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

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Presentation on theme: "Fostering Loyal Customer Relationships Duarte B. Morais, Ph.D. Assistant Prof. of Recreation, Park and Tourism Mgt."— Presentation transcript:

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 loyalty What is a loyal customer How to foster loyal relationships

3 Introductions 1.

4 Why talk about Loyalty Mature IndustryMature Industry –increasing competition Focus on getting more customersFocus on getting more customers –Market share Vs. share of customer Competitive advantageCompetitive advantage –Price –Service quality –Loyal relationships 2.

5 The bottom line Reduction of 5% of defective customers may result in 80% increase in profitability (Reichheld & Sasser, 1990)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)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.)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 profits20-40% of your customers bring 80% of your profits 2.

6 What to expect from loyal customers Behaviors:Behaviors: –Come back frequently –Buy most expensive products –Recommend provider to friends –Give important suggestions Emotions:Emotions: –Are attached to the provider/staff –Trust the provider –Resist changing despite competitors persuasion –Willing to forgive mistakes 2. ?

7 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 providerDefinition: 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?Are there various types of loyalty? 3.

8 Types of Loyal Customers Frequency of Purchases Attachment High loyalsLatent loyals Spurious loyalsLow loyals

9 Differentiated Strategy to Loyalty Segments Not all customers were created equal High loyals – most profitable, make them feel like family (20% of your customers)High loyals – most profitable, make them feel like family (20% of your customers) Latent loyals – find out why they cant come more often, find other ways they can help, dont discountLatent loyals – find out why they cant come more often, find other ways they can help, dont discount Spurious loyals – come but dont care, make them connect with you, make them wish for special treatmentSpurious loyals – come but dont care, make them connect with you, make them wish for special treatment Low loyals – dont get distracted with them, but make sure they are satisfied (approx % of your customers)Low loyals – dont get distracted with them, but make sure they are satisfied (approx % of your customers) 3. ?

10 How to foster loyal relationships Current loyalty programsCurrent 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 dont know how to generate customer loyalty 4.

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

12 R.I.M. Resource Investment Model Providers investment of special resources Customers investment of special resources Customers loyalty to provider Retribution to the provider Protect customers equity Loyal relationships facilitate special treatment Morais, Dorsch, & Backman (2004) 4. RIM

13 Types of Resources Love Status Information Services Goods Money 4. RIM

14 Types of Investments Give – to your valuable customers 1.Make sure that your special customers receive special treatment 2.Send cards for birthdays rather than just for the holidays 3.Make them feel unique (use name, compliment them for helping) 4.Educate them about front and back stage Receive – from customers 1.Give them opportunities to get to know you (your staff) 2.Help them become advocates of your company (merchandize, web) 3.Seek their opinion 4.Allow them to commit to you with a long term program ? 4. RIM

15 B.C. Brand Communities Definition: group of individuals united through the consumption of your productsDefinition: group of individuals united through the consumption of your products –Harley-Davidsons HOGs –Club Meds Gracious Members CharacteristicsCharacteristics –Communality – help and expect help from others –Brandfests are used to share history –Keep consuming to stay connected 4. BC

16 Building a Community Community 1.Use a newsletter to share news about customers 2.Develop an online forum for customers to stay in touch 3.Organize annual events by invitation for VIP customers 4.Facilitate picture / story sharing 5.Help customers help each other 6.Give a name to the community 7.… ? 4. BC

17 Action Outline 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 4.

18 The Love Triangle Social Network CustomerProvider


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