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Customer Loyalty IBS2 PDF
Customer Loyalty IBS2 PDF
QUESTION
PUT YOU HANDS UP IF YOU HAVE A LOYALTY CARD IN YOUR
WALLET OR PHONE? MOST OF YOU
HOW MANY SAY THAT THIS CARD INFLUENCES OUR BEHAVIOR IN
SOMEWAY WERE YOU SHOP?
HOW MANY SAYS THAT THIS LOYALTY CARD MAKE YOU LOYAL TO
THE BRAND?
GERARD DU TOIT,
A PARTNER IN BAIN'S FINANCIAL SERVICES PRACTICE
RESEARCH FINDINGS
ONE-THIRD OF BANKING CUSTOMERS HAVE RECENTLY PURCHASED
A NEW PRODUCT FROM A BANK THAT'S NOT THEIR PRIMARY BANK.
THE NEW PRODUCT IS OFTEN HIGH MARGIN SERVICE.
WE DO OUR BEST TO PLEASE A CUSTOMER WHEN THEY DECIDE TO
CLOSE THEIR CURRENT ACCOUNT.
EXPLAINS HOW THIS "HIDDEN DEFECTION" PROBLEM IS MAKING
CUSTOMER LOYALTY MORE IMPORTANT THAN EVER.
ROB MARKEY
RESEARCH FINDINGS
THE NET PROMOTER SYSTEM IS ABOUT CREATING A CULTURE IN WHICH
COMPANIES MAKE BETTER DECISIONS ON BEHALF OF THEIR CUSTOMERS.
THE ONLY WAY TO DO THAT IS TO GET RELIABLE FEEDBACK FROM CUSTOMERS.
COMPANIES GAINED A RADICALLY SIMPLE WAY TO GAUGE CUSTOMER SENTIMENT.
BUT THE SCORE SOON EVOLVED AS COMPANIES DEVELOPED PROCESSES TO ACT
ON THE FEEDBACK THEY COLLECTED AND IMPROVE THE CUSTOMER EXPERIENCE.
THE NET PROMOTER SYSTEM IS NOW A MANAGEMENT PHILOSOPHY THAT
COMPANIES AROUND THE WORLD USE TO EARN THE PASSIONATE LOYALTY OF
CUSTOMERS AND EMPLOYEES.
2. THE PAINTER
NOTES
BUILDING A LOYALTY PROGRAM CONCEPT REQUIRES
NOT JUST SOUND STRATEGIC THINKING, BUT LOADS
OF RIGOR. THE SUCCESS LIES IN BEING ABLE TO
DETAIL OUT SOLUTIONS TO OVER 100 DECISION
POINTS THAT A LOYALTY PROGRAM CONCEPT NEEDS
TO COVER. YOU CANNOT BE REACTING TO
SITUATIONS AS THEY HAPPEN!
4. THE NEUROMANCER
NOTES
THE SOFTWARE ON WHICH YOUR PROGRAM DEPENDS
NEEDS TO BE DESIGNED CAREFULLY, AND SHOULD
HANDLE ALL ASPECTS OF YOUR PROGRAM. RETAIL POS
SOLUTIONS OFTEN OFFER A BASIC LOYALTY MODULE
THESE ARE USUALLY INADEQUATE! THE POINT: DONT
DESIGN YOUR PROGRAM TO FIT THE SOFTWARE.
5. THE BAND
YOU NEED SUPERHEROES SKILLED IN
MARKETING, TECHNOLOGY, AND ANALYTICS
IT TAKES TEAMS THAT ARE NURTURED
IT TAKES PATIENCE AND TOP MANAGEMENT
BUY IN
6. THE CAMPAIGNER
LOYALTY PROGRAMS THROW UP A WEALTH
OF DATA DRIVEN CAMPAIGNS
GOOD CAMPAIGN MANAGEMENT ALLOWS
YOU TO HANDLE HUNDREDS OF SEGMENTS
AND COMMUNICATIONS SIMULTANEOUSLY
CAMPAIGN MANAGEMENT
NOTES
7. THE TIMEKEEPER
BUILDING LOYALTY TAKES MONEY, TIME AND PATIENCE
ASSUME IT WILL TAKE YOU 2-3 YEARS TO TRULY REAP
BENEFITS
YOURE IN IT FOR THE LONG RUN, ARENT YOU?
A MATTER OF PATIENCE
NOTES
TO SUMMARIZE
1.
CUSTOMERS SHAPE-SHIFT
2.
3.
4.
5.
6.
7.
MANAGERS AND
BUT THE REAL VALUE OF THE NET PROMOTER SYSTEM FLOWS FROM
CUSTOMER FEEDBACK TO FRONTLINE EMPLOYEES AND MANAGERS,
WHOSE CREATIVE ENERGY CAN BE HARNESSED TO MAKE PROCESS
IMPROVEMENTS LARGE AND SMALL.
BRAND
WHAT IS A BRANS?
A NAME, SYMBOL, DESIGN, OR SOME COMBINATION WHICH IDENTIFIES THE
PRODUCT OF A PARTICULAR ORGANIZATION AS HAVING A SUBSTANTIAL,
DIFFERENTIATED ADVANTAGE (ROONEY, 1995, P.48).
A BRAND IS A DISTINGUISHED NAME AND/OR SYMBOL (SUCH AS A LOGO,
TRADEMARK, OR PACKAGE DESIGN) INTENDED TO IDENTIFY THE GOODS OR SERVICES
OF EITHER ONE SELLER OR A GROUP OF SELLERS, AND TO DIFFERENTIATE THOSE
GOODS OR SERVICES FROM THOSE OF COMPETITORS (MARCONI, 2000, P.33).
DESPITE THE FORMAL DEFINITIONS, THE PURPOSE OF BRANDING IS ESSENTIAL TO
BUILD A PRODUCTS IMAGE.
THIS IMAGE WILL INFLUENCE THE PERCEIVED VALUE OF THE PRODUCT AND WILL
INCREASE THE BRANDS VALUE TO THE CUSTOMER, LEADING TO BRAND LOYALTY.
is (ROONEY, 1995)
BRAND USAGE
ORGANIZATIONS USE BRANDS AS A WAY TO ATTRACT AND KEEP
CUSTOMERS BY PROMOTING VALUE, IMAGE, PRESTIGE, OR
LIFESTYLE.
FURTHERMORE, BRANDING IS A TECHNIQUE TO BUILD A
SUSTAINABLE, DIFFERENTIAL ADVANTAGE BY PLAYING ON THE
NATURE OF HUMAN BEINGS.
THIS SINCE ONLY HUMANS CAN ATTACH MEANING AND FEELINGS
TO INANIMATE OBJECTS.
(Rooney 1995)
BRAND MANAGEMENT
THE MANIPULATION OF THE FOUR PS (PRODUCT, PLACE, PRICE AND
PROMOTION) AND THE IMPLEMENTATION OF STRATEGIES THAT FOLLOWS.
THE PRECISE FOCUS VARIES FROM ONE ORGANIZATION TO THE NEXT, BUT IN
GENERAL THE EMPHASIS TENDS TO BE PLACED ON PROMOTION, AND ITS
CORE COMPONENT ADVERTISING.
WITHIN BRAND MANAGEMENT THERE IS A DEVELOPMENT OF THE USE OF
BRAND EQUITY AND BRAND VALUE MEASURES AS A GUIDE TO CORPORATE
STRATEGY DEVELOPMENT.
(Logman, 2004)
BRAND EQUITY
HAS MULTIPLE MEANINGS AND ACCOUNTANTS OFTEN TEND DO DEFINE
BRAND EQUITY DIFFERENTLY FROM MARKETERS.
THE DIFFERENCE LIES IN THE CONCEPT BEING DEFINED BOTH IN THE TERMS OF
THE RELATIONSHIP BETWEEN THE CUSTOMER AND THE BRAND OR AS
SOMETHING THAT ACCRUES TO THE BRAND OWNER.
TO SIMPLIFY THESE APPROACHES A CLASSIFICATION OF THE DIFFERENT
MEANINGS OF BRAND EQUITY HAS BEEN PROVIDED.
Wood (2000)
THE BRAND
Brand value
the total value of a
brand as a
separable asset
Brand image
a description of
the associations
and beliefs the
consumer has
about the brand.
Brand strength
a measure of the
strength of
consumers
attachments to a
brand.
BRAND EQUITY
THE CORE OF BRAND EQUITY IS BRAND LOYALTY AND THE ASSETS OF
BRAND EQUITY ALL IMPACT ON BRAND LOYALTY.
ACCORDING TO RESEARCHERS IN THE 1970 S DISCOVERED THAT SUPPLIERS
WHO FORM CLOSE WORKING RELATIONSHIPS WITH THEIR CUSTOMERS TEND
TO HAVE BETTER CUSTOMERS.
THESE CLOSE RELATIONSHIPS MAKE THE CUSTOMER MORE LOYAL TO THE
SUPPLIERS AND THE CUSTOMERS OFTEN GIVE THE SUPPLIERS A GREATER
SHARE OF THEIR BUSINESS.
LOYALTY MARKETING
BUILDING CUSTOMER LOYALTY THROUGH LOYALTY MARKETING IS A BUSINESS STRATEGY NOT JUST A
MARKETING PROGRAM, ALL BUSINESSES SHOULD SEEK TO INCREASE AND MAXIMIZE THE SHARE OF
CUSTOMERS.
THE PURSUIT OF CUSTOMER LOYALTY IS CONTINUOUS AND IT IS MORE OF A JOURNEY THAN A
DESTINATION. (DUFFY, 1998)
AAKER (1996) STATES THAT FOCUS ON LOYALTY SEGMENTATION PROVIDE STRATEGIC AND TACTICAL
INSIGHTS THAT WILL ASSIST IN BUILDING STRONG BRANDS.
THE MARKET IS DIVIDED INTO SEVERAL DIFFERENT SEGMENTS THAT CONSIST OF GROUPS OF PEOPLE
WITH SIMILAR PREFERENCES WITHIN THE GROUPS RATHER THAN BETWEEN THE GROUPS (SODERLUND,
1997).
IF A COMPANY PRACTICE LOYALTY MARKETING, THEY MUST FIRST KNOW WHO THEIR LOYAL CUSTOMERS
ARE, WHICH IS A LOT EASIER FOR MANY BUSINESS-TO-BUSINESS MARKETERS THAN FOR MOST
CONSUMER GOODS MARKETERS (DOWLING & UNCLES, 1997).
FALSE LOYALTY
FALSE LOYALTY OCCURS WHEN THE CUSTOMERS HAVE A LIMITED
CHOICE OF PRODUCTS.
CUSTOMERS APPEAR TO BE LOYAL BECAUSE THEY CONTINUE TO
BUY FROM A SINGLE SELLER BUT THEIR APPARENT LOYALTY IS DUE
TO A LACK OF GOOD SUBSTITUTES AND THEY ARE ACTUALLY
UNHAPPY WITH THE PRODUCT.
(Burgeson, 1998)
DECISION MAKING
WHEN CONSUMERS CHOOSE BETWEEN DIFFERENT PRODUCTS AND SERVICES
THEY BEGIN BY IDENTIFYING AND SELECTING A SET OF ACCEPTABLE
ALTERNATIVES FROM WHAT IS AVAILABLE AND LIMIT THEIR PURCHASE TO THESE
ALTERNATIVES.
THIS SET OF POSSIBLE CHOICES IS KNOWN AS EVOKED SET OR
CONSIDERATION SET.
THE LIMITATION OF ALTERNATIVES TO A MANAGEABLE LEVEL ENABLES
CONSUMERS TO MAKE A RATIONAL CHOICE.
CONSUMER DECISION-MAKING
FIRST DEFINING THE ALTERNATIVES, THEN REVIEWING RELEVANT INFORMATION IN
MEMORY AND FINALLY APPLYING A DECISION RULE.
THE DIFFERENT ALTERNATIVES ARE REFERRED TO AS AN EVOKED SET OR
CONSIDERATION SET.
MOST EVIDENCE SUGGESTS THAT WHILE CONSUMERS HAVE KNOWLEDGE OF A
LARGE NUMBER OF BRANDS IN A PRODUCT CLASS THEY MAY ONLY CONSIDER A
FEW OF THESE FOR PURCHASE.
THE COMPOSITION OF AN EVOKED SET IS IMPORTANT FOR THE SUBSEQUENT
PROBABILITIES OF A BRAND TO BE CHOSEN BECAUSE A BRAND THAT IS NOT
CONSIDERED CANNOT BE CHOSEN.
three stages according to Baker, Hutchinson, Burke and Nedungadi (1986),
DISCUSSION
HOW CAN THE STRATEGIES USED IN MAINTAINING CUSTOMER
LOYALTY BE DESCRIBED?
HOW CAN THE BENEFITS OF KEEPING CUSTOMERS LOYAL BE
DESCRIBED?
(Fornell, 1992)
THE MAIN GOAL OF EVERY BANK IS PROFITABILITY AND ONE METHOD TO ACHIEVE THIS IS TO GAIN AND MAINTAIN LOYAL CUSTOMERS.
IF A BANK INVESTS RESOURCES TO BUILD CUSTOMER LOYALTY WITHOUT FOCUSING ON PROFITABILITY IT MAY LEAD TO FAILURE IN THE LONG RUN.
THIS GENERATES FOR A COMPANY IN DIRECT AND TANGIBLE RETURNS WHICH ATTITUDINAL LOYALTY DOES NOT.
ATTITUDINAL LOYALTY ON THE OTHER HAND IS IMPORTANT FOR A COMPANY, B ECAUSE IT HELPS THE COMPANY TO B UILD UP AN EXI T BARRI ER FOR
THEIR CUSTOMERS.
THIS IS ESPECIALLY TRUE IN NON-CONTRACTUAL SITUATIONS WHERE THERE ARE LOW SWITCHING COSTS.
ATTITUDINAL LOYALTY CAN BE A COMMITMENT OR TRUST TO A COMPANY, WHICH DO NOT HAVE TO RESULT IN ANY PURCHASE.
THIS BECAUSE, EVEN THOUGH THE CUSTOMER HAS A POSITIVE ATTI TUDE TOWARDS A COMPANY OR A BRAND, THEY MIGHT HAVE AN EVEN MORE
POSITIVE ATTITUDE TOWARDS ANOTHER COMPANY OR ANOTHER BRAND.
THE ATTITUDES THAT CUSTOMERS HAVE ARE B EST MEASURED THROUGH SURVEYS, OTHER TYP ES OF METHODS TO OB TAIN DATA A RE FOCUS GROUP S
AND FEEDBACK FROM THE CUSTOMERS.
A PSYCHOLOGICAL BENEFIT
A PSYCHOLOGICAL BENEFIT OF BELONGING TO A PROGRAM AND THE
ACCUMULATION OF POINTS.
THE ACCUMULATED POINTS AND BEING QUALIFIED FOR A REWARD COULD BE
REGARDED AS PSYCHOLOGICAL REWARDS IN LOYALTY PROGRAMS.
THIS VALUE PERCEPTION MIGHT ALSO BE RELATED TO THE DIFFERENT TYPE OF
REWARDS, CUSTOMERS PREFER LUXURIES AS REWARDS AND VALUE THEM
MORE THAN NECESSITY REWARDS.
EMOTIONAL RELATIONSHIP
THE PRIMARY AIM OF LOYALTY PROGRAMS IS TO BUILD UP EMOTIONAL
RELATIONSHIPS THAT GENERATE BENEFITS.
THE BENEFITS NEED TO BE VALUABLE AND CAPABLE OF CREATING AN
EMOTIONAL CONNECTION BETWEEN THE CUSTOMERS AND THE COMPANY.
THE CONCEPT OF BENEFITS RELIES ON THE IDEA THAT THE CUSTOMERS SELECT
BRAND ON THE BASIS OF THEIR DESIRE.
Butscher (2002)
(Marken, 2001)
ROUTE
FOR
DEFENSIVE STRATEGIES
KEEP EXISTING CUSTOMERS
SWITCHING BARRIERS
CUSTOMER SATISFACTION
CUSTOMER SATISFACTIO
NO CUSTOMER CAN BE MADE BRAND LOYAL UNLESS THEY ARE SATISFIED
CUSTOMERS THIS CREATES INCENTIVES FOR BANKS TO WORK TOWARDS
GAINING SATISFIED CUSTOMERS.
TO BE ABLE TO MAINTAIN AND EXPAND A PERSONAL RELATIONSHIP WITH THE
CUSTOMERS PROMISES MUST BE KEPT, AND AS LONG AS PROMISES ARE KEPT,
NEW ONES MUST BE ESTABLISHED.
WE CHOSE TO CONCEPTUALIZE THESE THEORIES SINCE THEY ARE RECENT AND
COVER THE MAJOR ISSUES OTHER THEORIES IN OUR LITERATURE REVIEW
BRINGS UP.
Marzo-Navarro et al., (2004)
ATTRACT
NEW
GENERATES PROFITS
DECREASE IN MARKETING COSTS
POSITIVE WORD OF MOUTH
SOCIAL BENEFITS
RELATIONSHIPS
PLEASANT
COMFORTABLE
TRUST
EXAMPLES
MERCEDES BENZ LOYALTY PROGRAM
CO-CREATION PROGRAMMES
CO-CREATION IS THE PRACTICE OF PRODUCT OR SERVICE
DEVELOPMENT THAT IS COLLABORATIVELY EXECUTED BY
DEVELOPERS AND STAKEHOLDERS TOGETHER
STARBUCKS HAS RECEIVED OVER 67,500 RESPONSES FOR
THEIR CO-CREATION PROGRAMME
FOOD AND BEVERAGE IDEAS NEW PRODUCT AND
PRODUCT IMPROVEMENT
EXPERIENCE IDEAS ORDERING AND STORE ATMOSPHERE
INVOLVEMENT IDEAS
RESPONSIBILITY
COMMUNITY
AND
SOCIAL
BRAND COMMUNITIES
} GROUP OF INDIVIDUALS UNITED THROUGH
THE CONSUMPTION OF YOUR PRODUCTS
HARLEY-DAVIDSONS HOGS
CLUB MEDS GRACIOUS MEMBERS
} CHARACTERISTICS
COMMUNALITY HELP AND EXPECT HELP
FROM OTHERS
BRANDFESTS ARE USED TO SHARE HISTORY
KEEP CONSUMING TO STAY CONNECTED
BUILDING A COMMUNITY
1.
2.
3.
4.
5.
6.
REGULAR COMMUNICATION
WEEKLY EMAILS WITH DIFFERENT THEMES
PERSONALIZED
ROTATING OFFERS
TESCO
TESCO
THE TESCO LOYALTY CARD IS ONE OF THE MOST EXCITING AND INTERESTING MARKETING
TALES OF THIS GENERATION. TESCOS HAVE GAINED THE REPUTATION AS SOPHISTICATED
LOYALTY SCHEME MARKETERS
IN 1995 TESCO INTRODUCED THEIR TESCO CLUB CARD
THE TESCO CLUB CARD HAS BECOME THE WORLDS MOST SUCCESSFUL RETAIL LOYALTY
SCHEME
TESCO CLUBCARD HOLDERS BENEFIT WHEN SHOPPING AT TESCO AS THEY RECEIVE 1 POINT
FOR EVERY 1 THEY SPEND, AND DOUBLE POINTS ON SPECIAL OFFERS
THESE POINTS ARE STORED AND BUILT UP AND 4 TIMES A YEAR THE HOLDER RECEIVES
VOUCHERS TO THE VALUE OF POINTS THEY HAVE SAVED
VOUCHERS CAN BE SPENT IN STORE ON SHOPPING OR USED ON CLUB CARD DEALS WHERE
THEY ARE WORTH 4 TIMES THE VALUE
TESCO
THEY ARE ALSO ENTITLED TO FREE ACCESS TO THE CLUBCARD CLUBS WHICH INCLUDE: WINE,
BABY AND TODDLER, HEALTHY FOOD, FOOD AND CHRISTMAS CLUBS
THERE ARE OVER 150 LOYALTY SCHEMES WITHIN THE UK, WHICH EQUATES TO THE
CIRCULATION OF OVER 40 MILLION CARDS
FOR TESCO THE BENEFITS THEY GIVE TO THE CUSTOMERS ENSURES THAT THEY CAN MICROSEGMENT CUSTOMERS BY LIFESTYLE HABITS, INCLUDING INDIVIDUAL PERSONALITY TRAITS FROM
ANALYSIS OF THE CONTENTS OF EACH GROCERY CART
THEY CAN THEN TARGET THEM WITH NEWSLETTERS AND OTHER PERSONALIZED INFORMATION
ALONG WITH A VARIETY OF OTHER MARKETING PROGRAMMES
THERE ARE OVER FOUR MILLION VARIATIONS OF ITS QUARTERLY CUSTOMER MAILING TO
ENSURE THAT ITS DISCOUNTS AND OFFERS ARE TAILORED SPECIFICALLY FOR THE CUSTOMER
???
THE BIG QUESTION WILL BE WHETHER
CONSUMERS ARE WILLING TO SIMPLY HAND
OVER THEIR IDENTITY TO EVERY BUSINESS FOR
ADDED BENEFITS AND REWARDS AND IF SO,
WHAT THIS SAYS ABOUT THE REAL STANCE AS
CONSUMERS ABOUT PERSONAL PRIVACY?
VALUE TRIAD
Customer
Value
Proposition
Thank You!