Driving customer loyalty

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Maz Iqbal of Peppers and Rogers Group argues that keeping customers coming back requires good experiences to be replicated again and again. The example chosen is the US car rental business.

Organisations that have embarked upon the CRM voyage have done so for more than one reason.

When CRM is studied more closely analysis shows that the vast majority of CRM projects are focussed on the better targeting of customers, up-selling and cross selling, and reducing the customer interaction related costs. Little or no effort is being made on improving customer loyalty by focussing on bettering the customer's experience with the organisation.

Acquiring new customers (through better targeting);

Increasing sales per customer (through up-selling and cross-selling);

Reducing costs (through automation and process redesign);


Increasing loyalty (through relationship building).

A significant impact on customer loyalty can only be made where the organisation focuses on improving the total customer experience:

Across all of the experiential elements (information, pre-sales, sale, post sale etc.);

Across all of the touch points (website, call centre, sales channel, service technicians etc.);


Across all departments and divisions.

Getting There

Car rental agencies have focussed on gaining the loyalty of their most valuable customers by providing what these customers want (minimal contact and independence through express service) and rewarding loyal customers. Whether it is Hertz #1 Club Gold, Budget Perfect Drive Fastbreak, National Emerald Club, Alamo Quicksilver or Avis Wizard, the fundamental premise is similar: at the beginning, a customer states his preferences and payment method, and then signs a rental agreement. The rental agency stores this data as a personal profile. This profile is used to drive the car pick-up and return processes. The customer need only tell the agency which location he will be arriving at on which day, and the car and keys will be ready in the parking lot. The return process is just as effective from a customer experience viewpoint.

Is this focus on express service justified? Yes, a survey conducted by JD Power in May 2000 revealed that the car pick-up process continues to be the single most important experiential factor contributing to customer satisfaction, followed by the return process. The study showed that car rental customers would switch companies if they were forced to wait too long.

Beyond Satisfaction

What happens when all the major rental companies are scoring above average in customer satisfaction? Enrich the value of the loyalty programmes: Budget Perfect Drive, National Emerald Club, and Hertz #1 Club Gold are three programmes whose membership advantages go beyond express services.

National and Budget web sites allow programme members to make one-click reservations. Once a member has entered his car preferences and payment method, the web sites store this information for all subsequent bookings. Thereafter, members need enter only the pick-up and drop-off locations, the dates, and the reservation is made. In the case of Nationalcar.com, one-click reservations contributed to a 100 per cent increase in bookings from April to December 2000.

Each of the three programmes offers rewards in exchange for rentals. Hertz, National, and Budget all allow members to redeem points towards rentals and upgrades. Although airline miles continue to be a staple, more and more members are using their reward points towards car rentals or upgrades. Hertz and Budget have been the most aggressive in awarding points. Both of them award one point for every dollar spent on a rental. In addition, both of them allow members to redeem points for bookings made through their web sites. Budget is actively encouraging bookings through the web site by awarding members extra web points for web based reservations.

Budget, a value brand, continues to differentiate its loyalty programme by allowing members to redeem points for merchandise and non-travel related services. Perfect Drive members can use their points towards golf clubs, Bolle eyewear, stays at vacation resorts, and even spa and massage services. Members can even purchase points at 10 cents apiece; this comes in handy where members are just short of what they need to claim an award.

National has put premium service above award points, as it is more dependent on its corporate customers than other rental agencies. Emerald Club members can select the exact car they want; right down to the model and colour. National is actively trying to increase share of customer by encouraging members to rent cars for leisure travel: Emerald Club members enjoy the same benefits as well as getting discounted leisure rates. Some USD 10 million have been spent since 1998 on a CRM initiative to identify and track customers, and to offer them relevant information and offers.

Hertz is also working hard to better recognise and retain its best customers. In the year 2000, it launched two new tiers to its #1 Club Gold programme: FiveStar, and Presidents Circle. Customers who complete 40 or more rentals in a 12-month period attain the top tier - Presidents Circle. This tier provides guaranteed availability of a vehicle with a 2-hour minimum advance reservation, a guaranteed upgrade, and a vehicle parked closest to the parking lot exit. In addition, Presidents Circle members receive a 25 per cent bonus on award points and a birthday gift on 500 award points.

Despite its value brand position, Budget has an upper-level tier for its most valuable corporate customers. Perfect Drive Optimum offers such benefits as being escorted from the airport gate to the rental car. What does Budget get in return? Programme members are its most valuable customers, not only renting more often but also renting more often through the web site, the company's cheapest interaction channel. The programme provides a mechanism for building dialogue and understanding of these important people.

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