Marketing Principle #3 All Competitors React  Managing Relationship-based Sustainable Competitive Advantage Agenda

1) RM Reward Elements
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3) Customer Loyalty Portfolio
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2) RM Delivery
(Steinhoff and Palmatier 2014)
Reward 1: priority check in
Reward 2: lounge access
Reward n:
Gratitude
Status
Unfairness
Firm portfolio performance
Target 1
Target 2
Target n
Bystander 1
Bystander 2
Bystander n
Visibility of reward
Clarity of rules

60% of Sales Lift Comes from Gratitude and 70% of Drop Comes from Unfairness

(Steinhoff and Palmatier 2014)
Customers Across Multiple US Airlines
See Understanding the Effectiveness of Loyalty Programs for overview

Maintaining Relationships: Takeaways

• Preventing customer perceptions of unfairness; may be “highest impact” RM strategy
• Prevents large negative effect
• Suppresses negative effect of other negative activities
• Prevents punishing or retaliatory behaviors
• Understanding ”true effectiveness” of loyalty programs needs a multidimensional view:
• Reward element perspective
• Reward delivery perspective
• Portfolio perspective (targets and bystanders)

However, RM Doesn’t Always Work

• Some customers try to avoid relationships
• Hassle, cost, and time
• Prevent psychological debt as know they will feel pressure to reciprocate and/or guilt
• RM more effective to customers that are “relationship oriented,” desire or need relationship to “solve” an exchange problem, and want governance benefits:
• Flexibility
• Minimize need for monitoring
• Cooperation
• Safeguard assets
• Manage risk

(Palmatier et al. 2008)