Marketing Events as a Supportive Tool for Customer Loyalty

TABLE OF CONTENTS

List of Figures

List of Appendices

Abstract

Part I Preface
1.1. Research Objectives
1.2. Report Structure
1.3. Methodology
1.3.1. Part Customer Loyalty
1.3.2. Part Marketing Events
1.3.3. Part Conclusions and Findings
1.3.4. Limitations of Research

Part II Customer Loyalty
2.1. Customer Satisfaction and Customer loyalty
2.2. Reasons to Create Customer Loyalty and Synergy Effects
2.3. Loyalty-creating factors
2.4. Appraisal of the Loyalty Tools

Part III Marketing Events
3.1. Definition
3.2. The Necessity of New Ways in Communication
3.3. Events and the Classical Marketing Communications Mix
3.3.1. Marketing Events and Advertising
3.3.2. Marketing Events and Public Relations
3.3.3. Marketing Events and Sponsorships
3.3.4. The Integrated Marketing Communications Mix
3.4. Reasons and Objectives for Marketing Events
3.5. International Aspects
3.6. Prospects for the Future
3.7. Virtual Events

Part IV Findings And Analysis
4.1. Customer Loyalty
4.2. Marketing Events
4.3. Marketing Events as a Supportive Tool for Customer Loyalty

Part V Conclusion

References

APPENDICES

List of Figures

Figure 1.1. Table of studies

Figure 2.1. Market share strategy vs. loyalty strategy

Figure 2.2. Level of satisfaction and the loyalty rate

Figure 2.3. Satisfaction-profit chain

Figure 2.4. Loyalty-creating factors

Figure 2.5. Contacts forming the brand’s image

Figure 3.1. Classical and non-classical tools in the marketing mix

Figure 3.2. Events within the promotion mix

Figure 3.3. Kind of events organised in

Figure 3.4. Mass communication and individualised communication

Figure 3.5. Interlinked communication system

Figure 3.6. Sponsorship objectives

Figure 3.7. Sponsorship and events

Figure 3.8. Event objectives

Figure 3.9. Future development of event activities

Figure 4.1. Results of question two

Figure 4.2. Results of question three

Figure 4.3. Results of question five

Figure 4.4. Results of question six

List of Appendices

Appendix A Abbreviations and Terms

Appendix B Process of a Loyal Customer Development

Appendix C The Measurement of Customer Loyalty

Appendix D How to Monitor the Success of Marketing Events

Appendix E The German Event Market

Appendix F Questionnaire

Abstract

“Marketing is moving into the soft issues – the emotional context of the customer relationship” (Frazer-Robinson, 1999:19). The customer relationship became an essential issue during the last decade, because companies suffered from increasing difficulties to secure their market position. Businesses moved away from transaction marketing principles, which involved the acquisition of new customers to raise sales figures. Customer satisfaction became a new business objective, since it was directly linked to several advantages. But soon, businesses found out that satisfying customers was not sufficient to contribute to the company’s financial aims. This brought up the terms customer retention and customer loyalty and correlated aspects, such as increasing turnover through customer lifetime value, cross-selling potential and word of mouth publicity. However, customer loyalty policies called former business strategies into question and were partly contradictory, which made some companies more successful in retaining customers than others. Soon, companies found out what tools were successful to make customers stay with their business. But every business process requires innovation since the business landscape surrounding a company is permanently changing and competitors tend to imitate well functioning customer loyalty schemes. Therefore, today’s businesses are striving for different factors and tools to retain old and new customers.

As the quotation at the beginning indicates, the discussion about innovative approaches brought up an emotional context of the customer relationship. Event marketing is a relatively new tool and is seen as highly emotional. Still, it is broadly not recognised as an independent tool within the promotional mix, although it clearly shows autonomous characteristics that visibly stand out from classical promotional tools like advertising and public relations. In recent years, an increasing trend in the use of marketing events was measured. This development mainly resulted from a changing media landscape and a decreased effectiveness of advertising. Businesses confirm this trend, enumerating various reasons for their use of marketing events and forecasting their definite employment of events in the future. New media as the internet, is giving new perspectives to the promotional tool event marketing.

At first glance, the terms customer loyalty and marketing events seem unconnected, since one is directly related with long-term measures and the other is commonly connected with one-off happenings. But studies confirm a link, since businesses clearly cite customer retention as one of their main objectives when carrying out events. Characteristics and arguments noticeably support the connection between marketing events and customer loyalty. Here, particularly, accurate target group segmentation can contribute to effectiveness. However, measurable results are still lacking and especially international aspects are not explored sufficiently. Still, the price argument heavily opposes emotional arguments, which puts customer loyalty schemes in general in an uncertain position. Nonetheless, companies with high-involving products that appeal more to the consumer’s intrinsic motivation could successfully employ marketing events as a supportive tool for customer loyalty.

Part I Preface

1.1. Research Objectives

The aim of this report is to find a link between marketing events and the development of customer loyalty.

To meet the aim of this report the following objectives have been identified:

1. To define the theoretical framework of customer loyalty and identify new structures to create customer loyalty.
2. To define the theoretical framework of marketing events and identify new structures and strategies within the marketing communications mix.
3. To establish a connection for marketing events as a supportive tool for customer loyalty.

1.2. Report Structure

Part one briefly introduces the reader to the topic and the research objectives. Moreover, the methodical approach to meet the research objectives will be presented. Part two provides the theoretical framework of customer loyalty. Terms, advantages and strategies related to customer loyalty are introduced. Furthermore, the report illustrates factors that support the development of customer loyalty and evaluates the requirements to develop new loyalty tools. Part three presents a definition and classification of marketing events as well as the inevitability of creating new ways of communication. Furthermore, it portrays international dimensions of marketing events, as well as a future outlook. Virtual events will be described as new approaches within the tool event marketing. Part four provides the findings of this project and analyses the connection between marketing events and customer loyalty. The report is finalised by a conclusion in part five.

1.3. Methodology

As suggested by Saunders et al (2000), diverse strategies have to be used for the research project to answer the research questions as precisely as possible. To approach this, the report uses primary and secondary sources. Since this report uses technical terms from the marketing sector, Appendix A gives an explanation of abbreviations and terms, to avoid misunderstandings through translations or false uses of terms.

Figure 1.1. shows the studies used throughout the report.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1.1. Source: Own Source

1.3.1. Part Customer Loyalty

The part on customer loyalty has mainly been researched on an exploratory basis. As mentioned by Saunders et al (2000), there are three principal ways of conducting exploratory research:

- a search of the literature
- talking to experts in the subject
- conducting focus group interviews

To meet the first objective of this report, the relevant literature on customer loyalty was studied intensively. The area of customer loyalty is a broadly explored topic and was therefore mainly covered with documentary secondary sources. Hague (1999:55) states that “…information, which can be obtained through desk research (secondary research), is vast and is often capable of meeting the needs of many market research projects….” The use of literature mainly provides the theoretical framework and different views on the topic of customer loyalty. Journal articles and current studies explore the latest trends and developments and contribute to the identification of the need for new strategies to create customer loyalty.

1.3.2. Part Marketing Events

The section about marketing events was mainly covered with external secondary sources, such as current journal articles and information provided by involved associations, companies or event agencies, since there is hardly any decent literature on this topic available. As the topic of event marketing is a relatively new one, this approach was chosen to explore answers to research objective two. As claimed by Saunders et al (2000) the author has to confront flexibility inherent in exploratory research. The author had to confront this flexibility, since especially Anglo-American sources on this topic were hardly available. Therefore, mainly German sources are used in this section to approach the research objective.

1.3.3. Part Conclusions and Findings

To collect primary data, an explanatory research approach explains the relationship between the variables customer loyalty and marketing events (Saunders et al, 2000). To meet research objective three, open- and closed-question e-mail-questionnaires were sent out to explore the practical approach on this topic. Self-administered questionnaires filled out by the respondents presented a timesaving and financially efficient method of research. Furthermore, the respondents were meant to have the smallest possible amount of time to fill out and return the questionnaire. As mentioned by Hague et al (1999:114) “…a questionnaire is a structured sequence of questions designed to draw out facts and opinions”, therefore, the database included 50 companies from different countries and industries to collect a broad overview of opinions and exemplary handling on the research topic. The results of the questionnaires are presented as follows:

Respondent 1 – insurance company
Respondent 2 – carriage company
Respondent 3 – mechanical engineering company
Respondent 4 – financial institution

Since a quantitative investigation about the research objectives was not in the temporal scope of this project, ad hoc surveys from different sources are used to support the meaningfulness of the questionnaires. According to Saunders et al (2000:193), “ad hoc surveys are usually one-off surveys … and include data from questionnaires that have been undertaken by independent researchers as well as surveys undertaken by organisations and governments.” This approach was chosen to gain more verified data and support the primary data.

The overall project used the Internet intensely since “the Internet provides access to millions of knowledgeable people through user groups so that a question thrown into the pool will sooner or later be answered” (Hague et al, 1999). Moreover, as a new topic, event marketing is broadly covered with current information and developments on the internet.

1.3.4. Limitations of Research

The focus on German secondary and primary sources results from the author’s extensive knowledge about relevant association and companies involved in the research topic. This report originally intended to include more international aspects, but unbureaucratic and useful support was mainly dominated by German companies and associations, giving the paper a relatively German perspective. The use of German studies limits the paper’s international transferability, since the studies mainly concentrate on German companies on the German market. This may misrepresent overall statements and results, although the report still includes international aspects and approaches. Moreover, difficulties in language and translation may contribute to inaccuracies within the report. Since this report mainly relies on secondary data further inaccuracies may occur because of the different purposes secondary data is collected for. As Saunders et al (2000:200) mentions, “secondary data will have been collected for a specific purpose which differs from your research question(s) or objectives.” Moreover, Saunders adds that changing definitions, aggregation of information and interpretation can falsify the suitability of secondary data. The author of this report recognizes the importance of these aspects and has tried to eliminate them throughout the paper.

The restricted use of primary data results from a lack of cooperation from companies, who only refer to their websites as source of information. Although, as suggested by Saunders et al (2000), a pre-survey contact was established to find out responsible contact persons and a covering letter was developed, the response rate remained low. Possible reasons might be wrong contact persons, lack of technological knowledge in handling e-mails, a ban against attachments or the company’s information policies. Although, the author chose the contact persons carefully and focussed on progressive companies, these factors could have contributed to a reduced representation of primary sources. Therefore, secondary data was further examined for validity and reliability to meet the research objectives.

However, the author recommends carrying out a quantitative research to find quantitative evidence for the findings of this project. Quantitative research with selected companies and industries would be more appropriate to prove a direct and measurable correlation between marketing events and customer loyalty.

Part II Customer Loyalty

The terms customer satisfaction, customer retention and customer loyalty have been the most discussed marketing terms in recent years. The study “Kundenbeziehungsmanagement 2000” investigated that the amount of companies dealing with the concept of customer retention increased from 95% in 1998 to 98% in 2000.

However, the concept of customer retention and loyalty has not been distinctively defined in marketing literature. Repeat purchase, preference, commitment, retention and allegiance are often synonymous with loyalty, which is reflected in various definitions (Rundle – Thiele et al, 2001). Kendrick (1998:314) supports this view, stating, “loyalty translates into an unspecified number of repeat purchases from the same vendor over a specified time.” Griffin (1995:31) adds to this definition that customer loyalty “demonstrates an immunity to the pull of the competition”. Gould (1995) asserts that only the loyal customer acts as an unpaid advocate and recommends the company to other people.

To further clarify the concept of customer loyalty, classical business strategies and loyalty strategies within a company have to be differentiated. The reason for this is that well-established business strategies like the market share strategy can demonstrably limit loyalty, as Exhibit 2.1. illustrates. (Griffin, 1995)

Abbildung in dieser Leseprobe nicht enthalten

Exhibit 2.1. Source: Griffin (1995)

A closely related term to customer loyalty is brand loyalty. Here, the literature offers different definitions to distinguish both expressions. However, this report is a general approach towards the connection of customer loyalty and marketing events and will therefore also include aspects and effects of brand loyalty, since both terms remain closely related.

2.1. Customer Satisfaction and Customer loyalty

In order to understand the principles of customer loyalty, the terms customer satisfaction and customer loyalty have to be differentiated. In the 1980s, customer satisfaction was considered necessary to any successful business. But satisfying customers does not simultaneously imply the development of loyalty as various studies suggest.

Griffin (1995) summarises several results of research institutes proving that up to 40 percent of satisfied customers switched their suppliers without hesitation. The Harvard Business Review reported that between 65 and 85 percent of customers who switched to a new supplier, stated, they were satisfied or very satisfied with their former supplier. Furthermore, the indicator satisfaction is falsified by the customer’s price awareness. The Juran Institute found out that price comes as the first or second feature with which customers were least satisfied. In addition, “loyal” customers reported the same level of dissatisfaction with price as lost customers. These research results lead to the conclusion that customer satisfaction is important to any successful business, but satisfaction does not automatically lead to customer loyalty. (Griffin, 1995)

A research of the Royal Bank of Scotland demonstrates that the level of satisfaction and the loyalty rate developed by the customers are not necessarily related as Figure 2.2. shows.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2.2. Source: Hill et al, (2000)

A significant difference between satisfaction and loyalty is that satisfaction mainly deals with the initial buying experience while loyalty is the outcome of building long-term relationships with the customer (Griffin, 1995). This fact is supported by the overall transformation from transaction marketing to relationship-marketing. The relationship-marketing concept changed the traditional sales-oriented business strategy towards attraction and retention of customers. The lifetime value of a customer became more important than one-time sales. (Kandampully et al, 1999)

Gould (1995) states that to gain cost advantages and to boost turnover customers have to be more than satisfied. Griffin (1995) argues that a loyal customer always has a specific bias about what and from whom to buy. This explains why loyal customers come back to the company and spend more money with the firm than other customers. Theorists like Griffin and Gould mention customer retention as a step between customer satisfaction and customer loyalty. Since the borders of satisfaction, retention and loyalty are blurred, this report only aims at a short demonstration of the differences but will handle these terms as closely related and partly mutually dependent.

2.2. Reasons to Create Customer Loyalty and Synergy Effects

As verified by various theorists the building of long-term relationships with customers has many positive effects:

- It is five times more expensive to acquire new customers than retaining an existing one (Kandampully, 1999), which results in reduced marketing and customer acquisition costs (Griffin, 1995).
- The maintenance of customer loyalty only comes to 10 to 20 per cent of the expenditure of a new acquisition (Bodenstein, 1997).
- Regular customers spent more money than bargain purchaser – 80 per cent of a company’s turnover comes from 20 per cent of the customers (Bodenstein, 1997).
- A 5 per cent increase in customer retention leads to an increase in profits of 25 to 125 per cent (Bowen et al, 2001).
- Loyal customers are especially important in stagnating and saturated markets, since the acquisition of new customers and the establishment of a unique selling proposition in these markets is extremely difficult (Sidler, 2000).
- Loyal customers are less sensitive towards an increase in prices, which offers broader opportunities in price competition (Griffin, 1995).
- Loyal customers tend to promote the company via word-of-mouth recommendation, which is an effective and cheap way of promotion (Gould, 1995).
- Customer loyalty secures competitive advantages towards competitors and can contribute to an increased market share (Griffin, 1995).

In addition to these advantages, customer loyalty also implies synergy effects that spread further than reduced costs and increased turnover:

- The “Loyal Customer – Loyal Employee Connection” mentions that more money can be spent for increased pay or incentives since less money is invested in customer acquisition. This supports the employee morale and commitment to the company, it leads to increased productivity and less training costs since employees tend to stay longer in the company. The resulting working experience and better service directly influence the customers positively, since committed employees create satisfied customers and vice versa. (Griffin, 1995)
- Cross-selling potential can be achieved as Griffin (1995:31) includes in her definition that “a loyal customer is one who purchases across product and service lines.” Gould (1995), on the other hand, criticises this argument since the buying argument of cross-buying actions are hardly verifiable. Although, Gould (1995) also admits that a long-standing customer might be more responsive to the suggestion of buying a greater variety of products or services from one supplier.

Figure 2.3. shows the satisfaction-profit chain. Although, customer loyalty is not separately mentioned here, it demonstrates how closely related the terms mentioned before are.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2.3. Source: Hill et al (2000)

2.3. Loyalty-creating factors

After having discussed what advantages and synergy effects customer loyalty has, it is important to see what concrete factors contribute to the creation of long-term relationships based on loyalty.

Hallberg (1995) identifies customer involvement as one of the main catalysts for customer loyalty, since involvement makes the message memorable and high levels of involvement strengthen the relationship with the customer. Involvement implies an increased integration of the customer in business processes. This can be realised in terms of interactivity, information or communication between company and customer.

Lenz (1999) mentions in her example of the American automobile manufacturer Saturn that the understanding of the customer’s specific needs and expectations, mutual trust, exceeding customer expectations, win-win cultures and continuous improvements are the essentials for building up customer loyalty. This argument is also given by Gould (1995:17) who states “to get loyal customers, you have to exceed their expectations.”

Moreover, Lenz includes interest in the product, service or company as an essential factor to strengthen customer loyalty. According to Lenz, interest is particularly aroused through being different. She recommends marketing-related measures, which stand out from the competitor’s such as special advertisements, open doors, product demonstrations and unexpected product placements. These measures manage to involve the customer while appealing to his senses like seeing, feeling and hearing as argued by Hallberg.

[...]