Do loyalty programs really create loyal customers? If the incentives disappeared, would the customers keep coming back? These are questions being asked by many people regarding the actual effectiveness of loyalty programs. For example, one of the brands that I am most loyal to is Honda, which has never offered a loyalty program to entice me to buy from them. Instead, I remain loyal to Honda for free because of the quality and service I receive from my Honda car and the Honda dealerships I’ve been to. On Monday, Byron Smith from Microsoft gave a very interesting speech on how Microsoft is trying to use loyalty programs to create incentives for Internet users to switch from their current search engine over to Microsoft Live. In this presentation, he gave examples of how Microsoft will be working to attract more users to its website by giving them X-Box Points that can then be redeemed on other merchandise. American Airlines came to my mind at this time because I could see a parallel between what Microsoft wants to do and what American Airlines started doing over 25 years ago with their frequent flier loyalty program called AAdvantage.
American Airlines has found its loyalty program to be extremely profitable for them. The reason for its profitability is that American sells its frequent flier miles to retailers that then use those miles as rewards for its customers. Since the incremental cost for passengers on airplanes is so low (about $20), American is receiving customer loyalty with very little incremental cost. Also, airlines don’t have to allow customers to redeem miles if there are no available tickets and if there are available seats, it is better for them to give a ticket away than to let the plane leave with many empty seats. So for the airline industry, loyalty programs such as the frequent flyer programs are a great strategic fit for making profit. The question then lies in whether this is actually creating loyalty to the airline or is it just a way for customers to find a great deal on a flight?
For Microsoft, I understand the need for them to create loyalty to Microsoft Live. Right now, Google is the hands-down leader in the Internet search engine profit war because it had the best search engine when it came out. Now, Microsoft has improved its own search engine and is betting that people will love it if they give it a try. They have done research that shows that people will definitely switch to Microsoft if they are rewarded for it, which means that they are not extremely loyal to their current search engine. Byron also mentioned though, that if the products are not equivalent, then the rewards will not have the effect it should. Also, he wonders, just like other people in the marketing world, will this loyalty program create true loyalty to Microsoft’s brand? Or will this just be a temporary fix for the deeper problem of having an inferior product? There is no question that loyalty programs can help switch some users from one brand to another. The ultimate question is how can we get those users to be completely loyal to our brand even if we weren’t paying them.
Thursday, October 25, 2007
Friday, October 19, 2007
Wal-Mart Strives to Improve Lives
Wal-Mart has finally figured it out. Even though it follows a low-cost strategy, it shouldn’t be all about saving money. They have realized that their strategy also needs to be about improving the lives of their customers. With this realization, they have launched a new marketing campaign that is intended to make customers feel better about shopping at Wal-Mart. This new campaign called “Save Money, Live Better,” focuses on customer experiences rather than the older campaign that only concentrated on having the lowest prices. Wal-Mart came in to the market and completely dominated the low-price retail stores. Now, they are hoping to keep low prices while providing more variety and better experiences for their customers. In this article, I will be discussing what Wal-Mart is doing differently now to keep its customers satisfied.
In 2006, Wal-Mart made a mistake when it decided to try and go upscale without first considering its customers. Their main competitor Target had huge success with differentiating itself from the discount retailer by providing much more high fashion products that were still very reasonably priced. When Wal-Mart decided to try this strategy, it failed. They didn’t realize who their core customers were or what they really wanted. Wal-Mart customers are there to get a great deal. In an article from the International Herald Tribune titled “Wal-Mart’s New Strategy Goes Back to Basics: Saving Money,” the author expresses that Wal-Mart’s diverse customers all want the same thing: low prices, just like they always have. As a marketing major, I know the whole idea behind marketing is to discover and satisfy consumer’s needs. Wal-Mart’s failed strategy is a clear example of why finding out what your customers want is essential before ever changing your core strategies.
Once Wal-Mart executives saw that they had chosen the wrong strategy, they realized that they needed to get back to its core values. Wal-Mart needs to be about saving money for the customers to make their lives better. They have scaled back the higher priced and fashionable items and gotten back down to what is really important to the Wal-Mart customer: low prices on great brands and products. Personally, I agree with this newer strategy and it makes me feel better about shopping at Wal-Mart. The new commercials they have been running convey the feeling that Wal-Mart cares about its customers rather than just advertising their everyday low prices. The commercials show normal families in their everyday lives and tells a story about how Wal-Mart helps to make their life better. According to the SEM’s we discussed in class, this new strategy really conveys good feelings that make you think that Wal-Mart cares for its customers.
I have decided to take a closer look at Wal-Mart as my individual report because it is the most powerful company in the world today. It has a huge impact on our society and I am also interested in learning more about their newest goal to become more environmentally friendly. Wal-Mart is hoping to turn around the bad reputation is has and wants to become a company that is seen in a good light that truly cares about its customers. I think they are on the right track. My paper will go beyond the price cutting strategies of Wal-Mart into how it can use its power to better the world.
Source:
http://www.iht.com/articles/2007/03/01/business/walmart.php
In 2006, Wal-Mart made a mistake when it decided to try and go upscale without first considering its customers. Their main competitor Target had huge success with differentiating itself from the discount retailer by providing much more high fashion products that were still very reasonably priced. When Wal-Mart decided to try this strategy, it failed. They didn’t realize who their core customers were or what they really wanted. Wal-Mart customers are there to get a great deal. In an article from the International Herald Tribune titled “Wal-Mart’s New Strategy Goes Back to Basics: Saving Money,” the author expresses that Wal-Mart’s diverse customers all want the same thing: low prices, just like they always have. As a marketing major, I know the whole idea behind marketing is to discover and satisfy consumer’s needs. Wal-Mart’s failed strategy is a clear example of why finding out what your customers want is essential before ever changing your core strategies.
Once Wal-Mart executives saw that they had chosen the wrong strategy, they realized that they needed to get back to its core values. Wal-Mart needs to be about saving money for the customers to make their lives better. They have scaled back the higher priced and fashionable items and gotten back down to what is really important to the Wal-Mart customer: low prices on great brands and products. Personally, I agree with this newer strategy and it makes me feel better about shopping at Wal-Mart. The new commercials they have been running convey the feeling that Wal-Mart cares about its customers rather than just advertising their everyday low prices. The commercials show normal families in their everyday lives and tells a story about how Wal-Mart helps to make their life better. According to the SEM’s we discussed in class, this new strategy really conveys good feelings that make you think that Wal-Mart cares for its customers.
I have decided to take a closer look at Wal-Mart as my individual report because it is the most powerful company in the world today. It has a huge impact on our society and I am also interested in learning more about their newest goal to become more environmentally friendly. Wal-Mart is hoping to turn around the bad reputation is has and wants to become a company that is seen in a good light that truly cares about its customers. I think they are on the right track. My paper will go beyond the price cutting strategies of Wal-Mart into how it can use its power to better the world.
Source:
http://www.iht.com/articles/2007/03/01/business/walmart.php
Wednesday, October 3, 2007
How to Gain Competitive Advantage
Competitive Advantage is a relative term. We hear it a lot about this term, but do companies really know what it means? Do they know how to achieve it? My topic for this individual assignment is about gaining competitive advantage in the retail world. I will discuss how marketing, and more specifically, how using customer insights customer experiences can help your company gain and sustain competitive advantage. I researched this topic and found an interesting article titled, “CRM In Retail Revisited: Using Customer Insight to Build Competitive Advantage.”
The article has many great insights into how companies can gain competitive advantage through expanding their customer insights and enriching the customer experience in the retail store. The author Lane Michel argues that relationships with your customers should be composed of learning what customers need, and it is important to also be proactive in this relationship to create strong loyalty to your company brand. Retailers develop relationships with their customers and then collect data from them. Michel states that “success comes when retailers are able to maximize the value of that customer information to create a meaningful ‘in-store’ experience for their best customers.” As a whole, this article is very insightful for the world of Customer Relationship Management; it gives many great examples of companies who understand how to leverage customer insights to gain sustainable competitive advantage.
In our class we have been learning about the topic of customer insights. I think this article does a great job of summing up the importance of this topic, and I am interested in learning more about how a company can apply this to their marketing strategies to gain an edge against their competition. As I read this article, the first company that came to my mind that exudes this subject is Nordstrom’s. People don’t shop at Nordstrom’s because it has the best clothes, shoes, accessories, etc. People shop at Nordstrom’s because of the experience they have when they walk through the door: the piano man playing, the clean and organized sections of the store, and the fabulous customer service they receive. People are willing to pay more if they feel good when they are done with their shopping experience. I know you’ve all been to a store and left extremely frustrated because the racks were a mess, the store was crowded, and the service was awful! A company like Nordstrom’s know how to please their customers which keeps them coming back and creates very strong loyalty to their brand.
For my report, I will be expanding on this topic of how companies create competitive advantage through building better relationships with their customers. Traditional marketing is no longer enough to be successful in the retail world. Companies have to learn about their customers to keep them happy and use this relationship to lock-in their customers and keep them from switching over to another retailer.
Source:
Michel, Lane. “CRM In Retail Revisited: Using Customer Insight to Build Competitive Advantage.” http://www.microsoft.com/dynamics/rms/product/customerinsightwhitepaper.mspx
The article has many great insights into how companies can gain competitive advantage through expanding their customer insights and enriching the customer experience in the retail store. The author Lane Michel argues that relationships with your customers should be composed of learning what customers need, and it is important to also be proactive in this relationship to create strong loyalty to your company brand. Retailers develop relationships with their customers and then collect data from them. Michel states that “success comes when retailers are able to maximize the value of that customer information to create a meaningful ‘in-store’ experience for their best customers.” As a whole, this article is very insightful for the world of Customer Relationship Management; it gives many great examples of companies who understand how to leverage customer insights to gain sustainable competitive advantage.
In our class we have been learning about the topic of customer insights. I think this article does a great job of summing up the importance of this topic, and I am interested in learning more about how a company can apply this to their marketing strategies to gain an edge against their competition. As I read this article, the first company that came to my mind that exudes this subject is Nordstrom’s. People don’t shop at Nordstrom’s because it has the best clothes, shoes, accessories, etc. People shop at Nordstrom’s because of the experience they have when they walk through the door: the piano man playing, the clean and organized sections of the store, and the fabulous customer service they receive. People are willing to pay more if they feel good when they are done with their shopping experience. I know you’ve all been to a store and left extremely frustrated because the racks were a mess, the store was crowded, and the service was awful! A company like Nordstrom’s know how to please their customers which keeps them coming back and creates very strong loyalty to their brand.
For my report, I will be expanding on this topic of how companies create competitive advantage through building better relationships with their customers. Traditional marketing is no longer enough to be successful in the retail world. Companies have to learn about their customers to keep them happy and use this relationship to lock-in their customers and keep them from switching over to another retailer.
Source:
Michel, Lane. “CRM In Retail Revisited: Using Customer Insight to Build Competitive Advantage.” http://www.microsoft.com/dynamics/rms/product/customerinsightwhitepaper.mspx
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