Customer Loyalty - Improving the Degree of Satisfaction

Abstract. The starting point that “triggered” this paper consisted of a sequence of frustrating uncertainties whose explanations could be discovered only by allocating a greater consideration to the topic in question, which deals with loyalty programs in managing customer relations, topic that also represents the object of this article. To be more specific, the major reason for which this paper deals with an analysis of the above mentioned subject was generated by not apprehending the cause of the low level of resources invested in the development of a loyalty program belonging to one of the titans on the Romanian mobile phone services market, company that would rather pay more attention to attracting new clients than rewarding the loyalty of numerous already existing ones. Taking into consideration the fact that there is a unanimous agreement regarding the considerably higher costs of creating new customers than maintaining existing ones (Fojt, 1995), the resulting paradox of this particular case stands as the motivation for choosing this topic. Therefore, the purpose of this paper translates itself into providing an overview concerning the design, implementation and subsequent benefits of creating a loyalty program for customers, followed by a practical example of American Airlines displaying the actual process of bringing into force these stages.

Keywords. Customer loyalty programs, Customer orientation, Customer satisfaction.

1. INTRODUCTION

1.1 Literature review

Customer loyalty represents the tendency of the customer in the process of choosing a product or a business that meets his needs and expectations, from a wide range of possibilities given by the existence of fierce competition on almost every market. (Churchill, 2007) Therefore, taking into consideration the fact that customers nowadays are better informed and more demanding when it comes to the quality of goods and services at the best prices, businesses are experiencing the phenomenon in which being the best is no longer enough. As a consequence, they must make use of an additional effective strategy that can support their traditional marketing schemes for maintaining or attracting new clients (Neilsen, 2005); such a tool is materialized in the form of tailored customer loyalty programs that provide benefits to consumers by rewarding them for their continued fidelity in a personalized manner, according to their specific buying profiles.

As far as the attempts to explain the concept of loyalty programs for customers, there seems to be a rather homogenous literary attitude, taking into consideration that nearly almost encountered way of revealing the meaning of this concept sounds more or less as: “a marketing strategy based on offering an incentive with the aim of securing customer loyalty to a retailer” (Gomez, Gutierrez et al, 2006), “tactical instrument of relationship marketing” (Wendlant, Schrader, 2007) or “a program that allows consumers to accumulate free rewards when they make repeated purchases with a firm” (Liu, 2007) . However, there are contradictory views with respect to the actual results reported by such programs, in the sense that some experts acknowledge their beneficial effects, while others argue that “firms that utilize these programs are explicitly shifting resources away from non-participating customers in favor of customers who participate in their loyalty programs, which may lead to accusations of discriminatory customer treatment” (Lacey, Sneath, 2006), that “most loyalty programs do not turn all disloyal customers into loyals or make customers exclusively loyal” (Leenheer, Heerde et al, 2007) or that “loyalty programs do not necessarily foster loyalty and are not cost effective and the proliferation of loyalty programs is a hype or a <<me-too>> scheme” (Dowling, 2002). All in all, efficient implementations of these loyalty programs have only led to positive results judging by the number of success stories speaking for themselves.

1.2 Personal opinion

Regardless of the professional authorized views previously mentioned concerning the genuine utility of creating loyalty programs, in my opinion, this tool of managing customer relations should definitely represent an area worth massive consideration from every business manager, as I tend to classify it as an extremely important link between a company and its customers and hence, an extremely important link between a company and its generated profit; the reason for this classification derives from the fact that even though at a first sight the appeal to such a method of transforming customers into loyal ones does not seem as being capable of almost instantly accelerating the process of increasing revenues, its effects are surely illustrated on the long term. In other words, I consider a well designed customer loyalty program to be a very useful method of reinforcing the company’s brand, of proving the clients that, as always, their opinions are valued the most in terms of elaborating new strategies; basically, I believe that it represents a company’s way of delivering its appreciation for the customers’ loyalty, by making them feel valued, offering them at the same time various benefits and rewards and persuading them to maintain their position with respect to their shopping habits. After all, nowadays, everything we see and experience is about marketing; the only aspect that makes a huge difference is the ability to know how to market.

2. THEORETICAL BACKGROUND

2.1 General aspects

The first action to be taken in the process of developing a successful customer loyalty program is to thoroughly analyze what the corporation intends to obtain by implementing such sequence of complex stages. It is of the utmost importance to decide upon the desired outcomes before making investments of any kind in the project. Questions such as “How much will the company’s revenue will increase by creating customer loyalty?”, “To what extent the company’s market share will change by implementing this loyalty program?” or “What percentage of customer loyalty would correspond to a X% growth in the company’s profit?” should definitely represent the main concern. This way, by analyzing the balance between the investment and the results, a clear, objective view of the loyalty program effectiveness can be reached. In other words, research is the key word in taking the first step towards launching a customer loyalty program.