This paper proposes a two-component customer loyalty program for Time Warner Cable aimed at reducing customer churn, increasing profitability through upselling, and maximizing lifetime customer value (LCV). The program introduces a Platinum status tier for long-term customers and a points-based bundling incentive for newer subscribers. Drawing on peer-reviewed research in CRM and services marketing, the paper addresses common objections to loyalty programs — including inflated metrics and high costs — and recommends transparency, SERVQUAL-based measurement, and coordinated financial accountability as safeguards. The conclusion emphasizes clear communication and internal marketing of results as keys to sustained program success.
Time Warner Cable continually faces the challenge of reducing churn within its customer base while simultaneously acquiring new customers. Balancing these two priorities is central to the company's ongoing customer relationship management (CRM) and loyalty strategies.
It is recommended that Time Warner initiate a new customer loyalty program with three primary objectives: first, to reduce churn among existing customers; second, to increase the profitability of existing customers by offering upsell promotions; and third, to significantly increase lifetime customer value (LCV) across all segments. These three objectives are commonly found in customer loyalty programs for service-based businesses and are also relied upon to create greater predictability in profits (Ou, Shih, Chen, & Wang, 2011).
The loyalty program consists of two components. The first rewards customers who have been with Time Warner for over a decade with Platinum status, granting them access to first-run movies on premium channels. The second component is a points system for new customers, designed to encourage them to bundle their cable TV, phone, and Internet services together in exchange for a 30% price reduction in the first year and a 50% reduction in the second year. Newer customers can also accumulate points toward achieving Platinum status.
Successful customer loyalty programs change behavior incrementally through feedback mechanisms and the ability of customers to monitor their own progress, motivating them to adjust their habits over time (Murthi, Steffes, & Rasheed, 2011). What is critical throughout the life of any loyalty program is staying true to its initial goals — in effect, keeping the promises made to customers from the outset (Murthi, Steffes, & Rasheed, 2011). Authenticity, transparency, and trust are also critically important for maintaining corporate credibility as loyalty programs are executed (Norton & Pine, 2009).
"Countering inflated metrics and high-cost criticisms"
It is also critically important to coordinate participation metrics with financial metrics in order to ensure a high level of accountability and auditability of results (Murthi, Steffes, & Rasheed, 2011). The most vocal opponents of loyalty programs frequently point to the lack of traceability between program activities and actual sales results (Murthi, Steffes, & Rasheed, 2011). The best approach is to anchor these two sets of metrics together and maintain complete transparency and authenticity about program performance in order to ensure long-term success (Norton & Pine, 2009).
Customer loyalty programs can significantly increase a company's profitability by sustaining and strengthening lifetime customer value (Ou, Shih, Chen, & Wang, 2011). For Time Warner, the program must be easily tracked by customers and straightforward to administer, ensuring clarity of communication throughout the process. When all of these elements come together, Time Warner will be positioned to achieve greater CLV and increased profitability as a result. Measuring program outcomes and marketing those results internally will also help to alleviate negative sentiment within the company.
Bagchi, R., & Li, X. (2011). Illusionary progress in loyalty programs: Magnitudes, reward distances, and step-size ambiguity. Journal of Consumer Research, 37(5), 888.
Murthi, B., Steffes, E., & Rasheed, A. (2011). What price loyalty? A fresh look at loyalty programs in the credit card industry. Journal of Financial Services Marketing, 16(1), 5–13.
Norton, D. W., & Pine, B. J., II. (2009). Unique experiences: Disruptive innovations offer customers more "time well spent." Strategy & Leadership, 37(6), 4–9.
Ou, W.-M., Shih, C.-M., Chen, C.-Y., & Wang, K.-C. (2011). Relationships among customer loyalty programs, service quality, relationship quality and loyalty. Chinese Management Studies, 5(2), 194–206.
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