“The Mismanagement of Customer Loyalty” by Reinartz & Kumar Essay (Article Review)

The article in question entitled “The Mismanagement of Customer Loyalty” is written by Reinartz and Kumar (2002). The article deals with a very important issue concerning developing relationships with loyal customers. The present research is well-grounded as it is based on the analysis of three companies: “large US mail-order company, a French retail food Business, and a German direct brokerage house” (Reinartz & Kumar, 2002, p. 5).

The researchers point out that it is believed that loyal customers tend to pay more, to require less attention and to be word-of-mouth marketers. However, Reinartz and Kumar (2002) argue that this belief does not have proper background. The researchers prove that many loyal customers do not fit the description mentioned above.

The authors analyze each point of the ‘conventional’ description of the loyal customer. It turns out that each point of the description is arguable. Thus, the researchers claim that loyal customers often require discounts for their loyalty, they are not that active word-of-mouth marketers. Besides, companies often spend far too much money to stay in touch with their loyal customers.

Therfeore, the reserchers claim that it is important for companies to be able to let customers go when necessary. Apart from this, the researchers provide several strategies to measure the level of customers’ loyalty. Notably, Reinartz and Kumar (2002) provide a brief description of three major types of ‘loyal’ customers: “true friends”, “enjoying butterflies”, “smoothing barnacles” (p. 10-11).

Finally, the researchers provide possible ways to treat different types of ‘loyal’ customers to decrease expenditures and, at the same time, to increase profits. The researchers depict quite easy methods which can be used by any company. The researchers also note that there can be no single way to develop communication with customers as well as there can be no single strategy of making customers more loyal. However, marketers can use existing techniques and strategies, combine them and work out their own ways. More so, the researchers conclude that development of technology opens up new horizons for marketers.

Key points

One of the major findings of the present research is the fact that loyal customers do not necessarily make profits. The researchers provide evidence that communication with loyal customers often leads to extra expenditure. Admittedly, this finding can (or rather should) change marketing strategies of many companies. The authors claim that companies should reshape their communication with loyal customers.

Thus, the researchers argue that marketers should continue close connections with ‘profitable’ customers while ignoring unpromising customers. It is important to note that the researchers suggest certain ways to communicate customers. Thus, profitable customers should feel the company’s care, but the company should not cross the line. Admittedly, many marketers make the same mistake sending loads of emails to loyal customers, which often has a reverse effect.

The researchers give advice to balance communication. As for unpromising customers, the researchers suggest to ignore them as this will enable companies to save a lot. Notably, the researchers point out when it is really necessary to let the customer go and when it is possible to try to enhance his loyalty.

Such approach can reshape the major trends in marketing. Thus, instead of chasing for ‘loyal’ customers, companies will, first, be able to understand whether the customers are really loyal. Marketers will be able to estimate profitability of their loyal customers. Secondly, companies will be able to sort customers which will enable them to allocate their funds properly. Remarkably, the researchers also depict some successful techniques to measure customer loyalty.

The article under consideration shows that this process is not that difficult and effort-consuming these days. The researchers prove that it is rather easy to develop certain pattern of communication with this or that customer if the company has certain data. It goes without saying that this will help companies to allocate their funds more effectively.

Follow-on research

It is important to note that now researchers are aware of the dual nature of loyalty of customers. On one hand, researchers understand that customer’s loyalty is one of the most important factors to take into account when developing various strategies for companies. On the other hand, many researchers as well as marketers understand that it is still important to focus on profitable loyal customers. Thus, Pitta et al. (2006) exploit major principles stated in the article under consideration.

The researchers point out that companies should work out various strategies for profitable loyal customers only. Apart from this, the researchers focus on the sphere of online services. More so, Pitta et al. (2006) present the most effective strategies to acquire profitable loyal customers and to develop proper relationships between the company and such customers. Another interesting work by Kumar et al. (2011) focuses on factors that influence customer loyalty.

The research concentrates on telecommunication services sphere. The researchers claim that operations speed often enables companies to acquire new customers, whereas operations dependability leads to customer loyalty. It is important to note that the three articles have much in common.

However, Reinartz and Kumar (2002) focus on the essence and significance of different levels of loyalty. Whereas, the other two articles dwell upon effective strategies to win customer loaylty. This fact suggests that now people have acknowledged the difference between profitable and non-profitable loyal customers. Now the major concern of researchers is to work out effective strategies to enhance loyalty of profitable customers.

Applications

Admittedly, the article under consideration does open up new horizons for marketers. Reinartz and Kumar (2002) analyze the essence of such notion as the loyal customer. The researchers unmask certain myths concerning customer loyalty. Thus, marketers have acknowledged that there are different types of loyal customers: profitable and non-profitable.

Undoubtedly, this understanding will enable many companies work out effective strategies of communication with their profitable loyal customers. Previously, it was believed that companies should develop proper communication with all of their loyal customers. Of course, this often led to ineffective allocation of funds as many loyal customers were not profitable ones.

However, now companies can start with sorting their customers. There are at least several techniques to sort loyal customers. Thus, loyal customers can be placed in several groups (at least three groups suggested by Reinartz and Kumar (2002)).

When the company understands which customers are profitable (or can soon become profitable), the company can focus on those customers allocating the funds effectively. Therefore, it is possible to conclude that the article under consideration contributed greatly to the development of effective marketing strategies in the field of customer loyalty. Now marketers can fosuc on developing precise communication patterns with particular groups of customers (depending on the level of their loyalty).

References

Kumar, V., Batista, L. & Maull, R. (2011). The impact of operations performance on customer loyalty. Service Science, 3(2), 158-171.

Pitta, D., Franzak, F. & Fowler, D. (2006). A strategic approach to building online customer loyalty: Integrating customer profitability tiers. Journal of Consumer Marketing, 23(7), 421-429.

Reinartz, W. & Kumar, V. (2002). The mismanagement of customer loyalty. Harvard Business Review, 80(7), 4-12.