4 Why talk about Loyalty Mature Industry Focus on getting more customers 2.Why talk about LoyaltyMature Industryincreasing competitionFocus on getting more customersMarket share Vs. share of customerCompetitive advantagePriceService qualityLoyal relationships
5 2.The bottom lineReduction 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 customers 2.What to expect from loyal customersBehaviors:Come back frequentlyBuy most expensive productsRecommend provider to friendsGive important suggestionsEmotions:Are attached to the provider/staffTrust the providerResist changing despite competitors’ persuasionWilling to forgive mistakes?
7 What is a Loyal Customer 3.What is a Loyal CustomerDefinition: customers with a long record of purchases from a preferred provider caused by their psychological and emotional bond with that providerAre there various types of loyalty?
8 Types of Loyal Customers 3.-+Frequency of Purchases+High loyalsLatent loyalsAttachmentSpurious loyalsLow loyals-
9 Differentiated Strategy to Loyalty Segments 3.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 discountSpurious loyals – come but don’t care, make them connect with you, make them wish for special treatmentLow loyals – don’t get distracted with them, but make sure they are satisfied (approx % of your customers)?
10 How to foster loyal relationships 4.How to foster loyal relationshipsCurrent loyalty programsIneffective in creating a bondMost are simply frequency programsMake people shop around and look for dealsMake customers price sensitiveErode profitsWe can identify loyal customers but we don’t know how to generate customer loyalty
11 The Love Triangle4.Social NetworkB.C.R.I.M.ProviderCustomer
12 R.I.M. Resource Investment Model Retribution to the providerProtect customer’s equityProvider’s investment of special resourcesCustomer’s investment of special resourcesCustomer’s loyalty to providerLoyal relationships facilitate special treatmentMorais, Dorsch, & Backman (2004)
13 Types of Resources 4. RIM Love Status Services Information Goods Money Particularism and tangibilityEmpirical support to structure & exchangeInformationGoodsMoney
14 Types of Investments Give – to your valuable customers 4. RIMTypes of InvestmentsGive – to your valuable customersMake sure that your special customers receive special treatmentSend cards for birthdays rather than just for the holidaysMake them feel unique (use name, compliment them for helping)Educate them about front and back stageReceive – from customersGive them opportunities to get to know you (your staff)Help them become advocates of your company (merchandize, web)Seek their opinionAllow them to commit to you with a long term program?
15 4. BCB.C. Brand CommunitiesDefinition: group of individuals united through the consumption of your productsHarley-Davidson’s “HOGs”Club Med’s “Gracious Members”CharacteristicsCommunality – help and expect help from othersBrandfests are used to share historyKeep consuming to stay connected
16 Building a Community Community 4. BC ? Use a newsletter to share news about customersDevelop an online forum for customers to stay in touchOrganize annual events “by invitation” for VIP customersFacilitate picture / story sharingHelp customers help each otherGive 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 valuable2. Design a relationship-building service cultureIdentify what type of treatment promotes customer loyaltyIdentify what loyal customers want to give to youIdentify potential for the development of a brand community3. Implement a loyalty treatmentDesign specific communication strategy and messageTrain staff to understand the importance and the processCreate opportunities to invest and receive investmentsGenerate a sense of community among your customers4. Measure effects of program and redesignMaintain constant communication with your loyal customersMonitor costs and results of your program
18 The Love TriangleSocial NetworkProviderCustomer
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