Blind reliance on customer loyalty as a universal goal will put you out of business, warn the authors. Any loyalty initiative needs to begin with an understanding of the profitability of individual customers. Their investigation revealed more than 50 commonly-held beliefs about customer loyalty that turned out to be oversimplifications, exaggerations or just plain lies. The difficult truth is that the links between customer loyalty and business profitability are far more complex than we have been led to believe. The authors provide the top ten key misunderstandings surrounding this widely-coveted phenomenon and provide advice for firms to counter each.
Authors :: Timothy L. Keiningham, Terry G. Vavra, Lerzan Aksoy, Henri Wallard
Swot Analysis of "Loyalty Myths" written by Timothy L. Keiningham, Terry G. Vavra, Lerzan Aksoy, Henri Wallard includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Loyalty Exaggerations facing as an external strategic factors. Some of the topics covered in Loyalty Myths case study are - Strategic Management Strategies, Sales and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Loyalty Myths casestudy better are - – increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, technology disruption, supply chains are disrupted by pandemic , increasing energy prices,
competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Loyalty Myths case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Loyalty Exaggerations, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Loyalty Exaggerations operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Loyalty Myths can be done for the following purposes –
1. Strategic planning using facts provided in Loyalty Myths case study
2. Improving business portfolio management of Loyalty Exaggerations
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Loyalty Exaggerations
Strengths Loyalty Myths | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Loyalty Exaggerations in Loyalty Myths Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Loyalty Myths Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Strategy & Execution industry
– Loyalty Myths firm has clearly differentiated products in the market place. This has enabled Loyalty Exaggerations to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Loyalty Exaggerations to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Loyalty Exaggerations has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Loyalty Myths - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Loyalty Exaggerations in the sector have low bargaining power. Loyalty Myths has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Loyalty Exaggerations to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Loyalty Exaggerations has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Loyalty Exaggerations to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Loyalty Exaggerations has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Loyalty Exaggerations has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Learning organization
- Loyalty Exaggerations is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Loyalty Exaggerations is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Loyalty Myths Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Loyalty Exaggerations is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Loyalty Exaggerations has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Strategy & Execution field
– Loyalty Exaggerations is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Loyalty Exaggerations in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Loyalty Exaggerations is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Timothy L. Keiningham, Terry G. Vavra, Lerzan Aksoy, Henri Wallard can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Highly skilled collaborators
– Loyalty Exaggerations has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Loyalty Myths HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Loyalty Myths | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Loyalty Myths are -
No frontier risks strategy
– After analyzing the HBR case study Loyalty Myths, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Loyalty Myths, in the dynamic environment Loyalty Exaggerations has struggled to respond to the nimble upstart competition. Loyalty Exaggerations has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Loyalty Exaggerations has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of Loyalty Exaggerations, firm in the HBR case study Loyalty Myths needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Loyalty Myths HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Loyalty Exaggerations has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Loyalty Exaggerations has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Loyalty Exaggerations even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Loyalty Exaggerations products
– To increase the profitability and margins on the products, Loyalty Exaggerations needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Loyalty Myths, is just above the industry average. Loyalty Exaggerations needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Loyalty Exaggerations has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Aligning sales with marketing
– It come across in the case study Loyalty Myths that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Loyalty Myths can leverage the sales team experience to cultivate customer relationships as Loyalty Exaggerations is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Loyalty Exaggerations needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Opportunities Loyalty Myths | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Loyalty Myths are -
Leveraging digital technologies
– Loyalty Exaggerations can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Loyalty Exaggerations to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Loyalty marketing
– Loyalty Exaggerations has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Loyalty Exaggerations can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Loyalty Exaggerations in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Loyalty Exaggerations is facing challenges because of the dominance of functional experts in the organization. Loyalty Myths case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Loyalty Exaggerations can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Manufacturing automation
– Loyalty Exaggerations can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Creating value in data economy
– The success of analytics program of Loyalty Exaggerations has opened avenues for new revenue streams for the organization in the industry. This can help Loyalty Exaggerations to build a more holistic ecosystem as suggested in the Loyalty Myths case study. Loyalty Exaggerations can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Loyalty Exaggerations to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Loyalty Exaggerations to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Loyalty Exaggerations to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Loyalty Exaggerations can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Loyalty Myths, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Loyalty Exaggerations in the consumer business. Now Loyalty Exaggerations can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Loyalty Myths External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Loyalty Myths are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Loyalty Exaggerations with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Loyalty Myths, Loyalty Exaggerations may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Loyalty Exaggerations will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Loyalty Exaggerations business can come under increasing regulations regarding data privacy, data security, etc.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Loyalty Exaggerations in the Strategy & Execution sector and impact the bottomline of the organization.
Regulatory challenges
– Loyalty Exaggerations needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Technology acceleration in Forth Industrial Revolution
– Loyalty Exaggerations has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Loyalty Exaggerations needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Stagnating economy with rate increase
– Loyalty Exaggerations can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of Loyalty Exaggerations
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Loyalty Exaggerations.
Shortening product life cycle
– it is one of the major threat that Loyalty Exaggerations is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Loyalty Exaggerations in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Loyalty Exaggerations can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Loyalty Exaggerations needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Loyalty Exaggerations can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Weighted SWOT Analysis of Loyalty Myths Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Loyalty Myths needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Loyalty Myths is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Loyalty Myths is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Loyalty Myths is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Loyalty Exaggerations needs to make to build a sustainable competitive advantage.