Q

Customer loyalty and commodity products

1-How do you build customer loyalty for a commodity product?
2-How do you ensure customer loyalty in a turbulent environment?
A commodity product is only perceived that way because of the approaches of marketers and those who manage CRM. Commodity, in addition to product and service, also refers to relationships: benign, passive, similar to that offered by competitors, and largely founded on price competition.

It is entirely possible for any product or service to break out of the 'commodity' mode. There are few industries perceived more as commodities than gasoline/petrol service stations. Principally, they compete on price. However, Mobil found that 80% of drivers would patronize a station that gave upgraded, more personalized, more convenient service. Initially, they began offering "Friendly Serve", a new component of service where an employee at the service station would keep the station much cleaner, pump gas - even get coffee - for patrons. Mobil was able to keep its gasoline prices higher (to offset the cost of having this individual provide those services) while sales volume rose dramatically. More recently, they've been offering "Speedpass", an electronic wanding technology at the pump that eliminates the need for credit cards or paying cashiers. Similarly, they've been able to strategically differentiate themselves, increase station patronage, and keep their prices higher.

My organization has developed customer insight for many clients operating in perceived 'commodity' market situations, such that we and they have been able to create methods to reduce the emphasis on price competition, while increasing the overall perceived value provided to customers.

With regard to maintaining customer loyalty in a turbulent environment, my recommendation is to assume that the environment is always turbulent - because it is. Market forces are in a constant change of flux, and it is essential to insure that current customer needs and concerns are always understood so that fresh methods can be applied to insuring loyalty.

This was first published in November 2001

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