Fostering Loyal Customer Relationships

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Fostering Loyal Customer Relationships

• Duarte B. Morais, Ph.D.
• Assistant Prof. of Recreation, Park and Tourism
  Mgt.
• dmorais_at_psu.edu

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Presentation Outline
1.
Introductions Why talk about loyalty What is a
loyal customer How to foster loyal relationships
2.
3.
4.
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Introductions
1.
www.quintadamata.net
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Why talk about Loyalty
2.

• Mature Industry
• increasing competition
• Focus on getting more customers
• Market share Vs. share of customer
• Competitive advantage
• Price
• Service quality
• Loyal relationships

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The bottom line
2.

• Reduction of 5 of defective customers may result
  in 80 increase in profitability (Reichheld
  Sasser, 1990)
• 60 to 80 of lost customers were satisfied
  (King, 1996)
• 90 of customers who love a company will repeat
  but only 30 of customers who like the company
  will repeat (Opinion Research Corp.)
• 20-40 of your customers bring 80 of your profits

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What to expect from loyal customers
2.

• Behaviors
• Come back frequently
• Buy most expensive products
• Recommend provider to friends
• Give important suggestions
• Emotions
• Are attached to the provider/staff
• Trust the provider
• Resist changing despite competitors persuasion
• Willing to forgive mistakes

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What is a Loyal Customer
3.

• Definition customers with a long record of
  purchases from a preferred provider caused by
  their psychological and emotional bond with that
  provider
• Are there various types of loyalty?

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Types of Loyal Customers
3.
-
Frequency of Purchases


High loyals
Latent loyals
Attachment
Spurious loyals
Low loyals
-
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Differentiated Strategy to Loyalty Segments
3.

• Not all customers were created equal
• High loyals most profitable, make them feel
  like family (20 of your customers)
• Latent loyals find out why they cant come more
  often, find other ways they can help, dont
  discount
• Spurious loyals come but dont care, make them
  connect with you, make them wish for special
  treatment
• Low loyals dont get distracted with them, but
  make sure they are satisfied (approx. 40-60 of
  your customers)

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How to foster loyal relationships
4.

• Current loyalty programs
• Ineffective in creating a bond
• Most are simply frequency programs
• Make people shop around and look for deals
• Make customers price sensitive
• Erode profits
• We can identify loyal customers but we dont know
  how to generate customer loyalty

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The Love Triangle
4.
Social Network
B.C.
R.I.M.
Customer
Provider
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R.I.M.Resource Investment Model
4. RIM
Retribution to the provider
Protect customers equity
Providers investment of special resources
Customers investment of special resources
Customers loyalty to provider
Loyal relationships facilitate special treatment
Morais, Dorsch, Backman (2004)
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4. RIM
Love
Status
Services
Types of Resources
Information
Goods
Money
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Types of Investments
4. RIM

• Give to your valuable customers
• Make sure that your special customers receive
  special treatment
• Send cards for birthdays rather than just for the
  holidays
• Make them feel unique (use name, compliment them
  for helping)
• Educate them about front and back stage
• Receive from customers
• Give them opportunities to get to know you (your
  staff)
• Help them become advocates of your company
  (merchandize, web)
• Seek their opinion
• Allow them to commit to you with a long term
  program

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B.C.Brand Communities
4. BC

• Definition 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

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Building a Community
4. BC

• Community
• Use a newsletter to share news about customers
• Develop an online forum for customers to stay in
  touch
• Organize annual events by invitation for VIP
  customers
• Facilitate picture / story sharing
• Help customers help each other
• Give a name to the community

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Action Outline
4.

• 1. Select your market segment
• Identify most valuable customers (what criteria?)
• Identify customers who might become valuable

• 2. Design a relationship-building service
  culture
• Identify what type of treatment promotes customer
  loyalty
• Identify what loyal customers want to give to you
• Identify potential for the development of a brand
  community

• 3. Implement a loyalty treatment
• Design specific communication strategy and
  message
• Train staff to understand the importance and the
  process
• Create opportunities to invest and receive
  investments
• Generate a sense of community among your customers

• 4. Measure effects of program and redesign
• Maintain constant communication with your loyal
  customers
• Monitor costs and results of your program

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The Love Triangle
Social Network
Customer
Provider