Another marketing strategy to create buyer loyalty

Another marketing strategy to create buyer loyalty

Syafruddin Chan
Contributor
Jakarta

With competition in all kinds of businesses becoming tougher
by the day, it is not surprising that marketers are racing to
modify their marketing strategies.

That customer loyalty is vital is now completely understood by
every marketer. Hence, it is agreed the key is maintaining their
loyalty, and, if necessary, pampering them so that they do not
switch over to competitors' products.

One of the marketing strategies that can make the customer
relationship highly personal and provide "royal" treatment to
customers has been made possible by the Internet. Using this
medium personalizes product offers and transactions. It also
matches each individual customer's requirements. In marketing
jargon, this concept is called relationship marketing (RM).
Another tool incorporated within this concept is the membership
card, with points or rewards for every purchase.

Apart from being highly personalized, another superior feature
of RM is its cost-effectiveness in comparison with conventional
advertising, a big budget game for conveying a message to the
less clearly defined target. The one-on-one characteristic of RM
leads to more focused concepts and definitely saves a lot.

With customer loyalty as its main objective, RM is also more
targeted in providing "individualized" services and solutions.
Another advantage is that the feedback is personalized as well.

The return on investment (ROI) when using RM is comparatively
advantageous. In conventional advertising, after spending huge
sums of money on production and media placement, a marketer
anxiously awaits results. When the market reacts negatively, his
massive investment simply goes down the drain.

In RM, initial costs are relatively low and the rewards for
customers are given only after a transaction or a certain amount
of purchases have been made. Admittedly, one of its attractive
features is the rewards, which are budgeted at about 2.5 percent
to 3 percent of the revenue received. This less risky method
creates a healthy inflow of cash for companies that can be
retained for quite some time before they return the small
percentage to the contributing customer.

RM rewards are also quite different from price cuts or
discounts given during sales and promotions. Here, the reward
points are, in accounting jargon, "equal to monetary value."

Marketers also often say that this reward system also gives
them a larger "share of the customer's wallet", because the
rewards can only be used for purchases from the same company,
while, in contrast, cash discounts -- given during sales -- that
are retained by customers can be used for purchases anywhere or
for other items, even competitors' products.

With today's highly advanced communications and information
technology, e-commerce costs are reducing. This is another factor
that is attributable to the accolade for RM as "the rising star"
of present marketing.

The RM concept was pioneered by American companies, which are
famous for efforts in satisfying customers to the maximum. Some
of the major, US-based corporations, which actively use RM, are:
Northwestern Airlines, US Sprint, Hallmark, Citibank, Hilton,
Hyatt, General Foods, Sears, Microsoft, Motorola, to name just a
few.

European companies were not far behind. British Airways,
Eurotunnel and Nestle, for example, are also getting best results
from RM. In Japan, meanwhile, Seiko, Toyota and Nissan have also
adopted RM for their marketing.

This phenomenal marketing method has also been used for
several years now in Indonesia. Among the major companies that
have reaped profits from RM in the country are: Citibank, with
reward points for its credit cardholders; Alfa supermarket chain,
with its membership program; Matahari department stores, with
Matahari Club Card (MCC); Metro department store, with Metro
Yours card; BCA, with its Reward BCA program; and Pasaraya
department store, with Pasaraya Passport. Most, like MCC and BCA,
have made RM available for their customers through the Internet.
Quite a number of multinational and local companies are currently
in the final stages of launching RM, each with its own specific
mechanism.

Another important premise behind RM is the "20/80 law", which
refers to the categorization of customers into two major groups:
the first 20 percent, which contributes 80 percent of the
company's revenue and the second 80 percent, which provides only
20 percent of the revenue. Naturally, the focus is on the first
cluster, which receives the best services and all the pampering.
Gradually, almost every company now realizes that this group --
often referred to as the Most Valuable Customers (MVC) -- forms
the core of its business and, as the company's survival largely
depends on it, it deserves the best. So, the days of "equal"
services to everyone are now almost over. Time, energy, capital
and so forth, should not be wasted on noncontributing customers,
say marketers.

For the Indonesian market, it may be too early to evaluate the
success of RM, because most companies acknowledge that it is
still "phase one". However, with the results so far, they are
already moving in the right direction.

Admittedly, in any marketing effort, especially RM,
identifying customers is foremost. This kind of detailed customer
data helps create new product development, and product and
service features that are demanded by the market with more
specific and focused segmenting. RM, with its two-way and one-on-
one capabilities, helps decision makers in companies provide
right-on target solutions that increase both the level of
customer loyalty and the number of loyal customers. (The writer
is a senior partner at AdDirect Marketing)