Leveraging customer loyalty in the short term domestic insurance industry through a focus on product stewardship

Staak, Barry John (2007-12)

Thesis (MPhil (Sustainable Development Planning and Management))--University of Stellenbosch, 2007.


The objective of this study is to test out the possibility of a synthesis between sustainable development, more specifically corporate citizenship, and customer value, a major focus of business strategy, which if correctly achieved nurtures customer loyalty. This synthesis as defined in this thesis is product stewardship. Product stewardship is the design and promotion of products and services that aim to positively impact the environment and society through the creation, consumption and disposal of such a product or service. In an increasingly competitive global environment, crafting business strategy that successfully nurtures customer loyalty is a vital component of long term business success. The delivery of products and services that customers trust and that fully satisfy customer expectations is a prerequisite for loyalty. Intense competition however squeezes profit margins and floods the market with homogeneous products and services. Competition now becomes price centred which drives both a decrease in product quality and a quest for operational efficiencies in an attempt to reduce overheads. Further, capturing a share of the consumer’s wallet becomes more difficult for corporations, forcing a heavy reliance on the brand and company image. In such circumstances, the delivery of customer value that fully satisfies expectations is hard to achieve and business strategy, concerned primarily with the delivery of exceptional customer value, becomes a major focus for most corporations. However, as all corporations strive for a similar end goal, competitive differentiation becomes harder to achieve. Simultaneously, in the context of greater environmental and social consciousness, including the progression of sustainability science, corporations have the added challenge or obligation to adopt these emerging themes. Scrabbling with these new ideas, few corporations are having a real profound effect in curbing the pending ecosystem crisis. Corporate social responsibility, corporate social investment and corporate citizenship have tended to focus on the company and how it is perceived; a kind of self-centredness that explodes into the gross exaggerations communicated by the brand. Product stewardship, as defined in this thesis, shifts the focus away from THE COMPANY and its BRAND, to the product being designed, produced, communicated, consumed and then wasted. The values of a better world articulated by sustainable development and the aspiration to find a better business strategy are fused into a focus on the product. The company and its brand, therefore is constructed not by a promotion of itself as ‘good’ but rather by the virtues and benefits of the product communicated relationally which, in turn, indirectly builds the reputation of the producer. Loyalty therefore is no longer loyalty to the brand, but to an experience of the product. A number of corporations, both local and international, in South Africa are displaying behaviour characteristic of a product stewardship approach. These behaviours or claims are recorded in case studies on four such corporations, namely; Toyota, Sasol, Woolworths, and the South African Breweries Limited. Each case demonstrates how the application of product stewardship can and does reduce negative impacts on both the environment and society while simultaneously nurturing exceptional customer loyalty. A number of critical questions about the design and promotion of short term domestic insurance products are raised to demonstrate how the application of a product stewardship approach could unlock the potential to nurture superior customer loyalty for corporations in the South African short term domestic insurance industry, a service industry plagued by a declining industry image, low customer loyalty and intense competition. The application of a product stewardship approach to a service orientated industry is significant as services are seldom analysed for their effects on the environment and society, as promoted by sustainable development theory. Instead, in an attempt to display the values of a better world, service industries expend huge resources engaging in activities peripheral to their core businesses, while adjustments as highlighted by a product stewardship approach, to their core offerings, their services, could deliver meaningful change for the environment, society, the corporation and ultimately the customer. Based on the real possibility of a synthesis between sustainable development and customer value as highlighted in this thesis, a further more in-depth study is proposed to determine the direct business effects, quantified, of improved customer loyalty nurtured through the application of product stewardship.

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