Tata Motors has been running a relationship programme with its customers for some years. This multi-level programme, with almost one million members, is possibly the biggest of its kind in Asia, reports Amit Bapna.business Updated: Oct 18, 2009 21:08 IST
Tata Motors has been running a relationship programme with its customers for some years. This multi-level programme, with almost one million members, is possibly the biggest of its kind in Asia. The attempt is to get customers to stay with the Tata Motors family of vehicles. A few years back, a decent share of bookings for Tata Indigo came from the database of Tata Indica hatchback owners.
Relationship branding happens in the financial sector too. Aegon Religare’s KILB (Kum Insurance Lene Ki Beemari) campaign, which got a lot of enquiries, comprised a systematic follow-up campaign that helped convert many of these enquiries. Says Raghu Bhat, senior VP and executive creative director, Contract Advertising, “Analysing this database of 'converts' gave great leads for the next offering, Pension Plans. Similarly, a targeted approach helped us launch even the third offering, the Star Child Plans, with a high degree of success.”
Says Ajay Kakar, chief marketing officer, Aditya Birla Financial Services, “The real opportunity for a financial services brand is to attract and retain its customer from cradle to grave, extracting the maximum customer life cycle value.” A financial services customer buys 'trust'.
Upmarket retail chains get almost 35 per cent of their business from their loyal customers, according to various researches. No wonder there are a number of loyalty and membership initiatives in evidence.
From automobiles to consumer durables to hotels, airlines, retail chains, petrol pumps, financial services and banking, mobile phone services and a host of other product and service categories, the effort to retain customers over a lifetime or a substantial period of time is giving rise to the attractiveness of what is called the ‘Customer Lifetime Value’ (CLV). This concept is not merely about customer retention but also about deriving the maximum profitability for the brand from the customer over time.
Says MG Parameswaran, executive director & CEO (Mumbai), Draftfcb + Ulka, “It costs six times more to get a new customer as against retaining an old customer. If we are able to retain customers by spending the optimum amount to get them to continue with us, the rest of the budget will be better spent in tapping new customers.”
The State Bank of India has been working on CLV. Says Chandramohan Mehra, head — branding and communications, SBI Life, “Maximising CLV is a function of catering to those corresponding needs in our customers arising with changing life stages.” As depicted in the recent campaign for SBI Life’s MahaAnand, the core proposition was: through small systematic steps, the product helps you meet every life stage need – education, marriage, setting up business, retirement.
Tracking the CLV is a continuous process. Ajay Kelkar, COO, Cequity, says, “CLV redefines the notion of customer loyalty by considering it from a customer-centric viewpoint instead of a product-centric one.” A bank, for example, should be able to reward a customer who owns multiple products with a lower home loan rate by banding this customer as a more profitable one and using that information at the home loan channel.
Harish Bijoor, CEO, Harish Bijoor Consults Inc, comments, “If deployed well, CLV means a depth of revenue harvest that insulates companies and their marketing expenditures from running behind totally new customers.”
The marketing question is not about just enhancing the relationship, but enhancing the profitability from each customer. Points out S Swaminathan, CEO, Cequity, “We worked across a range of clients where we were often able to dispel the notion that loyal customers are profitable. Customers may not always make money for you. Once our clients actually recognised that there are customers that are unprofitable, customers that break even, and customers that make the company money, suddenly a huge change in loyalty strategy was possible. And not just current customer profitability, but customer lifetime value.”
According to Jessie Paul, chief marketing officer, Wipro Technologies, “Increasingly, companies are shifting from one-time product sales to products-plus-service sales. Today, products are usually bundled with service offerings — cars-plus-after sales service, cellphones-plus-subscriptions, water purifiers-plus-annual maintenance. The customer buys the entire experience. Through this, brands have considerably extended customer life cycle.”
Customer lifetime value needs research and analytics led marketing. Though still nascent in India, marketers are opening up to it. As Contract’s Bhat concludes, “It encourages looking at acquiring and servicing a customer as an investment rather than a short-term expense. It allows flexibility in segmentation of customers.”