Customer Loyalty Schemes in Automotive Sector

client Loyalty Schemes in Automotive SectorThe k straightwayledgeableness of node verity in the automotive sectorMarketers push for marking fealty, across al unitedly motorcarrefour ranges, from toothpaste to bigger leveragings such as a spic-and-span car. Within the travel sedulousness there is miniscule convergence deflexions in severally segment, as partnerships, coalitions and takeovers bind producers together.Each manufacturer is tenor to obtain label dedication, non totally at the point of purchase, d angiotensin-converting enzyme servicing the vehicle, supply split and encouraging repurchases. This tote ups appraise to the face, and increases profits.Loyalty schemes arrive at been a success in super grocerys and other sell placelets, abide this var. of merchandising be transferred to the automotive industry. This paper sets break through to review the f minor writings of the subject, contend what subjection schemes the automotive industr y advises its clients, and to centering on whiz manufacturing business Volvo.Volvo take a shit in the last decade sullen around flagging sales, this was achieved through placing a lavishlyer rank on their guests, who responded by increased usage of their helping parts.3.0 IntroductionThe eventual(prenominal) obtainment for marketers would be for complete grime faithfulness, across all crossway ranges, from toothpaste to larger purchases such as a new car. Although without any trade name faithfulty, organisations could non survive. So is it possible to increase cross out committedness through schemes that target the consumer?One of the hardest atomic function 18as to increase defect loyalty is the automotive industry. Manufacturers argon perpetually assigning discounts, free insurance, sales and other packages to attract new customers and to resell to existing consumers. Consumers expect a good service and deal as it leave behind be their second largest p urchase (a ho do being the first).The outlet of partnerships, coalitions and takeovers in the go industry has stick byed manufacturers together. This has left very unretentive product variediation, with more than trade on the filth than product. Manufacturers throw away to look for different methods to attract customers.Each manufacturer is motivated to obtain betray loyalty, not only at the point of purchase, through servicing the vehicle, supply parts and encouraging repurchases. This adds value to the organisation, and increases profits. The added value foot be the mad pull in the customer has with the brand.Customer loyalty is not a new notion, although it is now the accent of many PR actioners, retaining existing customers is more grand than attracted new. If you mislay your core customers a steeper take of resources is required to maintain the same direct of sales. Therefore its vital to maintain loyal customers to economic consumption economies of scales .Loyalty schemes start been a success in supermarkets and other retail outlets. Some schemes involve several brands collaborating to give the consumer a prime(a) of where to spend. The foreland is send word this form of merchandising be transferred to the automotive industry.This paper sets out to review the current writings of the subject, discuss in general what loyalty schemes the automotive industry offers its customers, and to management thus on one Manufacturer Volvo.Volvo was chosen for this explore as an example of using customer loyalty as a change agent to turn the organisation around. station loyalty is very inviolable with Volvo, although this did not correlate with the franchises.Volvo has introduced methods to increase loyalty with their dealerships. They have taken loyalty a step further and prove all supply chainsVolvo traditionally had a strong brand recognition, exactly went sales went into decline the organisation had to re-focus on core set. The me thods that Volvo apply to build the brand and to increase customer loyalty depart be discussed, comparing them to the literature. We be loyal to brands our degree differs as to how we value the meanness of the product. Can this be influence by strong marketing play? With such a large purchase as a vehicle can the manufacturers sway our opinion, or do we remain loyal to what we jazz and organized religion?4.0 MethodologyThis chapter discusses the research methods use for the project and the justification for the choice of methods. It discusses methods that were not used, with justification of why they were not allow ind. Included is a follow-up of methods selected, and with hindsight identifies any changes that would have intensifyd the research.This paper evaluates brand loyalty at heart the automobile industry. Selection of the topic was stimulated and formed out of all manufacturers offering loyalty schemes therefore could they somebody schemes succeed. The nature of th e research was discussed with colleagues and fellow worker students this not only added practical ideas and suggestions, it opened new avenues of thought. This was the discussed with lecturers sounding out ideas, gauging opinions and clarifying the question. Focusing in on the question was obtained by employing relevancy trees, narrowing the research ara. This gave direction tithe research, although with reviewing the literature this changed several multiplication (Buzan, J. 1995).Next, a research suggestion was compiled, with the benefit of organising ideas and setting a measure-scale for research. Theoretically, the proposal would highlight any delicateies with the research question and access to data. Creating a time-scale would focus on targets and meet deadlines in the completion of the paper.The literature review, discussing theories and ideas that exist on the topic formed the foundation of the paper. The findings from the research ar then tried on theories for validit y (Saunders, M. et al1997). The literature review was challenging, there is very little academic research specifically on the topic ara, although is a hook of research in the panopticr markets for example Supermarket loyalty schemes. Journals and books were the back bone for the review, together with internet sites.Tertiary data sources, such as library catalogues and indexes were used to scan for secondary data. This introduced journals and newspaper articles, books and Internet addresses. With the amount of literature, it took time to crystalize out relevant material to the research. Narrowing down the search chimes (1993) six points parameters was applied. Applying key words that were set in the first search produced relevant and up-to-date material (Bell, J.1993).A limitation on the literature search was the amount of time to bring all articles and books on the subject. Whilst reviewing the literature references to other publications were followed and reviewed. Bells che cklist on identifying the relevance of literature found was a practical method to reduce the amount of version (Bell, J. 1993).Ethical considerations in research fall into three categories, during design, collection, and reporting of the data. These beas were cautiously considered at all stages of the research (Oppenheim,A.199684). The data sought throughout the research should remain at heart the scope of the project (Saunders, M. et al 1997).Case studies of organisations that through varying factors have use customer loyalty schemes to improve market sh be have been reviewed and comp bed to the literature. The showcase studies discuss the organisations strategy in the use of the data they have collected. This information was gathered from secondary data and their sack sites.To produce primary data on brand loyalty deep down the automobile industry proved to be a vast task, fetching a lot of time to produce results. Internal and external trading operations of several organi sations would have tube compared to reach any level of validity. kind of it was decide to review previously make case studies, interviews and surveys. This was then compared to the literature review.Other methods of data collection were considered and rejected. Focus groups would have offered free current information. This could have been facilitated with discussion led by the researcher. The idea was rejected overdue to the limited resources.The major limitation of the study lies in its relatively depleted sample size and the limited coverage. This was principally attributable to the limited time and other resources available for the study.5.0 Literature reviewThis chapter lead review and discuss all the relevant published material on brand loyalty. This starts of dewy-eyed to gain insight into brands and the theory that has scramn brand loyalty.5.1 BrandsKotler (2000) described a brand as a name, term, symbol, or design (oar combination of them) which is intend to signify the goods or services of the seller or groups of sellers and to differentiate them from those of the competitors (Kotler (2000) cited in Groucutt, J etal 2004275). The brand is part of the products tangible features, its the verbal and somatic clues that help the consumer identify what they want and to influence choice (Groucutt, J et al 2004).The actual word brand is derived from a Norse word which mover to burn. It is assumed that this means to imprint ideas or symbols on product. This then gives the product identification and leaves lasting mark on the consumer (Groucutt, J et al 2004).Because product features are easily imitated brands have been considered a marketers major turncock for creating product differentiation. Even when differentiation based on product characteristics is possible, much consumers do not feel motivated oracle to analyse them in adequate depth. Therefore the combination of brand name and brand signification has become a core competitive asset in an e ver-growing function of contexts. Brands incite beliefs, evoke emotions and prompt demeanors (Aaker, D. (1991) cited in Kotler, Pand Gertner, D. 2002249).The brand in the automobile industry is of great importance, purchasing vehicle is a attitude indication for the consumer. Manufactures brand their vehicles to attract the target audience the next step is retaining the customer to the brand. This is not just for repurchase, there is great value in retaining the customer to the brand through out the life of their purchase (Kottler, P et al . 2005).5.0 Global BrandsThere are very few car manufactures products that are not a world(prenominal) brand. Their appeal can span in a multitude of markets. Each manufactures portfolio is designed to attract a wide audience.The rapid reading of telecommunication and strong consuming capability of offspring have created common demands, tastes and values globally in last both or three decades, which thus has driven international marketers to increasely focus on the importance of global brands. In recent years, global stigmatization has not only taken root, its in full bloom. As pricking Doyle (1998165) said Brands area the heart of marketing and business strategy The calculate of marketing is to create a preference for the companys brand. The trend towards global branding, moreover, is accelerating rapidly. undefeated global brands are powerful to obtain a number of benefits.Consumers are willing to pay a premium impairment for global brands they suggest credibility, high fictional character and up-to-date global trend. To the consumers, brand choice fair reflects a certain lifestyle, taste, image or even social status beyond the product. If they feel the brand fits into this category, theyll not only prefer it, but are similarly willing to a high(prenominal)(prenominal) price for it. Consumers encompass added values, its the the subjective beliefs of the customers (Doyle 1998168).Global branding can benef it the organisation by considerably cut tolls, not only because of the significant scales of delivery it achieved(Aaker 2000306) in terms of new brand development, packaging and manufacturing, but also because with global reputations can enter new markets at lower cost than new national brands if you move into a Newmarket with a brand that is already global in scope, it reduces the cost of introductory and follow-up marketing programs.Suppliers and distributors obtain a comparatively stable marketing environment and can obtain higher(prenominal) profit, with less risk by trading as business partners with global brands. Therefore companies that market global brands posses powerful work leverage, in bargaining with for efficient service and lower costs, they have more options on choosing its suppliers and retailers.Although there are many advantages to a global brand, each area has tube considered as an individual market. Firstly, culture and custom difference can lead to market di fference, which enhance the difficulty of growth of global brand. To meet the different preference of consumers in different countries, global brand may have to adjust its marketing strategy accordingly and make products. Secondly, localisation and increase in nationalism to somewhat extent may resist the marketing development of global brands. Thirdly, the political factories considered as some other main barrier to global brand. Last but not least, along with the technology improvement and product innovation, the rise of local competitors is becoming an needful threat to global brand.5.3 Brand BuildingOnce a brand is established it requires nurturing, to bring out the full potential and add value to the organisation. Kashia (1999) relys that powerful brands are built over time through a conscious management effort. This is achieved through strategic decision making and purloin actions. All brands need tube based on values and attributes that are permanent and, purposeful and fundamental to its strategy (Kashia (1999) cited in Groucutt, Jet al 2004285). Therefore by creating such values in an organisation it will provide direction and a future for the brand.A brand with strong brand equity is a valuable asset to an organisation. This asset is difficult to measure although it has emerged as key strategic asset. A powerful brand enjoys a high level of consumer awareness and loyalty, with the organisation benefiting from lower marketing costs relative to revenues. Consumers expect more outlets to carry strong brands therefore the organisation has more leverage when bargaining with retailers. This all adds to the brands equity, which unavoidably to be managed by the organisation (Kotler, P. etal 2005).This brand asset management is a concept that is closely related to positioning, since certain brands are central to a companys current and future exploit. They need to be managed, enhanced and protected as assets. This allows brand names like Coca-Cola, Sony, Intel and Disney to extend into new product categories, and produce product variants and services (Kotler, P. 2004).Brand asset management is an area of increasing importance to marketers today, especially as organisations move toward attempts to communicate ever decomposable and intangible messages, as part of brand management strategies (Davis, 2000 Goodchild and Callow, 2001). Brand managers are concerned with how to develop a better understanding of the appropriate family between brand equity and customer loyalty, particularly in relative to the multitude of known variables to customer loyalty (Davis, (2000) Goodchild and Callow (2001) cited in Taylor, S. et al 2004219).It is vital that marketers position the brand correctly, and consider the fit with its attributes, values, culture, benefits, and personalizedity. For example Mercedes suggests that it attributes are well engineered and well built, it is durable, high prestige, fast and expensive. These attributes tell t he consumer the benefits and values that are placed in the product. These attributes represent the German philosophy and culture, which reassures the consumer the high value of the product. The personality of the product is wealthy, well-built and reliable (Kotler, P. 2005).Within the Motor manufacture it is difficult to extend products without inexpensive development and launch of a new vehicle, although continual research and development are vital to maintaining market position. numerous manufacturers have extended their brands by introducing for example clo involvement, toys, consumables and sporting equipment. These are retailed mainly through their ne iirk of dealerships, utilising economies of scale. These items are inclusive to them, adding value to the products(Johnson, G Scholes J 2004).The emerging literature suggests that customer brand loyalty is generally considered the supreme desirable marketing-based outcome from strategic marketing activi confiscates (Chaudhuri, (1999) Gwinner et al.,(1998) Kumar, (1999) Mittal and Lassar (1998) Reichfeld and Schefter,(2000) Strauss and Friege, (1999) Kotler (1999) have all published article that point to loyalty as the ultimate attainment in marketing. This assertion is largely based on the growing influence of the alliance marketing orientation on marketing theory and practice (Taylor, S. et al 2004219)5.4 Brand LoyaltyBrands have a personality and speak for the user. They enhance the comprehend utility and desirability of a product. Brands have the ability to add to or subtract from the sensed value of a product. On one hand, consumers expect to pay lower prices for unbranded products or for those with low brand equities. On the other hand, they pay premiums for their treasured or socially cherished brands. Brands have equity for both customers and investors. Brand equity translates into customer preference, loyalty and financial gains. Brands are appraised and traded in the marketplace. Brand equit y has been pointed out to include many dimensions, such as performance, social image, value, trustworthiness and identification (Kotler, P and Gertner, D. 2002)The four types of brand loyalty are characterised as (1) No loyalty No purchase at all, and a complete lack of bail bond to the brand, no social influences to be even cognitively loyal to a brand. (2) Covetous loyalty No purchase but, unlike the case of no loyalty, the individual exhibits a very high level of relative trammel to the brand as well as a strong corroborative predisposition towards the brand, which is developed from the social environment. (3) Inertia loyalty An individual, although purchasing the brand, does so out of habit, convenience or for some other reason, but not as a consequence of emotional supplement to the brand or a real social motive. (4) support loyalty An individual exhibits a high degree of relative attachment tithe brand, a high instance of repeat purchases, and appears to be highly influen ced by social pressure. Premium loyalty is characterised by the greatest degree of consumer attachment to the brand, and in this case the consumer purposefully seeks to purchase the particular brand, while attempting to overcome obstacles (Gounaris, S. and Stathakopoulos, V. 2004).Chaudhuri and Holbrook (2001) proposed a feign of brand loyalty that suggests that purchase loyalty tends to lead to greater market share, while attitudinal loyalty leads to higher relative brand pricing. Morgan (2000) suggests that the term loyal can be interpreted indifferent ways, ranging from printive loyalty (what I feel) to behavioural loyalty (what I do). Thus separating loyalty into emotional and actionable (Chaudhuri and Holbrook (2001) and Morgan(2000) cited in Taylor, S. et al 2004221).There are different levels of trust that affect brand loyalty, they are(1) calculus-based trust, the consumer believes it is in the service provider interest are not to suffer the loss of reputation and profits( 2) Knowledge-based trust, as the name suggests, is based on knowing the service firm well and being able to endure its actions. Effective two-way communication is important for knowledge-based trust to develop because it ensures that the parties swap information about their preferences and approaches to problems. (3) Customers with identification-based trust have full confidence in the service company and believe that it will act in their trounce interests. The service provider has in-depth knowledge of customers needs and desires, and customers perceive that their desires are fulfilled, and they overlap values (Liljander, V. and Roos, I. 2002)In terms of brand purchase expectations, the implicit presumption is that a satisfied customer will remain loyal to the brand (all other factors being equal). In the modern automotive marketing environment, this is thusly a fair assumption to make. The degree of price competition at the retail level is so intense that, when factoring in discounts, rebates and low interest finance rates, price parity inevitably results.Furthermore, the growing oligopolisation of the manufacturing industry (e.g. Ford owning/controlling Jaguar, Mazda,Volvo and Aston Martin) and co-operation between manufacturers (e.g.Ford/VW, Ford/Nissan, GM/Toyota) has resulted in few, if any, sustainable product differences (Liljander, V. and Roos, I. 2002)Is brand loyalty resistance to change? The literature accepts that committal is central to kind marketing. There is a link between commitment, trust and loyalty. Pritchard et al. (1999) define commitment as the emotional or psychological attachment to a brand. They argue that resistance to change is the root disposition of commitments well as the primary evidence of commitment, and that resistance to change is a key antecedent to loyalty (Pritchard et al. (1999) cited in Taylor, S. et al 2004221).5.5 kinship marketOrganisations should build a stronger relationship with their profitable custom ers. There are 5 different levels of relationship marketing that can be practiced. The staple fibre level does not really involve building a relationship, for example it is when a car salesperson smiles and sells you a car and waves good-bye as you drive it off the lot. You never see him again if you need service you let loose to someone in the service department. Very few auto dealership systems succeed in building such a strong bond between the dealership and the client that the client keeps buying from the same dealership (Kotler,P. 199252).Reactive marketing is the next level of relating. At this level, as the salesperson waves good-bye to the customer, he swears, By the way, if theres any problem, please call me. You dont have to call the service department I am responsible for your gaiety The employee has taken on some of the responsibility of managing the customers needs(Kotler, P. 199252).A higher form of relationship is accountability. At this level, the salesperson calls the new car owner within two weeks of the sale and asks how he likes the car, and if there is any way the car could have been better. Those salespeople often get an earful. The customer might say, I wish the entry had a pocket for maps. I wish there was a promote window wiper. At that point, the dealer should ask, How much would it have been worth to you if the car did have a map pocket in the door and john window wiper? That type of information will help the automobile manufacturer continuously improve its product (Kotler, P. 199252).Still, a higher level is proactive, where the salesperson will call the customer from time to time and say The manufacturer has developed product that will help you save fuel, its something we can add to your engine and it will reduce your fuel costs. Customers get a sense that the company still is interested in their needs. Partnerships are the ultimate form of relationship marketing. They involve actually living with the customer and are mos tly confined to business-to-business relationships (Kotler, P. 199252).Each level requires more cost, so it is important for organisations to determine when it is worth going to the next level. Two dimensions that are particularly critical are the margin that the firm makes on the business and the number of customers making purchases. For example, allow-margin business with many customers, for example selling toothpaste would operate at the basic level. The organisation has so many customers for that product and makes so little per unit that it would not be cost-effective to develop a high-altitude relationship (Kotler, P.199252).There are five levels of response for each customer service and retention tool. Those levels vary within companies an organisation might be reactive with treasure to technical care, accountable with respect to service and basic in terms of value-added. The important thing is to know where your competitors stand, what is their profile with respect to rela tionship investments, and what things should you do to be superior to the target market.5.6 Service woodlandThe organisation has to decide and implement which level of value-added service it will offer its customers. This experience of the customer will reflect in brand loyalty.Relationship marketing strategy will decide the level of service customer will receive. For example on the basic level technical assistance might be a owners manual, yet on the reactive level possibly help line, at the level of accountability, perhaps an occasional visit to the customer to see if the customer is using the product correctly and efficiently(Kotler, P. 199252).Training of employees would appropriate at the proactive level. This can offer the customer a higher level of service, making them feel precious by the organisation. Many manufacturers offer in house training to the employees within the dealerships. This not only trains employees to a similar level of customer service skills, it reinforc es the brand. The customers experience of the brand is uniform across the manufacturers network (Kotler, P. 199252).Frequently organisations move from one strategic possibility to another with little consideration of their natural progression. This has been the case for many companies that have moved from an emphasis on bore in the 1980s, to customer satisfaction in the early 1990s, to customer loyalty and retention today. Managers proclaim that they have moved beyond quality and customer satisfaction to focus on what really matters, namely loyalty and profitability. Although it is argued that there is no such thing as moving beyond quality and satisfaction. They are essential building blocks toward building loyalty and a valuable business organisation. (Gustafsson, A. and Johnson, M. 2002249).The service quality perceived by the customer varies across the spectrum. Relationship benefits are perceived advantages that the regular customer receives over and above the core service. T hese are rewards the individual has gained over time by being a regular customer. The benefits tie him or her to the company by making it unattractive to switch providers. They may take the form of loyalty programmes, which are offered to all customers, or benefits that can be customised to individual consumers (Liljander, V. and Roos, I. 2002) . This then becomes a relationship benefit, but only when it is not offered to any customer who enters the dealership, regardless of relationship length. However, companies may believe that they are offering benefits, but only customers can tell if they are experiencing any. Therefore the level of service received is subjective (Liljander,V. and Roos, I. 2002)5.7 Customer judgeCustomer value management (CVM) has become a major focus in current marketing, as value marketing has become a slogan among marketing practitioners. Sinha, I and DeSarbo, W. (1998) defined this as in the marketplace, value often is defined as quality at the right pric e and is seen as more important to consumers than quality, because value is quality that the consumers can devote (Sinha, I and DeSarbo, W.1998236).Zeithaml (1988) reports considerable heterogeneity among consumers in the integration of the underlying dimensions of perceived value. They define the perceived value as a trade-off of higher order abstractions, such as perceived benefits and sacrifice, which are formed from both intrinsic and extrinsic product attributes, including texture, quality, price, performance, service, and brand name (Zeithaml(1988) cited in Sinha, I and DeSarbo, W. 1998236). Zeithaml 1988236)There is a strong link between relationship marketing and customer value, the higher value placed on the customer will reflect in their purchasing choices. True and spurious relationships are the fundamental points on a continuum. At the lower end, customers may be behaviourally attached to the service but satisfaction is only latent. At the higher end, customers are mor e manifestly satisfied and more affectively committed to the service (Liljander, V. and Roos, I. 2002) pluck (2000) proposed three relationship levels of customer perceived value. These are based on financial, social and morphologic bonds. Financial bonds, such as loyalty programmes, are considered the weakest form and may only lead to spurious relationships Social and structural bonds are more closely related to true customer relationships. consort to Berry (2000), structural bonds offer value-adding problem solutions that are not hooked on individual service representatives, and which are difficult for competitors to copy (Berry (2000) cited inLiljander, V. and Roos, I. 2002598)5.8 Customer LoyaltyCustomer satisfaction can be considered the central determinative in all phases of the contact chain. Multi-dimensional recording of customer loyalty reveals move in differences in the interactions first with brand loyalty and, second, with dealer loyalty. In crinkle to the opinion widely held in practice, customers in the automotive sector emphatically do not perceive the brand and the dealer as one unit. The results obtained are so fundamental that they can be translated into implications even by internationally operating companies (Huber, F and Herrmann, A 2001)The relationship between the purchase intention and customer satisfaction has been widely investigated (for example, Oliver 1980Bearden and Teel 1983). The evidence suggests that there is a strong positive relationship between the two. Several of these studies indicate that higher levels of satisfaction lead to greater customer loyalty (Yi (1991) Anderson and Sullivan (1993) Boulding, Staelin,Kalra, and Zeithaml (1993) all cited in Dervaraj, S. et al 2001425)Consumers who purchase higher quality vehicles expect to receive higher quality service, therefore the assumption is made that poor service will lead to greater dissatisfaction among those that purchase the higher quality vehicles. Conlon, et al (1997) sight that customers who purchase higher quality rated vehicles are more likely to use dealer facilities to maintain their vehicles (Conlon, et al(1997) cited in Dervaraj, S. et al 2001425)An explanation for such behaviour is that there is a correlation between the perception of vehicle quality and the perception of the quality of service at dealer facilities. Therefore, high customer expectations of service quality can lead to better service performance which, in turn, this positively influences customer satisfaction with service. Therefore in the higher end of the industry there is greater loyalty (Dervaraj, S. et al 2001425)Oliver (1999) suggests that ultimate customer loyalty is a function of perceived product superiority, personal fortitude, social bonding, and their synergistic effects. His arguments generally support the assertion that measures of loyalty that are constrained only to repurchase considerations fail to capture the richness of the loyalty construct (Ol iver (1999)cited in Taylor, S. et al 2004219).If loyalty is essentially an irrational and emotional attachment to product, service or business, then marketers need to focus on elements that create this emotional attachment. In developing a strategy that draws on the irrational attitudes of consumers, brand equity plays an important role. All the elements that contribute to the development of brand equity are difficult to mea