Consumers can easily switch loyalty in a market where they get the same value or level of service and products from various companies.
Thus, firms have to be creative in order to stay competitive and retain customers’ loyalty.
Companies often come up with various forms of incentives and rewards to retain loyal customers and attract new ones.
A research conducted by the US Massachusetts Institute of Technology (MIT) focusing customer rewards, found that consumers can easily switch loyalty in a market where they get the same value or level of service and products from various companies.
Thus, firms have to be creative in order to stay competitive and retain customers’ loyalty.
“In retail, for example, different people spend vastly different amounts on clothes and can switch from store to store at the drop of a hat. As per our research, when there is a high degree of shopping flexibility and a high degree of value creation, retailers should reward and focus on retaining existing customers by providing discount value catalogues or membership club cards otherwise, otherwise, they are endangering profitability,” reported MIT.
As part of its effort to attract new customers, e-commerce company, Jumia Kenya last week launched an initiative called ‘Try Jumia for Free’. The campaign will see new customers buy Amaize maize flour for only a shilling and also enjoy free delivery in Nairobi. The flour retails at Sh142. Existing customers will only get one-week free delivery during the period if they purchase products worth more Sh1,000.
While Jumia is likely to acquire new customers thanks to the campaign, it risks isolating its existing and loyal customers who might feel unfairly treated thus seek services from competitor.
“Our ‘Try Jumia for Free’ campaign is in line with the government’s initiative to create awareness in e-commerce sites such as Jumia. We recognise the strength of this initiative and as a result, have made it possible for 10,000 customers to experience an online order for the first time for only 1 bob,” said Sam Chappatte, Jumia MD.
The campaign, which will run from June 18 to 24, is an initiative to build trust and confidence in new customers by allowing them to experience the simplicity of online shopping and eliminate the perceived online buying barriers such as the payment methods.
Consumers are thus asked to pay only one shilling via cash on delivery or M-Pesa for the maize flour in order to monitor the process as well as encourage them to shop online more regularly.
It is also a strategy to sensitise the Kenyan consumer market of the new maize flour, Amaize that was launched in April. Existing customers, on the other hand, will receive free delivery across all major towns in the country including Nairobi, Mombasa, Kisumu and Eldoret during the period for all orders above Sh1,000, excluding large appliances. At Jumia Kenya, delivery charges depend on location; in Nairobi it costs Sh250.
In customer acquisition, discounts and incentives can be essential but companies can reward existing customers for their loyalty as well in more or less equal measure to avoid negative impact in sales or loss od customers t to competitors.
For example, Naya Traveller, a US tourism website which specialises in international destinations, offers a $500 discount to its new customers and $1,000 discount for existing ones for trips lasting at least seven days, which can cost up to $5700 per person.
“What companies gain from new customers, following a price promotion, are short-term profits because most of them buy in order to experience the deal but existing and loyal customers are members since they enjoy the services and using the company’s products,” said Stella Kimani, a brand strategist.
“However, they still can easily switch if they feel that the promotional deals and prices are discriminative to them. Keep in mind that it costs more to acquire a customer than retain one.”
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