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Presentation on theme: "Financed bySupported byImplemented in cooperation with Products and Services Customer Service JOY."— Presentation transcript:

1 Financed bySupported byImplemented in cooperation with Products and Services Customer Service JOY

2 Financed bySupported byImplemented in cooperation with To gain and improve customer loyalty and satisfaction, many companies have developed different strategies. Question: What is customer loyalty ? Is this really profitable for us? For customer? Customer Loyalty

3 Financed bySupported byImplemented in cooperation with Exercise ? (brainstorming) Why Do You Want Loyal Customers?

4 Financed bySupported byImplemented in cooperation with What does loyalty mean to businesses ? Retention of Customers ? Repeat Purchases ? Create Profitable Customers ? Acquisition of Customers ? More Information on Customers ? Reward Loyal Customers ? Just Another Marketing Program ? Reality …….….could be all of the above !!!!

5 Financed bySupported byImplemented in cooperation with Meeting basic respect & courtesy needs; dissatisfaction if not met; indifference if met Customer tells what is important; satisfaction vs. dissatisfaction if met Customer hopes & asks but doesn’t expect; if met then delighted. Unlikely to cause dissatisfaction. Build customer loyalty Benefits above & beyond expectations; identify and suggest innovations with new products

6 Financed bySupported byImplemented in cooperation with Some key points on developing loyalty Since what was once unexpected/unstated becomes expected/stated, you must keep innovating Performance excellence occurs by design, not default All parts of the organization are part of creating customer loyalty Reliability: Keeping your promise, doing what you said you will do. Doing things right the first time. Assurance: Making the customer feel safe in their dealings with you, being thoroughly professional and ethical. Tangibles: How the product/service looks to the client, the appearance of personnel and equipment, etc. Empathy: The degree to which the organization and service personnel understand the individual client and their needs, the ability to adapt the service to each client, the willingness to 'go the extra' for the client. Responsiveness: The availability, accessibility and timeliness of the service. The ability to respond to enquiries and complaints in a timely fashion.

7 Financed bySupported byImplemented in cooperation with

8 Financed bySupported byImplemented in cooperation with Four different reasons for loyalty should be promoted psychological; economic; technical/functional; contractual.

9 Financed bySupported byImplemented in cooperation with Trading stamps Accumulate stamps every time you shop for groceries, petrol, etc Redeem them for “ free “ gifts How did it all start – the Loyalty Program way Airline Frequent Flyer Programs Fly and earn points Redeem points for free flights Interesting though not surprisingly…….. 1.Initial objective was to collect data on customer purchase patterns 2.Simple proposition – Earn Points for future value hence loyalty Plethora of loyalty programs in different forms across industries Frequent buyer, frequent flyer, frequent player, frequent dining, points-at-pumps

10 Financed bySupported byImplemented in cooperation with What’s the Good News ? Loyalty programs are 1.Key drivers for enhancing customer experience. 2.Active point of differentiation 3.Help pinpointing individual buying patterns and predicting future customer behavior. 90 % Americans are active participants in at least 1 program ---- 75% have at least 1 loyalty card. Are Loyalty cards effective in Eastern Europe? If no, how do we adjust and adapt? 82% customers think Loyalty program marketers are more in touch with their customers 66% of Loyalty program members do not mind sharing extra information about themselves Unconventional industries also bitten by loyalty bug  Starbucks Card to store information of the Card members preferences.  Nike Smart card allows them to design their own shoes

11 Financed bySupported byImplemented in cooperation with What’s the Not-So-Good News ? Do customers perceive reward programs making a difference ? Some difference A lot of difference Little difference Don’t Know Dont make any difference at all Dont make much difference 12% 23% 13% 24% 16% 11% Do Loyalty Programs work -- Not as well as they are intended to 48% customers did not have any serious intention of repurchasing the brand 55% customers accumulate points because they anyway come along with their purchases

12 Financed bySupported byImplemented in cooperation with Launched in in 2003, Teemed up with American Airlines,Hilton Hotels & eight other companies to offer called eBay Anything Points: Points can be earned from one business & swap them for points at eBay. e Bay has more than 135 million registered members across the globe Program has 44 mln items listed for sale with 4 mln added daily. Some successful US programs – e-Bay Success of e Bay Anything points is attributed to Linking online purchases with Travel & Airlines purchase. Enabling customers to redeem high ticket size points against lower value purchases Choice of redemption options.

13 Financed bySupported byImplemented in cooperation with Coalition & database-driven loyalty program --- launched in Sept 2002. UK's largest Customer Reward Program -- > 50% of all UK households participating in the program. Launched with 4 partners, today it has 17 & Over 6,000 retail locations Nectar customers can earn points on 40% of their household expenditure. It has given back over 450m pounds worth of rewards since launch. Sainsbury's, Barclaycard, BP and Debenhams, Thresher Group, Vodafone, Adams, Ford, e-Energy, all:Sports, Winemark, Hertz, Magnet, Brewsters, Brewers Fayre, ebookers UK, and Beefeater. Some successful UK programs – Nectar Success of Nectar is attributed to Availability & Wider choice for redeeming points across relevant segments. Enabling customers to earn rewards more quickly At higher value than if they collected points from only one company.

14 Financed bySupported byImplemented in cooperation with Some insights --- Customer & Company perspective Treat profitable and unprofitable customers differently Get your metrics in place ---- measure costs & returns offer right mix of Product, Price, Service Delivery & Relationship benefits deliver tangible value in proportion to the value the customer brings to the company Customers new perspective of Rewards ( Loyalty ) 1.Cash value 2.Redemption options 3.Aspirational value 4.Relevance 5.Convenience Loyalty initiatives are not short term marketing tools. They should Communication to be transparent, timely and focussed ---- Immediate gratification ---- More Choice ---- Feel Good factor ---- Does it make sense ---- Ease of availing reward Consistent across all customer touch points Loyalty initiatives must also be profitable

15 Financed bySupported byImplemented in cooperation with What does loyalty mean to the customer today ? Primary drivers Physical product Service product Service delivery Service environment Ethics Image Reputation Positioning Loyalty Programs Co Brands Alliances Special treatment Affinity Customer community Price Product / service* Brand**Relationship Purchase price Effort Time Customer cost of using your product Customer Perceived value Complete Customer “ Relationship” Experience Customers want an end-to-end relationship experience

16 Financed bySupported byImplemented in cooperation with Customer Relationship experience – Banking illustration Customer Value Perception Organization’s translation of Value Fee Income Simplified product offering Bottom line Life Time Free Transparency in charges Value for money One stop Shop for all financial needs Network availability Best in class % returns /cancellations # service calls/repairs # customer inquiries # billing queries Ease of availability Relevant Features Wide service range Easy accessibility Speedy service Customer empathy Resolution of query the first time Strengthening Brand image Advertising costs Aspirational value Flash Value Inspires confidence Customer touch time No. of product training hours Understanding needs Processes & Service Knowledge Preferential offers Price Product / Quality Customer Service Brand Relationship

17 Financed bySupported byImplemented in cooperation with Can your Products & Delivery systems provide ….. 1. End to end solutions / Address future needs 2. Competitive & flexible pricing plans 3. Ease of access / acquisition --- Options to use most appropriate services / channels Ask yourselves…..are you truly Customer Centric? Are your business processes geared up for ….. 1.Settling customer issues, with 1 phone call or web-site visit? 2.Responding immediately & appropriately to "moments of truth" when customers' business is on the line? Do you measure your customers …… 1.Lifetime Value & Cost to the business 2.Preferences, Dislikes, Usage Patterns 3.Satisfaction levels Do you monitor your Loyalty programs to see ……. 1.Address the right customers 2.If they are profitable?

18 Financed bySupported byImplemented in cooperation with 1st : Have a clear articulated Customer Loyalty Strategy Enterprise approach to Loyalty Covers the entire customer experience during his lifecycle Covers all customer touch points Addresses his existing / potential relationship with the company 2nd : Must be in sync with Business Objectives Customer / Segment profitability Customer Contact strategy 3rd : Business Process to be customer centric 4th : Design Customer centric & Profitable Loyalty programs Risk, Underwriting, Operational processes Acquisition, Customer service, Marketing

19 Financed bySupported byImplemented in cooperation with Lifecycle Experience ---- Define value proposition to customer segments Dynamic ---- Ability to react to changing customer needs and behaviors How do you do it ……. Business Objectives Process Changes Loyalty Programs Seamless --- across all Channels, Business Functions and touch points Flexible ---- Ability to accommodate changes without compromise Value & Choice ---- Value based on Customer Profitability & offering relevant choice ( Bought-out or Co- Branded ) Personalised ---- to the customer’s unique profile based on Analytics Branded ---- Bought-out or Co-branded to address emotional needs Targets ---- Program objectives clearly communicated Metrics ---- Measurement capability in line with objectives

20 Financed bySupported byImplemented in cooperation with Addresses the new customer need of Offering wider choice of involvement platforms Accrual / Redemption of Rewards across several relevant involvement categories Faster value accumulation compared to stand-alone programs Branding association to address aspirational & emotional needs Role of Partnering & Co Branded Programs Addresses the companies need to Lower costs of loyalty through sharing Access partner customer touch points Access additional customer databases Improve Brand image

21 Financed bySupported byImplemented in cooperation with Success in Co-Brand partnership is higher, if Core value of the two partnering brands are related. Partner Co brand objectives are in congruence Each activity has consequent benefit to both partners Availability of Partners Partnering or Co branding --- which option to choose ? Bought out approach works when No feasible Co Brand partners are available Feature / Service is commoditised Cost of feature low Partner not interested in Co branding

22 Financed bySupported byImplemented in cooperation with Co-Branding in Credit Cards – Is it Profitable? Same 64% Less 9% 4% Purchase more 23% Purchase amount from Co-Brand Partner Same 64% Dont know Purchase 23% Frequency of using CoBranded-Partner Same 59% More often 31% Dont know 2% Less often 8% Yes …… by a factor of 1.2 – 1.5 times Yes …… If you can get customers to aggregate all their usage on the co branded program Yes …… If you can the relationship needs of the customer and show value

23 Financed bySupported byImplemented in cooperation with To summarise Loyalty is not about short term rewards…….it is about end-to-end customer experience with your products / services Loyalty is’nt created by a program……it can at best strengthen it. Companies need to have a enterprise wide loyalty strategy backed by customer centric processes to deliver value Co branded programs work --- Ensure you get the value proposition right Loyalty has to be earned…..its hard work….but at the end you have a profitable customer

24 Financed bySupported byImplemented in cooperation with Activity-based costing (ABC) is a technique that allocates the cost of performing various services to each customer (customer-specific costing). Through Customer Relations Management (CRM) programs, one can relate revenues and costs to each and every activity. Measuring Customer Profitability

25 Financed bySupported byImplemented in cooperation with Employing an activity-based costing (ABC) process, one can accurately assess the cost and profitability of each customer. By linking financial information with transactional data created in CRM programs, companies are able to accurately calculate “cost-to-service” components to yield customer profitability. Activity-Based Costing

26 Financed bySupported byImplemented in cooperation with Figure 3.3 The Whale Curve of Cumulative Profitability

27 Financed bySupported byImplemented in cooperation with 20/80 Rule says “20% of customer provide 80% of sales Whale Curve reveals: 20% of customers generate 150–300% of total profits 70% of customers break even 10% of customers lose from 50-200% of total profits Leaving company with 100% of total profits Whale Curve & Profitability

28 High-Cost-to-Serve Customers Order custom products Order small quantities Unpredictable order arrivals Customized delivery Frequent changes in delivery requirements Manual processing Large amounts of presales support (i.e., marketing, technical, and sales resources) Large amounts of post-sales support (i.e., installation, training, warranty, field service) Require company to hold inventory Pay slowly (i.e., high accounts receivable) Low-Cost-to-Serve Customers Order standard products Order large quantities Predictable order arrivals Standard delivery No changes in delivery requirements Electronic processing (EDI) (i.e., zero defects) Little to no presales support (i.e., standard pricing and ordering) No post-sales support Replenish as produced Pay on time Source: Robert S. Kaplan and V.G. Narayanan, “p. 8. Measuring and Managing Customer Profitability,” Journal of Cost Management 15, No. 5 (September/October 2001): High- vs. Low-Cost-to-Serve Customers

29 Financed bySupported byImplemented in cooperation with As mentioned previously, some customers are profitable and some aren’t. To determine this, we look at the cost/profitability structure with the plan to: 1. Keep profitable customers 2. Convert unprofitable ones to profitability 3. Fire those who are not profitable Customer Profitably

30 Financed bySupported byImplemented in cooperation with Managing loyalty and profitability Source: Hadson & Hadson. Customer service for Hospitality & Tourism. Chapter 7. Building and Maintaining Customer Relashionship. (Adapted from Kumar and Rajan, 2009, p. 5)

31 Financed bySupported byImplemented in cooperation with Low margin / high cost customers offer the most challenge for marketing mangers. Start with ways to reduce costs Next, work with customers to possibly change their actions resulting in lowering costs or increasing profitability Managing Unprofitable Customers

32 Financed bySupported byImplemented in cooperation with We must try everything to make a customer profitable before firing them. If after trying, and the customer continues to be reluctant to change, and the relationship remains unprofitable, we can say outright, “YOU’RE FIRED!” but… There are better approaches. We can let customers ‘fire themselves’ by raising our prices, reducing or charging more for services, eliminating discounts, etc., until they become profitable or find another distributor. Firing the Customer

33 Financed bySupported byImplemented in cooperation with slides slides program-users/ program-users/ Fostering Loyal Customer Relationships. Duarte B. Morais, Ph.D. Assistant Prof. of Recreation, Park and Tourism Manage Customers for Profits (Not Just Sales)” B.P. Shapiro et al., September-October 1987, p. 104, Harvard Business Review. Useful links B.P.Shapiro

34 Financed bySupported byImplemented in cooperation with Hold, hold, hold!!!!

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