SOLUTION A
UTTARA PARIKH
Deputy Commercial Director, Air India

Ace Toys committed four conceptual errors in designing the Blondie Friends Club. First, the objective of the Club was not clearly articulated. As a result, there was no linkage with the company's marketing strategy. Was the Club meant to enhance the sale of the flagship brand? Or the doll accessories? Or was it meant to catalyse the sales of the entire range of Ace Toys' products? Their objectives have to be made clear to provide focus to marketing efforts. Without such clarity, an organisation will find its marketers working at cross-purposes. Second, there was no elucidation of the benefits, privileges, or preferential treatment that the members of the Club would be entitled to at progressive stages of repeat purchases. Pampering is integral to the success of relationship marketing. Customers must be made to feel important if it is to succeed.

Third, Ace Toys did not factor in the impact of market-forces on sales. For instance, no attempt seems to have been made to counter the effect of video-games, amusement parks and TV, which compete for children's attention. It is only by sharpening its competitive edge that Ace Toys' marketing efforts can be properly directed. And, finally, except for branding the Club with the name Blondie-the flagship product-it appears to have had no sustainable identity. Indeed, hardly any effort was made to build the ambience associated with the brand. The fact that any child could apply for the membership of the Club just by paying the subscription fees deprived it of exclusivity. Pre-qualifications for membership could have provided the Club with an elitist appeal. More importantly, the Club lacked focus and, to put it succinctly, was no different from a magazine subscription. It is surprising how Blondie's marketers overlooked such an interesting opportunity.

Therefore, it is hardly surprising that these errors have had an impact on Ace Toys' business. While the initial burst of membership did lead to a substantial increase in sales in the first year, that success was short-lived since there was a sharp drop in sales thereafter. The reasons are obvious: not only has the company faltered in its efforts at cultivating the customer, it hasn't identified the customer group properly. Typically, one of the pre-requisites of relationship marketing is the identification of the core customer. It is, however, not necessary that the customer group be finite or fixed. Relationship marketing exercises assume that the customer-base will grow. In the process, some members will exit even as new ones enter. In fact, a shifting database provides opportunities for relationship-building through extended periods of time. Ace Toys' target group of girls in the age-group of 3 to 13 offers an adequate time-frame for relationship-building before they outgrow these toys. A 10-year period is long enough to develop, and sustain, the core customer group.

Any business with the potential of repeat purchases-either of any single product or a range of products-has an opportunity for relationship-building. For instance, Roadmaster Tyres' success in a commodity business like tyres indicates the existence of such opportunities. Ace Toys had a big advantage: it had an excellent opportunity to build lifetime value because the targeted group was at its most impressionable age. Catching customers young is the surest way of building relationships. Ace Toys should, therefore, decide in favour of reviving the Club. However, the concept needs to be redefined. To relaunch the Club successfully, the toy company should adopt the following strategies:

• Build a sense of identity and affinity by imposing pre-qualifications for membership to the Club. Not only will this make the target group more manageable, it will also help the company manage both present and future promotion schemes for its products better.

• Add value to the Club membership by offering special privileges. These could be discounts or reward points-which fetch special gifts-on additional purchases. Besides, Ace Toys should explore the possibility of developing mutually-beneficial alliances to boost the brand and share the costs of building it. The Frequent Flyer Programme, offered in the civil aviation industry, is an excellent example. Alliances with companies providing travel-related services enable frequent travellers to increase their mileage points-and get free tickets faster. Interactive alliances multiply the benefits, and give the member a sense of belonging, which is an important attribute of relationship marketing. For example, besides gaining mileage points for travel, members earn points for using designated hotels, car rental companies, and credit cards.

• Offer more toys to the target group through attractive schemes. In fact, the entire range of Ace Toys products should be covered by the scheme in due course of time.

• Extend the benefits of the Club to other members of the customer's family.

• Make the Club a dynamic entity, with frequent special offers and invitations to events to encourage interaction between members.

• Develop special offers for the target group by tying up with companies with allied product-lines. In fact, the number of opportunities for such tie-ups is immense.

• Waive the annual fees if the purchases exceed a certain level in a year to spur repeat purchases.

There is no reason why the cost of maintaining such a Club should be a deterrent for Ace Toys. It should be perceived by the company as an investment in sustaining its customer-base. Why, the cost of bringing out the magazine could easily be underwritten by forging alliances with products and services catering to the target group, and securing their advertising support. Ultimately, the members of the Blondie Friends Club should be given the special feeling of recognition to retain and strengthen their loyalty. And that is exactly where Ace Toys' marketers erred.

Solution B
RAKHSHIN PATEL
CEO, HTA Direct

Relationship marketing is in today. But how many marketers really have the thinking, the caring, and the daring to do it right? As in any human relationship, relationship marketing too needs careful handling, and gentle, but consistent nurturing. Unfortunately, Ace Toys seems to have jumped into relationship marketing without understanding it. Frankly, its reasons for abandoning the Club are unfounded since the problems can be solved quite easily. So, the question of restarting the Club-or not-is actually a no-brainer. Given the market scenario-transnationals and big companies have turned it extremely competitive-Ace Toys today has no choice but to establish strong, sustainable relationships with its customers. Before it does so, Ace Toys needs to learn from its past mistakes and change its relationship marketing programme. I am talking about real change-------not smiles, and a spit-and-polish of armour. The faster Ace Toys realises that, the quicker it can restart and reorient its customer retention strategy.

How should Ace Toys change the rules of the game while reviving the Blondie Friends Club? First, a thorough number-crunching exercise needs to be done. It may have to spend at least six months in developing the programme before it is finally launched. Could Ace Toys have missed something important? It got off to a flying start with 6,000 members, but did not capitalise on it by growing the membership beyond this. Sending the members a children's magazine was a good idea, but not good enough to sustain a Club. Moreover, with a limited product range, the content of such a programme will be limited. Once you know what your priorities are, arriving at affordable spends in acquiring and retaining customers is an easy matter. Expenditure is never estimated as a percentage of turnover, but as a percentage of each customer's value to the company over his, or her, lifetime. It is based on the expected purchase value of a member over a period of 5-10 years. When you look at the issue of costs from that perspective, and work out the corresponding numbers, you will never complain of a lack of funds. In fact, you will begin looking at such expenditure as an investment in value-addition.

Second, the backbone of all relationship marketing programmes is customer rewards. The Club's members, like all children, will demand immediate gratification, constant attention, and perennial excitement. They will demand it now-and again, and again. Slip up, and they will forget you faster than yesterday's school lesson. Rewards can excite them, retain them, make them buy more and more from you, and induce their friends to buy from you. Make the Blondie Club a movement, make it happen. The children will be happy. And you will profit. Indeed, the best way to expand the Club will be to make it the single-most exciting and accessible source for the child-her friend, counsellor, and guide. By being a source of rewards, fun, freebies, entertainment, and even help, the Club can play a big role in a little girl's world.

Ace Toys should rope in non-competing children's product- and service-providers as partners while maintaining its leadership in the arrangement. Such partners could include book publishers, audio- and video-cassette marketers, amusement parks, and manufacturers of children's shoes, clothes, and school bags. More and more partners will be tempted to join the programme since they will find it an effective and cost-efficient way of accessing a large, focused segment of their target group. Add them on regularly; the more the merrier. Once the partners pool in, Ace Toys can offer its members more benefits. The child will earn rewards more often, and there will be higher involvement and excitement for every member. In fact, over time, the programme could become self-financing, and might even turn into a profitable venture. It would straightaway take the sting out of the argument that the Club needs to be subsidised and is, hence, unsustainable for Ace Toys.

Ace Toys and its partners could provide special deals and value coupons for every purchase. They could be collected by members and exchanged for free gifts, such as Blondie dolls and accessories, with the partner paying Ace Toys for the value of the coupons redeemed. Once the programme and the partners are in place, a membership drive should be the primary focus. Every opportunity to enrol members should be tapped: from pack-inserts to in-store posters, and from friend-get-friend plans to dealer-programmes. Dealers and shopkeepers, naturally, should get incentives for enrolling new members. Sridhar Venkitesan, the company's new marketing chief, is right when he says that there should be other activities for members, such as contests. For instance, a Blondie fashion contest is an excellent way of keeping the excitement alive. Similar group activities should be integrated with the programme to provide live, two-way interaction between the customers and the company. Bonus coupons and lucky draws are the other ways to keep up the excitement. Promotional schemes should be increased without fail during the holiday and festival seasons since that is the right time to attract children's attention.

The Club would take on new meaning if it had a counsellor, to whom a child could write for advice on every issue that troubles her, and who would empathise with the child. There is no doubt that the potential for building relationships is immense in the toy business. But how do you handle the growth factor? The Club must give its members parting gifts as they enter adulthood. And if a child is going to remain in the programme for 5-10 years, it is a great opportunity to build a relationship. A final piece of advice: sometimes, professionals are crucial to the success of a relationship marketing exercise. That should have been obvious to Ace Toys, which has been unable to introduce aggression into its customer-loyalty gameplan. It is always better to rope in a professional to sell a new strategy. Perhaps that is what Mahapatra has really done by hiring an outsider.

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