Co-Opetition - Adam M. Brandenburger [72]
Cable TV companies really seem to have missed the boat on this. They have the ability to give their loyal customers premium services that are currently sitting idle. Very few people subscribe to all three of HBO, Showtime, and Cinemax. People would like to have a second or third premium channel, but with the overlap among them, it’s often not worth the high price. But it’s worth something. So after someone has subscribed to HBO for a year, the cable company should throw in Cinemax for an extra dollar. Or after people have paid for ten pay-per-view movies, the cable company should give them a selection of movies they can view for free.
Why have cable companies missed the boat? Perhaps because they have the monopoly mindset. They don’t feel the need to create loyalty. Big mistake. Their markets are opening up. Today they face nascent competition from satellite TV and “wireless” cable. Tomorrow they’ll wish that they’d invested more today in creating loyal customers. The local phone companies, like the cable companies, are also facing deregulation of their industry. And they’re making the same mistake: they’re failing to create customer loyalty while they have the game all to themselves.
9. Say thank you to your suppliers as well as to your customers. Recall the symmetry of the Value Net: every strategy toward customers has a symmetric counterpart toward suppliers. Just as you should reward loyal customers, you should reward loyal suppliers.
Is this really necessary? You are your suppliers’ customers. Isn’t it incumbent on them to have loyalty programs for you? Why do you need loyalty programs for them? The answer is that the programs should go both ways. You want your suppliers to be loyal to you—that’s why you need a loyalty program. Your suppliers want you to be loyal to them—that’s why they need loyalty programs.
Companies understand the idea of saying thank you to suppliers as it applies to employees. They often give employees freebies, or at least large discounts off the company’s products. Many companies offer recognition, even rewards, to their longtime employees. But companies should think beyond their employees and reward other loyal suppliers, too. If you offer employee discounts on your products, think about extending this benefit to all your suppliers (and their employees). Or you may be able to use your superior clout and access to help a supplier get a better price on its raw materials. These are just two ways of saying thank you to your suppliers.
Every company should have a frequent-customer program and a frequent-supplier program. This is the way to create loyalty both up and down the Value Net.
Nine Tips on Saying Thank You
1. Say thank you in kind, not cash.
2. Save the best thank-you for your best customers.
3. Say thank you in a way that builds your business.
4. Don’t say thank you too quickly, or too slowly.
5. Say you’re going to say thank you.
6. Recognize that you may have to compete for loyalty.
7. Allow your competitors to have loyal customers, too.
8. Don’t forget to say thank you even if you have a monopoly.
9. Say thank you to your suppliers as well as to your customers.
4. Imitation
The American AAdvantage program was our model example of how to create customer loyalty. We saw how AAdvantage worked and how it continued to work even after the other airlines copied it. Today practically every airline has a frequent-flyer program. Yet the programs remain an effective strategy for creating loyalty. A strategy that continues to work even after being copied? This seems to fly in the face of conventional wisdom.
Conventional wisdom has it that imitation is the bugaboo of business strategy. You develop a new strategy. It works. In fact, it works so well that everyone copies you. And then your strategy no longer works. You have to come up with something new again.
That’s the view commonly expressed in business-strategy textbooks. Yale School of Management professor Sharon Oster writes: “If everyone