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An Investigation of the Factors that impact on customer loyalty at M&E Commercial Engineers Ltd

BY SHIRIN GEERDHARRY

Research Proposal submitted in partial fulfillment of the requirements for the degree of Master in Business Administration

In the Department of Business Studies Management College of Southern Africa

2013

Table of Contents
1.0 Introduction1 2.0 Research Context: Background.2 3.0 The Research Problem...3 4.0 Aim of the Study...3 5.0 Research Objectives...3 6.0 Research Questions3 7.0 Significance of the Study..4 8.0 Literature Review..4 8.1 Customer Loyalty..4 8.2 Impact on the company.5 8.3 Customer Relationship Management...6 8.4 Value Chain Configuration...6 8.5 The Strengths and Weaknesses of a firm to gain Customer Loyalty.8 8.6 Barriers to Customer Loyalty9 8.7 Recommendations on how to improve customer loyalty...10 9.0 Research Design and Methodology.....11 9.1 The Research Methodology.....11 9.2 Sampling Strategy....12 9.3 Data Collection Instruments....13 9.3.1 9.3.2 9.3.3 List questions...14 Category questions..15 Rating questions..15 Inductively based analytical procedures.17 Testing for reliability...19

9.4 Data Analysis... 17 9.4.1 9.4.2

9.5 Pilot Study.20 10.0 Ethical Considerations21 10.1 10.2 Ensuring participants have given formal consent.22 Ensuring no harm comes to participants...22

10.3 11.0 12.0 13.0 14.0

Ensuring that permission is obtained...22

Chapter Organisation.23 Proposed Time Table.24 Bibliography...25 Appendices Appendix A: Draft of Covering Letter..26 Appendix B: Letter for Requesting Permission to carry out the Study.27 Appendix C: Questionnaire...........28

1.0 Introduction Anonymous, 2013: 26, customer loyalty is the result of consistently positive emotional experience, physical attribute-based satisfaction and perceived value of an experience, which includes the product or services. Customers become loyal because of the emotional bond that is built between the customers and the firm or company. To build customer loyalty, customer experience management blends the physical, emotional and value elements of an experience into one cohesive experience. According to beyond philosophy Building Great Customer Experiences, it is found that retaining customers is less expensive than acquiring new ones, and customer experience management is the most cost-effective way to drive customer satisfaction, customer retention and customer loyalty. Not only do loyal customers ensure sales, but they are also more likely to purchase ancillary, high-margin supplemental products and services. Loyal customers reduce costs associated with consumer education and marketing, especially when they become Net Promoters for an organisation. Given the highly commoditized competitive landscape today, customer experience programs are the most effective way to differentiate an organisation from the competition. Such differentiation effectively drives customer loyalty when customers are engaged on an emotional, intellectual, or even spiritual level, and when a customer cherishes a product or service before, during and after its use. In terms of customer loyalty, customer experience management proves itself as a sustainable competitive advantage. The purpose of this study is to investigate the factors that impact on customer loyalty at M&E Commercial Engineers Ltd. The background to the problem will be discussed; the aims and objectives of this study will be laid out, followed by the literature review and the chosen research methodology. Thereafter, the factors that impact on customer loyalty at M&E Commercial Engineers Ltd will be identified and recommendations will be made to management on solutions to improve customer loyalty thus increasing the annual turnover.

2.0 Research Context: Background Anonymous, 2013: 27, customer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in larger quantities and bring more customers. Anonymous, 2013: Customer loyalty is one of the most frequently addressed subjects in the marketing and service literature. The subject has gain attention of service companies because of its importance to the successful running of any business. Issues involving loyalty in service organizations have drawn the attention of various researchers concerned with finding the determinants of customer loyalty and their implications in service industries. Most of the studies on this matter have concluded that customer satisfaction is one of the major determinants of customer loyalty. Other studies have found that service quality is a strong determinant of customer satisfaction and customer loyalty. Moreover, value chain can be used to analyse the specific activities through which firms can create a competitive advantage. It is useful to model the firm as a chain of value creating activities. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit margin. M&E Commercial Engineers Ltd is a company providing consultancy and contracting services in the field of Mechanical and Electrical Engineering. Its major activities deal with the mounting of electrical boards for motor starters. It undertakes projects in the industrial sector such as the sugar milling and refinery and other industries such as Coca Cola, Panagora among many others. It also provides services for the design and installation of solar photovoltaic panels and wind turbines that is, producing electricity from renewable sources of energy. The company imports most of its components and equipment that is used in providing its services. The company was created in the year 2002, it started small and gradually the number of personnel was increased. It was noted that the annual turnover since its creation to the year 2009 was increasing gradually then after 2010, a fall in the annual turnover was noted.

3.0 The Research Problem A decrease in sales was noted starting from the year beginning of 2011 to 2012 and consequently a considerable amount of goods that was ordered remained in store as stock items and also the number of projects obtained was diminishing thus causing a decrease in the companys cash flow and annual turnover. The causes of this decline in sales and consequent deteriorating cash flow have not so far been formally analysed by Management. In order to secure its sales and create a stable base of customers, M&E Commercial Engineers Ltd needs to analyse these causes and develop a strategy that builds on customer loyalty. 4.0 Aim of the Study The aim of this study is to investigate the factors or variables of M&E Commercial Engineers which impact on customer loyalty. 5.0 Research Objectives To determine the factors/variables that contributes to M&E customer loyalty To investigate whether M&E value chain configuration supports customer loyalty To identify the strengths and weaknesses in the firms ability to gain customer loyalty To analyse potential barriers to customer loyalty To provide recommendations to M&E management on solutions to improve customer loyalty through better service delivery 6.0 Research Questions What are the factors/variables that impact on customer loyalty? What are the components of M&E value chain configuration that supports customer loyalty? What are the strengths and weaknesses in the firms ability to gain customer loyalty? What are the potential barriers to customer loyalty? What is the impact of a better service delivery on customer loyalty?

7.0 Significance of the Study There has been no known study to find out firstly the factors that impact on customer loyalty at M&E Commercial Engineers Ltd and secondly whether M&E value chain supports customer loyalty. The research is therefore important to find out what are the factors that impact on customer loyalty and also to determine the elements of the value chain that supports customer loyalty. It is only in the light of this study that the factors that impact on customer loyalty can be determined and the elements of the value chain that supports customer loyalty can be identified. The research will benefit both the employer and employees at M&E Commercial Engineers Ltd and other similar businesses encountering the same difficulty, as in general many service oriented companies are facing this problem. Employees will also benefit from this study because if a company is performing well in terms of sales and delivering good service to its customers there is no doubt that its sales will increase and thus it will have more means to re-numerate its employees in terms of benefits and increments on their salary. 8.0 Literature Review This section provides an outline of how customer loyalty has contributed to increased sales in companies. 8.1 Customer Loyalty According to Clark (2006: 29), the theory of customer loyalty is quite simple: a business that retains its customers for longer usually makes more money from them at lower cost than one that is constantly paying to acquire new customers. The basic principles are simple, too: know your customers, and only reward them for behaving in the way that you want. Anonymous, 2013:44, existing customers are among the most important assets of a business they have already chosen a given company instead of competitors. Keeping them costs far less than attracting new business, so it is worth taking steps to make sure that they are satisfied with the service they are receiving. There are a number of techniques that can be employed, including:

Providing a free customer helpline Answering frequently asked question on the companys website Following up sales with a courtesy call Providing free products that will help customers look after or make the most of their purchases Sending reminders when services or check-ups are due Offering preferential discounts to existing customers on further purchases

Anonymous, 2013:44, existing customer relationship provides opportunities to increase sales because these customers already have a degree of trust in the recommendations that are made to them. Anonymous, 2013:44, cross-selling and up-selling are ways of increasing either the range or the value of what are being sold by pointing out new purchase possibilities to these customers. Alerting customers when new upgraded or complimentary products become available perhaps through regular emails or newsletters is one way of increasing sales. To retain customers trust, we must ensure that we are not selling to them something that does not meet their needs. Anonymous, 2013:44, it should be remembered that our aim is to build a solid long-term relationship with customers rather than making quick one-off profits. Anonymous, 2013:44, studies have shown that loyal customers will contribute to a business for years, through their purchases and through recommendations and referrals of that particular business. 8.2 Impact on the company Loyal customers directly impact companys profitability Anonymous, 2013:56, there are many ways in which it pays to earn the true loyalty of customers. For example: loyal customers buy more, and are often willing to pay more, which means a steadier cash flow; loyal customers tend to refer others to your business, thus saving the marketing and advertising costs of acquiring them as customers; loyal customers are more forgiving when mistakes are made - even big ones (especially if there is a system in place that empowers employees to correct errors on the spot, in which case even greater loyalty is usually

earned); A loyal customer's endorsement is more powerful to their family and friends than any ad campaign; Thriving companies with high customer and employee loyalty levels are generally seen to outpace their competitors; loyal customers become familiar with the way of a particular business, and are usually the first to see and report opportunities for improvement; and of course an increase in customer retention can boost bottom line profits significantly. 8.3 Customer Relationship Management Successful CRM (customer relationship management) According to Clark (2006: 39), the loyalty of customers stems from building relationships with them, and those relationships have to be managed. This is where CRM comes in. Whether the relationships are finely tuned as to be one-to-one relationships, or whether they are in bigger segments or groups, the principles of management are similar. Over the past decade CRM has come to be regarded by many marketers as being synonymous with huge, costly IT systems. But many of the big companies have now passed through that stage, and are focusing more on explaining to both employees and customers the benefits of the system, and streamlining the laborious processes of data collection. CRM's reputation is improving - it is making a comeback. Some of the key faults that can cause CRM projects to fail or prevent delivery of the expected return on investment - ROI are a reliance on technology as a global 'cure-all' and downplaying the importance of management level buy-in. But having the correct focus and commitment can significantly improve a CRM initiative's performance. According to IBM's research, CRM should be run at the corporate level or with a cross-functional perspective - and when this is the case, there is a 25-60% greater chance of success. 8.4 Value Chain Configuration In order to understand the activities through which a firm develops a competitive advantage, it is useful to separate the business system into a series of value generating activities referred to as value chain. [Online from: http://www.netmba.com/strategy/value-chain/]. Michael Porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. Porter identified primary and support activities.

The goal of these activities is to offer the customer a level of value that exceeds the cost of these activities, thereby resulting in a profit margin. The primary value chain activities are: Inbound Logistics: the receiving and warehousing of raw materials and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods. Marketing and sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.

These primary activities are supported by: The infrastructure of the firm: organisational structure, control systems, company culture. Human resource management: employee recruiting, hiring, training, development and compensation. Technology development: technologies to support value creating activities. Procurement: purchasing inputs such as materials, supplies and equipment.

The firms margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the product exceeds the cost of the activities in the value chain. It is in these activities that the firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation. The value chain model is a useful analysis tool for defining a firms core competitive advantage as follows: Cost advantage: by better understanding costs and squeezing them out of the value adding activities. Differentiation: by focusing on those activities associated with core competencies and capabilities in order to perform better than do competitors.

Cost Advantage and the Value Chain A firm may create a cost advantage either by reducing the cost of individual value chain activities or by reconfiguring the value chain. Once the value chain is defined, a cost analysis can be performed by assigning costs to the value chain activities. The costs obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activities. Porter identified 10 cost drivers related to value chain activities: Economies of scale Learning Capacity utilization Linkage among activities Interrelationships among business units Degree of vertical integration Timing of market entry Firms policy of cost or differentiation Geographical location Institutional factors (regulation, union activity, taxes, etc.)

A firm develops a cost advantage by controlling these drivers better than do competitors. A cost advantage also can be pursued by reconfiguring the value chain. Reconfiguration means structural changes such as a new production process, new distribution channels, or a different sales approach. [Online from: http://www.netmba.com/strategy/value-chain/]. 8.5 The Strengths and Weaknesses of a firm to gain Customer Loyalty This part describes the strengths and weaknesses in the firms ability to gain customer loyalty. According Recklies (2013:47), the SWOT-Analysis is one of the most common strategic management models. According to Mintzberg, the SWOT originates from the so called Design School, which seeks to establish a fit between an organisations strengths and weaknesses with the opportunities and threats in its external environment.

The SWOT compiles the most important results from the analysis of external drivers and the analysis internal competences of an organization. The objective of the SWOT is to determine to what degree the actual strategy is suitable and appropriate to meet the challenges and changes in the organizations environment. The SW-Part comprises internal factors the strengths and weaknesses of the organisation. These are competences and resources that the organisation possesses and that are under its control. Strengths and weaknesses can relate to a variety of aspects and may depend on the actual situation. Typical areas from which strengths or weaknesses can arise are for instance: Employees know-how and competences Quality of internal processes Financial situation, financial structure Ownership / shareholder structure Market position Relationships to customers, suppliers and networks R&D capabilities, resources and capacities Corporate culture and many more

8.6 Barriers to Customer Loyalty The following gives the potential barriers that can affect customer loyalty: According to Colbourn (2013:52), poor experience that customers may have with the company such as a job that was not well done or late delivery of a project. Spam, irrelevant emails and weak, meaningless offers all lead customers to conclude that the salesman (or retailer) is not interested in them as an individual, but is out for the quick transaction. That sense of anonymity leads to a loss of connection and eventually a loss of loyalty. Poor, policy-based treatment in person by disinterested staff, either on the phone or in person, has the same result (often quicker).

Loss of trust or confidence that a customer might have had with a company Employees that are not trained on how to give customer service; often fail to meet customers satisfaction. It is known that customer service standouts tend to have extensive employee training and talent management programs. The company also tends to treat workers well by giving them incentives, robust career development paths and other benefits.

Unsatisfied employees tend to provide bad customer service. Businesses must adopt human resource policies to make sure that employees are satisfied in their jobs and convey that satisfaction to customers.

Marketers and business leaders must focus on customer experience across channels to demonstrate loyalty only then will loyalty be reciprocated.

8.7 Recommendations on how to improve customer loyalty According to Greenwell, the following indicates ten ways of how to improve customer loyalty: Customers who do business with us must be thanked in writing. The value of the product or service will determine what is appropriate. High cost service deals warrant a handwritten note; even smaller cost transaction companies can send pre-printed appreciation notes to customers on a scheduled basis. Existing and past clients must be contacted on a consistent basis by either using phone calls, note cards or postcards, newsletters, and e-mails are only some ideas. Opportunities for personal contact should also be considered. By not forgetting them, they wont forget us. Customers must be given more than they expect. Anticipate a need and fill it. Answer a question before they ask it. Delivering more than they expect is one of the most powerful ways to gain customer loyalty. Listen. Time shall be taken to truly listen to what customers want, and if they dont give information it should be asked for.

Customers must be treated in a polite manner, words such as please and thank you shall be used. We must be on time for meetings. Phone calls and e-mail messages shall be replied promply.

Realistic promises must be made and shall be consistent. It is far better to promise something in a week and deliver in three days than the other way around.

Information must be shared. As such, pertinent articles or information that may be valuable or simply interesting to a client must be sent. Ways to help customers learn must be sought.

We must try to give referrals to clients. Whenever possible send business back to a client, and let them know that we are doing it. As far as possible we must explain how things work and when selling a product, show the clients how to use it. If we sell a service, explain what the customer can do to maximize its value.

Customers must be won (customer relationship management), and good care must be taken of them. [From 10 ways to improve customer loyalty]

9.0 Research Design and Methodology In this section the research design and methodology that will be used for this research will be elaborated. 9.1 The Research Methodology In this research the qualitative research approach will be used. Qualitative research is a method of inquiry employed in many different academic disciplines, traditionally in the social sciences, but also in market research and further contexts. Qualitative researchers aim to gather an indepth understanding of human behaviour and the reasons that govern such behaviour. The qualitative method investigates the why and how of decision making, not just what, where, when. Hence, smaller but focused samples are more often needed than large samples. In the conventional view, qualitative methods produce information only on the particular cases studied, and any more general conclusions are only propositions .(Wikipedia)

9.2 Sampling Strategy To answer the research objectives and questions, data needs to be collected. However, according to Saunders, Lewis and Thornhill (2009:150), it is impossible to collect all the data available due to time, money or access restrictions. Therefore sampling strategy is used to reduce the amount of data by considering data from sub-group rather than all possible cases or elements. Cooper and Schindler (2003: 183) state that there are two types of sampling techniques: Non probability sampling technique Probability sampling techniques

A probability sampling is one in which every unit in the population has a chance (greater than zero) of being selected in the sample, and this probability can be accurately determined. The combination of these traits makes it possible to produce unbiased estimates of population totals, by weighting sampled units according to their probability of selection. Probability sampling includes: Simple Random Sampling, Systematic Sampling, Stratified Sampling, Probability Proportional to Size Sampling, and Cluster or Multistage Sampling. These various ways of probability sampling have two things in common: 1. Every element has a known nonzero probability of being sampled and 2. Involves random selection at some point. Non-probability sampling is any sampling method where some elements of the population have no chance of selection (these are sometimes referred to as 'out of coverage'/'undercovered'), or where the probability of selection can't be accurately determined. It involves the selection of elements based on assumptions regarding the population of interest, which forms the criteria for selection. Hence, because the selection of elements is non random, non-probability sampling does not allow the estimation of sampling errors. These conditions give rise to exclusion bias, placing limits on how much information a sample can provide about the population. Information about the relationship between sample and population is limited, making it difficult to extrapolate from the sample to the population. Non-probability sampling methods include accidental sampling, quota sampling and purposive sampling. In addition, non-response effects may turn any probability design into a non-

probability design if the characteristics of non-response are not well understood, since nonresponse effectively modifies each element's probability of being sampled. (Wikipedia) For this research, probability sampling will not be chosen because contrary to non-probability sampling, probability sampling requires to specify the probability that any case will be included in the sample. This is not possible because there is no sampling frame and moreover it will not be appropriate to answer the research objectives of this study. Therefore, non-probability sampling will be chosen. The suitable sample size would be 80 based on Quirks marketing research media, according to which the key point is that the qualitative sample must be big enough to assure that we are likely to hear most or all of the perceptions that might be important. Within a target market, different customers may have diverse perceptions. Therefore, the smaller the sample size, the narrower the range of perceptions we may hear. On the positive side, the larger the sample size, the less likely it is that we would fail to discover a perception that we would have wanted to know. In other words, our objective in designing qualitative research is to reduce the chances of discovery failure. (Quirks)

9.3 Data Collection Instruments Data Collection is an important aspect of any type of research study. Inaccurate data collection can impact the results of a study and ultimately lead to invalid results. Data collection methods for impact evaluation vary along a continuum. At the one end of this continuum are quantitative methods and at the other end of the continuum are Qualitative methods for data collection. According to Owen and Jones (1994), there are two types of data: Primary Data Data which is collected in response to specific questions and has been obtained for the purpose of this survey which is being undertaken. As such this data is unanalyzed.

Secondary Data Data which has been collected for another survey, another purpose. This data has already been processed. However, the questions from which data has been collected may not be the same as those in the survey being undertaken.

Questionnaires can be used to collect data about phenomena that is not directly observable (e.g. inner experiences, opinions, values, interests, etc.) They are more convenient to use than direct observation when used for collecting data on observable behaviour. The advantages of using questionnaires are as follows: 1) can be given to large groups, 2) respondents can complete the questionnaire at their own convenience, answer questions out of order, skip questions, take using questionnaires is less than with interviews. The questionnaire will contain the specific investigative questions to each research objective for which data needs to be gathered. The investigative questions will be in the form of list questions, category questions and rating questions.

9.3.1 List questions According to Saunders et al. (2009:375), list questions offer the respondent a list of responses, any of which they can choose. Such questions are useful when it is sure that the respondent has considered all possible responses. However, the list of responses must be defined clearly and meaningfully to the respondent. For structured interviews, it is often helpful to present the respondent with a prompt card listing all responses. The response categories vary widely and include yes/no, agree/disagree and applies/does not apply along with dont know or not sure.

9.3.2 Category questions According to Saunders et al. (2009:376), category questions are designed so that each respondents answer can fit only one category. Such questions are particularly useful if the data that needs to be collected is about behaviour or attributes. The number of categories can be included without affecting the accuracy of responses and is dependent on the type of questionnaire. Self-administered questionnaires and telephone questionnaires should usually

have no more than five response categories. Structured interviews can have more categories provided that the interviewer categorises the responses.

9.3.3 Rating questions Rating questions are often used to collect opinion data. Rating questions most frequently use the Likert-style rating scale in which the respondent is asked how strongly she or he agrees or disagrees with a statement or series of statements, usually on a four-, five-, six- or seven-point rating scale. Possible responses to rating questions should be presented in a straight line rather than in multiple lines or columns as this is how respondents are most likely to process the data. The questionnaire will consist of five sections: Section A Section A will contain questions, to help determine the background of the customer, the nature of business and the value of project that they were involved in. Section B Section B will contain questions, to help investigate whether M&E value chain configuration help to support customer loyalty. Section C Section C will contain questions, to help in knowing the strengths and weaknesses of the firms ability to gain customer loyalty. Section D Section D will contain questions, to help in investigating the potential barriers to customer loyalty. Section E Section E will contain questions that will contribute in providing recommendations to M&E management on how to improve customer loyalty. Another important stage of the data collection is the testing of the validity and reliability of the collected data.

For this research, the validity of the data will be accessed through the following stages: According to Saunders et al. (2009:372-373), internal validity in relation to questionnaires refers to the ability of the questionnaire to measure what is intended to measure. This means that what is there in the questionnaire actually represents the reality of what is being measured. Content validity refers to the extent to which the measurement device, in our case the measurement questions in the questionnaire, provides adequate coverage of the investigative questions. Judgement of what is adequate coverage can be made in a number of ways. One is through careful definition of the research through the literature review and, where appropriate, prior discussion with others. Another is to use a panel of individuals to assess whether each measurement question in the questionnaire is essential, useful but not essential, or not necessary. Criterion-related validity, also known as predictive validity, is concerned with the ability of the measures (questions) to make accurate predictions. This means that if the measurement questions are used within the questionnaire to predict customers future buying behaviours, then a test of these measurement questions criterion related validity will be the extent to which they actually predict these customers buying behaviours. In assessing criterion-related validity, the data from the questionnaire needs to be compared with that specified in the criterion in some way. Often this is undertaken using statistical analysis such as correlation. Construct validity refers to the extent to which measurement questions actually measure the presence of those constructs intended to measure. This term is normally used when referring to constructs such as attitude scales, aptitude and personality tests and the like and can be thought of as answering the question: How well can you generalise from the measurement questions to construct? Because validation of such constructs against existing data is difficult, other methods are used.

9.4 Data Analysis This section gives an idea about how data collected from the questionnaire will be analysed. A number of inductively based analytical procedures to analyse qualitative data are as shown below:
data

display and analysis;

template analysis;

analytic induction; grounded theory; discourse analysis; narrative analysis. In practice, however, a number of these analytical procedures combine inductive and deductive approaches to analyse qualitative data. There may be a number of good reasons for adopting an inductive approach to research project and the analysis of the data that are revealed. First, it is possible to commence an exploratory project seeking to generate a direction for further work. Second, the scope of a research may be constrained by adopting restrictive theoretical propositions that do not reflect the participants views and experience.

9.4.1 Inductively based analytical procedures (Bryman 1988), in this case, the use of a theoretically based approach to qualitative analysis would prove to be inadequate. The use of an inductive approach in such a case should allow a good fit to develop between the social reality of the research participants and the theory that emerges it will be grounded in that reality. This relationship should also mean that those who participated in the research process would understand any theory that emerges. Third, the theory may be used to suggest subsequent, appropriate action to be taken because it is specifically derived from the events and circumstances of the setting in which the research was conducted. Finally, the theorys generalisability may also be tested in other contexts (e.g. Glaser and Strauss 1967; Strauss and Corbin 2008). An inductive approach should not be used as a means of avoiding a proper level of preparation before commencing a research project. Researchers who use such an approach do not start to research a subject area without a competent level of knowledge about that area. Their research commences with a clearly defined research question and objectives, even though this may be altered by the nature of the data that they collect. For example, Hodson (1991, cited in Erlandson et al. 1993) reported that his initial purpose was focused on organisational sabotage, although the research process led him to develop and seek to verify a hypothesis related to more subtle forms of non-cooperation with an employer. The avoidance of a predetermined theoretical basis in this type of approach is related to the desire to

search for and recognise meanings in the data and to understand the social context and perceptions of your research participants. It is not to avoid the burden of producing this before the process of data collection! You will need to compare your explanations with existing theory once these have emerged. The use of an inductive approach may also involve in a lengthy period of data collection and concurrent analysis in order to analyse a theme adequately or to derive a well-grounded theory. Strauss and Corbin (2008) suggest that this type of approach may take months to complete. This is an important consideration if, like many students, a research project is time constrained by a submission date. Data display and analysis The data display and analysis approach is based on the work of Miles and Huberman (1994), whose book focuses on the process of doing analysis. For them, the process of analysis consists of three concurrent sub-processes: data reduction; data display; drawing and verifying conclusions.

As part of the process, data reduction includes summarising and simplifying the data collected and/or selectively focusing on some parts of this data. The aim of this process is to transform the data and to condense it. Miles and Huberman outline a number of methods for summarising data. These include the production of interview or observation summaries, document summaries, coding and categorising data and perhaps, constructing a narrative.

Data display involves organising and assembling data into summary diagrammatic or visual displays. Miles and Huberman describe a number of ways of displaying data, and refer to two main families of data display: matrices and networks. Matrices are generally tabular in form, with defined columns and rows, where data are entered selectively into the appropriate cells of such a matrix. A network is a collection of nodes or boxes that are joined or linked by lines, perhaps with arrows to indicate relationships. The boxes or nodes contain brief descriptions or labels to indicate variables.

9.4.2 Testing for reliability According to Saunders et al. (2009:372-373), reliability refers to consistency. Although for a questionnaire to be valid it must be reliable, this is not sufficient on its own. Respondents may consistently interpret a question in a questionnaire in one way, when something else is meant. As a consequence, although the question is reliable, it does not really matter as it has no internal validity and so will not enable research question to be answered. Reliability is therefore concerned with the robustness of the questionnaire and, in particular, whether or not it will produce consistent findings at different times and under different conditions, such as with different samples or, in the case of an interviewer-administered questionnaire, with different interviewers. Three common approaches to assessing reliability are outlined, in addition to comparing the data collected with other data from a variety of sources. Although the analysis for each of these is undertaken after data collection, they need to be considered at the questionnaire design stage.

They are: test re-test; internal consistency; alternative form.

Test re-test estimates of reliability are obtained by correlating data collected with those from the same questionnaire collected under as near equivalent conditions as possible. The questionnaire therefore needs to be administered twice to respondents. This may create difficulties, as it is often difficult to persuade respondents to answer the same questionnaire twice. In addition, the longer the time interval between the two questionnaires, the lower the likelihood that respondents will answer the same way. Internal consistency involves correlating the responses to each question in the questionnaire with those to other questions in the questionnaire. It therefore measures the consistency of responses across either all the questions or a sub-group of the questions from the questionnaire. The final approach to testing for reliability is alternative form. This offers some sense of the reliability within your questionnaire through comparing responses to alternative forms of the same question or groups of questions. Where questions are included for this purpose, usually in

longer questionnaires, they are often called check questions. However, it is often difficult to ensure that these questions are substantially equivalent. The final approach to testing for reliability is the alternative form. This offers some sense of the reliability within the questionnaire through comparing responses to alternative forms of the same question or groups of questions. Where questions are included for this purpose, usually in longer questionnaires, they are often called check questions. However, it is often difficult to ensure that these questions are substantially equivalent. Respondents may suffer from fatigue owing to the need to increase the length of the questionnaire, and they may spot the similar question and just refer back to their previous answer. It is therefore advisable to use check questions sparingly.

9.5 Pilot Study Prior to using the questionnaire to collect data it should be pilot tested. The purpose of the pilot test is to refine the questionnaire so that respondents will have no problems in answering the questions and there will be no problems in recording the data. In addition, it will help to obtain some assessment of the questions validity and the likely reliability of the data that will be collected. Preliminary analysis using the pilot test data can be undertaken to ensure that the data collected will enable investigative questions to be answered. Initially an expert or group of experts should be asked to comment on the representativeness and suitability of the questions. As well as allowing suggestions to be made on the structure of the questionnaire, this will help establish content validity and enable necessary amendments to be made prior to pilot testing with a group as similar as possible to the final population in the sample. For any research project there is a temptation to skip the pilot testing. Pilot testing is a trial run that enables us to know whether the questionnaire will succeed. As part of a pilot test each completed pilot questionnaire should be tested to ensure that respondents have had no problems understanding or answering questions and have followed all instructions correctly. Their responses will give an idea of the reliability and suitability of the questions. For self-administered questionnaires additional information about problems can be obtained by giving respondents a further short questionnaire. Bell (2005) suggests that the pilot study should be used to find out:

how long the questionnaire took to complete; the clarity of instructions; which, if any, questions were unclear or ambiguous; which, if any, questions the respondent felt uneasy about answering; whether in their opinion there were any major topic omissions; whether the layout was clear and attractive; any other comments. Saunders et al. (2009: 394)

For this research, a pilot test will be carried out with a sample of 10 respondents and their comments will serve to amend the final questionnaire. 10. Ethical Considerations Saunders et al. (2009:193) state that data collection stage is associated with a range of ethical issues. This section will give a summary of these ethical considerations that the research will abide to. 10.1 Ensuring participants have given formal consent According to Saunders et al. (2009:193), the concept of informed consent refers to the importance of informing the participants of the nature of the research study. 10.2 Ensuring no harm comes to participants The researcher must ensure that no harm comes to the participants to the research (Saunders et al., 2009:194). The research should ensure that the identity of all participants is protected (Saunders et al., 2009:194). 10.3 Ensuring that permission is obtained It is important that official channels are cleared by formally requesting permission to carry out a study (Saunders et al., 2009:194).

11.0 Chapter Organisation This section gives a draft of the contents of each of the chapter of the dissertation. Chapter 1 is the introduction which will give information about the research that is being undertaken. Chapter 2 is the Literature Review which will provide a critical analysis and evaluation of existing knowledge pertaining to each research problems that this research will seek to study. Chapter 3 is the Research Methodology where information about the chosen research methodology will be given. Chapter 4 is the Results, Discussion and Interpretation of Findings, Chapter 5 is the Conclusions and Recommendations which will consist of an introduction and conclusion.

12.0 Proposed Time Table Chapter 1 - Introduction 1st to 15th of April Chapter 2 Literature Review 15th April to 30th May Chapter 3 Research 1st June to 30th June Chapter 4 Results 1st July to 15th August Chapter 5 Conclusion 16th August to 15th of September Proof Read and Redraft 16th September to 15th October

13.0 Bibliography 1. Customer Loyalty What is customer loyalty Understanding the true definition of customer loyalty? From Beyond Philosophy- Building Great Customer Experiences. [Online]. Available from: http://www.beyondphilosophy.com/customerexperience/customer-loyalty Accessed on 20th February 2013 2. Customer Loyalty & Retention What is Customer Loyalty? [Online]. Available from: http://www.customerloyalty.org/what-is-customer-loyalty/ Accessed on 17th 2013 3. Clark, P. (2006) the wise marketer The 30 major factors behind a successful customer loyalty programme. [Online]. Available from: http://www.thewisemarketer.com/features/read.asp?id=89 Accessed on 22nd February 2013 4. http://en.wikipedia.org/wiki/Qualitative_research Accessed on 24th February 2013 5. http://en.wikipedia.org/wiki/Sampling_(statistics) Accessed on 24th February 2013 6. http://www.quirks.com/articles/a2000/20001202.aspx. Accessed on 24th February 2013 7. http://663studygroup.pbworks.com/w/page/1050543/Chapter%208%20%20Collecting%2 0Research%20Data%20with%20Questionnaires%20and%20Interviews Accessed on 2nd March, 2013 8. http://www.netmba.com/strategy/value-chain/ Accessed on 7th March 2013 9. [From the Manager.org] http://www.themanager.org/models/swot.htm. Accessed on 7th March 2013 10. http://knowledge.wharton.upenn.edu/article.cfm?articleid=2954 March 2013 11. http://www.cultivatingyourcustomers.com/2011/02/25/five-barriers-to-building-retailcustomer-loyalty-retailcustomerexperience-com/ Accessed on 8th March 2013 Accessed date: 10th February

12. Greenwell Lori, Manager of Marketing Communications for American Business

Advisors, Inc. -10 ways to improve customer loyalty [Online]. Available from: http://www.abadvisors.com/pdf/Loyalty%20article.PDF Accessed on 8th March 2013 13. Saunders, M.N., Lewis. P. and Thornhill, A. (2009). Research Methods for Business Students. 5th Edition. England: Pearson Education Ltd.

Customer Loyalty

What is Customer Loyalty?


Understanding the true definition of customer loyalty There are many definitions of customer loyalty. Yet each of them fails to realize that loyalty runs hand-in-hand with emotions. Customer loyalty is the result of consistently positive emotional experience, physical attribute-based satisfaction and perceived value of an experience, which includes the product or services. Consider who you yourself are loyal to. Surely youll answer family and friends. Why? Because of the emotional bond you have with them. Your family and friends can do things you may not like, but you stay loyal because of that bond. The same applies with customer loyalty. To prompt customer loyalty you must build an emotional bond with your customers. To build customer loyalty, customer experience management blends the physical, emotional and value elements of an experience into one cohesive experience. Retaining customers is less expensive than acquiring new ones, and customer experience management is the most cost-effective way to drive customer satisfaction, customer retention and customer loyalty. Not only do loyal customers ensure sales, but they are also more likely to purchase ancillary, high-margin supplemental products and services. Loyal customers reduce costs associated with consumer education and marketing, especially when they become Net Promoters for your organization. Given the highly commoditized competitive landscape today, customer experience programs are the most effective way to differentiate your organization from the competition. Such differentiation effectively drives customer loyalty when customers are engaged on an emotional, intellectual, or even spiritual level, and when a customer cherishes a product or service before, during and after its use. In terms of customer loyalty, customer experience management proves itself as a sustainable competitive advantage. Click here to learn how you can improve your customer loyalty.

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loyalty/#sthash.I7zBoXAJ.dpuf

What is Customer Loyalty?


Customer loyalty is all about attracting the right customer, getting them to buy, buy often, buy in higher quantities and bring you even more customers. However, that focus is not how you build customer loyalty. You build loyalty by

keeping touch with customers using email marketing, thank you cards and more. treating your team well so they treat your customers well. showing that you care and remembering what they like and dont like. You build it by rewarding them for choosing you over your competitors. You build it by truly giving a damn about them and figuring out how to make them more success, happy and joyful.

In short, you build customer loyalty by treating people how they want to be treated. Does your marketing plan include strategies and tactics for customer loyalty & customer retention?

Feature article...

The 30 major factors behind a successful customer loyalty programme

By Peter Clark (co-author, The Loyalty Guide) Published by The Wise Marketer in March 2006.

A good loyalty programme has the power to transform a business into a customer-centric profit machine. Here, we offer a thirty-point list of the major factors that directly impact the success and profitability of a customer loyalty programme... In this article, we've drawn guidance and data from The Loyalty Guide report, to offer practical insights into using customer loyalty programmes and data to increase not only customer retention but also customer lifetime value and profitability by means of a long-lasting customer relationship. We have purposely kept our focus on practical matters rather than merely expounding theory. The case for loyalty initiatives It is vital for the marketing department to contribute to the profitably of the business, and it has to be able to measure and demonstrate its contribution to profits, despite a the common misconception that marketing is a cost centre, not a profit centre. But at the same time, the marketplace is changing: customers are becoming more demanding, and competition is becoming more intense. It's becoming increasingly difficult to differentiate one business from another. Technology is providing some answers, but each answer brings more choices and more decisions to be made. However, it is sensible to:

Focus on the best customers that you already have; Optimise the profit that can be made from them; Increase the period in which they remain customers; Be able to produce measurable results of success.

Benefits of a loyalty programme A well designed and run loyalty programme can do all of these things. But it is just one aspect of a comprehensive marketing strategy. Having said that, if a loyalty

programme is used to full effect, it should be the central pillar of that strategy. The theory of customer loyalty is quite simple: a business that retains its customers for longer usually makes more money from them at lower cost than one that is constantly paying to acquire new customers. The basic principles are simple, too: know your customers, and only reward them for behaving in the way that you want. Through a loyalty programme, customer and transactional data can be collected, and the intelligent use of that data will provide a much clearer picture of the customer base - and this will lead to more profits from the beginning. A common question is "What proportion of turnover should a loyalty programme cost, and how long should it take before it begins to pay back?" Well, although there is no definite answer, a good loyalty programme will pay back from the very beginning. (Tesco's ClubCard - arguably one of the biggest and best-run loyalty programmes in the world today - actually made money from Day One.) Thirty factors that make loyalty pay... 1. Focus on acquiring data, not just repeat visits A so-called "loyalty programme" can't buy true loyalty - or even repeat visits - in any lasting way. This is a popular misconception. Early operators thought that the reward would be enough to bring customers back time after time. But it didn't take long to become apparent that they were mistaken. Customers simply carried many loyalty cards and collected points wherever they shopped. They were just as promiscuous as before. The smarter operators used loyalty programmes not to buy repeat visits but to garner information from their customers in order to learn more about them: who their most profitable and least profitable customers were, what they wanted, and what changes or offerings would be most likely to make them truly loyal. 2. Target customer acquisition more accurately A loyalty programme should attract new customers to the business. How effectively it does so will depend on how exciting and how valuable the rewards seem to be to the target audience. Acquiring customers is no doubt essential to any business, but it can be expensive if compared to nurturing existing good customers. But it should not be the central focus of the loyalty programme. However, the quality of new customers acquired can be raised by careful use of the existing data from a loyalty programme, which can be used to establish the demographic profiles of existing 'best

customers', and then to target prospective customers with similar demographic profiles in acquisition campaigns. 3. Move customers up the spend bands By grading rewards (for example, offering extra points for exceeding a specified spend threshold in a time period), customers can be moved up from one spend level to the next. A good example of this is how The Continuity Company (a provider of best customer marketing programmes) skews its rewards in its Best Customer Marketing programmes (also known as 'continuity programmes') to encourage lower-spending customers to move up through the spend segments. In one of the examples, the top spending band's contribution to sales increased by 41%, the next band down increased its contribution to sales by 45% and the lowest spend band decreased its contribution to sales by 7% (because customers from the lower spend segments had increased their average weekly spend and moved into higher spend segments). 4. Intelligent deselection of the least profitable customers It can be more profitable to lose bad customers than to gain new ones. 'Cherry pickers' (customers who buy only your discounted lines and nothing else) cost you money, as does any low-spending customer. They cost more money to service than they generate. Designing a loyalty programme that rewards better customers without rewarding this segment at all gives these less-desirable customers less reason to stay. In fact, the Syracuse, NY-based Green Hills Supermarket has observed that only around 30% of customers actually generate enough profit to cover the cost of servicing them. In Philip Kotler's version of a Pareto Principle chart, the top 20% of customers generate 80% of the profits, while the bottom 30% of customers eat up 50% of the profits that the others produce. 5. Win back profitable customers that have defected Customer win-back expert Michael Lowenstein (of Harris Interactive) says that the success rate in approaching 'lost' customers can be three to four times as high as it is when prospecting for new customers. For example, the rate for converting prospects might typically be 5%, while that for reactivating inactive customers might be as high as 15% - 20%. In the book Customer Winback by Jill Griffin and Michael Lowenstein, it is reported that there are several reasons why customer win-back has a greater chance of success than acquisition. You have advantages with lost customers that you don't have with prospects, including: information about their past

purchase history; where and how to reach them; and their preferred communication channels. 6. Increase Customer Lifetime Value (CLV) Customer Lifetime Value (CLV) is increasingly being recognised as one of the most important measures of the worth of a customer. It takes into account not only the customer's value now but the expected value over their projected lifetime as a customer. It is arguably the best way a marketer can demonstrate unequivocally that a programme is working: the CLV of targeted customers will rise. Being able to identify customers through a loyalty programme means being able to monitor long-term customer lifetime value, and being able to identify the demographic, sociographic, and even purchase profiles that define the most profitable customers - and that knowledge enables you to target and develop more of them. 7. Build real customer relationships based on relevance Building relationships is crucially important but not always as straightforward as it might seem. It has been said that relationship marketing is powerful in theory but troubled in practice - an unpalatable concept but probably one with which many marketers could identify. Building a relationship with customers can lead to improved behavioural loyalty and thus to increased bottom-line profits. If you examine the human elements of a long-lasting relationship you'll find several elements, all of which can be approximated by careful collection and analysis of loyalty programme data. The key element, trust, can be built up by always excelling at customer service and problem correction, and by providing consistently good products and services that suit the customer's unique needs. Surprise and delight can be achieved by delivering personal offers for the most profitable loyalty programme members, such as birthday discount shopping days. 8. Set fairer tiered pricing policies There was a time when manufacturers recommended a price for each item, and retailers simply charged that price. Any differentiation then was purely on convenience, ambience, product range and quality of service of the retailer. But the data from a loyalty programme can help formulate pricing structures. If enough best customers are happy to buy a product at a particular price there seems little point in reducing that price simply to attract cherry-pickers. The effect of changing prices can also be studied for example, which customer segments buy significantly more or less. To

help with differentiation, some retailers reduce the prices of key products to attract new customers (hoping they will buy other products as well as the reduced-price ones). Other retailers try to "buy loyalty" to low pricing (EDLP or Every Day Low Prices). Yet others use Profit Up Front (PUF) pricing, where the customer pays to be a shopper but gets low prices allround. Recently a fourth way, called 'Access Pricing', has emerged, allowing customers to use loyalty points to 'buy' extra discounts on selected items in store (e.g. US$9.99 for nappies, or US$3.99 plus 600 loyalty points). 9. Intelligent response to competitive challenges A good loyalty programme's ability to tie purchases to individual customers allows quick and accurate identification of customers who defect when new competition opens nearby. They can then be enticed back with customerspecific special offers or even direct contact. In his book, Loyalty Marketing: The Second Act, Brian Woolf describes how one fairly small, older store had to face up to a competitor opening a much bigger store on the same parking lot. In anticipation, the small store was extensively remodelled, causing considerable disruption. Over the period of remodelling (a matter of several weeks) turnover dropped by 40%. However, a loyalty programme enabled management to identify regular shoppers and mail them a letter thanking them for their patience and enclosing some special offers. All but 183 customers returned to the store. The store management team then sent handwritten invitations and a US$10 gift certificate to those 183 customers. All but three returned. After the new competitor opened, the smaller store's whole customer database was mailed an offer containing US$5-off coupons for US$50 orders in each of the following twelve weeks. Any customer using all twelve received an extra US$10 certificate. The result was that sales actually rose by between 6% and 7% over the months following the new opening. The competitor's store (which was approximately twice the size) achieved less than half the sales of the remodelled store. This shows the power of knowing who your customers are. 10. Improving product range and stock selection Knowing what best customers buy frequently helps choose which lines to stock and which lines to expand on. The owner of a small suburban supermarket in the UK had some twelve months' notice that a large national supermarket was opening right over the road from him. He realised that without major changes he would not survive. What he did was simple but

clever. The suburb in which he was situated was mixed, having mainly lowcost housing but also a very exclusive area. Many of his customers were low earners who bought their basic requirements every day or two from him - in essence, what they could carry home in a couple of bags. He knew that they would migrate to the lower prices and bigger ranges of the big chain. However, a considerable number of the more wealthy people would call in on their way home from work to pick up bread and milk and a few odds and ends. He started noting what they bought, and what they never bought. Over the months, he stopped ordering products that they never bought, and increased his range of things that they did buy. Over the year, his store slowly changed from a small supermarket to a very big delicatessen. His wealthy customers told their friends and the composition of his customer base changed from mainly low earners to mainly high earners. When the supermarket opened over the road, his low earners did migrate, but he hardly noticed the difference. 11. Better merchandising and store layout planning Basket analysis can identify what lines are bought at the same time, particularly by best customers, and planograms can be planned accordingly to encourage cross-purchasing. The apocryphal story of a retailer discovering from basket analysis that men who buy baby nappies also buy beer (the refined version includes "on Friday evenings") may be true or not, but it does illustrate the potential of the principle in its own (bizarre) way. Insights similar to this are used widely to plan planograms for store merchandising. Of course, on one level, plain basket analysis without a loyalty programme is enough for this purpose. But add the dimension of knowing who the customer is, how much they spend, and where they live and you can confidently decide whether it is worth putting a display of nappies in the beer aisle on Friday evenings or not! 12. Reduce promotional and advertising costs When you have a loyalty programme - and the detailed data that comes with it - your advertising can be targeted instead of untargeted, and significant savings can be made. There is no need to send out thousands of flyers that will be thrown away unread, or take pages of newspaper space that is irrelevant to many of the readers. Better still, the response from such targeted advertising can be measured accurately because the audience is known to you, and each offer can carry a unique identifier that ties the offer to both the customer and the moment of redemption. The cost-saving advantage of targeting can be astonishing. In one instance reported by the

DMA a few years ago, a company mailed an offer to 450,000 of its 'better' customers. The mailing generated US$22 in revenue for each US$1 spent. On analysing the response data, it was found that 97% of sales came from 13% of the ZIP codes. Imagine the difference that that made to the profitability of future mailings. 13. Geographical targeting for new store locations Selecting a site for a new store is no longer a case of sticking a pin in a map, or choosing a site on a hunch. The loyalty card enables you to profile the demographics of best customers and - because it is often likely that the best prospective customers will have similar demographics - choose new locations much more accurately. In addition, if the addresses of existing customers are known, they can be plotted geographically and sites can be chosen where there are outlying pockets of customers or gaps in coverage. 14. Loyal customers directly impact company profitability There are many ways in which it pays to earn the true loyalty of customers. For example: Loyal customers buy more, and are often willing to pay more, which means a steadier cash flow; Loyal customers tend to refer others to your business, saving you the marketing and advertising costs of acquiring them as customers; Loyal customers are more forgiving when you make mistakes - even big ones (especially if you have a system in place that empowers employees to correct errors on the spot, in which case even greater loyalty is usually earned); A loyal customer's endorsement is more powerful to their family and friends than any ad campaign; Thriving companies with high customer and employee loyalty levels are generally seen to outpace their competitors; Loyal customers become familiar with your way of business, and are usually the first to see and report opportunities for improvement; and of course an increase in customer retention can boost bottom line profits significantly. 15. Developing a core offer that can't be refused The companies that boast the highest levels of fiercely loyal customers have built that loyalty not on card programmes or gimmicks, but on a solid, dependable, core offering that appeals to their customers. These companies have focused intently on what they know appeals to the type of customers they want to attract, and have determinedly concentrated on delivering what is expected every time. For example, the North American retailer Nordstrom is well known for the extreme loyalty of its customers. It built this loyalty by understanding what its customers wanted and then

empowering its employees to deliver those needs consistently. The data from a good loyalty programme will help improve this core offering by tailoring and moulding it more closely to the customers' needs and desires. 16. Influencing customer satisfaction levels Clearly, satisfaction is important; indeed essential. But, taken in isolation, the level of satisfaction is not a good measure of loyalty. Many auto manufacturers claim satisfaction levels higher than 90%, yet few have repurchase levels of even half that. The situation is stacked against the business: if customer satisfaction levels are low, there will be very little loyalty. However, customer satisfaction levels can be quite high without a corresponding level of loyalty. Customers have come to expect satisfaction as part and parcel of the general deal, and the fact that they are satisfied doesn't prevent them from defecting in droves to a competitor who offers something extra. The point is that, while high levels of customer satisfaction are needed in order to develop loyal customers, the measure of customer satisfaction is not a good measure of the level of loyalty. The two are not measuring the same thing. 17. Influencing the elasticity of a purchasing decision Elasticity expresses the importance and weight of a purchasing decision effectively the level of involvement or indifference. This applies to both the customer and the business. The more important your product or service is to the customer, the more trouble they have probably taken in their decision to do business with you, and the more likely they are to stick with what they have decided. Most customers would be highly involved in the category when choosing a new car, a new jacket, or a bottle of wine. However, when choosing a new pair of shoelaces, involvement is not usually high. Businesses dealing in commoditised products and services cannot expect high involvement and need to earn loyalty in other ways. The customer's level of ambivalence is also important. Few decisions are clear cut. There are usually advantages and disadvantages to be balanced, and vacillation is unstable. Again, we see that the more commoditised a product or service, the more difficult it is to cultivate loyalty. It is only when points of differentiation are introduced that the customer has a valid reason for consistently preferring one particular supplier. 18. Judging the marketplace's influence on customer loyalty The marketplace is a key factor in the development of loyalty. The elements most closely involved are: ease of switching, and inertia. If the number of

competing suppliers is high and little effort is required to switch, switching is likely. Conversely, the more time and effort invested in the relationship, the more unlikely switching becomes. The level and quality of competition has a significant effect on how easy it is for a customer to switch from any one particular supplier. When competitors are offering very similar products at similar prices, with similar levels of service, some means of useful differentiation has to be found in order to give customers a reason to be loyal. But inertia is the opposite: most banks enjoy a high level of inertia loyalty simply because it's often so difficult and time-consuming to change to a new bank and transfer direct debits and standing orders. 19. Using demographic data to predict loyalty According to Jan Hofmeyr and Butch Rice, developers of 'The Conversion Model' (which enables users to segment customers not only by their commitment to staying with a brand but also to segment non-users by their openness to switching to the brand), more affluent and better educated customers are less likely to be committed to a specific brand. They say that the commitment of less affluent consumers to the brands they use is often unusually strong - possibly because they cannot afford to take the risk of trying a brand that might not suit them as well. They also suggest that younger consumers are less committed to brands than older consumers. Interestingly, these differences carry over into cultural groups as well: they find that French-speaking Canadians are more likely to be committed to a brand than English-speaking Canadians, and Afrikaans-speaking South Africans are more likely to be committed than English-speaking South Africans. In their excellent book, Commitment-Led Marketing, they show how commitment norms for the most frequently used brand of beer vary from country to country. At the two extremes we see both Australia and the UK (58%) and South Africa at 83% - a considerable difference. 20. Increasing share of wallet Share of wallet expresses how much of a consumer's total spend in a given category they award to your company. For example, if a household buys US$800 worth of groceries each month, and they buy US$200 of that in your supermarket, your share of wallet for groceries is 25%. As markets become saturated and customers have so much more to choose from, share of wallet becomes increasingly important. It is cheaper and more profitable to increase your share of what the customer spends in your sector, than to acquire new customers. After all, that's what loyalty is really about. Totally loyal customers would give you a 100% share of their spend in your sector.

A loyalty programme that's working properly provides enough data about consumers and their households to be able to reasonably estimate share of wallet. There are complete formulae and data analysis tool-sets just for the job. 21. Promoting the brand to build customer loyalty Every business must develop and deliver a consistently branded experience for its customers. The essence of the brand should be apparent in every interaction a customer has with the company, enabling customers to form an emotional attachment with the brand. This includes: training and enabling front-line employees who interact with customers; developing high-impact marketing campaigns; defining the brand's "promise"; and segmenting customers on the basis of value. The loyalty programme provides a truly multi-channel vehicle through which to communicate this brand experience, and through which the consumer can become more attached to the company and its brand. 22. Becoming truly customer-centric Most businesses are, by nature, either product-centric or service-centric. Remember the days when business owners knew their customers by name, and knew their personal preferences - and just about everything else there was to know about them? Those who have realised the value of a customercentric approach have thrived: examples are the Tesco Clubcard programme in the UK, widely regarded as one of the best loyalty programmes in the world, and the Nectar retail coalition programme, which very quickly signed up 13 million members, representing half of the UK's households. But adopting a customer-centric approach generally involves changing several procedures, including: marketing, sales and service applications must be merged seamlessly; differentiation based on products or services must be changed to differentiation based on customers; reactive service must be swapped for proactive service; and data that's segmented by products must be segmented by customers instead. Again, the loyalty programme's data is already customer-centric by its very nature, and the implementation of a loyalty programme is a vital opportunity to merge cross-department data silos. 23. Ensuring the success of a loyalty programme There are dozens of elements that are critical to the long-term success of any customer loyalty or relationship marketing initiative. First, these programmes are definitely not a 'quick fix' for an ailing corporate bottom

line. It takes time to build loyalty because loyalty is based on trust- and relevance-based relationships with best customers. Accurately targeted marketing is a benefit of loyalty data, and is essential if the programme is to be seen as 'relevant' by its members. Other secrets of success include: gaining consumer buy-in, knowing your customers, rewarding only the right behaviour, rewarding and recognising customers in the right circumstances, spotting defection patterns, insights into customer lifecycles, making sure rewards are attainable, recovering the programme's costs in a reasonable time, well timed and relevant communications, keep the programme simple to understand and use, measuring campaigns and results continually, acquiring new customers, having unique and uncopyable benefits on offer (as a barrier to entry for competitors in the same space), empowering your staff to make the right decisions under all circumstances, and of course making the customer's life easy. 24. Detailed planning and careful execution The list of issues to consider and pre-plan when designing a loyalty programme is enormous: there are hundreds - sometimes thousands (depending on programme complexity) - of individual action points that have to be worked through before a programme can confidently be called "a success". Indeed, any failure to address some of the more important points could result not only in a failed programme but also unrecoverable expenses, lost consumer good will, legal problems, and lasting brand damage. The loyalty consultancy and management company ICLP uses a comprehensive list, of which the following are just a few of the more important issues to be defined: Loyalty programme markets and objectives; strategy (programme type, proposition, comms, partnerships, infrastructure, etc.); objectives, key process flows, KPIs, rewards, benefits, financials, and timelines; desired behavioural changes; benefits and rewards, type, tracking, communicating, bonussing, reward currency, breakage, and liability; partnership details; tiers (both thresholds and management); financial and administrative controls; legal aspects; staff requirements and training; ROI; programme rules; system functionality; fulfilment process and costs; data requirements and usage; and the list goes on. There is much to be planned for a well-executed programme. 25. Rapid market penetration with a coalition programme Partnership in a coalition loyalty programme is often thought of (quite rightly) as a quick method of entry into the field of customer loyalty however, there are disadvantages that must be weight up first, such as the

ownership and usage of loyalty programme and customer-specific data, and potential competition of other programme partners in future markets you plan to expand into. Successful coalition programmes have a major partner in several of the key consumer sectors in order to quickly capture a significant proportion of consumers' spend. Ideally, this would be a major grocer, fuel retailer, bank or credit card, department store, and mobile telecoms provider. Proportions as high 50% - 60% of the target market can be enrolled very quickly. This means that not only is the data collected more representative of the target market but that the share of each consumer's wallet is also maximised. Most importantly, new partners joining the programme after it becomes established will automatically gain the same degree of market penetration as the existing partners, and comarketing activities with the programme's operator will usually raise consumer awareness rapidly. 26. Successful CRM (customer relationship management) The loyalty of customers stems from building relationships with them, and those relationships have to managed. This is where CRM comes in. Whether the relationships are so finely tuned as to be one-to-one relationships, or whether they are in bigger segments or groups, the principles of management are similar. Over the past decade CRM has come to be regarded by many marketers as being synonymous with huge, costly IT systems. But many of the big companies have now passed through that stage, and are focusing more on explaining to both employees and customers the benefits of the system, and streamlining the laborious processes of data collection. CRM's reputation is improving - it is making a come-back. Some of the key faults that can cause CRM projects to fail or prevent delivery of the expected ROI are a reliance on technology as a global 'cure-all' and down-playing the importance of management level buy-in. But having the correct focus and commitment can significantly improve a CRM initiative's performance. According to IBM's research, CRM should be run at the corporate level or with a cross-functional perspective - and when this is the case, there is a 25-60% greater chance of success. 27. Using gift cards and store value cards for loyalty The market for gift cards - many of which are pre-paid, stored value cards is expanding rapidly. Clearly, the card is the mechanic: what is done with it determines how useful it is as a vehicle for building loyalty to the retailer. Copious research has been carried out to show the potential of the gift card

market. Gift cards have been widely used in the US for longer than in other parts of the world, but the popularity is now beginning to spread. Gift card merchants can use different types of promotions to increase the level of excitement. For example, creating a swipe and win sweepstake when the gift card is redeemed is an excellent way to drive additional sales. Another opportunity that can benefit both the merchant and the customer is the use of receipt coupons, or custom coupons, as part of a gift card programme. For stored value cards that are a cash replacement and need customers to reload their cards, a bonus can be given when they add value to the card. And if something can be offered that is difficult to put a price on - priority service, a backstage pass, a ticket on the 50-yard line at the Superbowl there is an opportunity to create 'extreme perceived value'. All of these are gift card-based ways of generating renewed consumer engagement. 28. Use the six Ps of customer loyalty marketing Loyalty programmes have become necessary due to vast customer bases and market sizes, according to The Allegiant Group, which suggests adding two new 'Ps' to the well-known 'Four Ps of Marketing' (those being Product, Price, Place and Promotion). The two newcomers that stand to benefit the customer loyalty marketer are People and Performance: People (and how they affect customer loyalty) are an increasingly important part of the marketing mix, and the Performance of the entire enterprise, and its quality and consistency therein, is increasingly critical to delivering products and services in a way that engenders loyalty and repeat purchasing behaviour. Other critical success factors in the development and management of successful loyalty initiatives include: strategy and economics, the features and benefits offered by the programme, the methodology of the reward component, and the metrics and measurements used to track the effect of the programme. 29. Building a database that can really create loyalty There's a myth that says most companies have enough data about their customers to conduct successful marketing campaigns. But, in fact, some of the largest firms in the world have not assembled the personal identities and key contact information of their largest customers into a single database. Instead, the information resides in the minds, drawers, or handheld PDAs of their sales representatives. Rarely is it warehoused as it should be. The amount of junk mail the average consumer gets today proves the point: despite talk of CRM, it hasn't improved relationships between consumers and their suppliers. The problem is that properly implementing a customer

database is far more difficult than ever imagined. A customer loyalty programme's unifying effect on data, if the data structure is properly planned based on clearly set-out business objectives, forms the basis of relationship-based campaigns that start with "Fred, we see you've moved here's a map of your local stores to get you started" instead of mailers that start with "Dear Occupier". 30. Avoiding technological problems with loyalty platforms If you're setting out to find a ready-made or partly-customised loyalty platform, there are hundreds of points to consider before making a final choice. In 2005 a survey of the capabilities of over 30 loyalty programme platforms was conducted by UK-based MJA Associates, finding that many of the solutions examined were merely "points engines" that could increment and decrement the points in a member's account but were limited in the functionality required to manage bonussing, lifestyle data collection, surveys, partner management and other fundamental operations. Most of the loyalty solution software platforms examined were lacking in many areas particularly in terms of bonussing, partner management, survey functionality, and contact centre information screens. Of the hundreds of factors, these are just a few of the most important: Application and member number tracking; Archiving of programme data; Audit logs; Awards redemption processing; Bonussing functions and flexibility; Card management; Different currencies and languages; Events management; Interactive Voice Response features; Fees management; Kits and cards processes; Location hierarchy; Member services provisions for call handling; Member management, transaction and attributes recording; Partner management; Points expiration; Point types; Reporting; Security; Development kits and APIs; Statementing; Surveys; Tiering; and Financial transactions and points management. It's important that the system you choose has the features you need, not only for today but for the future development of the loyalty programme. Where to find more detail... The Loyalty Guide, our comprehensive guide to customer loyalty, explains every aspect of loyalty programmes, best practices, concepts, models and innovations, all backed up with case studies, original research, illustrations, charts, graphs, tables, and presentation material. Find out about the principles, practicalities, metrics, analysis, and

bottom-line effects of loyalty, and gain the expert guidance of dozens of loyalty and relationship marketing thought-leaders, worldwide. It will show you exactly how to use customer data to increase profits, reduce churn, and increase frequency, spend, and share of wallet. See how and why others have already succeeded, what works, and - more importantly - what doesn't work. The report's full executive summary, table of contents, downloadable samplers, and pricing/ordering are all available online - click here.

MANAGE YOUR CUSTOMER CARE Customer care is a crucial element of business success. Every contact your customers have with your business is an opportunity for you to improve your reputation with them and increase the likelihood of further sales. From your telephone manner to the efficiency of your order-fulfilment systems, almost every aspect of your business affects the way your customers view your business. But there are also specific programs you can put in place to increase your levels of customer care. This guide outlines what customer care involves. It explains how you can use customer contact, feedback and loyalty schemes to retain existing customers, increase your sales to them and even win new customers. It also covers how to prepare for receiving a customer complaint.

What is customer care? Understand your customers Customer feedback and contact programs Customer loyalty schemes Use customer care to increase sales How to deal with customer complaints WHAT IS CUSTOMER CARE? Customer care involves putting systems in place to maximise your customers' satisfaction with your business. It should be a prime consideration for every business - your sales and profitability depends on keeping your customers happy. Customer care is more directly important in some roles than others. For receptionists, sales staff and other employees in customer-facing roles, customer care should be a core element of their job description and training, and a core criterion when you're recruiting. But don't neglect the importance of customer care in other areas of your business. For instance, your warehousing and shipping departments may have minimal contact with your customers but their performance when fulfilling orders has a major impact on customers' satisfaction with your business. A huge range of factors can contribute to customer satisfaction, but your customers -both consumers and other businesses - are likely to take into account:

how well your product or service matches customer needs the value for money you offer your efficiency and reliability in fulfilling orders the professionalism, friendliness and expertise of your employees how well you keep your customers informed the after-sales service you provide Training courses may be useful for ensuring the highest possible levels of customer care. UNDERSTAND YOUR CUSTOMERS In business-to-business trading, providing a high level of customer care often requires you to find out what your customers want. Once you have identified your most valuable customers or best potential customers, you can target your highest levels of customer care towards them. Another approach, particularly in the consumer market, is the obligation to treat all consumers to the highest standard. Collect information about your customers Information about your customers and what they want is available from many sources, including:

their order history records of their contacts with your business - phone calls, meetings and so on direct feedback - if you ask them, customers will usually tell you what they want changes in individual customers' order patterns changes in the overall success of specific products or services feedback about your existing range - what it does and doesn't do enquiries about possible new products or services feedback from your customers about things they buy from other businesses changes in the goods and services your competitors are selling feedback and referrals from other, non-competitive suppliers See our guide Know your customers' needs. Manage your customer information It's important that you draw up a plan about how customer information is to be gathered and used in your business. Establish a customer-care policy. Assign a senior manager as the policy's champion but make sure that all your staff are involved - often the lower down the scale you go, the more direct contact with customers there is. You can manage your customer records using a database system or with customer relationship management software. You should be aware that collecting and using customer information requires you to comply with Qubecs An Act respecting the protection of personal information in the private sector. Measure your customer service levels Where possible, put systems in place to assess your performance in business areas which significantly affect your customers' satisfaction levels. Identify Key Performance Indicators (KPIs) which reflect how well you're responding to your customers' expectations. For instance, you might track:

sales renewal rates the number of queries or complaints about your products or services the number of complaints about your employees the number of damaged or faulty goods returned average order-fulfilment times the number of contacts with a customer each month the volume of marketing material sent out and responses generated time taken from order to delivery Your customers and employees will be useful sources of information about the KPIs which best reflect key customer service areas in your business. Make sure the things you measure are driven not by how your business currently runs, but by how your customers would like to see it run. There are important areas of customer service which are more difficult to measure. Many of these are human factors such as a receptionist's telephone manner or a salesperson's conduct while visiting clients. In these areas it's crucial that you get feedback from your customers about their perceptions of your customer service. Customer surveys, feedback programmes and occasional phone calls to key customers can be useful ways of gauging how customer service levels in your business are perceived. CUSTOMER FEEDBACK AND CONTACT PROGRAMS Customer feedback and contact programmes are two ways of increasing communication with your customers. They can represent great opportunities to listen to your customers and to let them know more about what you can offer. Customer feedback can provide you with detailed information about how your business is perceived. It's a chance for customers to voice objections, suggest changes or endorse your existing processes, and for you to listen to what they say and act upon it. Feedback is most often gathered using questionnaires, in person, over the telephone or by mail. The purpose of customer contact programs is to help you deliver tailored information to your customers. One example is news of a special offer that is relevant to a past purchase - another is a reminder sent at the time of year when a customer traditionally places an order. Contact programs are particularly useful for reactivating relationships with lapsed customers. Do your best to make sure that your customers feel the extra contact is relevant and beneficial to them - bombarding customers with unwanted calls or marketing material can be counterproductive. Newsletters and email bulletins allow you to keep in touch with useful information. CUSTOMER LOYALTY SCHEMES While good overall service is the best way of generating customer loyalty, sometimes new relationships can be strengthened, or old ones refreshed, using customer loyalty schemes. These are programs that use fixed or percentage discounts, extra goods or prizes to reward customers for behaviour that benefits your business. They can also be used to persuade customers to give you another try if you feel you have successfully tackled past problems with your customer service. You can decide to offer rewards on the basis of:

repeat custom cumulative spend orders for large quantities or with a high value prompt payment length of relationship For example, a car wash might offer free cleaning every tenth visit or a free product if a customer opts for the deluxe service. A mail-order company might seek to revive the interest of lapsed customers by offering a voucher redeemable against purchases -response rates with such vouchers can be improved by setting an expiry date. You can also provide key customers with loyalty cards that entitle them to a discount on all their purchases. Employees who deal with customers' orders should be fully aware of current offers and keep customers informed. Sometimes brochures and other marketing materials are the best way of getting word out about a new customer incentive. Don't forget though that your customers' view of the overall service you provide will influence their loyalty much more than short-term rewards will. USE CUSTOMER CARE TO INCREASE SALES Your existing customers are among the most important assets of your business - they have already chosen you instead of your competitors. Keeping their custom costs far less than attracting new business, so it's worth taking steps to make sure that they're satisfied with the service they receive. There are a number of techniques you can employ, including:

providing a free customer helpline answering frequently asked questions on your website following up sales with a courtesy call providing free products that will help customers look after or make the most of their purchases sending reminders when services or check-ups are due offering preferential discounts to existing customers on further purchases Existing customer relationships are opportunities to increase sales because your customers will already have a degree of trust in your recommendations. Cross-selling and up-selling are ways of increasing either the range or the value of what you sell by pointing out new purchase possibilities to these customers. Alerting customers when new, upgraded or complimentary products become available perhaps through regular emails or newsletters - is one way of increasing sales. To retain your customers' trust, however, never try to sell them something that clearly doesn't meet their needs. Remember, your aim is to build a solid long-term relationship with your customers rather than to make quick one-off profits. Satisfied customers will contribute to your business for years, through their purchases and through recommendations and referrals of your business.

HOW TO DEAL WITH CUSTOMER COMPLAINTS Every business has to deal with situations in which things go wrong from a customer's point of view. However you respond if this happens, don't be dismissive of your customer's problem - even if you're convinced you're not at fault. Although it might seem contradictory, a customer with a complaint represents a genuine opportunity for your business:

if you handle the complaint successfully, your customer is likely to prove more loyal than if nothing had gone wrong people willing to complain are rare - your complaining customer may be alerting you to a problem experienced by many others who silently took their custom elsewhere Complaints should be handled courteously, sympathetically and - above all - swiftly. Make sure that your business has an established procedure for dealing with customer complaints and that it is known to all your employees. At the very least it should involve: listening sympathetically to establish the details of the complaint recording the details together with relevant material, such as a sales receipt or damaged goods offering rectification - whether by repair, replacement or refund appropriate follow-up action, such as a letter of apology or a phone call to make sure that the problem has been made good If you're proud of the way you rectify problems - by offering no-questions refunds, for example make sure your customers know about it. Your method of dealing with customer problems is one more way to stay ahead of your competitors. Original document, Manage your customer care, Crown copyright 2009 Source: Business Link UK (now GOV.UK/Business) Adapted for Qubec by Info entrepreneurs Our information is provided free of charge and is intended to be helpful to a large range of UKbased (gov.uk/business) and Qubec-based (infoentrepreneurs.org) businesses. Because of its general nature the information cannot be taken as comprehensive and should never be used as a substitute for legal or professional advice. We cannot guarantee that the information applies to the individual circumstances of your business. Despite our best efforts it is possible that some information may be out of date.p> As a result:

The websites operators cannot take any responsibility for the consequences of errors or omissions.li> You should always follow the links to more detailed information from the relevant government department or agency. Any reliance you place on our information or linked to on other websites will be at your own risk. You should consider seeking the advice of independent advisors, and should always check your decisions against your normal business methods and best practice in your field of business. The websites operators, their agents and employees, are not liable for any losses or damages arising from your use of our websites, other than in respect of death or personal injury caused by their negligence or in respect of fraud.

SWOT (-Analysis)
By Dagmar Recklies
Strengths Weaknesses Opportunities Threats

When I started to write this paper about the SWOT-model, I compiled theory and researched literature. This is part 1 of this paper. However, after several years of practical experience with the SWOT, I found this was not enough. I have worked as a consultant and in the strategic planning department of a global player. During this time I had the chance to do some SWOTs by myself, and more importantly I saw lots of SWOT-matrixes prepared by others. Thus I learned that the SWOT is not as easy as it seems. In part 2 of this paper I share my work experience with you and highlight some common misunderstandings. With this I hope to make it easier for you to gain some real value from your SWOT-exercises.
Part 1: Description of the Model

The SWOT-Analysis is one of the most common strategic management models. According to Mintzberg, the SWOT originates from the so called Design -School, which seeks to establish a fit between an organizations strengths and weaknesses with the opportunities and threats in its external environment.
The SWOT compiles the most important results from the analysis of external drivers and the

analysis internal competences of an organization. The objective of the SWOT is to determine to what degree the actual strategy is suitable and appropriate to meet the challenges and changes in the organizations environment. The SW-Part comprises internal factors the strengths and weaknesses of the organization. These are competences and resources, that the organization possesses and that are under its control. Strengths and weaknesses can relate to a variety of aspects and may depend on the actual situation. Typical areas from which strengths or weaknesses can arise are for instance:

employees know-how and competences quality of internal processes financial situation, financial structure ownership / shareholder structure market position relationships to customers, suppliers and networks R&D-capabilities, - resources and capacities

corporate culture and many more

It may be helpful to determine critical success factors for the organizations industry or business model prior to doing the SW-part. Any identified strengths or weaknesses can be tested in relation to these key success factors: Does an identified strength help you to be superior at a key success factor? If it does, you really have a major strength. If you are superior at something that is not really critical for success in your business is it a strength worth mentioning? Or have you just identified something that could it be a basis for an advantage that nobody ever thought of?

It should further be noticed that all strengths and weaknesses are relative. They gain significance only by benchmarking them against competitors competences or industry standards. For example: You think the regional coverage of your sales force is an asset. Map it against your strongest competitor and see if you are really that strong.

Internal analysis may be structured in different ways, e.g. for particular business units, product groups or by function. There are several models and tools available for this purpose; the value chain is one of the most popular. The OT-Part of the SWOT identifies Opportunities and Threats that the organizations faces from trends and changes in its environment. These external factors are not under the control or influence of the organization. For example, a high customer loyalty is an (internal) strength of the organization, since it has to satisfy its customers again and again in order to keep them loyal. If, however, the industry faces a new trend that customers become less loyal to any organization, this is an external threat that might undermine the companies competitive advantage. There are several business models that help to do the external analysis which leads to the opportunities and threats. One of the most common tools is the PEST. It analyses political, economical, socio-cultural and technological drivers and trends. Here it is important to identify the most important drivers for change, that might have serious impact on the organization and its environment. This will draw your attention to the really critical issues, whereas a mere list with as many drivers as possible will not tell you on what you should focus your attention. In the result, the organization should know, to which degree its existing competences and resources will help to address the expected external changes. The SWOT raises various questions. The SWOT-exercise itself will not give any answers on these questions, but it helps organizations to start thinking about the right things:

Is our actual strategy suitable and sufficient to successfully face the expected changes?

In order to exploit our opportunities or to minimise our threats which strengths should we improve even more and which weaknesses should we try to fix?

Will our actual strengths and core competences fit the world of tomorrow? Could our actual strengths become weaknesses tomorrow if we dont enhance them? In view of our opportunities, which is the best way to exploit our strengths?

How can we use our specific competences to prepare ourselves for the changes to come better than our competitors can do?

What in particular can we do better? Could this be the basis for new core competences / businesses / services etc.?

In order to make a SWOT-exercise the basis for answering these and other questions, it is important to understand that this model is more than a compilation of internal and external factors. Rather The key point is the identification of and the focus on the major drivers. A very detailed analysis of every bit of information is as unsuitable as the use of the model as a mere checklist. True strengths are those factors that give the organization a strong competitive position, compared to other players in the market. True weaknesses hinder the organization to gain competitive advantages. Opportunities of real importance are of a kind that the organization is able to exploit and that fit to its specific strategic resources. Real threats, however, are those risks that the organization has to face anyway and for which it is not well prepared.
Part 2: Practical experience from working with the SWOT

1 The SWOT really is of relevance After several years of work experience I can say that the SWOT model has passed the test of practice. If done and used properly, it really is of relevance. The SWOT is still very popular. It survived the rise and fall of New Economy and it is still a great tool for contrasting a companies strengths and weaknesses with the opportunities and threats in its environment. I guess, the SWOT is one of the most often used management models at all. There is hardly any top-management presentation on strategic issues, which does not present the four boxes labeled with the letters S-O-W-T. One reason might be that the SWOT is perceived as a very easy and intuitive tool. In my experience this last point is true more for the reader of a SWOT, than for the one who prepared it. 2 Many users do not really understand the theory behind the SWOT At least this is true for the SWOTs I have seen.

The greatest problem is the clear distinction between internal and external factors. The meaningfulness of the tool is based on the distinction between the organizations (internal) strengths and weaknesses i.e. those factors that it can influence on one hand and between the external opportunities and threats from its environment on the other. The latter ones are those factors that affect organization, if it does something about it or not. In practice, people seem to have difficulties with this distinction. Sometimes the identified factors are categorized into good for us and bad for us, followed by some more or less intuitive allocation to strength or opportunity (if good for us). Some Examples: The launch of product xy is called an opportunity. This is wrong! If a company has a great product with the potential for a real competitive advantage in its development pipeline, than it as a portfolio of promising new products and thus a strength. Possibly, the R&D-departments ability to bring competitive products to market is also a strength. The market (i.e. the external environment) did not do anything so far. An opportunity would be a sudden change in customers preferences and the product idea from the R&D-department is the only solution in the whole industry that can meet these new customer requirements.

The loss of market share to competitor yz is often attributed to the risks-box.

This might be true only if the expected loss of market share is the result of an aggressive movement of yz, e.g. a change in strategy. It might also be a risk that market conditions change and the products of yz are the better solution to these changed customers requirements. In both cases, however, the loss of market share is the result, not the risk itself. It shows what will happen if the organization fails to address the risks (aggressive competitors, changing customer requirements) properly and in time. In most cases, the own products will simply fall behind competition under unchanged or even unchanged market conditions. Be it that they are too expensive, of poor quality or become technically out of date. Than the organization has a cost problem, a wrong R&Dstrategy, an outdated product portfolio or something similar a self-made weakness. The decreasing market share is again only the result. If the SWOT is understood in such a wrong way, it is nothing more than is list of issues that are worth thinking about. But there is another misunderstanding: 3 The SWOT is not an analysis I try to avoid the term analysis in the context of the SWOT wherever possible. To my understanding, the SWOT is not an analysis. It is a summary of a set of previous analyses

even if those were not more than 15 minutes of mini-brainstorming with yourself in front of your computer. Many management presentation try to impress by starting with a SWOT. After that follow lots of slides with different analyses. In the best case, they repeat the content of the SWOT in more detail. Then the SWOT in the beginning should be called Executive Summary. In the worse cases, the slides full of analyses have nothing to do with the SWOT they follow. You dont want to bore your audience with repetitions, do you? This is the problem. In the end of the day, the SWOT is not more than a summary of a set of different analysis of the organization itself and its environment. This is the real value of the SWOT methodology. Five slides that address trends in the industry environment and five more slides full of competitor benchmarking might be to confusing to bring your core message across. Those ten slides are valuable backup for decision making. The SWOT allows to present the core findings and the bigger picture in a structured and concise way.
To summarize:

The SWOT is a clear and easily understandable tool for presenting a set of influencing factors and their interdependency. The user should avoid, however, to allocate everything that comes to his mind in the context of the organization and its environment to the four boxes labeled S-W-O-T. He should even more avoid to think that he is halfway through his strategy-making-process when he has successfully finished his SWOT. Here I like to repeat my statement from the year 2000, that is still valid: Management tools can help to better understand particular aspects of an organization or its environment. For the following step the analysis of insights provided by the models however, there is no model. Management models are effective only if their users are able to realize connections and gaps and to draw appropriate conclusions.1 ----------------------------

Are you loyal to your customers? Keith Colbourn of the consulting firm dunnhumby, in a great post on the Retail Customer Experience site, points out that retailers (and most marketers in turn) focus more on generating loyalty from their customers than demonstrating how they are loyal to those best customers in the first place. To show loyalty, retailers frequently install a loyalty program (typically a points-based card), as a turnkey solution to their problems. But loyalty programs do not generate loyalty. Rather, loyalty is the lump sum of all the experiences that a customer has with your brand, in stores, on the phone, through email and on the web site (and now through mobile as well!). No points program will overcome poor customer experience. Spam, irrelevant emails and weak, meaningless offers all lead customers to conclude that the retailer is not interested in them as an individual, but is out for the quick transaction. That sense of anonymity leads to a loss of connection and eventually a loss of loyalty. Likewise, poor, policy-based treatment in person by disinterested staff, either on the phone or in person, has the same result (often quicker). Marketers and business leaders must focus on customer experience across channels to demonstrate loyalty - only then will loyalty be reciprocated. And no "silver bullet," such as a loyalty program, will be the turnkey solution to their problems.

APPENDICES Appendix A: Draft of Covering Letter Management College of South Africa Date: 10th March 2013 Dear Participant I am a Masters student at the Management College of South Africa conducting a research on the factors that impact on customer loyalty at M&E Commercial Engineers Ltd. According to a study made by Bain & Company and published in 2001. It showed that acquiring a new customer can cost six to seven times more than retaining an existing customer, and that increasing customer retention rates by 5% boosts profits by 25% to 95%. Therefore it's better to keep the customers you have than to have to keep acquiring new ones. "Long-term loyal customers tend to stay longer and spend more money with the company. The goal of every business owners should be to make sure its customer base is satisfied and doesn't leave. The enclosed questionnaire will gather data pertaining to this study and will give further insight of how the customers view the company. Completion of the questionnaire would take ten minutes. Participation in this project is completely voluntary but your response will be very helpful to both the company and I. All information provided through your participation in this study will be confidential. Further, you will not be identified in the thesis or in any report on this research. The data collected through this study will be kept for a period of 1 year in a secure location. Thank you in advance for your cooperation in my research. Yours sincerely, Shirin Geerdharry

Appendix B Letter for Requesting Permission to carry out the Study

The Managing Director M&E Commercial Engineers Ltd 385, Residence Union Park Union Park 10th March 2013 Dear Sir, It will be a pleasure for me if you could grant me the permission to do a study within your company for my research project. The purpose of this study is to investigate the factors that impact on customer loyalty at M&E Commercial Engineers Ltd. As such questionnaires will be sent to our existing customers to find out how they perceive the company as a whole, how they find service delivery and whether they are satisfied or not. This study will be helpful to the company and will be a way to improve the present situation. Thank you for your cooperation.

Yours sincerely, Shirin Geerdharry

Appendix C Questionnaire Section A 1. Are you a customer of M&E Commercial Engineers? Yes or No.

2. Were you involved in the purchase of goods or for the implementation of projects? Item No. 1. Question Nature of business Purchase of goods involved Implementation projects of

3. What was the value of goods purchased or the amount of the project? Please tick in the following table Item No. 1. 2. 3. 4. 5. Less than Rs 5,000 Between R5,000 to Rs. 10,000 Above Rs 10,000 but less than Rs 50,000 Between Rs 50,000 to 100,000 Greater than Rs 100, 000 but less than Rs 500,000 6. Greater than Rs 500, 000 but less than Rs 1,000,000 7. Please specify for other amount Value

4. How many times have you bought goods or given work from/to M&E Commercial Engineers Ltd? Please Specify?

5. For how many years have you done business with the company?

Section B 6. Were you satisfied with the goods or the project? Yes or No.

7. How do you find the quality of service at M&E Commercial Engineers Ltd? 8. How do you find the quality of goods that are sold at M&E Commercial Engineers Ltd? Please tick as appropriate for questions 6 and 7. Question Quality of service Quality of goods Section C 9. Was the project delivered on time? Yes or No. Poor Average Good Excellent

10. Do you find it difficult to contact the company for an order? Yes or No.

Section D 11. Is the location of the company a problem to you? If so, please specify how by ticking the following table? Question Not easily accessible Question Not in your area of doing business Alternative goods can be bought from other places Nothing special given by the company that will attract you to do business with it 12. How do you find the cost of services offered by the company in relation with the quality of service and product offered? Please fill in the following table. Question Cost of services in relation to the quality of service offered by the company Low Good High Strongly Agree Agree Dont know Disagree Strongly Agree Agree Dont know Disagree

Section E 13. How do you find the after sales service of the company? Question How is the after sales service of the company 14. Are the salesmen easily available to give information that you may require? Yes or No. Low Good High

15. Do intend to work with the company in the near future? Yes or No