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I am working in the marketing department of an Iranian steel manufacturing company.

  • Sid Adelman, Chuck Kelley, Clay Rehm, Scott Howard
  • November 05 2003, 1:00am EST
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I am working in the marketing department of an Iranian steel manufacturing company so I know the industry well but I need to understand more about "customer loyalty." Would you please explain it and tell me how it relates to my industry.


Sid Adelman’s Answer: Customer loyalty will mean that your customers are likely to buy from you and not from your competitors. They will buy from you because you provide excellent service, you fulfill your obligations, you deliver on time, your products are of high quality and your prices are competitive.

These are a few of the applications that have been implemented in the steel industry:

  • Control (reduce) inventory
  • Understand item-level detail by cost, revenue, profit, inventory, customer, location
  • Analysis of production problems
  • Reduce accounts receivable
  • Understand profitability by customer
  • Understand margins and profitability by manufacturing facility leading to decisions about where to manufacture each item
  • Evaluate possibilities for renegotiating contracts with customers
  • Identify opportunities for new products
  • Identify opportunities for new locations
  • Compare plans to actual performance
  • Improve product and customer mix

The following are applications that are general to manufacturing that should be explored for your organization:

  • Analyze emerging business trends
  • Examine product bookings
  • Determine product shipments, backlogs and cancellations
  • Better manage product portfolio
  • Sharper contract negotiations
  • Better manufacture forecasting
  • Earlier detection of warning conditions
  • Ability to eliminate products from portfolio
  • Allows product mangers to more quickly identify product lines that are not longer required or profitable
  • Information about margins, product backlogs or historical sales data to critical decisions.
  • Visibility to its customers – on an individual customer level, what products the company sells, where it sells the products and at what price point.
  • Worldwide view of marketing developments

Scott Howard’s Answer: I would suspect that customer loyalty is not a concern in your industry. In studying and attempting to maintain customer loyalty a business tries to understand why customers do business with them and how to ensure the customer remains loyal in continuing their business relationship. If your industry is as I suspect, that is one dominated by large purchases, price and product quality will drive loyalty. However, it may be interesting to verify or dispute this with a detailed loyalty analysis made possible by studying customer histories. These histories are best captured and represented in a data warehouse.

Chuck Kelley’s Answer: There could be numerous ways that customer loyalty can be applied to the steel industry. Customer loyalty has been applied in the industry where customer equals end- user/purchaser. In the steel industry, the customer is two-fold – 1) the organization buying the steel and 2) the ultimate user of the steel (consumer). My guess is that when you use the term customer loyalty, you mean the former. But you might put two processes into place to make sure that both are covered.

One place that customer loyalty might be used in your industry is by providing statistical measurements on purchases vs. "returns" or unusable product. You probably know that certain processes have run within ranges. However, is there any "returns" where you can trace back the data to a process that came close to a range (temperature, volume, pressure, for instance) and you can determine new ranges. That helps create customer loyalty.

A second place you might use data warehousing for customer loyalty in the steel industry is where you can compare and determine whether your customer is buying a certain type of product (rolled, flat) from you. Doing repetitive tasks faster, lowering cost thereby having customer retention (hence loyalty).

Clay Rehm’s Answer: From a simplistic point of view, customer loyalty is about keeping a customer coming back to you for your products or services. You have achieved customer loyalty when a customer will purchase goods or services from your company even if they have the option to purchase it somewhere else cheaper or easier. I assume your customers can purchase steel from other manufacturers. Your job is to make sure they continue to only purchase it from you.

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