building loyalty in the luxury market
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8/3/2019 Building Loyalty in the Luxury Market
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Leading with luxury program
Building loyalty in the luxurymarket
Claudia Rodriguez, MS
San Ignacio de Loyola UniversityLima, Peru
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Loyalty programs and the
luxury market
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T ypes of luxury
consumers X-fluents:² Extremely affluents, spend heavily on luxury living
Butterflies:
² Powered by a search of meaning and newexperiences Luxury cocooners:
² Focused on heart and home Aspirers
² Highly attuned to brands and believe luxury is bestexpressed in what they buy and own
T emperate pragmatist:² Newly emerged luxury consumers. Careful spenders
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Business logic for the
luxury marketCustomer logic T argeted
customer range
Product logic Lifestyle andself-identification
Economic logic Selected
locationsStructural logic Customization
focus
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Loyalty, customer and from wherethey come from
T he word ´customerµ is somewhat difficult totrack its origin back in time. We can go as far asthe times of the Roman Empire who had the´hospitium privatumµ similar as what weunderstand today as a ´right of asylumµ or to themedieval times where the Lords were pledged todefend their ´clientsµ or people that served themin case of invasions.
In the end, the core idea was the same; toprotect and, in doing so, prevent that theprotegé betrays them and shift lines with theenemy.
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Key question:
Do Loyalty programsactually build customerloyalty?
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Definition According to Shoemaker and Lewis (1998)
loyalty programs are offered to the
customers in order to build an emotionalattachment to the brand.
While customer loyalty is defined as thelikelihood of a customer to repurchase and
have a high level of emotional attachmentto the company. (Wijaya, S. 2005).
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T ypes of loyalty
Attitude
L i k e l i h o o d
o f
r e p u r c h a s e Spurious
Inertia loyaltyPremiun
T rue loyalty
No loyalty Latent loyalty
L H
L
H
Backman and Crompton, 1991
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Back to the basics« Question: where does the process of
building loyalty actually start? T he starting point: T he sale! Or even
before. It is much more than a marketing
initiative, it requires a culturaltransformation in the organization.
Be aware of focusing only on ´conquestmarketingµ«
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Key concept What really drives repurchase is not
high-quality customer service, well-
managed communications or rewardsprogram such as frequent stayprograms«
Superior customer value, does.
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Value and Loyalty
Desired
Basic
Expected
Un-anticipated
Customer value
Customer
loyalty
Level of service
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Awareness
Interest
Evaluation
Action
Reevaluation
Reconciliation
Learning
Commitment
Repeatpurchase
Loyalty
Hierarchy of effects Hierarchy of Experience
Prior to the experience
MKT
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Loyalty = Fidelity
T he quality or state of being faithful
Steadfast in affection
Loyal
Unswerving in allegiance/devotion
RAVING FANS!
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Loyalty Programs: Working
definition
Process used by companies in order to
get the loyalty of their customers,meaning faithfullnes to their brand
that translates in continuospurchases
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Working definition
Process used by companies in order to
get the loyalty of their customers,meaning faithfullnes to their brand
that translates in continuospurchases
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´Loyalty means you retain a customerand increase the business you do with
that customer, developing arelationship so he/she will not belured away to the competition with
the promise of a lower priceµ
Ford,L. 1998.
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Implications
Getting the loyalty of customers goes farbeyond the goal of retaining them. Itimplies the need to build a lifelong
relationship.T o do this we needto assess the valueof this lifelong
relationship and linkthis to thesegmentationprocess.
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a. Attract new customers is
expensive
Selling to a new customer is 5 times moreexpensive than selling more to an existingone. (actually, it could be much more!).(McIlroy and Barnett, 2000).
An existing client buys easily from thecompany with whom has an existingrelationship
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b. Loyal clients generate lower
operative costs
Frequent customers are cheaper toserve as they know better theprocess, representing savings intime and costs, both for thecompany and the client.
T he effect of switching costs
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c. Loyal clients bring more clients
Word-of-mouth effect
Credibility
Impact between 3 to 10 multiplier² Is this still true?
Be careful with
regional/international differences
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d. Loyal customers tend to accept
higher prices A loyal customer is less attracted to
change service providers based solely
on price Because:
² Switching costs
² Fear of failure in getting what he or shewants
² Price of ´being-safeµ
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Customer loyalty threats Price reduction policies
E-global distribution systems
Low switching costs ´Conformance to requirementsµ operational
policy
Access to competitive info
Nature of the business² In what business is the luxury-hospitality business?
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T he process of building loyalty
First Imperative:² KNOW YOUR CUST OMER!
Database management/CRM² Who are they?² What do they prefer?² Why do they buy from me?² Pattern of behaviour
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1. Design a competitive
offer Deliver value
Not only defined in
economic terms What is value for your
customer?² Freebies?
Customization? Smile?
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2.K
now your customer Customer Information Intelligence
Opportunities for the hospitalityindustry² Frequent stay programs, Fidelization
Cards, Face-to-face Interaction«
What do you do with all theseinformation?
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But this is not the final goal, thereal intent is to evolve into a realpartnership!
3. Build a learning
relationship
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How do you learn from
your customer?
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4. T rain your staff
Your staff is key in this process, theyare your ´spiesµ all-around«
Develop customization-skills among them
Empower them to ´break the rulesµ
T rain them to develop listening skills,recovery skills and handling complaints
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In hospitality services, the human-factorplays a strategic role in customer loyalty
but to be effective, they must we awareof:² Building and maintaining a learning relationship
² T he fragility of this relationship
² T he life-time value of the customer² T he importance of service-recovery
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5. Stage your act wisely
CustomerSatisfaction is notenough«
Minimize CustomerSacrifice
Stage CustomerSuprise«stage the
unexpected! Stage CustomerSuspense
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Customer Satisfaction is
not enough ´«just having satisfied customers
isn·t good enough anymore. You don·t
own those customers. T hey are justparked on your doorstep and will beglad to move along when they findsomething better«µ
Blanchard and Bowles, 1993
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´«customer satisfaction is now just arequisite for loyalty, but satisfied
customers may not become ever, loyalcustomers«µ
Bowen and Shoemaker, 1998
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6. Aftermarketing
activities Any activity directed at current
customers with the express purpose
of increasing those customers·likelihood of repurchasing a productor service in the future, or ofincreasing their share ofrequirements.
Vavra, T and Pruden, D. 1995
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Loyalty at Leading
http://www.lhw.com/LeadersClub/lchome.aspx
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Issues about Loyalty programs
in the luxury market A one-size fits-all loyalty strategy
doesn·t work in the luxury market.
Loyalty programs in this market mustbe crafted around what really turnthe customer on and the rewardsthat will make a real difference to
them. Based on emotional and experiential
benefits.
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Customer Loyalty
Management Staging of memorable events Use of relationship marketing tools
Staging of memorable events«forreturning customers! Developing a learning relationship with the
customer
Stage of surprise effect Customer relationship Management
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Questions?
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T hank you!
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