As a matter of fact some brands even encourage customers from leaving the brand. Recently I was talking to a class mate of mine from B school who handles a major Indian brand in north India. He was telling me how the company was encouraging the customers they had acquired earlier to leave the brand as they were no longer profitable. These customers he explained has been acquired almost 5-6 years go through promotional schemes. As the brand evolved, these customers were no longer profitable and it was better for the company in his opinion for these customers to leave.
I was rather taken aback by this disclosure. I was always under the opinion that it was easier to retain a customer rather than to acquire a new one. If a new customer was profitable then it was worth spending that money in acquiring the customer. Also could brands encourage customers who are not profitable to leave?
As I continue to grapple with this question, I received a call from my auto manufacturer who continues to call me to inform me about when my car is due for servicing. Not only do they pick up my car for servicing, they also continue to give me value added services for almost no charge. So they I must admit value my loyalty to the brand. But I remembered some time ago the same manufacturer had been very non customer friendly. But increased competition had changed their approach to their customers.
Based on these observations, I have come up with potential 3 reasons why Indian brands have a lukewarm approach to customer loyalty.
The market is expanding
Unlike the west and Japan, where almost stagnant population have resulted in limited market, Indian market is growing. As more income levels rise there is more disposable income, hence Indian brands can add many customers without bothering much about the churn in existing customers.
Lack of Maturity in Brand management
Indian brands lack the maturity in brand management. Unlike the brands in the US, Germany and Japan, very weak brand management principles are applied to Indian brands. This is one of the main reasons why there is not a single Indian brand in the Interbrand top 100. I have discussed this in an article before how brands from Europe and Japan were losing to the US
Customers themselves are not very clear on their own rights. We have had cases where banks have arm twisted customers to very unfriendly terms and financial institutions have seized assets using illegal means. If you compare this to the level of consumer activism in the developed markets, then Indian consumers have still a long way to go.
In conclusion, I think the issue is both ways and Indian consumers are very price sensitive and do adopt mercenary tendencies while deals with the brands themselves. Till that maturity comes on both sides I think we can lock away all books on customer loyalty and throw that key into the ocean.
I would definitely like to hear your views on the same, the good, bad and ugly experiences that you have had while dealing with Indian and international brands. And what can be done to make both brands and customers more accountable?