Technology is now so complex that it is almost impossible for one company to be everything to its customers. Partnering with others may be the answer.
A new type of business model - the Digital Loyalty Network (DLN) - could be the way forward for firms in the global high-tech industry. A study by Deloitte Research, an arm of Deloitte & Touche and Deloitte Consulting, focuses on this model which emphasises relationship-based networks as the key to success.
Doug Tuttle, global high-tech leader at Deloitte Consulting, defines a Digital Loyalty Network as "a new type of business model, where partnerships of companies provide a complement of products and services to meet their customers' needs in a profitable manner - one customer at a time." He adds that the complexity of technology has made it virtually impossible for a single company to be everything to its customers.
An example of a DLN would be a computer hardware company that partners with a software company and a management consulting company in order to solve a customer's need. By solving that need as a collective group, the partnership creates a loyal customer. Clearly, the right partners are essential to success.
Deloitte & Touche's Jeff Balentine says: "The supply chain becomes an ecosystem with companies dynamically working with key partners to provide industry vertical solutions, not just hardware and software." Tuttle adds that loyalty networks are based around humans, not bits and bytes. They build relationships which use technology as a means, not as the centre of the business.
The essential components that need to be in place are a well-developed digital platform with strong CRM, strong Supply Chain Management (SCM) and e-business capabilities, and the ability to share and use information linked to customer loyalty.
Much more profitable
The study found that companies with loyalty networks are 81% more profitable than those with below-average supply chain collaboration and sub-par customer loyalty. And companies with loyalty networks are twice as profitable and up to four times as likely to show superior shareholder value, sales growth, market share and return on assets than other companies that - despite having excellent supply chain integration - have mediocre customer loyalty. It also revealed that early adopters of DLNs improved their customer relationships by 50%. However, elements that drive loyalty vary from customer to customer and from solution to solution.
The report provides detailed information on implementing DLNs, including how to develop a network for each customer, how to grow loyalty, the key challenges for collaborative customer solutions, using loyalty strategy to drive differentiation, and the benefits expected.