financed bysupported byimplemented in cooperation with products and services customer service joy

Financed by Supported by Implemented in cooperation with

Products and Services

Customer Service

JOY


To gain and improve customer loyalty and satisfaction, many companies have developed different strategies.

Question: What is customer loyalty ?Is this really profitable for us? For customer?

Customer LoyaltyCustomer Loyalty


Exercise ?

?

?

?(brainstorming)

Why Do You Want Loyal Customers?Why Do You Want Loyal Customers?


What does loyalty mean to businesses ?What does loyalty mean to businesses ?

Retention of Customers ?

Retention of Customers ?

Repeat Purchases ?

Repeat Purchases ?

Create Profitable Customers ?

Create Profitable Customers ?

Acquisition of Customers ?

Acquisition of Customers ?

More Information on Customers ?

More Information on Customers ?

Reward Loyal Customers ?

Reward Loyal Customers ?Just Another

Marketing Program ?

Just Another Marketing Program ?

Reality …….….could be all of the above !!!!


Meeting basic respect & courtesy needs; dissatisfaction if not met; indifference if met

Customer tells what is important; satisfaction vs. dissatisfaction if met

Customer hopes & asks but doesn’t expect; if met then delighted. Unlikely to cause dissatisfaction. Build customer loyalty

Benefits above & beyond expectations; identify and suggest innovations with new products


Some key points on developing loyaltySome key points on developing loyalty

• Since what was once unexpected/unstated becomes expected/stated, you must keep innovating

• Performance excellence occurs by design, not default

• All parts of the organization are part of creating customer loyalty

• Reliability: Keeping your promise, doing what you said you will do. Doing things right the first time.

• Assurance: Making the customer feel safe in their dealings with you, being thoroughly professional and ethical.

• Tangibles: How the product/service looks to the client, the appearance of personnel and equipment, etc.

• Empathy: The degree to which the organization and service personnel understand the individual client and their needs, the ability to adapt the service to each client, the willingness to 'go the extra' for the client.

• Responsiveness: The availability, accessibility and timeliness of the service. The ability to respond to enquiries and complaints in a timely fashion.


Four different reasons for loyalty should be promotedFour different reasons for loyalty should be promoted

psychological;economic;technical/functional;contractual.


Trading stamps Accumulate stamps every time you shop for groceries, petrol, etc Redeem them for “ free “ gifts

How did it all start – the Loyalty Program way How did it all start – the Loyalty Program way

• Airline Frequent Flyer Programs• Fly and earn points• Redeem points for free flights

Interesting though not surprisingly……..1. Initial objective was to collect data on customer purchase patterns

2. Simple proposition – Earn Points for future value hence loyalty

• Plethora of loyalty programs in different forms across industriesFrequent buyer, frequent flyer, frequent player, frequent dining, points-at-pumps


What’s the Good News ?What’s the Good News ?What’s the Good News ?What’s the Good News ?

Loyalty programs are 1. Key drivers for enhancing customer experience.

2. Active point of differentiation

3. Help pinpointing individual buying patterns and predicting future customer behavior.

• 90 % Americans are active participants in at least 1 program ---- 75% have at least 1 loyalty card. Are Loyalty cards effective in Eastern Europe? If no, how do we adjust and adapt?

• 82% customers think Loyalty program marketers are more in touch with their customers

• 66% of Loyalty program members do not mind sharing extra information about themselves

• Unconventional industries also bitten by loyalty bug Starbucks Card to store information of the Card members preferences.

Nike Smart card allows them to design their own shoes


What’s the Not-So-Good News ?What’s the Not-So-Good News ?What’s the Not-So-Good News ?What’s the Not-So-Good News ?

• Do customers perceive reward programs making a difference ? Some difference

A lot of difference

Little difference

Don’t Know

Dont make any difference at all

Dont make much difference

12%

23%

13%

24%

16%

11%

Do Loyalty Programs work -- Not as well as they are intended to

• 48% customers did not have any serious intention of repurchasing the brand

• 55% customers accumulate points because they anyway come along with their purchases


• Launched in in 2003,

• Teemed up with American Airlines,Hilton Hotels & eight other companies to offer called eBay Anything Points:

• Points can be earned from one business & swap them for points at eBay.

• e Bay has more than 135 million registered members across the globe

• Program has 44 mln items listed for sale with 4 mln added daily.

Some successful US programs – e-BaySome successful US programs – e-Bay

• Success of e Bay Anything points is attributed to

• Linking online purchases with Travel & Airlines purchase.

• Enabling customers to redeem high ticket size points against lower value purchases

• Choice of redemption options.


• Coalition & database-driven loyalty program --- launched in Sept 2002.• UK's largest Customer Reward Program -- > 50% of all UK households participating in the

program. • Launched with 4 partners, today it has 17 & Over 6,000 retail locations • Nectar customers can earn points on 40% of their household expenditure.• It has given back over 450m pounds worth of rewards since launch.• Sainsbury's, Barclaycard, BP and Debenhams, Thresher Group, Vodafone, Adams, Ford, e-Energy,

all:Sports, Winemark, Hertz, Magnet, Brewsters, Brewers Fayre, ebookers UK, and Beefeater.

Some successful UK programs – NectarSome successful UK programs – Nectar

• Success of Nectar is attributed to

• Availability & Wider choice for redeeming points across relevant segments.

• Enabling customers to earn rewards more quickly

• At higher value than if they collected points from only one company.


Some insights --- Customer & Company perspectiveSome insights --- Customer & Company perspective

• Treat profitable and unprofitable customers differently

• Get your metrics in place ---- measure costs & returns

• offer right mix of Product, Price, Service Delivery & Relationship benefits

• deliver tangible value in proportion to the value the customer brings to the company

Customers new perspective of Rewards ( Loyalty )

1. Cash value

2. Redemption options

3. Aspirational value

4. Relevance

5. Convenience

Loyalty initiatives are not short term marketing tools. They should

• Communication to be transparent, timely and focussed

---- Immediate gratification---- More Choice

---- Feel Good factor

---- Does it make sense

---- Ease of availing reward

• Consistent across all customer touch points

Loyalty initiatives must also be profitable


What does loyalty mean to the customer today ?What does loyalty mean to the customer today ?

Primary drivers

• Physical product• Service product• Service delivery• Service environment

• Ethics• Image• Reputation• Positioning

• Loyalty Programs• Co Brands• Alliances• Special treatment• Affinity• Customer community

Price Product / service*

Brand** Relationship

• Purchase price• Effort• Time

Customer cost of using your product

Customer Perceived value

Complete Customer “ Relationship” Experience

Customers want an end-to-end relationship experience


Customer Relationship experience – Banking illustrationCustomer Relationship experience – Banking illustrationCustomer Value Perception

Organization’s translation of Value

• Fee Income

• Simplified product offering

• Bottom line

• Life Time Free

• Transparency in charges

• Value for money

• One stop Shop for all financial needs

• Network availability

• Best in class

• % returns /cancellations

• # service calls/repairs

• # customer inquiries• # billing queries

• Ease of availability

• Relevant Features

• Wide service range

• Easy accessibility

• Speedy service

• Customer empathy

• Resolution of query

the first time

• Strengthening

Brand image

• Advertising

costs

• Aspirational value

• Flash Value

• Inspires confidence

• Customer touch time

• No. of product training hours

• Understanding needs

• Processes & Service Knowledge

• Preferential offers

PriceProduct / Quality

Customer Service

Brand Relationship


Can your Products & Delivery systems provide …..1. End to end solutions / Address future needs2. Competitive & flexible pricing plans 3. Ease of access / acquisition --- Options to use most appropriate services / channels

Ask yourselves…..are you truly Customer Centric? Ask yourselves…..are you truly Customer Centric?

• Are your business processes geared up for …..

1. Settling customer issues, with 1 phone call or web-site visit?

2. Responding immediately & appropriately to "moments of truth" when customers' business is on the line?

• Do you measure your customers ……1. Lifetime Value & Cost to the business

2. Preferences, Dislikes, Usage Patterns

3. Satisfaction levels

• Do you monitor your Loyalty programs to see …….1. Address the right customers

2. If they are profitable?


1st : Have a clear articulated Customer Loyalty StrategyEnterprise approach to Loyalty Enterprise approach to Loyalty

• Covers the entire customer experience during his lifecycle

• Covers all customer touch points

• Addresses his existing / potential relationship with the company

2nd : Must be in sync with Business Objectives

• Customer / Segment profitability

• Customer Contact strategy

3rd : Business Process to be customer centric

4th : Design Customer centric & Profitable Loyalty programs

• Risk, Underwriting, Operational processes

• Acquisition, Customer service, Marketing


Lifecycle Experience ---- Define value proposition to customer segmentsDynamic ---- Ability to react to changing customer needs and behaviors

How do you do it …….How do you do it …….

Business Objectives

Process Changes

Loyalty Programs

• Seamless --- across all Channels, Business Functions and touch points

• Flexible ---- Ability to accommodate changes without compromise

• Value & Choice ---- Value based on Customer Profitability & offering relevant choice ( Bought-out or Co- Branded )

• Personalised ---- to the customer’s unique profile based on Analytics

• Branded ---- Bought-out or Co-branded to address emotional needs

• Targets ---- Program objectives clearly communicated

• Metrics ---- Measurement capability in line with objectives


Addresses the new customer need of Offering wider choice of involvement platforms

Accrual / Redemption of Rewards across several relevant involvement categories

Faster value accumulation compared to stand-alone programs

Branding association to address aspirational & emotional needs

Role of Partnering & Co Branded ProgramsRole of Partnering & Co Branded Programs

Addresses the companies need to • Lower costs of loyalty through sharing

• Access partner customer touch points

• Access additional customer databases

• Improve Brand image


Success in Co-Brand partnership is higher, if

Core value of the two partnering brands are related.

Partner Co brand objectives are in congruence

Each activity has consequent benefit to both partners

Availability of Partners

Partnering or Co branding --- which option to choose ?Partnering or Co branding --- which option to choose ?Partnering or Co branding --- which option to choose ?Partnering or Co branding --- which option to choose ?

Bought out approach works when

• No feasible Co Brand partners are available

• Feature / Service is commoditised

• Cost of feature low

• Partner not interested in Co branding


Co-Branding in Credit Cards – Is it Profitable?Co-Branding in Credit Cards – Is it Profitable?

Same64%

Less9%

4%

Purchase more23%

Purchase amount from Co-Brand Partner

Same64%

Dont know

Purchase

23%

Frequency of using CoBranded-Partner

Same59%

More often31%

Dont know2%

Less often8%

• Yes …… by a factor of 1.2 – 1.5 times

• Yes …… If you can get customers to aggregate all their usage on the co branded program

• Yes …… If you can the relationship needs of the customer and show value


To summariseTo summariseTo summariseTo summarise

• Loyalty is not about short term rewards…….it is about end-to-end customer experience with your products / services

• Loyalty is’nt created by a program……it can at best strengthen it.

• Companies need to have a enterprise wide loyalty strategy backed by customer centric processes to deliver value

• Co branded programs work --- Ensure you get the value proposition right

Loyalty has to be earned…..its hard work….but at the end you have a profitable customer


Activity-based costing (ABC) is a technique that allocates the cost of performing various services to each customer (customer-specific costing).

Through Customer Relations Management (CRM) programs, one can relate revenues and costs to each and every activity.

Measuring Customer ProfitabilityMeasuring Customer Profitability


Employing an activity-based costing (ABC) process, one can accurately assess the cost and profitability of each customer.

By linking financial information with transactional data created in CRM programs, companies are able to accurately calculate “cost-to-service” components to yield customer profitability.

Activity-Based CostingActivity-Based Costing


Figure 3.3 The Whale Curve of Cumulative Profitability


20/80 Rule says “20% of customer provide 80% of salesWhale Curve reveals:

20% of customers generate 150–300% of total profits70% of customers break even10% of customers lose from 50-200% of total profitsLeaving company with 100% of total profits

Whale Curve & ProfitabilityWhale Curve & Profitability

High-Cost-to-Serve Customers

Order custom products

Order small quantities

Unpredictable order arrivals

Customized delivery

Frequent changes in delivery requirements

Manual processing

Large amounts of presales support(i.e., marketing, technical, and sales resources)

Large amounts of post-sales support(i.e., installation, training, warranty, field service)

Require company to hold inventory

Pay slowly (i.e., high accounts receivable)

Low-Cost-to-Serve Customers

Order standard products

Order large quantities

Predictable order arrivals

Standard delivery

No changes in delivery requirements

Electronic processing (EDI)(i.e., zero defects)

Little to no presales support(i.e., standard pricing and ordering)

No post-sales support

Replenish as produced

Pay on time

Source: Robert S. Kaplan and V.G. Narayanan, “p. 8. Measuring and Managing Customer Profitability,” Journal of Cost Management 15, No. 5 (September/October 2001):

High- vs. Low-Cost-to-Serve CustomersHigh- vs. Low-Cost-to-Serve Customers


As mentioned previously, some customers are profitable and some aren’t. To determine this, we look at the cost/profitability structure with the plan to:

1. Keep profitable customers2. Convert unprofitable ones to profitability3. Fire those who are not profitable

Customer ProfitablyCustomer Profitably


Managing loyalty and profitability

Source: Hadson & Hadson . Customer service for Hospitality & Tourism . Chapter 7. Building and Maintaining Customer Relashionship. (Adapted from Kumar and Rajan, 2009, p. 5)


Low margin / high cost customers offer the most challenge for marketing mangers.

•Start with ways to reduce costs•Next, work with customers to possibly change their actions resulting in lowering costs or increasing profitability

Managing Unprofitable CustomersManaging Unprofitable Customers


We must try everything to make a customer profitable before firing them.

If after trying, and the customer continues to be reluctant to change, and the relationship remains unprofitable, we can say outright, “YOU’RE FIRED!” but…

There are better approaches. We can let customers ‘fire themselves’ by raising our prices, reducing or charging more for services, eliminating discounts, etc., until they become profitable or find another distributor.

Firing the CustomerFiring the Customer


http://www.marketingdonut.co.uk/marketing/customer-care/customer-loyalty-schemes http://www.loyaltylab.com/what-we-do.html http://www.powershow.com/view/50-NmRkO/Building_Customer_Loyalty http://www.slideshare.net/PowerPoint-Templates/customer-loyalty-powerpoint-presentation-

slides http://prloyaltymarketing.com/customer-loyalty/what-is-customer-loyalty/types-of-loyalty-

program-users/ http://www.marketingdonut.co.uk/marketing/customer-care/customer-loyalty-schemes http://www.retentionloyalty.com/ Fostering Loyal Customer Relationships. Duarte B. Morais, Ph.D.Assistant Prof. of Recreation, Park and Tourism [email protected] Customers for Profits (Not Just Sales)” B.P. Shapiro et al., September-October 1987, p. 104, Harvard Business Review.

Useful linksUseful links

B.P.Shapiro


Hold,

hold,

hold!!!!

Hold,

hold,

hold!!!!

financed bysupported byimplemented in cooperation with products and services customer service joy

Documents

customer loyalty slide

customer loyalty reliability

customer loyalty benefits

developing loyalty

customer hopes

customer purchase patterns

profitable customers

retention of customers