MT202 Unit 10 Customer Loyalty Plan Example

Nine Branches and a Cheaper Quote on Copy Paper: A Unit 10 Customer Loyalty Plan for a Credit Union Account

[Student Name]

Purdue University Global

MT202: Building Customer Sales and Loyalty

Unit 10 Customer Loyalty Plan

[Instructor Name]

[Date]

Prairie Office Supply, Heartland Federal Credit Union, their staff and every figure are composite and illustrative; bracketed figures stand where the account file would supply the numbers; the sources cited are real.

Executive Summary

Prairie Office Supply should renew its contract with Heartland Federal Credit Union in April and raise its share of Heartland's supply spending from about 60 percent to 75 percent. The plan does this by fixing the two weaknesses that make Heartland open to a competitor, invoice disputes and inconsistent branch ordering, and by adding three mechanisms: a consolidated monthly invoice, a quarterly business review and a volume rebate. The total cost to Prairie is about [$9,800] for the year, against an account worth about [$186,000] a year in sales.

Account Snapshot

Heartland Federal is a composite credit union with nine branches in central Iowa and a headquarters in Ames. Its yearly supply bill for paper, toner, breakroom items and cleaning products comes to about [$310,000], of which Prairie supplies about 60 percent. The rest goes to an online seller and to a janitorial distributor that recently quoted copy paper at [7] percent below Prairie's price. The contract renews in April.

Relationship Map

Three people shape this account. The purchasing coordinator, Erin Walsh, places the headquarters orders, receives every invoice and handles disputes. The facilities director, Mark Ibsen, approves the contract and cares about cost and branch complaints. The nine branch managers each order their own supplies, some through Prairie's website and some by calling Erin.

Every mechanism in this plan has to reach a specific person. A rebate matters to Mark, a cleaner invoice matters to Erin, and an easier ordering process matters to the branch managers.

Account Health

Before proposing anything, the plan scores the account on three measures from the past year.

Delivery accuracy is strong: about 98 percent of orders arrived complete and on time. Invoice disputes are weak. Erin disputed [41] invoices last year, most because branch orders were billed separately and sometimes at different prices. Order frequency is uneven: three branches order weekly, four order monthly and two order through the online seller instead of Prairie.

The weakness is not price but friction. Erin spends hours each month on disputes, and that frustration is what makes a competitor's lower paper price attractive. Morgan and Hunt (1994) found that trust and commitment are built on reliability and shared values and that conflict over day-to-day problems erodes both. Invoice disputes are exactly that kind of conflict.

Heartland is not shopping because Prairie costs too much; it is shopping because Erin is tired of correcting invoices.

Loyalty Mechanisms

The first mechanism is a consolidated monthly invoice. All nine branches' orders would appear on one invoice, at one contract price, with each branch's orders listed separately. It rewards consolidated ordering and removes the main cause of disputes. Its cost is about [$1,200] in setup and staff time.

The second is a quarterly business review with Erin and Mark. Each review covers spending by branch, disputed invoices, delivery accuracy and any products where Heartland could save money by switching brands. It rewards a long relationship by giving Heartland information it cannot get from a website. Its cost is about [$2,400] a year in representative time.

The third is a volume rebate. If Heartland's total purchases from Prairie exceed [$230,000] in the contract year, Prairie returns 2.5 percent of everything above [$186,000]. At [$232,000] in purchases, the rebate would be about [$1,150]. If Heartland moved all its janitorial and online spending to Prairie and reached [$280,000], the rebate would be about [$2,350]. The rebate rewards the branches that now buy elsewhere for moving their orders back, and it costs Prairie only on sales it would not otherwise have.

On copy paper itself, Prairie should match the competitor's price for the contract year. Paper is the item Mark will compare, and losing a [$310,000] account over a paper price of [7] percent would be a poor trade. The cost of matching is about [$3,900] a year.

Risks

The largest risk is that the competitor offers a broader discount after hearing about the paper match. The quarterly review is Prairie's answer, because it gives Mark a reason to stay that a lower price cannot replace. A second risk is that consolidated invoicing fails in its first month and creates more disputes than it removes; Prairie should run it in parallel with the old invoices for one month. A third is that Erin leaves, taking her knowledge of the account with her, which is why the reviews include Mark.

Contact Calendar

In January, the representative meets Erin to set up the consolidated invoice. In February, the first parallel invoice goes out. In March, the representative meets Mark and Erin to present the renewal with the paper match, the rebate and the review schedule. In April, the contract renews. Reviews follow in July, October and January. Between reviews, the representative calls the two branches that buy online each quarter to ask what they need that Prairie's site does not make easy.

Bolton et al. (2004) argued that customer value grows through three behaviors: how long a customer stays, how much more it buys and what else it buys. The calendar targets all three, with renewal, a larger share of spending and janitorial products the branches now buy elsewhere.

Measures

Prairie will judge the year by three figures. Share of spending should rise from 60 percent to 75 percent by the end of the contract year. Invoice disputes should fall from [41] to fewer than [10]. And the contract should renew in April. Each measure has a baseline, and each will be reported at the quarterly review, so Heartland sees the results as clearly as Prairie does.

Kotler and Keller (2016) note that retaining customers requires the seller to keep delivering value after the sale. This plan treats the year after renewal as the real test of the account.

References

Bolton, R. N., Lemon, K. N., & Verhoef, P. C. (2004). The theoretical underpinnings of customer asset management: A framework and propositions for future research. Journal of the Academy of Marketing Science, 32(3), 271-292. https://doi.org/10.1177/0092070304263341

Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson.

Morgan, R. M., & Hunt, S. D. (1994). The commitment-trust theory of relationship marketing. Journal of Marketing, 58(3), 20-38. https://doi.org/10.1177/002224299405800302