'Digital Loyalty Networks' Sow Seeds Of Profitability

Compiled ByJill Jusko Consumer-oriented businesses that tightly bind their customer-management and supply-chain operations by creating "digital loyalty networks" are twice as profitable as companies that do not, says new research by Deloitte Consulting's research arm. Deloitte Research identifies these highly developed linkages as "digital" because they hinge on Internet or other digital technologies to collaborate, "loyalty" due to the network's goal of increasing satisfaction and retention of the most profitable customers, and "network" indicating that the information is shared seamlessly among customers, suppliers and other business partners. Research shows however, that just 17% of consumer businesses use the Internet effectively, and 41% score low on both supply-chain collaboration and customer loyalty. "The smart money is on those companies that aggressively integrate with their customers and vendors by building tight bonds that engender loyalty," says Jim Duffy, principal in Deloitte Consulting's Global Consumer Business Practice. The research indicates that companies with digital loyalty networks are two to five times more likely to achieve superior performance in market share, sales and customer service. However, Deloitte Consulting concedes that challenges face companies that attempt to create such networks. Those challenges include:

• Bridging the divide between supply-chain and customer-service operations. These initiatives typically have operated independently of each other.
• Incompatible information, measures and rewards.
• Continually rising customer expectations.

"Certainly these challenges are significant, but they are not insurmountable," says Duffy. "At the same time, we've found no companies are fully leveraging their digital loyalty networks. That means the untapped opportunities for business improvement are immense, even for the leaders."