Why loyalty schemes work here, but not there

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By: Wise Marketer Staff |

Posted on September 23, 2014

What has proved to be a brilliant customer relationship marketing strategy in one country could be a complete non-starter in another thanks to cultural differences, according to a marketing study by the American Marketing Association (AMA).

The research, which included a meta-analysis of nearly 50,000 relationships across 170 studies, 36 countries and 6 continents, was conducted to uncover cross-country insights into the most effective relationship marketing strategies as well as where customer relationships pay off the most (and least).

For example, while many companies believe rewards programmes help build loyalty, the researchers find the effectiveness of certain reward strategies is contingent upon a country's culture. Take Gazprom, a major Russian fuel company; it rewards its customers with points delivered in a tiered, status-based system that highlights membership level (silver, gold, etc.), consistent with Russian culture that emphasizes social status.

Alternatively, Shell in the US similarly rewards fuel consumers but does not highlight status, consistent with the America's more egalitarian cultural values. Moreover, while status-based rewards programmes may work in Russia, rewards programmes in general do not, partly due to a cultural tendency to avoid unfamiliar giveaways.

The analysis, which appeared in the September issue of the AMA's Journal of Marketing, also highlights the effect of relationship marketing on performance (sales growth and market share). On average, building strong relationships is far more effective outside the United States, exemplified among BRIC nations (Brazil, Russia, India, China) where relationship marketing is 28%, 20%, 71%, and 100% more effective, respectively. But, what strategies work best at building those relationships?

For managers launching on-the-ground relationship marketing initiatives, the co-authors created benchmark comparisons across the 25 largest countries and six continents that provide insights into the most effective strategies by country. The strategies evaluated were those involving communication, seller expertise, dependence, investments, and length of relationship.

The research was conducted by Assistant Professors Stephen A. Samaha at California State University Northridge and Joshua T. Beck at University of Cincinnati and Professor Rob Palmatier from the University of Washington's Foster School of Business.

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