Legal/financial agreements

It is common practice for mobile phone operators to insist on a minimum of a year’s initial contract in return for special offer, usually a cheap handset. Many ‘Pay as you talk’ services involve an element of commitment, the customer being required to maintain a minimum spending level. For example, in 2000 BT Cellnet followed a policy of deactivating accounts if the customer failed to top up within a set time period – in this case, however, the benefit to the customer is less clear. In order to be viewed positively by the customer, the request for a commitment on their part must be accompanied by a benefit, and preferably one that the customer can appreciate for the length of the relationship to which he commits. The use of special offers to trap customers in an exploitative relationship will not be successful in the long term.

A good example is provided by Mi8 Corp, a small, Manhattan-based application provider, which in 2001 rented and serviced Microsoft server software. When it found that Microsoft Corporation was planning to raise its prices, it was faced with the necessity of upping its own rates by 14 per cent. Mi8 took the opportunity to select some long-term partners. It wrote to its customers, explaining the circumstances behind the planned rise, offering them a 90-day grace period, and offering them a lower price if they signed a one-year contract. Only a few took the contract, but none of them defected.

Resources and information

A customer that has invested resources, whether tangible or intangible, will have a greater stake in the continuation of the relationship. Still greater commitment will exist if resources or valuable information are shared between the two parties. Munsen et al. (1999) note that the introduction of Electronic Data Interchange (EDI) systems and the practice of Vendor Managed Inventory (VMI) can affect the commitment of both supplier and the buyer organizations.

Time, effort and involvement.

Time, physical exertion or mental effort all represent an investment on the customer’s part in the relationship with the supplier. The greater the investment in these terms, the greater the commitment will be. As one financial services customer put it: At the moment I want to continue with my present [financial] adviser though I am not fully satisfied with the service. It is very difficult for a small investor to find a new, good adviser’ (in Sharma and Patterson, 2000).

The level of customer involvement in the buying decision and consumption of the product is to some extent dictated by the nature of the product type. In high involvement, extended problem-solving buying situations, the task of the marketer is to make the process as pleasurable (or painless) as possible, so that the customer follows through to a final purchase decision. In the case of low risk, low involvement products, however, encouraging the customer to expend greater psychological effort and time can increase loyalty.