-Relationship building as a

process (IDIC model)

-Ladder of Loyalty

Module 1: session 3, 22nd Nov Dr. Deepak Halan

What is Customer Loyalty?

"a consumer's firm and unchanging

friendship, support and belief in an
organization, or its products, brands
and services and a propensity to act in
support of those feelings"
 WHAT IS
THE DIFF BTWN
REPEAT PURCHASE
&
LOYALTY??
Repeat Buying Behaviour vs
Genuine Loyalty
 Repeat customers take the decision to come back to you and buy
again.  Loyal clients don’t even have to make that decision – it’s a
given.
 Loyal clients are your advocates
 Repeat customers will easily go elsewhere if they face an issue. 
Loyal customers will sit it out – because they know that you’re there
to sort it out for them, and it’s a genuine mistake (which you will have
owned up to).
 Loyal clients are willing to pay more because they appreciate what
you do.  They know you know their business pretty well, and are
willing to pay for the service you provide.

When consumers become committed to a brand and make repeat purchases over
time, they are brand Loyalty customers. Loyal customers will consistently
purchase products from their preferred brands, regardless of convenience or
price.
 The Loyalty Effect

 The Loyalty Effect by Frederick Reichheld (Harvard

Business School Press 1996). In this book, he opens
up several new ways to look at customer lifetime value

 If you have loyal customers, several things happen:

 Retention rates go up
 Referrals go up
 The customers are less price sensitive
 The costs of servicing them go down
 Returns and losses are lower
 Profits go up
 Zero Customer Defections
 Companies try to engage their customers through
different levels of bonding to ensure that they do not
defect

 The concern for reducing and eliminating customer

attrition emerged from studies that indicated the
following:

 Customers are profitable over a period of time.

 Across industries, profits can increase by 35 to 85 per cent by
increasing customer retention by only 5 per cent
 About 70 per cent of customers switch to competitive offerings due to
perceived indifference of the current provider
So which brands come to your mind
when you think of brands that have
fiercely loyal customers???
Sephora
The beauty marketplace is as huge
as it is competitive. So while other
brands vie for consumer attention,
Sephora packs it all under one roof
which works as their biggest USP

Lululemon
A brand with a purpose. And their loyal
consumers are well-aware of that. The
driver and promoter of healthy living
and mindfulness, has over 1400
ambassadors who speak for their brand
across the globe.
Do you recollect Pareto Principle???
 The Pareto Principle
 It is named after Italian economist Vilfredo
Pareto, who observed in 1896 that 20% of the
people in Italy owned 80% of the land. This
principle has since been observed to be true in
the areas of economics, marketing etc

 The Pareto Principle, or “80/20 Rule” as it is

frequently called today, is an incredible tool for
growing your business

 By identifying the characteristics of the top

20% of your customers (who represent 80% of
your sales), you can find more customers like
them and dramatically grow your sales and
 RM Ladder of Loyalty

The loyalty ladder

is a 
relationship marke
ting
 concept that sees
customers
gradually moving
up through
relationship
levels, 
 PARTNER: They are walking advertisements for your
brand. Recommend you often, without even being
asked. Are more powerful than any salesforce you
could ever employ
'Partner'
ADVOCATE: someone who actively recommends you to
others, who does your marketing for you
'Advocate' SUPPORTER: someone who likes your organization, feel
like they belong, don’t price shop, just send in the order. U
treat them exclusively, and they know they are your best
'Supporter' customers BUT they only support you passively

CLIENT: someone who has done business with you

on a repeat basis BUT perhaps may be negative, or at
'Client' best neutral, towards your organization. This group is
critical, and needs to be

'Purchaser' PURCHASER: someone who has done business

just once with your organization. FTUs

'Prospect'
PROSPECT: someone who you believe may be
persuaded to do business with you-need to ans
their queries
Relationship Building as a Process

 Companies interact with their customers and learn about

them

 This analysis enables identification of profitable customers

 To retain these customers, companies have to learn to tailor

their offerings to suit their requirements

 Based on cumulative learning from multiple interactions with

the customer, the company’s offerings start matching the
customer’s needs better
It is an iterative learning process
 IDIC Model

 Peppers and Rogers (1993) proposed the IDIC framework

 to explain the process of converting existing customers into loyal
customers. It represents four key steps in the relationship building
process

Identify

Differentiate

Interact

Customize
The value of sieve (differentiating
profitable customers from non-profitable
customers)
 Identify

 This step requires the company to locate and

contact a large number of its customers directly
and know as much detail about them as possible
(names, addresses, phone numbers, account
details, habits, preferences etc.)

 And recognize them when they come back in

person/online/ph etc. Conversation should pick up
from where last one was left

United Airlines have devised a customer recognition

program to identify their frequent travellers
 Differentiate

 Customers can be differentiated on the

basis of the value they represent and also
on their needs

 Refer to loyalty ladder

United Airlines have identified their

most valuable customers as the
frequent business travellers, 
 Interact
 The purpose is to learn more about
customers starting with more valuable
customers

 Can be done through formal surveys,

telephonic interactions or self-service
channels like the web, call centres, ATMs
etc.
United Airlines allow their target customers to express their
dissatisfactions via email, SMS, phone etc. This allows the airlines to
alter their future course of action in order to provide better customer
service. 
 Customize

 A critical step as it builds upon all learning about

the customers to offer real value to them

 When customization is done on the basis of what

the customer has indicated during his interactions,
it improves the ability to fit the product and service
to this customer’s exact needs

United Airlines frequent travellers get more personalized

benefits such as priority check-in and baggage handling.
This to some extent deters their loyal customers from
travelling with the rival airlines.
 FORD CASE STUDY

In this course there are 20 marks for case analysis and I will be awarding
these marks over the different case discussions.

I will call out any one student at random from each group for their views
and the marks awarded to this student will apply to all group members
Only Q1&2 of this Ford case will be discussed
Thank You