CRC: retaining customers

Dr D Sriram
 recap

Purpose of I.D.I.C. framework

What are the customer segmentation techniques used?
 FMCG Products
 Situations when no. of transactions are very high
 Variance of expenditure is high
 High value products necessitating ‘Post Sale’ interactions

Sriram D 2
 Customer relationship cycle

Acquire Develop Retain

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 Session objectives

By the end of the session, students are expected to:

 Learn the importance of loyalty programs

 Understand the process of developing customer loyalty programs (B2C & B2B)

 Appreciate the nuances in designing loyalty programs

 Synthesize learning through case analysis

Sriram D 4
 Customer Loyalty

How do you track customer loyalty?

Why loyalty programs?
Design loyalty programs:
 Lifestyle
 Vodafone
 Lenovo (Enterprise customers)

Sriram D 5
 Developing an effective Loyalty Program

Types of Loyalty Programs

 Type – I – Discounts
 Type – II – ‘One’ free item
 Type – III – Accumulate and Redeem
 Type – IV – Targeted offerings
Loyalty Program Effectiveness is a concern
Potential Benefits of effective Loyalty Program
 Lower price sensitivity & strong brand attitude
 Access to customer information
 Higher average sales (up-selling & cross-selling)
 Better response to product recalls

Sriram D 6
 Develop, Implement & Control Loyalty Program

Develop Selecting
Objectives Eligibility
Budgets Rewards
1. Revenues, Profits, Retention
2. Fixed costs, recurring costs
3. Open vs Closed programs, Free vs Paid
4. Tiers, Points to Money, Ease of
Data
Maintain Build accumulation & redemption
warehousing & Partnerships
Database Organization
mining 5. Joint programs, Independent
programs, Partnership Fit

Evaluate Course Correct 6. Effective & appropriate organization

7. Database design issues
8. Data mining capability
9. Metrics (B/E, Acq. Cost, Ret. Cost,
Churn rate etc.)
10. Course correct (in line with customer
Sriram D needs and expectations) 7
 Loyalty: Hyundai Motors India Ltd

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 Potential Pitfalls of Loyalty Programs

Market Saturation
Low levels of customer commitment
Using wrong type of programs
Focusing only on monetary rewards
Using loyalty to cover-up ineffective marketing
Program Privacy

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 Loyalty vs Profitability (Reinartz & Kumar)

Butterflies True Friends

 Good Fit
 Good Fit
 High Profit Potential
H Actions
 Highest Profit Potential
Actions
 Aim for transactional
 Communicate consistently
satisfaction
 Build Att. & Beh. Loyalty
 Milk the accounts
Profitability

 Delight these customers

 Cease investing

Strangers Barnacles
 Limited Fit
 Little Fit
 Low Profit Potential
 Least Profit Potential
Actions
L Actions
 Measure size & share of
 No investment required
wallet
 Make profit on every txn
 Act accordingly

L Loyalty H
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 Loyalty in B2C Context

Loyalty program – Scheme that offers delayed or immediate

incremental rewards to customers for their cumulative patronage
(RFM based)
Customer club – Company-run membership organisation that offers
a range of value-adding benefits exclusively to members
Sales promotions
 In pack or on-pack voucher
 Rebate or cash-back
 Patronage awards
 Free premium for continuous purchase
 Collection schemes

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 Loyalty in B2B Context

B2B vs B2C Selling Process

Feature vs Benefit Selling
Typology of Benefits
 Tangible financial
 Nontangible financial
 Tangible nonfinancial
 Nontangible nonfinancial

Link benefits to decision makers

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 Benefit Stack

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 Loyalty Ladder

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 Customer Typologies & Loyalty

Most Valuable
Partners
Customers
Loyalty

Commodity Under
Buyers Performers

L Cost to Serve H

Create Customer Portfolio & move Commodity Buyers & Under

Sriram D Performers up the Loyalty Ladder 15