Friday, October 5, 2007

Customer Loyal Companies?

We often hear about companies trying to find their loyal customers. They do various analysis and build predictive models to find and predict the loyal one. But do any company ever try to be loyal to its customers?

This question went through my mind while doing some research on Life Time Value Analysis. This is actually a very tough question. And I feel the future of business lies on companies being customer loyal. They not only need to be customer focussed but should be customer centric. They should be doing much more than what customer expect from them to make the customers feel that the company is caring them.

This is however not easy. First let us see how can a company be loyal to its customers.
Campanies can identify their potential customers and do one or more of the following.
1. Share a part of the profit.
2. Distribute company shares.
3. Serve the customer in the way they wanted to be served.
4. Provide them some extra non-core services.
...... the list may go on.

A important point to note here is, if any of this step is done the service cost rises there by making the portfolio less profitable for the company.

Next way is to serve only the profitable customers and give quality service to them at affordable cost. The unprofitable are always the cost for the company, which in turn calls for making the service costly for all. The profitable customers are actually paying for the service to the others. This sounds lot better than the earlier steps but the problems are here too.

It leads to controlled growth of the portfolio of business, in turn making the operations cost very high which is passed to the profitable customers. So the further solution one can think of is to come to a optimal point where the operations cost per consumer is minimal.

Here lies the challenge. Let me give a few examples first.

Cost of iPhone was slashed to half for christmas season push and now many can afford to have it in US. The scenerio is unlike most early customers thought. They bought it to be seen as elites in the society like the MAC and Apple PC users. But this time their interest was compromised for higher cell phone market share by Apple. Here increased volume sales may have been done to bring AT&T back in competition to Verizon and Singular, and ultimately it may lead to better service to all iPhone users. But this was not what consumers were asking.

Many a times we hear companies coming up with offers for new customers. Few banks in India charged Rs. 100 while issuing Debit card to existing account holders while had a offer of free debit card for new account openers. I know few existing customers who argued with their banks and asked them to provide free debit card got it for free. But how about other thousands who didn't complain? They were simply cheated by their banks for being too loyal.

Does banks need to look at these campaigns? Yes, they will need to do. Not only banks, all companies have to pass their best service to their loyal and/or profitable customers because those customers deserve it. At all time it has to be done.

Few people may not agree with me. For them, I have more arguments. The world today has changed and consumers' behaviour is completely away from how they use to be ten years ago. The consumers are changed because they have lot more to do now than they had earlier. They have many passwords to remember, many type of accounts (savings, demat, trading, current etc), many friends and activities (linked by office, games, surroundings, party, music, gym etc) etc.
These busy customers thus try to decrease vendors for services so that there is less work to do, and fewer ids and passwords to remember. When they chose few, they go for the best. But there are many best in the market, all offer almost the same quality product. Thus these customers buy products after through research and references. They form user groups to make their voice heard and for mutual help too.

These consumers are very independent. But they are more dependent on others voices as they don't have time to experience everything themselves. Thankfully, they have access to user reviews through forums and blogs.

So now companies, the days of aggressive business is coming to an end. The day of valuatic business has started. Its all in the hands of customers now. They are powerful and they know everything. So its the time for customer centric business.

My final say is "A company sustains if it is making profit. And it grows if its customers are making profit."

This is all I have to say on this topic. Now its your turn to say. Please share your views through comments. Here are a few open questions to you all.
Does Companies need to be loyal to its customers?
How can companies be loyal?

Here are few of my earlier posts related to the topic, Brand Dilution is important and Customer Centricity.

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