The myth of customer loyalty: why information and scale are more important during downturns

Abstract

Purpose

The purpose of this article is to find out if a focus on promoting customer loyalty is a supplier’s best strategy for gaining significant immunity against customer desertions and business losses during recessions? And if not, what are the alternatives?

Design/methodology/approach

The authors investigated how loyalty strategies played out in practice in the Indian IT-ITES industry (Information Technology – Information Technology Enabled Services) during the recent global downturn.

Findings

Field interviews with executives of many of the major players in the industry revealed the weakness of their customer loyalty strategy and discovered some useful alternative tactics.

Practical implications

Service providers that successfully navigated the rough recessionary waters relied not on loyalty but their superior information advantage.

Originality/value

Field interviews suggest that hanging on to clients in a recession have less to do with investment in a loyalty strategy and more with the vendor’s superior capabilities – such as an information advantage, agile use of diverse competencies and scale–that enable it to offer the client a superior deal even in a painful business downturn.

Citation

Kailasam, M. and Wongsurawat, W. (2015), "The myth of customer loyalty: why information and scale are more important during downturns", Strategy & Leadership, Vol. 43 No. 6, pp. 38-41. https://doi.org/10.1108/SL-08-2015-0068