Establishing Profitable Customer Loyalty for Multinational Companies in the Emerging Economies: a Conceptual Framework

Topics: Developed country, Marketing, Emerging markets Pages: 7 (2437 words) Published: August 27, 2013
A Review of the Article

Establishing Profitable Customer Loyalty for Multinational Companies in the Emerging Economies: A Conceptual Framework

By
Sagar D. Agrawal
Roll No.: 102
MMS – Marketing

K.J. Somaiya Institute of Management Studies & Research
Vidyanagar, Vidyavihar (E), Mumbai – 400 077
The authors capture our attention by asking why some companies succeed at going multinational while others continue to struggle inspite of making significant efforts to gain market share by investing time and human and financial resources. For example, despite its presence in India since 1993, Coca-Cola has yet to bypass the popularity of the local Indian drink, Thumps Up. Conversely, there are success stories: General Motors’ performance in Brazil, McDonald’s ability to create niches in China and India. This article has more than 20 concise findings (what to dos/what not to dos) for a company to do achieve “Profitable Customer Loyalty”. The study highlighted in this article was a qualitative study interviewing 42 managers of multinational companies from US, Canada, Asia, Europe and Australia to glean insights that identify possible factors that drive the creation of both a profitable and loyal customer base (termed “profitable loyalty” in the study) in emerging economies. The finding related to “innovation” was “Incremental and adaptive innovations are more likely to create PCL in emerging economies than radical innovations”. This article proposes a conceptual framework that can be used to establish profitable customer loyalty in emerging economies. It focuses on the key factors namely- Customer specific, Marketing Mix, Firm specific as well as Moderating variables that can help the MNCs to establish profitable customer loyalty in the long run. The emerging economies continue to hold much promise to MNCs because of the: (1) Presence of a significantly larger middle-class population with a higher per capita income (2) Higher levels of disposable income

(3) Wider selection of customer groups with varying tastes and preferences, and (4) Unmet demand for necessary and luxury products/services.

Traditionally, MNC’s have relied on two sets of strategies to guide them in foreign markets: standardization and adaptation. The standardization strategies are followed if the strength and form of the relationships between marketing-mix elements, market structure, competition, and business process in a newly entered market resembles a market in which the MNC is already operating. Whereas, adaptation strategy can be fruitful, only if the markets are not alike. However, the MNCs are unsure of which international marketing strategies to adopt in these emerging economies. Thus, the author propose that the establishment of “profitable customer loyalty” (PCL) is the key to ensuring the success of an MNC in the emerging markets. Profitable customer loyalty refers to customers who exhibit both behavioural and attitudinal loyalty and provide profits for the firm. Traditionally, customer loyalty is classified into two aspects: behavior and attitude, which says that the company should focus on building both behavioural and attitudinal loyalty simultaneously to achieve true loyalty. The researchers have hypothesized that at the firm level customer loyalty varies with product categories and finds that loyalty toward a brand depends on how widely the brand is distributed. At the customer level research has uncovered several linkages such as customer delight leading to customer satisfaction, which in turn leads to the creation of customer loyalty. For MNCs aiming to establish a loyal customer base in overseas markets, the country-specific factors would play a vital role in determining the success of the company. However the author Kumar and Shah proposes that the companies should focus on the creation of PCL rather than increasing only metrics such as loyalty, revenue, or market share, among others. They have also shown that when companies...
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