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, geopolitical disruptions, increasing transportation and logistics costs, wage bills are increasing, there is increasing trade war between United States & China, increasing commodity prices, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, 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 -
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.
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.
Superior customer experience
– The customer experience strategy of Loyalty Exaggerations in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Diverse revenue streams
– Loyalty Exaggerations is present in almost all the verticals within the industry. This has provided firm in Loyalty Myths case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Loyalty Exaggerations are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Organizational Resilience of Loyalty Exaggerations
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Loyalty Exaggerations does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Loyalty Myths | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Loyalty Myths are -
Increasing silos among functional specialists
– The organizational structure of Loyalty Exaggerations is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Loyalty Exaggerations needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Loyalty Exaggerations to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Loyalty Exaggerations has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
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.
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.
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.
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.
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 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.
Skills based hiring
– The stress on hiring functional specialists at Loyalty Exaggerations has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Need for greater diversity
– Loyalty Exaggerations has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Products dominated business model
– Even though Loyalty Exaggerations has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Loyalty Myths should strive to include more intangible value offerings along with its core products and services.
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 -
Using analytics as competitive advantage
– Loyalty Exaggerations has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Loyalty Myths - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Loyalty Exaggerations to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Loyalty Exaggerations can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Loyalty Exaggerations can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Loyalty Exaggerations can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Loyalty Exaggerations can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Loyalty Exaggerations can use these opportunities to build new business models that can help the communities that Loyalty Exaggerations operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
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.
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 -
Consumer confidence and its impact on Loyalty Exaggerations demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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.
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.
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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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.
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.
High dependence on third party suppliers
– Loyalty Exaggerations high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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 .
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.
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.
