1. Fostering Loyal Customer Relationships
Duarte B. Morais, Ph.D.
Assistant Prof. of Recreation, Park and Tourism Mgt.

2. Presentation Outline Introductions Why talk about loyalty1.
Introductions
Why talk about loyalty
What is a loyal customer
How to foster loyal relationships 2. 3. 4.

3. 1.
Introductions

4. Why talk about Loyalty Mature Industry Focus on getting more customers2.
Why talk about Loyalty
Mature Industry
increasing competition
Focus on getting more customers
Market share Vs. share of customer
Competitive advantage
Price
Service quality
Loyal relationships

5. 2.
The bottom line
Reduction of 5% of defective customers may result in 80% increase in profitability (Reichheld & Sasser, 1990)
60% to 80% of lost customers were satisfied (King, 1996)
90% of customers who love a company will repeat but only 30% of customers who like the company will repeat (Opinion Research Corp.)
20-40% of your customers bring 80% of your profits

6. What to expect from loyal customers2.
What to expect from loyal customers
Behaviors:
Come back frequently
Buy most expensive products
Recommend provider to friends
Give important suggestions
Emotions:
Are attached to the provider/staff
Trust the provider
Resist changing despite competitors’ persuasion
Willing to forgive mistakes ?

7. What is a Loyal Customer3.
What is a Loyal Customer
Definition: customers with a long record of purchases from a preferred provider caused by their psychological and emotional bond with that provider
Are there various types of loyalty?

8. Types of Loyal Customers3. - +
Frequency of Purchases +
High loyals
Latent loyals
Attachment
Spurious loyals
Low loyals -

9. Differentiated Strategy to Loyalty Segments3.
Differentiated Strategy to Loyalty Segments
“Not all customers were created equal”
High loyals – most profitable, make them feel like family (20% of your customers)
Latent loyals – find out why they can’t come more often, find other ways they can help, don’t discount
Spurious loyals – come but don’t care, make them connect with you, make them wish for special treatment
Low loyals – don’t get distracted with them, but make sure they are satisfied (approx % of your customers) ?

10. How to foster loyal relationships4.
How to foster loyal relationships
Current loyalty programs
Ineffective in creating a bond
Most are simply frequency programs
Make people shop around and look for deals
Make customers price sensitive
Erode profits
We can identify loyal customers but we don’t know how to generate customer loyalty

11. The Love Triangle 4.
Social Network
B.C.
R.I.M.
Provider
Customer

12. R.I.M. Resource Investment Model
Retribution to the provider
Protect customer’s equity
Provider’s investment of special resources
Customer’s investment of special resources
Customer’s loyalty to provider
Loyal relationships facilitate special treatment
Morais, Dorsch, & Backman (2004)

13. Types of Resources 4. RIM Love Status Services Information Goods Money
Particularism and tangibility
Empirical support to structure & exchange
Information
Goods
Money

14. Types of Investments Give – to your valuable customers
4. RIM
Types of Investments
Give – to your valuable customers
Make sure that your special customers receive special treatment
Send cards for birthdays rather than just for the holidays
Make them feel unique (use name, compliment them for helping)
Educate them about front and back stage
Receive – from customers
Give them opportunities to get to know you (your staff)
Help them become advocates of your company (merchandize, web)
Seek their opinion
Allow them to commit to you with a long term program ?

15. 4. BC
B.C. Brand Communities
Definition: group of individuals united through the consumption of your products
Harley-Davidson’s “HOGs”
Club Med’s “Gracious Members”
Characteristics
Communality – help and expect help from others
Brandfests are used to share history
Keep consuming to stay connected

16. Building a Community Community 4. BC ?
Use a newsletter to share news about customers
Develop an online forum for customers to stay in touch
Organize annual events “by invitation” for VIP customers
Facilitate picture / story sharing
Help customers help each other
Give a name to the community … ?

17. Action Outline 4. 1. Select your market segment
Identify most valuable customers (what criteria?)
Identify customers who might become valuable
2. Design a relationship-building service culture
Identify what type of treatment promotes customer loyalty
Identify what loyal customers want to give to you
Identify potential for the development of a brand community
3. Implement a loyalty treatment
Design specific communication strategy and message
Train staff to understand the importance and the process
Create opportunities to invest and receive investments
Generate a sense of community among your customers
4. Measure effects of program and redesign
Maintain constant communication with your loyal customers
Monitor costs and results of your program

18. The Love Triangle
Social Network
Provider
Customer