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    Customer Loyalty Management: Gimmick or Sound Strategy?

     
    3/29/2004
    by Jim Heskett

    This month's column presented two views of the importance of customer loyalty management, one challenging its feasibility and long-term impact (Michael Treacy, Double Digit Growth) and one concluding that it is one of the most important drivers of profitability and growth (Frederick Reichheld, The Loyalty Effect).

    Instead of joining a debate, many respondents decried the misuse of the term "customer loyalty management" and superficial attempts to manage the phenomenon. In the view of Theresa Quintanilla, "It's a pity that 'loyalty' has become synonymous with gimmicks to let customers acquire points or miles or any loot unconnected to the product they are using . . . It's about customers and suppliers caring for each other's success." As Alan de Winter put it, "A consistently well-delivered product or service at good value goes much farther in retaining customers than programs that focus on retaining customers but add cost to the product or service."

    Others tended to regard Treacy's and Reichheld's views as complementary. "I don't see a conflict," said Jack Flanagan. "The confusion or conflict occurs when we assume that a customer loyalty management initiative, in and of itself, will overcome basic shortfalls in product/service delivering in a competitive situation." Robin Clark pointed out that: "Neither view is completely right or wrong. I think that it would be wrong to base all your efforts on trying to keep customers loyal . . . However, a customer base high in 'loyals' is a good indicator that you're doing something right." In Scott Bailey's opinion, "It seems to me that the positions . . . are really not at odds with one another . . . Treacy is suggesting that firms focus not on the program, but on whether or not the program is providing significant value to the segment for which it is intended."

    A third line of thought concerned the impact of rising customer expectations on loyalty initiatives. As Wendy Jameson said, "Loyalty initiatives have become the baseline standard. To compete with truly 'sticky' customer service, you're going to need to get creative . . ." Jim Coyle suggests that this may involve putting in place effective service recovery programs that "fix problems when they are brought forth."

    Have we witnessed just the first phase of customer loyalty management initiatives? What directions should customer loyalty management take in the future? Is it really worth the money invested in it? What do you think?

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