to consumers, it is something they can come to appreciate on their own by spending time with the same seller (Drew, 2004). Rewards The relationship marketing approach has given Mazda significant rewards and the results obtained since the program was started have been appreciated by the industry analysts as well as the company members. Mazda Motors has many dealerships across the country and all dealerships report rising figures for fleet related sales. Mazda reports that: Last year [2004] fleet sales were up almost 50 per cent on 2003 levels and in 2005 Mazda expects fleet sales to total about 18,000 units [this figure was exceeded]- around a third of total sales - and approximately 2,000 registrations up on last years corporate business (Mazda, 2005, Pg. 1).” It must be noted that before taking this initiative and focusing on marketing towards businesses, Mazda had just a few fleet specialist dealers across the country and their fleet sales were only a fraction of their total sales. By getting more dealers of Mazda to join into the fleet sales program, Mazda not only improved their own business, but also expanded their fleet dealership network to places where they previously could not penetrate. The dealers also have a lot to gain since by becoming fleet dealers, they increase their reputation in the area to a great extent (Mazda, 2005). Relationship to the Next Level Any company can utilise the customer relationship lifetime cycle or the relationship ladder to take customers higher up for more profits and sales to the same client (Lindsay, 2006). By offering specialised business services and loyalty based programs, a company can attract individuals who may connections with other companies since rewards for repeat purchases can be significant. As recommended by Little & Marandi (2003) once these prospects have become customers they move to the second rung of the ladder in which there is an ongoing mutually beneficial relationship between the company pushing the loyalty program and the individual who uses the loyalty program. A higher step is the creation of a client relationship that further goes on to develop into supporter leading to an advocacy position in which there are chances of making the advocate a partner of the company. It is clear that the loyalty based approach is following that route to the letter since as sales are made to the same customer over and over again, the connections between the buyer and seller are getting stronger. One of the simplest and most efficient way to make prospects and customers move up the relationship ladder is to offer them services that they want and to give them benefits which are unique to their class of client. Conclusion Mazda has certainly been very successful in marketing their loyalty program to business customers and this statement is supported by their relationship marketing methodology and their sales figures which show that corporate sector sales have certainly improved in the past (Mazda, 2005). However, if Mazda wants to continue the same levels of growth for their company, they have to understand that continual expansion and betterment of services is needed for customers who have been with the company for a long period of time (Christopher et. al, 1991). This improvement will move them from customers to higher ends of the relationship chain. While every company in the world can not apply the exact same rules for marketing a loyalty program, the basic ideas remain the same. The customer has to be offered services and benefits which are unique to the brand and these should be such that they add value to the relationship if the customer remains loyal to the company. It is certainly an investment to be made by most companies and often the loyalty program or relationship marketing projects are not cheap. However, the companies which are ready to invest in such programs certainly reap the benefits of having a long term, loyalty based relationship. Works Cited Christopher, M. et. al. 1991, Relationship Marketing, BH. Cochran, C. 2006, ‘Seven ways to keep customers front and center’, Machine Design, vol. 78, no. 8, pp. 65-65. Cohen, S. 2004, ‘Performance improvement through relationship building’, T+D, vol. 58, no. 7, pp. 41-46. 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