2. 2Customer Loyalty and Retention Strategies 吳明泉博士 2009
OutlineOutline
Definition of Customer LoyaltyDefinition of Customer Loyalty
What Affects Customer LoyaltyWhat Affects Customer Loyalty
Relationship programsRelationship programs
Customer life cycleCustomer life cycle
Reasons for Lost CustomersReasons for Lost Customers
Customer Retention StrategiesCustomer Retention Strategies
Problem Identification and ManagementProblem Identification and Management
Conflicts and customer complaintsConflicts and customer complaints
3. 3Customer Loyalty and Retention Strategies 吳明泉博士 2009
Customer loyaltyCustomer loyalty
Customer’s commitment or attachment to aCustomer’s commitment or attachment to a
brand, store, manufacturer, servicebrand, store, manufacturer, service
provider, or other entity.provider, or other entity.
AA behaviorbehavior toward the producttoward the product
AnAn attitudeattitude to behaveto behave
5. 5Customer Loyalty and Retention Strategies 吳明泉博士 2009
Churn rate or Attrition RateChurn rate or Attrition Rate
The rate at which new customers try aThe rate at which new customers try a
product or service and then stop using it in aproduct or service and then stop using it in a
given period of time.given period of time.
Retention rate = 1 – the attrition rate..Retention rate = 1 – the attrition rate..
6. 6Customer Loyalty and Retention Strategies 吳明泉博士 2009
Problems with behavioral approachProblems with behavioral approach
A customer may be making a repeatA customer may be making a repeat
purchase not because of any true loyalty orpurchase not because of any true loyalty or
commitment,commitment,
But because of convenience, price,But because of convenience, price,
availability, oravailability, or inertiainertia due to habit.due to habit.
Inertia suggests a low sensitivity to theInertia suggests a low sensitivity to the
brand since purchases are made without abrand since purchases are made without a
real motive for the choice.real motive for the choice.
7. 7Customer Loyalty and Retention Strategies 吳明泉博士 2009
Attitudinal brand loyaltyAttitudinal brand loyalty
Include favorable attitude that reflects aInclude favorable attitude that reflects a
preference or commitmentpreference or commitment expressed overexpressed over
time. Emotional attachment, evaluationtime. Emotional attachment, evaluation
No loyaltyNo loyalty
Inertial loyalty or spurious loyaltyInertial loyalty or spurious loyalty
Latent loyaltyLatent loyalty
8. 8Customer Loyalty and Retention Strategies 吳明泉博士 2009
Relationship commitmentRelationship commitment
An enduring desire to maintain a valuedAn enduring desire to maintain a valued
relationshiprelationship
Loyal customers, high in repeat purchaseLoyal customers, high in repeat purchase
behavior and strong in attitudebehavior and strong in attitude
9. 9Customer Loyalty and Retention Strategies 吳明泉博士 2009
Transaction vs. relational continuumTransaction vs. relational continuum
TransactionTransaction RelationalRelational
ObjectiveObjective Make a saleMake a sale Create a customerCreate a customer
CharacteristicCharacteristic AnonymityAnonymity interdependenceinterdependence
Criteria of successCriteria of success Volume price, newVolume price, new
customercustomer
ValueValue
enhancements,enhancements,
repeat exchangerepeat exchange
Interaction toneInteraction tone Sale as aSale as a
conquest, discreteconquest, discrete
eventevent
Sale as anSale as an
agreement,agreement,
continuing processcontinuing process
10. 10Customer Loyalty and Retention Strategies 吳明泉博士 2009
What affects customer loyaltyWhat affects customer loyalty
12. 12Customer Loyalty and Retention Strategies 吳明泉博士 2009
A post-purchase or post-choice evaluationA post-purchase or post-choice evaluation
that results from athat results from a comparison betweencomparison between
those pre-purchase expectation and actualthose pre-purchase expectation and actual
performanceperformance
Satisfied customers may not be loyalSatisfied customers may not be loyal
customers.customers.
Xerox’s finding: satisfaction rating 4 is sixXerox’s finding: satisfaction rating 4 is six
times more likely to switch to others thantimes more likely to switch to others than
rating 5.rating 5.
Customer satisfactionCustomer satisfaction
13. 13Customer Loyalty and Retention Strategies 吳明泉博士 2009
Emotional BondingEmotional Bonding
Brand affect, brand equityBrand affect, brand equity
Company attachmentCompany attachment
Establish feelings of closeness, affection,Establish feelings of closeness, affection,
trust, and respect.trust, and respect.
IT may limit emotional bonds. PersonalIT may limit emotional bonds. Personal
contacts, non-verbal signals, friendships,contacts, non-verbal signals, friendships,
and personal interactions are criticaland personal interactions are critical
elements.elements.
14. 14Customer Loyalty and Retention Strategies 吳明泉博士 2009
TrustTrust
Willingness of customer to rely on theWillingness of customer to rely on the
organization.organization.
Reduces uncertainty/riskReduces uncertainty/risk
Honest, fair, and responsibleHonest, fair, and responsible
15. 15Customer Loyalty and Retention Strategies 吳明泉博士 2009
Choice reduction and habitChoice reduction and habit
People have tendency to reduce choice.People have tendency to reduce choice.
There can be a switch cost associated withThere can be a switch cost associated with
change to the unfamiliar, untried, or thechange to the unfamiliar, untried, or the
new. There may be cost in time, money,new. There may be cost in time, money,
and riskand risk
16. 16Customer Loyalty and Retention Strategies 吳明泉博士 2009
History with the companyHistory with the company
Corporate ImageCorporate Image
Contacts and purchase historyContacts and purchase history
Service experienceService experience
Intergeneration influenceIntergeneration influence
17. 17Customer Loyalty and Retention Strategies 吳明泉博士 2009
Multi-faced loyaltyMulti-faced loyalty
Customer loyalty to:Customer loyalty to:
Brand: promotionBrand: promotion
Product: productionProduct: production
Company: public relationsCompany: public relations
Customers: meeting, chats, reunionCustomers: meeting, chats, reunion
Price: discounts, couponsPrice: discounts, coupons
Places: sounds, excitementPlaces: sounds, excitement
Variety: new options, variations,Variety: new options, variations,
18. 18Customer Loyalty and Retention Strategies 吳明泉博士 2009
Guidelines for enhancing loyaltyGuidelines for enhancing loyalty
20. 20Customer Loyalty and Retention Strategies 吳明泉博士 2009
Financial IncentivesFinancial Incentives
Increased customer loyalty to price,Increased customer loyalty to price,
incentivesincentives
– Frequent flyer/reader/buyer/visitors… Rewards.Frequent flyer/reader/buyer/visitors… Rewards.
– Discounts, product upgrades, awards, prizesDiscounts, product upgrades, awards, prizes
– Related products or providers expand the netRelated products or providers expand the net
Relationships concentrate exclusive onRelationships concentrate exclusive on
incentives tend to be weak. Averageincentives tend to be weak. Average
American Consumer: 3.5 programsAmerican Consumer: 3.5 programs
21. 21Customer Loyalty and Retention Strategies 吳明泉博士 2009
Social BondingSocial Bonding
Refers to a friendly companionship, trust,Refers to a friendly companionship, trust,
and ties. Increased customer loyalty to theand ties. Increased customer loyalty to the
organizationorganization
– ConnectionsConnections
– Personal insight, recognition, mutual affectionPersonal insight, recognition, mutual affection
– Interpersonal interactions expand the linkInterpersonal interactions expand the link
22. 22Customer Loyalty and Retention Strategies 吳明泉博士 2009
Structural-interactionStructural-interaction
Use system design to solve problems,Use system design to solve problems,
reinforce purchases, and recognize thereinforce purchases, and recognize the
importance of each customer.importance of each customer.
– Systemic mass personalization….Systemic mass personalization….
– ManagementManagement
– Cultivation, simulationCultivation, simulation
– Artificial intelligence continues the connectionsArtificial intelligence continues the connections
Increased customer loyalty to theIncreased customer loyalty to the
experience.experience.
23. 23Customer Loyalty and Retention Strategies 吳明泉博士 2009
Customer life cycleCustomer life cycle
24. 24Customer Loyalty and Retention Strategies 吳明泉博士 2009
Reasons for Lost CustomersReasons for Lost Customers
DissatisfactionDissatisfaction
Relative AdvantageRelative Advantage
ConflictConflict
Loss of TrustLoss of Trust
Cease to needCease to need
Novelty SeekingNovelty Seeking
26. 26Customer Loyalty and Retention Strategies 吳明泉博士 2009
A welcome strategyA welcome strategy
The organization’s appreciation for theThe organization’s appreciation for the
initiation of a relationship.initiation of a relationship.
• Creating a delightful surprise, making a goodCreating a delightful surprise, making a good
first impressionfirst impression
• First touch: additional customer informationFirst touch: additional customer information
• Reassure the buyers that they have made theReassure the buyers that they have made the
correct choices.correct choices.
• Treat like a first date. Don’t overdo it!Treat like a first date. Don’t overdo it!
27. 27Customer Loyalty and Retention Strategies 吳明泉博士 2009
ReliabilityReliability
The organization can repeat the exchangeThe organization can repeat the exchange
time and time again with the same satisfyingtime and time again with the same satisfying
results.results.
– Keep promiseKeep promise
– Ensure consistent qualityEnsure consistent quality
– Continuous promotion is still the key.Continuous promotion is still the key.
28. 28Customer Loyalty and Retention Strategies 吳明泉博士 2009
ResponsivenessResponsiveness
The organization shows customers it reallyThe organization shows customers it really
cares about their needs and feelings.cares about their needs and feelings.
Loyal employees create loyal customers.Loyal employees create loyal customers.
Internal marketing.Internal marketing.
Customer-contacted employees shouldCustomer-contacted employees should
have the authority as well as thehave the authority as well as the
responsibility for date to date operationalresponsibility for date to date operational
activities and CRM decision.activities and CRM decision.
29. 29Customer Loyalty and Retention Strategies 吳明泉博士 2009
RecognitionRecognition
Special attention or appreciation thatSpecial attention or appreciation that
identifies someone as having been knownidentifies someone as having been known
before.before.
People respond to recognition.People respond to recognition.
Recognition and appreciation helpRecognition and appreciation help
maintain and reinforce relationships.maintain and reinforce relationships.
30. 30Customer Loyalty and Retention Strategies 吳明泉博士 2009
PersonalizationPersonalization
Use CRM system to tailor promotions andUse CRM system to tailor promotions and
products to the specific customers.products to the specific customers.
Offer engine: take customer data after it isOffer engine: take customer data after it is
analyzed and applies it to create the offeranalyzed and applies it to create the offer
or message that is appropriate to theor message that is appropriate to the
individual customer. Ex., My site, Clickindividual customer. Ex., My site, Click
stream analysis, free ride, etc.stream analysis, free ride, etc.
31. 31Customer Loyalty and Retention Strategies 吳明泉博士 2009
Access strategyAccess strategy
Identify how customers will be able toIdentify how customers will be able to
interact with the organization.interact with the organization.
General contact, product return, technicalGeneral contact, product return, technical
report, service representative, change areport, service representative, change a
mailing addressmailing address
Is the access quick and easy?Is the access quick and easy?
32. 32Customer Loyalty and Retention Strategies 吳明泉博士 2009
A Communication processA Communication process
33. 33Customer Loyalty and Retention Strategies 吳明泉博士 2009
Organization vs. customer initiatedOrganization vs. customer initiated
communicationcommunication
InIn organization-initiated communicationorganization-initiated communication,,
organizations must consider the intendedorganizations must consider the intended
message, channel (medium), and receivermessage, channel (medium), and receiver
characteristics.characteristics.
InIn customer-initiated communicationcustomer-initiated communication,,
consider the establishment of toll free calls,consider the establishment of toll free calls,
web sites, priority access for providingweb sites, priority access for providing
services and collecting customer data.services and collecting customer data.
34. 34Customer Loyalty and Retention Strategies 吳明泉博士 2009
Customer-initiated communicationCustomer-initiated communication
35. 35Customer Loyalty and Retention Strategies 吳明泉博士 2009
Reward strategiesReward strategies
Frequent, best customersFrequent, best customers
Partnership Management ProgramPartnership Management Program
Switching costs: financial penalty, time loss,Switching costs: financial penalty, time loss,
psychological barrierpsychological barrier
Termination PenaltyTermination Penalty
36. 36Customer Loyalty and Retention Strategies 吳明泉博士 2009
Problem Identification and ManagementProblem Identification and Management
Rather tell the company than switch to aRather tell the company than switch to a
competitor or tell someone else. Actingcompetitor or tell someone else. Acting
rather than reacting.rather than reacting.
Build numerous mechanism for identifyingBuild numerous mechanism for identifying
customer problems.customer problems.
– Customer satisfaction surveyCustomer satisfaction survey
– Mysterious shoppersMysterious shoppers
– Websites, other contacts pointsWebsites, other contacts points
37. 37Customer Loyalty and Retention Strategies 吳明泉博士 2009
Conflicts and Customer ComplaintsConflicts and Customer Complaints
Level of dissatisfactionLevel of dissatisfaction
Attrition of blameAttrition of blame
Cost/benefits of actionsCost/benefits of actions
Personal characteristics:Personal characteristics:
– highly educated,highly educated,
– self-confident,self-confident,
– aggressive,aggressive,
– Older women.Older women.
38. 38Customer Loyalty and Retention Strategies 吳明泉博士 2009
Dealing with complaintsDealing with complaints
Having the skill to interact with different types ofHaving the skill to interact with different types of
people. Trained in methods of interaction and inpeople. Trained in methods of interaction and in
different style of communication.different style of communication.
Be customer-centric. Let the customers know thatBe customer-centric. Let the customers know that
they have been understood.they have been understood.
Express regretExpress regret
Resolve conflictResolve conflict
– Accommodation, Compromise, TerminationAccommodation, Compromise, Termination
Follow-up and prevent recurrenceFollow-up and prevent recurrence
Keep in touch and listen to customerKeep in touch and listen to customer
39. 39Customer Loyalty and Retention Strategies 吳明泉博士 2009
Resolve conflictResolve conflict
A disagreement in which the views of theA disagreement in which the views of the
customer and the organization appear tocustomer and the organization appear to
be incompatible.be incompatible.
Accommodation: a settlement thatAccommodation: a settlement that
emphasizes cooperative behavior.emphasizes cooperative behavior.
Compromise: mutually acceptable middleCompromise: mutually acceptable middle
ground that is somewhat satisfactory toground that is somewhat satisfactory to
both parties.both parties.
TerminationTermination