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Customer Service
Products and Services
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JOY
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To gain and improve customer loyalty and satisfaction, many companies have developed different strategies.
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Exercise
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(brainstorming)
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What does loyalty mean to businesses ?
Repeat
Purchases ?
Retention of
Customers ?
Acquisition of
Customers ?
Create Profitable
Customers ?
More Information on Customers ?
Financed by
Just Another
Marketing Program ?
Reward Loyal
Customers ?
Reality …….….could be all of the above !!!!
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Customer tells what is important; satisfaction vs. dissatisfaction if met
Meeting basic respect
& courtesy needs; dissatisfaction if not met; indifference if met
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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
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Some key points on developing loyalty
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Since what was once unexpected/unstated becomes expected/stated, you must keep innovating
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Performance excellence occurs by design, not default
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All parts of the organization are part of creating customer loyalty
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Reliability : Keeping your promise, doing what you said you will do. Doing things right the first time.
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Assurance : Making the customer feel safe in their dealings with you, being thoroughly professional and ethical.
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Tangibles : How the product/service looks to the client, the appearance of personnel and equipment, etc.
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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.
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Responsiveness : The availability, accessibility and timeliness of the service. The ability to respond to enquiries and complaints in a timely fashion.
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 psychological;
 economic;
 technical/functional;
 contractual.
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How did it all start – the Loyalty Program way
 Trading stamps
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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……..
1.
Initial objective was to collect data on customer purchase patterns
2.
Simple proposition – Earn Points for future value hence loyalty
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What’s the Good News ?
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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?
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82% customers think Loyalty program marketers are more in touch with their customers
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66% of Loyalty program members do not mind sharing extra information about themselves
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Unconventional industries also bitten by loyalty bug
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Starbucks Card to store information of the Card members preferences.
 Nike Smart card allows them to design their own shoes
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.
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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%
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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
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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.
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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.
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Some successful UK programs – Nectar
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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
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Availability & Wider choice for redeeming points across relevant segments.
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Enabling customers to earn rewards more quickly
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At higher value than if they collected points from only one company.
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Some insights --- Customer & Company perspective
Customers new perspective of Rewards ( Loyalty )
1. Cash value
2. Redemption options
---- Immediate gratification
---- More Choice
3. Aspirational value
---- Feel Good factor
4. Relevance
---- Does it make sense
5. Convenience
---- 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
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Communication to be transparent, timely and focussed
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Consistent across all customer touch points
Loyalty initiatives must also be profitable
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Treat profitable and unprofitable customers differently
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Get your metrics in place ---- measure costs & returns
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What does loyalty mean to the customer today ?
Customer cost of using your product
Complete Customer
“ Relationship” Experience
Primary drivers
Price
• Purchase price
• Effort
•
Time
Product / service*
• Physical product
•
Service product
• Service delivery
• Service environment
Brand**
• Ethics
• Image
•
Reputation
•
Positioning
Relationship
• Loyalty Programs
• Co Brands
•
Alliances
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Special treatment
• Affinity
• Customer community
Customers want an end-to-end relationship experience
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Customer Value Perception
• Life Time Free
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Transparency in charges
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Value for money
Customer Relationship experience – Banking illustration
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Ease of availability
• Relevant Features
• Wide service range
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Easy accessibility
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Speedy service
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Customer empathy
• Resolution of query the first time
• Aspirational value
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Flash Value
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Inspires confidence
• Understanding needs
• Processes &
Service
Knowledge
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Preferential offers
Price
Product /
Quality
Customer
Service
Brand Relationship
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Fee Income • One stop Shop for all financial needs
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Simplified product offering
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Network availability
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Bottom line
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Best in class
Organization’s translation of Value
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% returns
/cancellations
• Strengthening
Brand image
• # service calls/repairs
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# customer inquiries
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# billing queries
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Advertising costs
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Customer touch time
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No. of product training hours
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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.
Address the right customers
2.
If they are profitable?
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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
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How do you do it …….
 Lifecycle Experience ---- Define value proposition to customer segments
 Dynamic ---- Ability to react to changing customer needs and behaviors
Business
Objectives
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Targets ---- Program objectives clearly communicated
• Metrics ---- Measurement capability in line with objectives
Process
Changes
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Seamless --- across all Channels, Business Functions and touch points
• Flexible ---- Ability to accommodate changes without compromise
Loyalty
Programs
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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
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Branded ---- Bought-out or Co-branded to address emotional needs
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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
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• Access partner customer touch points
• Access additional customer databases
• Improve Brand image
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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
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Co-Branding in Credit Cards – Is it Profitable?
Purchase amount from Co-Brand Partner
Less
Dont know
4%
9%
Frequency of using CoBranded-Partner
Less often
8%
Dont know
2% more
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
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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
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 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.
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Figure 3.3 The Whale Curve of
Cumulative Profitability
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 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
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High-Cost-to-Serve Customers Low-Cost-to-Serve Customers
Order custom products
Order small quantities
Unpredictable order arrivals
Customized delivery
Order standard products
Order large quantities
Predictable order arrivals
Standard 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)
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
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):

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.
Keep profitable customers
Convert unprofitable ones to profitability
Fire those who are not profitable
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Managing loyalty and profitability
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Source: Hadson & Hadson . Customer service for Hospitality & Tourism . Chapter 7.
Building and Maintaining Customer Relashionship. (Adapted from Kumar and Rajan, 2009, p. 5)
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Low margin / high cost customers offer the most challenge for marketing mangers.
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• Start with ways to reduce costs
Next, work with customers to possibly change their actions resulting in lowering costs or increasing profitability
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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.
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 http://www.marketingdonut.co.uk/marketing/customer-care/customer-loyalty-schemes
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 http://www.loyaltylab.com/what-we-do.html
http://www.powershow.com/view/50-NmRkO/Building_Customer_Loyalty
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 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
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 http://www.retentionloyalty.com/
Fostering Loyal Customer Relationships. Duarte B. Morais, Ph.D.
Assistant Prof. of Recreation, Park and Tourism Mgt.dmorais@psu.edu
Manage Customers for Profits (Not Just Sales)” B.P. Shapiro et al.,
September-October 1987, p. 104, Harvard Business Review.
B.P.Shapiro
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Hold,