Text 3 tying in an asset

Organisations with successful customer-responsive strategies are alike in a number of ways. There is a willingness to serve customers differently, with the best customers getting the best treatment. The airline industry, for example, has created multi-level frequent-flyer programmes, with dedicated reservation lines, priority upgrades, rapid check-in privileges and so on to recognise the best customers.

Decisions are based on detailed information about customers. Databases pull key data from internal operating systems (such as a retailer's transaction system) and merge it with information from external sources. This enables database marketing and “micro-marketing” campaigns.

A “have it your way” attitude prevails. This can range from tailoring messages to micro-segments ― such as Parents magazine in the US, which is customised according to the age of the buyer's children ― to Nordstrom's department store allowing its clerks to go through the entire store to put together clothing ensembles for their customers.

A customer-responsive strategy is likely to gain an advantage if it:

• delivers superior customer value by personalising the interaction;

• demonstrates trustworthiness;

• tightens connections with customers.

Too often, these are only traditional mass-marketing efforts that overwhelm consumers with too many products, messages and appeals for personal information. Often they are badly designed, as when a bank's “privileged” customers were sent offers of special credit-card rates that were normally available only to new customers. A lot of money has been wasted on short-term rewards through gifts or one-time reductions for loyal customers. These are nice to receive but do nothing to strengthen the relationship.

There was a time when there were no loyalty schemes in the UK grocery market (with the exception of Co-op's stamp scheme), but once Tesco started its scheme, all the others were forced to do the same. No doubt Tesco benefited because it was first, but for the rest, the frequency rewards became a costly burden. Once everyone has a programme, most customers are able to obtain points with whichever shop they use and loyalty patterns remain unchanged.

The difference between repeat behaviour and loyalty is that the former is for sale while the other is earned. This sums up why gifts and other one-time rewards have little lasting impact ― they demonstrate neither more benefits nor lower costs than the competition.

Guarantees, by contrast, build trust by symbolising a company's commitment to fair play with its customers. They also maintain the pressure on the entire organisation to continue to improve performance in order to avoid the costs and conflicts created by frequent payouts and replacements. Guarantees can also put intolerable pressure on competitors if they cannot match the terms. Xerox gained 4.5 percentage points of the office copier market when it introduced a “no questions asked” guarantee whereby customers could decide they wanted the copier replaced.