For industries with low switching costs, customer loyalty programs (LPs) have potential to drive differentiation and sustain a competitive advantage. However, incentives provided through LPs also have a potential to escalate into costly price wars. In this article, we discuss how to design successful customer loyalty reward programs that bring value to participants and that cannot be emulated by competitors easily. We focus on three distinct aspects of improvement: personalization, reward types, and additional services. Through personalization, companies can leverage the knowledge they already have on their customers to tailor offers that they find relevant and appealing. For the reward structure, we argue in favor of a certain degree of opacity. We also encourage loyalty programs to consider giveaways that are unique and difficult to imitate and to use all the information they have available to provide rewards that fit with each customers'idiosyncratic situation or preference. Finally, competitive LPs should look beyond offers and rewards. In addition to purchases, LPs can reward participants for other desirable behaviors; they can also provide additional services that impose minimal costs on firms, but bring value to customers.
Uralkali, the giant Russian potash producer, decided to stop export sales through the Belarusian Potash Company - an export cartel it had formed with Belaruskali. Uralkali planned to increase potash production and export it independently through its own trading company. This move threatened to reduce global potash prices by up to 25 per cent. Immediately, the stock prices of major potash producers around the world plummeted. This set of three cases looks at the potential competitive strategies of three key players in the industry: PotashCorp, the firm with the world's largest potash reserves; Agrium, a firm in the midst of a large potash mine expansion; and BHP Billiton, the world's largest mining company planning huge potash mine development. See B case 9B14M031B and C case 9B14M031C.
Uralkali, the giant Russian potash producer, decided to stop export sales through the Belarusian Potash Company - an export cartel it had formed with Belaruskali. Uralkali planned to increase potash production and export it independently through its own trading company. This move threatened to reduce global potash prices by up to 25 per cent. Immediately, the stock prices of major potash producers around the world plummeted. This set of three cases looks at the potential competitive strategies of three key players in the industry: PotashCorp, the firm with the world's largest potash reserves; Agrium, a firm in the midst of a large potash mine expansion; and BHP Billiton, the world's largest mining company planning huge potash mine development. See A case 9B14M031A and C case 9B14M031C.
Uralkali, the giant Russian potash producer, decided to stop export sales through the Belarusian Potash Company - an export cartel it had formed with Belaruskali. Uralkali planned to increase potash production and export it independently through its own trading company. This move threatened to reduce global potash prices by up to 25 per cent. Immediately, the stock prices of major potash producers around the world plummeted. This set of three cases looks at the potential competitive strategies of three key players in the industry: PotashCorp, the firm with the world's largest potash reserves; Agrium, a firm in the midst of a large potash mine expansion; and BHP Billiton, the world's largest mining company planning huge potash mine development. See A case 9B14M031A and B case 9B14M031B.
This B2B case describes a common situation that arises when channel partners gain success and the perceived balance of power shifts from the supplier to the channel. The manager for Bolster Electronics, one of the largest suppliers in Canada of state-of-the-art industrial video equipment for harsh environments, must consider a request from Vickers Industrial Supplies, a regional dealer, to be upgraded from a dealership to a distributor. Vickers was generating a growing business volume for Bolster in an important market segment, the Canadian oil sands in northern Alberta. Approving Vickers' request will generate slimmer margins for the manufacturer, which may be made up with higher projected volume, if the projections are reasonable. The potential reaction of the company's national distributors is causing concern. Although Bolster sells to regional dealerships in the United States, its policy is to distribute its products in Canada through two national distributors, and it fears that increasing Vickers' role will alienate these distributors. Each alternative has benefits and risks.
In February 2008, the president of Vacances Paradis Inc. (Paradise) was assessing his options for the company's competitive strategy for the future. Paradise was Quebec's market leader in the tour operating industry but was facing a significant challenge: FunTours Holidays (FunTours) had stolen a sizeable portion of Ontario's market share in only two years and was planning on conquering the Quebec market for the 2008/09 winter season. FunTours' aggressive strategy was to provide large capacity at low prices, thus creating a price war and decreased margins. The president had to consider how to meet FunTours' threat in the face of several challenges: the tour industry was fundamentally changing as a result of shifting from traditional travel agents towards Internet distribution; limited differentiation in product offering forced competing on price; and a growing customer base as more people could afford travel. Price had emerged as the dominant criteria for travelers and a huge consideration for tour operators. The president wondered which strategy would be best for the company's short- and long-term viability.
In November 2007, Barack Obama, along with his chief strategist and campaign manager, was faced with a Gallup Poll of Democratic Presidential Candidates that indicated among Democratic voters Hillary Clinton held 48 per cent support of voters, compared with Obama's 21 per cent. Pundits and analysts essentially declared the race over; however, the triumvirate was convinced they had devised a perfect campaign strategy to overcome the long odds and win the nomination. Their confidence was validated when Barack Obama was elected the President of the United States in November 2008. This win was aided by a strategy that focused on competing in markets that other candidates did not, and embracing technological developments in a manner that other candidates would not. The Obama campaign employed such tools as lowering the target donation from potential donors, competing in non-traditional markets, unique resource allocation and use of technology to gain tactical advantages.
Logitech is an international company that designs and manufactures computer peripheral products. The retail pointing devices unit director is thinking about the development of the next generation of his device, the Logitech io digital pen. With less than two months until launch time, the director is still unsure which features are valuable to potential users, who these potential users are, and for which applications the digital pen can be used.
McDonald's, one of the world's strongest and most recognizable brands, intends to extend its "world's best quick service restaurant experience" brand into the hotel industry by launching a hotel in Illinois. An industry observer examines the hotel venture's positioning options and the McDonald's brand extension into a different product class.
This is an MIT Sloan Management Review article. Why do your customers choose to buy from you rather than from your competition? For the past three years, marketing professors Mark Vandenbosch and Niraj Dawar have posed that question to more than 1,500 senior executives in interviews and group discussions. And despite the vast range of industries represented by the executives they probed, the responses they got were remarkably similar: Customers often value how they interact with their suppliers as much or more than what they actually buy. As the main drivers of customer choice, the executives cited cost-oriented factors such as convenience, ease of doing business, and product support and risk-oriented factors such as trust, confidence, and the strength of relationships. Strategies built around reducing customers' interaction costs and risk offer a systematic way to tap into new sources of customer value while avoiding the often futile attempt to compete on product innovation. The authors illustrate five different strategies that some companies are using to build a sustainable advantage.
The vice president and general manager of Mitel's semiconductor division is faced with a rapidly growing market for the company's business communication chips, but has limited capacity at the semiconductor plant. There is little industry capacity to outsource production. He must determine how to pursue the growing market and how to secure additional capacity. Options include modifications to the current facility, construction of a new facility, or the acquisition of a plant from another company.
A world leader in the design and volume production of complex, rigid, multilayer printed circuit boards must decide how to compete in a rapidly consolidating industry. Many of Praegitzer's key competitors are growing rapidly and developing new skills that threaten Praegitzer's position in the market.
The management team at Electrohome's Projection Systems Division must decide what to do in response to a surprise new product introduction by Sony Projection Systems. The new product threatens Electrohome's position at the high end of the market. This case focuses on competitive analysis as three players from three differnet regions of the world vie for profitable positions in the industrial projection systems market.