Do Nokia's Loyalty Programs Actually Work?
1.1 INTRODUCTION TO THEORETICAL FRAMEWORK:
“The first step in managing a loyalty-based business system is finding and acquiring the right customers.” FREDERICK F.REICHHELD
Loyalty is an old-fashioned word traditionally used to describe fidelity and enthusiastic devotion to a country, a cause or an individual. More recently, it has been used in a business context, to describe a customer’s willingness to continue patronizing a firm over the long term, preferably on an exclusive basis, and recommending the firm’s products to friends and associates. Customer loyalty extends beyond behaviour and includes preference, liking and future intentions.
WHY IS CUSTOMER LOYALTY IMPORTANT TO A FIRM’S PROFITABILITY? * Profit derived from increased purchases: Over time, business customers often grow larger and so need to purchase in greater quantities. Individuals may also purchase more as their families or income size grows. Both types of customers might be willing to consolidate their purchases with a single supplier who provides high quality service. * Profit from reduced operating costs: As customers become more experienced they make fewer demands on the supplier (e.g.: less need for information and assistance). They may also make fewer mistakes when involved in operational processes, thus contributing to greater productivity. * Profit from referral to other customers: Positive word of mouth recommendations are like free sales and advertising, saving the firm from having to invest as much money in these activities. * Profit from price premium: New customers often benefit from introductory promotional discounts; long term customers are more likely to pay regular prices when they are highly satisfied and tend to be less price-sensitive. Moreover customers who trust a supplier may be more willing to pay higher prices at peak periods or for express work.
THE WHEEL OF
“The first step in managing a loyalty-based business system is finding and acquiring the right customers.” FREDERICK F.REICHHELD
Loyalty is an old-fashioned word traditionally used to describe fidelity and enthusiastic devotion to a country, a cause or an individual. More recently, it has been used in a business context, to describe a customer’s willingness to continue patronizing a firm over the long term, preferably on an exclusive basis, and recommending the firm’s products to friends and associates. Customer loyalty extends beyond behaviour and includes preference, liking and future intentions.
WHY IS CUSTOMER LOYALTY IMPORTANT TO A FIRM’S PROFITABILITY? * Profit derived from increased purchases: Over time, business customers often grow larger and so need to purchase in greater quantities. Individuals may also purchase more as their families or income size grows. Both types of customers might be willing to consolidate their purchases with a single supplier who provides high quality service. * Profit from reduced operating costs: As customers become more experienced they make fewer demands on the supplier (e.g.: less need for information and assistance). They may also make fewer mistakes when involved in operational processes, thus contributing to greater productivity. * Profit from referral to other customers: Positive word of mouth recommendations are like free sales and advertising, saving the firm from having to invest as much money in these activities. * Profit from price premium: New customers often benefit from introductory promotional discounts; long term customers are more likely to pay regular prices when they are highly satisfied and tend to be less price-sensitive. Moreover customers who trust a supplier may be more willing to pay higher prices at peak periods or for express work.
THE WHEEL OF
References: Jeevananda S. (2011)“Influence of Customer Loyalty Programs on Buying Decisions”The International Journal’s Research Journal of Economics and Business Studies Preeta H. Vyas ,Piyush K. Sinha (2008) “ Loyalty Programmes: Practices, Avenues and Challenges” Journal of Marketing WEBSITES: www.loyalty.com www.loyaltyone.com www.harrah.com www.loyaltycardsindia.com