Customer Loyalty Today - Essay Example

The industrial revolution created a new economic movement in which corporations became catalyst of growth for industrialized nation such as the United States. New products were brought into the marketplace. In 1927 after the invention of television marketing campaign became the primary strategic option companies utilized to attract new customers and achieve greater customer retention and loyalty. Since then companies placed great importance in utilizing brand loyalty to achieve customer retention. The broadband era which commenced at the turn of the century created information overload which is making brand loyalty a fading concept since loyalty may not exist anymore. Marketing has become one of the most important disciplines in business administration. The level of success an organization achieves depends on its ability to satisfy the needs of the customers by providing products and service they seek at reasonable prices that add value. A strategy that many multinational corporations have pursued for many create a brand image that will help companies achieve customer loyalty. Customer loyalty can be defined as a deeply held commitment to re-buy or repatronize a preferred product or service in the future despite situational influences and marketing efforts having the potential to cause switching behavior (Kotler, 2002, p.294). This paper examines the concept of loyalty in order to evaluate the statement there is no such thing as customer loyalty anymore. Customer loyalty is key business strategy utilized to increase the levels of customer retention within a firm. A high customer retention rate adds value to a company because these customers represent future stream of revenues that the company can achieve with minimal marketing investment. There is a basic marketing rule that states that 80% of a company’s sales come from 20% of their customers (About, 2009). This implies that building a solid foundation of customer is extremely important for the long term success of a company. The stronger the sense of loyalty a customer feels towards the product of a company, the less likely this individual will purchase the goods or services from a competitor. A marketing quantitative analysis performed by Hughes (2009) of Fast Lube Corporation revealed that the longer a customer is retained the more the person spends annually with the company. One of the basis reasons marketing exist is to help a firm increase its sales totals. The sales of a company increase if the company is able to growth its customer base or if the customers the company currently has buys more. Attracting new customers is an expensive task that must be performed by companies in order to grow. Customer loyalty is a strategy that can be implemented effectively to increase sales without attracting new customers. Branding or brand name loyalty is the marketing strategy that is utilized to build customer loyalty (Holezky, 2009). A company that has been able reap the benefits of brand loyalty to build multination empire is Starbucks Café. Howard Schultz, Starbucks CEO said “The goal is to create a bond with the customer, thereby establishing unparallel loyalty” (Gonzalez). Brand loyalty is a concept that no longer has the same impact as it once did in the past. The business world wishes it could continue its practice of building strong loyalty ties that blind the customer eyes, but the vast amounts of information available on the internet as well as the tremendous selection customers have has made loyalty harder to achieve than before. The loyalties that use to exist based on imaginary image created by marketers no longer exist. Take for example the automobile industry in the United States. For years auto makers had utilize a marketing strategy to achieve brand loyalty based on patriotism and a reminder than Americans were the pioneers who started the automobile industry. The customers would become loyal to GM, Ford, and Chrysler products because they were American Made. The recent bill for an auto bailout plan valued at over $25 billion in order to save the Big 3 Detroit automakers from bankruptcy is a clear indicator that American customers stop buying in into the branding strategy of these companies (Dilanian, 2008). Brand loyalty is still a valid strategic option, but its application has become more of a niche (Brandchannel, 2009). Companies utilize the brand loyalty strategy for specific products that meet certain criteria. A product can achieve brand loyalty if it provides value to the customers in the form of quality, functionality, uniqueness, performance, or another differentiation attribute. In the auto making business American companies lost most of their loyalty gains because it simply never built a branding strategy by investing in technology and innovation to improve the quality of products. Honda a Japanese automaker has become the top company as far loyalty in 2008 with an impressive 64.7% retention rate of Honda owners who purchase a Honda as their subsequent vehicle (Honda is the new loyalty leader, 2008). Despite the fact that loyalty is no longer the driving marking force it used to its existence can not be questioned. Loyalty has its greatest impact when companies are able to built the brand name over a prolonged period of time. Coca Cola Company is a great example of a corporation that has gained tremendous brand name loyalty. Coca Cola was founded in 1892 by Asa Griggs Candler who built the beverage firm based on syrup formula he purchased from John Pemberton in 1886 (Nndb, 2008). Coca Cola has created its customer loyalty by satisfying billions of customers for over 100 years. The secret formula utilized by the Coca Cola has helped the firm built brand loyalty. In 1985 when Coca Cola attempted to introduce a new Coke formula the general public was outraged at the idea. “The sense of emotional attachment was palpable among customers who for years had agreed with Coca Cola that ‘Coke is it’” (Fisher, 1985). The brand loyalty of the company was so strong that customer protested on the streets and other even when as far filing a lawsuit against the company after it became public knowledge of the possibility of a change in the Coca Cola formula. Brand loyalty is a business strategy that can be utilized to gain a competitive advantage. In the 21st century many scholars and businesspeople believe that brand loyalty is a concept in the blinks of extinction. Appendix B provides arguments for and against the existence of brand loyalty. In my opinions brand loyalty is still alive and it manifest itself purchasing behavior of customers. Customer loyalty in the form of a branding strategy has become difficult to implement for new companies in the marketplace. As we move forward towards the second decade of the century companies must continue to invest to build customer loyalty. Appendix A: Comparative Table of existence of Loyalty vs. Disappearance of Loyalty Pro Against 1. Customer retention exists and it is vital strategy to achieve greater profitability through customer retention 1. Customers buy out of convenience and may continue to return to a store out or purchase a product out coincidence. If a better competitor with better prices and more value comes they will switch instantly. 2. Investing in a branding strategy will reap good long term benefits for a company. 2. Companies should use their marketing budget to get new customers in the short term. 3. The globalization movement has allowed companies to implement new strategies to build loyalty across national boundaries. 3. If the concept of loyalty ever existed globalization destroyed it because consumers now have plenty of other choices. 4. Brand loyalty is build over time and it grows in value as time moves forward. 4. If a loyalty program is implemented and it does not within a year, the company should abort the initiative and invest in other types of marketing programs. 5. Name brand loyalty is an intangible asset that creates value for company. 5. The name of a company, product or service is irrelevant and many times in mergers the name changes and nobody cares. References Brandingchannel.com (2009). Is Brand Loyalty Dead? Available from [Accessed 19 February 2009]. Dilanian, K. (2008). Republicans Blast Auto Bailout Plan. USA Today. Available from [Accessed 19 February 2009]. Fisher, A. (1985). Coke’s Brand – Loyalty Lesson. Cnn Money. Available from [Accessed 18 February 2009]. Gonzalez, A. Howard Schultz: Chairman of Starbucks Corporation. Available from [Accessed 17 February 2009]. Holetzky, S. (2009). What is Customer Loyalty? WiseGeek. Available from [Accessed 19 February 2009]. Honda is the new loyalty leader (2008). Automobile News, 83, p.34. Available from [Accessed 19 February 2008]. Nndb.com (2008). Coca Cola. Available from [Accessed 20 February 2009]. Hugues, A. (2009). Customer Retention: Integrating Lifetime Value into Marketing Strategies. Database Marketing Institute. Available from http://www.dbmarketing.com/articles/Art112.htm> [Accessed 18 February 2009]. Kotler, P. (2002). Marketing Management (12th ed.). New Jersey: Prentice Hall. Lake, L. (2009). Explore the Value of Customer Retention. Answers. Available from [Accessed 18 February 2009]. Read More