Winning and Retaining Customer Loyalty

In our first two reports on the new book Mastering Marketing (Understanding Today’s Global Marketplace and New Strategies for Success) we looked at the forces changing the basics of marketing, and the new strategies being used to capitalize on them. In this the third and final report we focus on the ways top companies are winning and retaining customers in today’s high-tech global economy as seen by more than 50 marketing strategists from the University of Pennsylvania’s Wharton School, the J.L. Kellogg Graduate School of Management at Northwestern University, the London Business School, and INSEAD, the European institute for management education. Earlier versions of these articles first appeared in the Financial Times, which has now published the book with Prentice Hall as part of its FT Mastering series.

Strategies for getting and keeping customers, says Wharton’s George Day, range from the airlines’ frequent-flyer programs, to videogame makers’ clubs where for a modest annual fee players receive a magazine, previews of new games, "inside" tips etc. But increasingly, he adds, the premier strategies are capitalizing on the selling power of the latest advances in electronic technology and the new symbiosis between companies and their customers.

More and more wholesalers and retailers are realizing that to stay profitable in today’s marketplace they must embrace the voracious, explosively growing and many-tentacled octupus called electronic commerce. This is revolutionizing marketing , says Kelloggs’ Philip Kotler, since customers are increasingly able to buy virtually everything they need without setting foot inside a shop. Not only that, he adds, but most producers today get over 60% of their needs from outside suppliers "…with a few outsourcing 100%, making them into virtual companies owning very few assets and therefore earning extraordinary rates of return"

This is going on, says INSEAD’s David Soberman, against a background that is reversing the homogeneity in consumption created by mass production and automation, splintering the mass media "global village" envisaged by Marshall McLuhan in the 1960′s, and allowing people to re-turn to rural life because work, play, learning and shopping can be done in the confines of a small rural community or even the family home.

One day Amazon.com is selling books through the mails, and the next day it’s sending customers a card advising them that it’s gone high tech and is offering everything from camcord-ers to VCR’s online. "We have a great selection of name-brand electronics," says Amazon, "and the information you need. You’ll find easy-to-understand buying guides, technical data, expert reviews and recommendations, and our five-star customer rating system. Plus, with our 30-day return policy, we’ll arrange for pick-up and even pay for shipping."

Customers today are a whole new breed of cat from what they were prior to the coming of the Internet in 1969. And the key to understanding what’s been happening, says Eric Johnson, former director of Wharton’s Forum on E-Commerce, is that "…the adoption of information technology by customers radically changes costs, in some cases by considerable orders of magnitude." Advertising on the web is more efficient than print or television, says Johnson, "because it talks to people when they want to be talked to and enables them to control the amount of information that they are given." It also allows sellers to focus on their customers’ unique interests. As a result, Johnson concludes, "Online commerce now provides us with the opportunity for continuous marketing research, in which we constantly watch and listen to customers as part of the normal course of doing business."

The No. 1 problem faced by sellers in today’s explosively growing electronic marketplace is attracting consumers to their products and then getting them to remember why they’re the best buy. Once customers have sunk their "learning capital" into a product, say Kellogg’s Vikas Mittal and Mohanbir Sawhney, they will be more reluctant to switch to a competing product. They’re also more likely to see a satisfactory return on the time they’ve invested in mastering the product once they’ve started using it.

"Marketers of information products must therefore design effective learning experiences for consumers," say Mittal and Sawhney, and "this involves carefully managing the order in which people find out about product attributes, matching the learning experience to the user’s require-ments and ensuring that any new technical vocabulary meshes with existing knowledge." This last point is particularly relevant today where new electronic products are routinely described using language such as "…various configurations combine 210-400 MHz"G3" chips with either 512K or 1 Mbyte of backside cache."

While electronic commerce is a mere youngster in the venerable world of marketing, com- pany/customer symbiosis has been around since entrepreneurs and their suppliers first realized that if you want to get a little you’ve got to give a little, which, say Kellogg’s Anderson and Carpenter, has been sweetening deals for years. A pigment supplier was able to get an extra half a cent per pound for providing its pigment in easy to handle slurry form rather than in 50-pound dry bags. And McKinsey consultants contend that a 1% improvement in price, assuming no volume loss, increases a supplier firm’s operating profits by 11%.

In this three-part review of Mastering Marketing we’ve looked at how marketing know-how is being put to work today and how it will be improving bottom lines into the 21st century. There has never been a more exciting time to reexamine the old maxim that nothing happens until somebody sells something.

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"Winning and Retaining Customer Loyalty." Knowledge@Wharton. The Wharton School, University of Pennsylvania, [29 September, 1999]. Web. [31 October, 2014] <http://knowledge.wharton.upenn.edu/article/winning-and-retaining-customer-loyalty/>

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"Winning and Retaining Customer Loyalty" Knowledge@Wharton, [September 29, 1999].
Accessed [October 31, 2014]. [http://knowledge.wharton.upenn.edu/article/winning-and-retaining-customer-loyalty/]


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