Customer Loyalty Program [CLP] Design to Introduce a Customer Loyalty Program for ‘Chevrolet’ car services within the domestic segment Bharath Karthikeyan PGDSSM(2011-12)
Objective Loyalty programs differ from promotions that they are ongoing campaigns for targeted customers. “What you want to do with a loyalty program is to select and reward your most-valued customers ”
Loyalty in an automobile industry…is it a trap?• Cars are now almost a commodity, and car manufacturers have a problem.• It might almost be fair to say that the most noticeable point of differentiation between competing, similar marquees is the dealer who sells the car. Certainly, that seems to be the area where most can go wrong, and most complaints arise.• So much depends on the way the car is sold and particularly the way that the after sales contacts and service are carried out.• Its quite possible that its for this reason that research shows less loyalty to dealers than to manufacturers.
Objective of having CLPs for ‘Chevrolet’ service centers• Helps gain customer satisfaction and loyalty to the brand as a whole.• After sales service is one among the prime factors car buyers consider while buying.• People in India relate to Chevrolet with a trendy outlook and the company has huge potential to offer ‘Customizability services’ for its product.• There are no such initiatives by any other automobile company in India for such customization options.
CRM’s major milestone addressed: Make a customer feelunique and special !A customer can customize a 4 Lac car to something trendy looking like thiswithout void of any warranty as services are rendered by the parent companyitself
Indian Automobile industry and Chevrolet• Car Buyers(at least in India) seem to prefer imported vehicle brands• India is one among the rapidly growing ‘Developing nations’ and most of the dispensable income is concentrated on the demography segment of age: 25-40
Types of Loyalty Programs• Appreciations Giving customers more of a companys product/service.• Rewards Giving customers rewards unrelated to a companys product/service• Partnership Marketing to another companys database and allowing loyal customers to choose their rewards from either company.• Rebate Giving customers money back when they buy more.• Affinity Building a lifetime value relationship with a customer based on mutual interests and not on the use of rewards.• Coalition Teaming up with different companies to share customer data to jointly target a customer demographic.
Customer Loyalty Excellence• Design of Services• Operation Execution with appropriate technological backing
Objectives for the Chevrolet Car Services CLP Chevrolet has been a relatively new entrant in the field of automobiles in India.
CLP techniques● 360 degree view across all channels● Personalized and perceived customer value● Actionable feedback / Understanding customer needs● Customer win back/ Improved customer retention / reduction in customer attrition / enhancingcustomer acquisition● Promoting cross-selling● Achieving business goal
TechnologyAnalysts have indicated that the success of loyalty programs is influenced by the choice of technology.Given a differentiating Loyalty Program concept, a lot of challenges relate to the choice oftechnology. A good CLP concept, to succeed, needs appropriate technological backing.
FAQs with CLPs● Do Loyalty Programs go beyond cost of doing business?● Do Loyalty Programs offer any competitive differentiation?● Do Loyalty Programs lead to customer loyalty or are limited to customer satisfaction only?● Do Loyalty Programs influence purchase behaviors or are taken for granted?● Do Loyalty Programs influence margins
Key Advantages of Having a Loyalty Program• It encourages consumers to concentrate their purchases in your company so that they can reach a reward faster.• It increases switching cost so that consumers who have already earned points through your loyalty program are less likely to jump ship to a competitor.• Compared with other promotions such as price discounts, a loyalty program incurs delayed promotional cost, because consumers make purchases first and get rewards later only after they have accumulated enough points.• Related to the above cost issue, not all points earned through a loyalty program translate into reward costs, as there will always be some consumers who never reach the reward threshold or who never redeem their points.• A loyalty program offers a way to capture consumer transaction history and can lead to more in-depth understanding of your customers.• If you have a sizable business such as an airline, a loyalty program can be a revenue source as you can sell program currency (e.g., miles, points, etc.) to partner businesses.• A loyalty program, when properly designed, can make your best customers feel appreciated and become more loyal.
Key Disadvantages of Having a Loyalty Program• A loyalty program can be expensive to implement, unless you are doing a basic punch card based “buy 10 get 1 free” type of program. Also unlike one-time promotions, a loyalty program is typically a long-term commitment and therefore needs financial support over time.• Loyalty program points can represent significant financial liability and may increase risk to your business. (Note: This can be alleviated by setting an appropriate point expiration policy.)• Your best customers may like you enough to want to buy from you any way. So having a loyalty program may be giving away your profit margin unnecessarily. My own research shows that existing heavy buyers barely change their behavior after joining a loyalty program.• The long-term impact of a loyalty program on true customer loyalty is not well-established. Consumers may join your program purely for the financial incentive and will abandon you if your competitor offers a better program.