crm loyalty[2]
TRANSCRIPT
Customer
Loyalty
MonogamyAn unselfish belief in institutions or unswerving fidelity in marriage, or emotional commitment to friends.
A deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future.
A reliance on a particular brand or company even though numerous satisfactory alternatives may exist.
Three basic approaches to conceptualize loyalty: -
Behavioral ModelAttitudinal ModelSituational Model
Behavioral Model
Historical Purchasing of Brand & Competitors
Satisfactory Experiences
(Reinforcement)
Behavioral Loyalty(Divided Loyalty = Polygamous Behavior)
Loyalty mainly expressed in terms of Revealed Behavior
Attitudinal Model
Attitudes and Beliefs toward the Brand or
Company
Social Factors, influence of significant others and community
Attitudinal Loyalty(Strong Loyalty = Monogamous Behavior)
Loyalty is an attitude that some times leads to an ongoing relationship with a Brand
Situational Model
Situation and usage occasion
Consumer’s characteristics and desire for variety
Co-Determinants of Choice (Weak loyalty = Promiscuous behavior)
Loyalty as behavior moderated by the customer’s characteristics, circumstances,
and/or the Purchase situation
Measures of Loyalty
Liking and preference for the brand
Repeat purchases
Loyalty Types
True Loyalty Attitudinal Brand Loyalty
Spurious LoyaltyInertial Loyalty
Latent Loyalty
Loyalty TypesTrue loyalty = attitudinal brand loyalty. Can be undivided loyalty or divided loyalty (where person is loyal to two brands). Can be temporarily interrupted due to novelty-seeking behavior or stock out of favorite brand, price promotions, etc.
Spurious loyalty = inertial loyalty. The only brand sold.When there is no feeling at all toward brands within a particular product category and the consumer purchases whichever brand the store sells (coffee filters, vegetable oil, sugar) there may be no loyalty at all. Convenience goods are characterized by this.
Latent loyalty: Consumer feels very positive toward a brand but does not buy it, maybe due to economic situation.
Brands are not built by ad and sales promotion alone but are also built by customers’ quality experiences with the brand. By and large, these experiences are based on a customer’s interaction with the company. Chinese Restaurant
Stages of Loyalty
Cognitive loyalty – price and qualityAffective loyalty – due to satisfaction of using the
productConative loyalty – Intention to rebuying the same
brandDelivery failure may diminish this loyaltyAction loyalty – exhibiting consistent repurchase
behavior
Loyalty is Important to Profitability : Index of Customer Profits over Time
Credit card Industrial laundry Industrial Selling Auto servicing
0
(Year 1=100)
50
250
300
350 –
100
150
200
Year 1 Year 2 Year 3 Year 4 Year 5
Based on data from Reichheld and Sasser
What Makes Loyal Customers More Profitable?
Tend to spend more as relationship develops
May consolidate purchases to one supplier
Cost less to serve
Less need for information and assistance
Make fewer mistakes
Recommend new customers to firm (act as unpaid sales people)
Value Proposition of Customers
Product Performance
Customer Needs
Total cost to customer
Customer Relationship life cycle
Value Proposition Formulation
Defining target cutsomers Benefits offered Prices charges vis a vis competitors Is the proposition clearly superior?
To understand benefits of value propositions Ask customers to rank various attributes
Customer Value Chain
• Value Selection• Value Creation/delivery• Value Communication• Value Enhancement
Value Profit Chain
• Key Constituents– Customers– Employees– Investors
• Behaviours– Retention– Related sales– Referrals
Customer Expectations (enhancing value)
Supply reliability Supply lead time Quality Price Technical Support
Customer Touchpoints
Marketing & salesCustomer SupportBilling & paymentDispute ResolutionProduct Development & Testing
RFM Model Novo 2004
• Higher the score, more profitable
Life time value of Customers
Acquisition CostCLV = Average Transaction value X Frequency of
Purchase X Customer Life Expectancy
Retention Strategy
Customer valuationCustomer Retention measurementDetermine reasons for defection
Root causes (probe former customers, analyse complaints)
Develop and implement a corrective planImprove employee practicesBenchmarking
Retention Strategies build barriers to customer switching
Hotel Experience
Aviation Experience
Exploratory Growth Maturity DeclineTransaction Low Growing Stable Declining
Commitment Average Hi Decreasing Maximum Lo
Objective Both higher Both higher Retain Prevent
Policy Inform, Differentiate, Measure Satisfaction
InteractAppealCross Selling
Change Routines
Determine causes, suggest solution
Loyalty Implementation
Observation
Calculating inertial CLVBasis for segmentation
Selection
Prioritization
Leveraging
The Wheel of Loyalty
1. Build aFoundationfor Loyalty
2. Create LoyaltyBonds
3. Reduce Churn Drivers
CustomerLoyalty
Be selective in acquisition
Conduct churn diagnosticSegment the market
Use effective tiering of service.
Deliver quality service.
Deepen the relationship
Give loyalty rewards
Build higher level bonds
Implement complaint handling & service recovery
Address key churn drivers
Increase switching costs
Intensifying Loyalty
Entry Barriers• Economies of scale
• Product Differentiation
• Capital Requirements
• Switching Costs
• Access to channels of distribution
• Govt. policies
Exit Barriers• Customer learning curve
• Process Integration
• Personalisation
• Customization
• Risk reduction and trust
• Loyalty program
• Brand affinity
• Customer collaboration
• Be a standard
Measurement of relationship
• Identify and differentiate between successful and unsuccessful products
• Evaluate the quality of relationship in all cases
• Mapping those relationship with success/failure of the product
Relationship Quality Survey
Client feedback• Product related (5)
• Relationship related (5)
Relationship related inputs• Client Servicing (6)
• Managerial Role (5)
• Synergy and Integration (6)
• Personal Skill Orientation (5)
• Operations (3)
Measurement Score
Score• Below 100 (<50%)
• 100 - 129
• 130 - 169
Explanation• Lack of concern from both
organisation and individual towards customer (Serious)
• Individual commitment to customer is present but organisation goals need orientation
• Individual commitment to excellence, client servicing is adequate. System needs to be streamlined
The Customer Satisfaction-Loyalty Relationship
0
20
40
60
80
100
1 2 3 4 5Very
dissatisfied DissatisfiedNeithersatisfied
nor dissatisfiedSatisfied
VerySatisfied
Satisfaction
Near Apostle
Zone of Defection
Zone of Indifference
Zone of Affection
Terrorist
Apostle
Factors Intervening between Satisfaction and Loyalty
Shear number of competitors’ offerings
Novelty seeking
Lack of consistency in performance
New competitors offering better value or a greater variety of ancillary services
Customer expectation of future use
Customers may not want a relationship with your firm
Customer Satisfaction
• ACSI• Servqual Model• Loyalty Accounting Matrix