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Customer Service Products and Services JOY Financed by Supported by Implemented in cooperation with Customer Loyalty 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? Financed by Supported by Implemented in cooperation with Why Do You Want Loyal Customers? Exercise ? ? ? ? (brainstorming) Financed by Supported by Implemented in cooperation with What does loyalty mean to businesses ? Repeat Purchases ? Retention of Customers ? Create Profitable Customers ? Acquisition of Customers ? More Information on Customers ? Just Another Marketing Program ? Reward Loyal Customers ? Reality …….….could be all of the above !!!! Financed by Supported by Implemented in cooperation with Customer hopes & asks but doesn’t expect; if met then delighted. Unlikely to cause dissatisfaction. Build customer loyalty Customer tells what is important; satisfaction vs. dissatisfaction if met Benefits above & beyond expectations; identify and suggest innovations with new products Meeting basic respect & courtesy needs; dissatisfaction if not met; indifference if met Financed by Supported by Implemented in cooperation with Some 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. Financed by Supported by Implemented in cooperation with Financed by Supported by Implemented in cooperation with Four different reasons for loyalty should be promoted psychological; economic; technical/functional; contractual. Financed by Supported by Implemented in cooperation with How did it all start – the Loyalty Program way Trading stamps Accumulate stamps every time you shop for groceries, petrol, etc Redeem them for “ free “ gifts • Airline Frequent Flyer Programs • Fly and earn points • Redeem points for free flights • Plethora of loyalty programs in different forms across industries Frequent buyer, frequent flyer, frequent player, frequent dining, points-at-pumps Interesting though not surprisingly…….. Financed by 1. Initial objective was to collect data on customer purchase patterns 2. Simple proposition – Earn Points for future value hence loyalty Supported by Implemented in cooperation with What’s the Good News ? • 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 Loyalty programs are 1. 2. 3. Financed by Key drivers for enhancing customer experience. Active point of differentiation Help pinpointing individual buying patterns and predicting future customer behavior. Supported by Implemented in cooperation with What’s the Not-So-Good News ? • Do customers perceive reward programs making a difference ? A lot of difference Some difference Little difference Dont make much difference Dont make any difference at all Don’t Know 12% 23% 13% 24% 16% 11% • 48% customers did not have any serious intention of repurchasing the brand • 55% customers accumulate points because they anyway come along with their purchases Do Loyalty Programs work -- Not as well as they are intended to Financed by Supported by Implemented in cooperation with Some successful US programs – e-Bay • 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. • 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. Financed by Supported by Implemented in cooperation with Some successful UK programs – Nectar • • • • • • • 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. Success of Nectar is attributed to Financed by • 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. Supported by Implemented in cooperation with Some insights --- Customer & Company perspective Customers new perspective of Rewards ( Loyalty ) 1. Cash value 2. Redemption options ---- Immediate gratification ---- More Choice ---- Feel Good factor 3. Aspirational value 4. Relevance 5. Convenience ---- Does it make sense ---- Ease of availing reward Loyalty initiatives are not short term marketing tools. They should • deliver tangible value in proportion to the value the customer brings to the company • offer right mix of Product, Price, Service Delivery & Relationship benefits • Communication to be transparent, timely and focussed • Consistent across all customer touch points Loyalty initiatives must also be profitable • Treat profitable and unprofitable customers differently • Get your metrics in place ---- measure costs & returns Financed by Supported by Implemented in cooperation with What does loyalty mean to Complete Customer “ Relationship” Experience the customer today ? Customer cost of using your product Primary drivers Price • Purchase price • Effort • Time Product / service* Brand** • Physical product • Service product • Service delivery • Service environment • Ethics • Image • Reputation • Positioning Relationship • Loyalty Programs • Co Brands • Alliances • Special treatment • Affinity • Customer community Customers want an end-to-end relationship experience Financed by Supported by Implemented in cooperation with Customer Value Perception • Life Time Free • Transparency in charges • Value for money Customer Relationship experience – Banking illustration • Ease of availability • Easy accessibility • Speedy service • Relevant Features • Customer empathy • Resolution of query • Wide service range • Aspirational value • Flash Value • Inspires confidence • Understanding needs • Processes & Service Knowledge the first time • Preferential offers Price • Fee Income • Simplified product offering • Bottom line Product / Quality • One stop Shop for all financial needs • Network availability • Best in class Customer Service • % returns /cancellations • # service calls/repairs • # customer inquiries • # billing queries Brand Relationship • Strengthening Brand image • Customer touch time • Advertising costs • No. of product training hours Organization’s translation of Value Financed by Supported by Implemented in cooperation with Ask yourselves…..are you truly Customer Centric? • Do you measure your customers …… 1. Lifetime Value & Cost to the business 2. Preferences, Dislikes, Usage Patterns 3. Satisfaction levels Can your Products & Delivery systems provide ….. 1. 2. 3. • End to end solutions / Address future needs Competitive & flexible pricing plans Ease of access / acquisition --- Options to use most appropriate services / channels 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 monitor your Loyalty programs to see ……. 1. 2. Financed by Address the right customers If they are profitable? Supported by Implemented in cooperation with Enterprise approach to Loyalty 1st : Have a clear articulated Customer Loyalty Strategy • 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 • Risk, Underwriting, Operational processes • Acquisition, Customer service, Marketing 4th : Design Customer centric & Profitable Loyalty programs Financed by Supported by Implemented in cooperation with How do you do it ……. Lifecycle Experience ---- Define value proposition to customer segments Dynamic ---- Ability to react to changing customer needs and behaviors • Targets ---- Program objectives clearly communicated Business Objectives • Metrics ---- Measurement capability in line with objectives Process Changes • Seamless --- across all Channels, Business Functions and touch points • Flexible ---- Ability to accommodate changes without compromise Loyalty Programs • 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 Financed by Supported by Implemented in cooperation with Role of Partnering & Co Branded Programs 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 Addresses the companies need to • Lower costs of loyalty through sharing • Access partner customer touch points • Access additional customer databases • Improve Brand image Financed by Supported by Implemented in cooperation with Partnering or Co branding --- which option to choose ? 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 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 Financed by Supported by Implemented in cooperation with Co-Branding in Credit Cards – Is it Profitable? Purchase amount from Co-Brand Partner Less Dont know 9% 4% Frequency of using CoBranded-Partner Less often 8% Dont know 2% Purchase more 23% More often 31% Same 64% Same 59% • 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 Financed by Supported by Implemented in cooperation with To summarise • Loyalty is’nt created by a program……it can at best strengthen it. • Loyalty is not about short term rewards…….it is about end-to-end customer experience with your products / services • 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 Financed by Supported by Implemented in cooperation with Measuring Customer Profitability 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. Financed by Supported by Implemented in cooperation with Activity-Based Costing 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. Financed by Supported by Implemented in cooperation with Figure 3.3 The Whale Curve of Cumulative Profitability Financed by Supported by Implemented in cooperation with Whale Curve & Profitability 20/80 Rule says “20% of customer provide 80% of sales Whale Curve reveals: 20% of customers generate 150–300% of total profits 70% of customers break even 10% of customers lose from 50-200% of total profits Leaving company with 100% of total profits Financed by Supported by Implemented in cooperation with High- vs. Low-Cost-to-Serve Customers High-Cost-to-Serve Customers Low-Cost-to-Serve Customers Order custom products Order standard products Order small quantities Order large quantities Unpredictable order arrivals Predictable order arrivals Customized delivery Standard delivery Frequent changes in delivery requirements No changes in delivery requirements Manual processing Electronic processing (EDI) (i.e., zero defects) Large amounts of presales support (i.e., marketing, technical, and sales resources) Little to no presales support (i.e., standard pricing and ordering) Large amounts of post-sales support (i.e., installation, training, warranty, field service) No post-sales support Require company to hold inventory Replenish as produced Pay slowly (i.e., high accounts receivable) 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): Customer Profitably 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. 2. 3. Financed by Keep profitable customers Convert unprofitable ones to profitability Fire those who are not profitable Supported by Implemented in cooperation with 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) Financed by Supported by Implemented in cooperation with Managing Unprofitable Customers 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 Financed by Supported by Implemented in cooperation with Firing the Customer 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. Financed by Supported by Implemented in cooperation with Useful links 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-presentationslides http://prloyaltymarketing.com/customer-loyalty/what-is-customer-loyalty/types-of-loyaltyprogram-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] Manage Customers for Profits (Not Just Sales)” B.P. Shapiro et al., September-October 1987, p. 104, Harvard Business Review. B.P.Shapiro Financed by Supported by Implemented in cooperation with hold!!!! hold, Hold, Financed by Supported by Implemented in cooperation with