Leveraging customer loyalty in the short term domestic insurance industry through a focus on product stewardship
Date
2007-12
Authors
Journal Title
Journal ISSN
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Publisher
Stellenbosch : University of Stellenbosch
Abstract
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.
Description
Thesis (MPhil (Sustainable Development Planning and Management))--University of Stellenbosch, 2007.
Keywords
Social responsibility of business, Product stewardship, Customer loyalty in the insurance industry, Dissertations -- Public management and planning, Theses -- Public management and planning