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Customer Service Products and Services JOY.

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Presentation on theme: "Customer Service Products and Services JOY."— Presentation transcript:

1 Customer Service Products and Services JOY

2 Customer Loyalty Question: What is customer loyalty ?
Customer Loyalty 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?

3 Why Do You Want Loyal Customers?
Exercise ? (brainstorming)

4 What does loyalty mean to businesses ?
Repeat Purchases ? Retention of Customers ? 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 Customer hopes & asks but doesn’t expect; if met then delighted
Customer hopes & asks but doesn’t expect; if met then delighted. Unlikely to cause dissatisfaction. Build customer loyalty Customer tells what is important; satisfaction vs. dissatisfaction if met Benefits above & beyond expectations; identify and suggest innovations with new products Meeting basic respect & courtesy needs; dissatisfaction if not met; indifference if met

6 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.


8 Four different reasons for loyalty should be promoted
psychological; economic; technical/functional; contractual.

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

10 What’s the Good News ? Loyalty programs are
90 % Americans are active participants in at least 1 program % 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 Loyalty programs are Key drivers for enhancing customer experience. Active point of differentiation Help pinpointing individual buying patterns and predicting future customer behavior.

11 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% 48% customers did not have any serious intention of repurchasing the brand 55% customers accumulate points because they anyway come along with their purchases Do Loyalty Programs work -- Not as well as they are intended to

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

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

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

17 Ask yourselves…..are you truly Customer Centric?
Do you measure your customers …… Lifetime Value & Cost to the business Preferences, Dislikes, Usage Patterns Satisfaction levels Can your Products & Delivery systems provide ….. End to end solutions / Address future needs Competitive & flexible pricing plans Ease of access / acquisition --- Options to use most appropriate services / channels Are your business processes geared up for ….. Settling customer issues, with 1 phone call or web-site visit? Responding immediately & appropriately to "moments of truth" when customers' business is on the line? These are just a few of the questions that manufacturers need to ask themselves and shown here to give you some idea to what the study is about. Do you monitor your Loyalty programs to see ……. Address the right customers If they are profitable?

18 Enterprise approach to Loyalty
1st : Have a clear articulated Customer Loyalty Strategy 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 Risk, Underwriting, Operational processes Acquisition, Customer service, Marketing 4th : Design Customer centric & Profitable Loyalty programs

19 How do you do it ……. Business Objectives Process Changes
Lifecycle Experience Define value proposition to customer segments Dynamic Ability to react to changing customer needs and behaviors Targets Program objectives clearly communicated Metrics Measurement capability in line with objectives Business Objectives Process Changes Seamless --- across all Channels, Business Functions and touch points Flexible Ability to accommodate changes without compromise Loyalty Programs 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

20 Role of Partnering & Co Branded Programs
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 Addresses the companies need to Lower costs of loyalty through sharing Access partner customer touch points Access additional customer databases Improve Brand image

21 Partnering or Co branding --- which option to choose ?
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 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 Co-Branding in Credit Cards – Is it Profitable?
Same 64% Less 9% 4% Purchase more 23% Purchase amount from Co-Brand Partner Dont know 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 To summarise Loyalty is’nt created by a program……it can at best strengthen it. Loyalty is not about short term rewards…….it is about end-to-end customer experience with your products / services 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 Measuring Customer Profitability
Measuring Customer Profitability 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.

25 Activity-Based Costing
Activity-Based Costing 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.

26 Figure 3.3 The Whale Curve of Cumulative Profitability

27 Whale Curve & Profitability
Whale Curve & Profitability 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 % of total profits Leaving company with 100% of total profits

28 High- vs. Low-Cost-to-Serve Customers
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):

29 Customer Profitably 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: Keep profitable customers Convert unprofitable ones to profitability Fire those who are not profitable

30 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 Managing Unprofitable Customers
Managing Unprofitable Customers 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

32 Firing the Customer 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.

33 Useful links 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. B.P.Shapiro

34 Hold, hold, hold!!!!

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