Customer Loyalty
and
Retention Strategies
Customer Retention Strategies 吳明泉博士 2007
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Outline
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Definition of Customer Loyalty
What Affects Customer Loyalty
Relationship programs
Customer life cycle
Reasons for Lost Customers
Customer Retention Strategies
Problem Identification and Management
Conflicts and customer complaints
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Customer loyalty
Customer’s commitment or attachment to a
brand, store, manufacturer, service
provider, or other entity.
 A behavior toward the product
 An attitude to behave
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Behavioral brand loyalty
 Measured by proportion of purchase
Undivided loyalty
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Occasional switcher
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Switched loyalty
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Divided loyalty
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Indifference
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Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Churn rate or Attrition Rate
 The rate at which new customers try a
product or service and then stop using it in a
given period of time.
 Retention rate = 1 – the attrition rate..
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Problems with behavioral approach
 A customer may be making a repeat
purchase not because of any true loyalty or
commitment,
 But because of convenience, price,
availability, or inertia due to habit.
 Inertia suggests a low sensitivity to the
brand since purchases are made without a
real motive for the choice.
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Attitudinal brand loyalty
Include favorable attitude that reflects a
preference or commitment expressed over
time. Emotional attachment, evaluation
 No loyalty
 Inertial loyalty or spurious loyalty
 Latent loyalty
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Relationship commitment
 An enduring desire to maintain a valued
relationship
 Loyal customers, high in repeat purchase
behavior and strong in attitude
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Transaction vs. relational continuum
Transaction
Relational
Objective
Make a sale
Create a customer
Characteristic
Anonymity
interdependence
Criteria of success Volume price, new Value
customer
enhancements,
repeat exchange
Interaction tone
Sale as a
Sale as an
conquest, discrete agreement,
event
continuing process
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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What affects customer loyalty
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Customer satisfaction
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Customer satisfaction
 A post-purchase or post-choice evaluation
that results from a comparison between
those pre-purchase expectation and actual
performance
 Satisfied customers may not be loyal
customers.
 Xerox’s finding: satisfaction rating 4 is six
times more likely to switch to others than
rating 5.
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Emotional Bonding
 Brand affect, brand equity
 Company attachment
 Establish feelings of closeness, affection,
trust, and respect.
 IT may limit emotional bonds. Personal
contacts, non-verbal signals, friendships,
and personal interactions are critical
elements.
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Trust
 Willingness of customer to rely on the
organization.
 Reduces uncertainty/risk
 Honest, fair, and responsible
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Choice reduction and habit
 People have tendency to reduce choice.
 There can be a switch cost associated with
change to the unfamiliar, untried, or the new.
There may be cost in time, money, and risk
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History with the company
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Corporate Image
Contacts and purchase history
Service experience
Intergeneration influence
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Multi-faced loyalty
Customer loyalty to:
 Brand: promotion
 Product: production
 Company: public relations
 Customers: meeting, chats, reunion
 Price: discounts, coupons
 Places: sounds, excitement
 Variety: new options, variations,
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Guidelines for enhancing loyalty
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Relationship programs
 Financial Incentives
 Social Bonding
 Structural-interaction
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Financial Incentives
 Increased customer loyalty to price,
incentives
– Frequent flyer/reader/buyer/visitors… Rewards.
– Discounts, product upgrades, awards, prizes
– Related products or providers expand the net
 Relationships concentrate exclusive on
incentives tend to be weak. Average
American Consumer: 3.5 programs
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Social Bonding
 Refers to a friendly companionship, trust,
and ties. Increased customer loyalty to the
organization
– Connections
– Personal insight, recognition, mutual affection
– Interpersonal interactions expand the link
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Structural-interaction
 Use system design to solve problems,
reinforce purchases, and recognize the
importance of each customer.
– Systemic mass personalization….
– Management
– Cultivation, simulation
– Artificial intelligence continues the connections
 Increased customer loyalty to the experience.
Customer Loyalty and Retention Strategies 吳明泉博士 2009
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Customer life cycle
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Reasons for Lost Customers
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Dissatisfaction
Relative Advantage
Conflict
Loss of Trust
Cease to need
Novelty Seeking
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Customer Retention Strategies
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Welcome
Reliability
Responsiveness
Recognition
Personalization
Reward Strategies
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A welcome strategy
The organization’s appreciation for the
initiation of a relationship.
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Creating a delightful surprise, making a good
first impression
First touch: additional customer information
Reassure the buyers that they have made the
correct choices.
Treat like a first date. Don’t overdo it!
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Reliability
The organization can repeat the exchange
time and time again with the same satisfying
results.
– Keep promise
– Ensure consistent quality
– Continuous promotion is still the key.
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Responsiveness
 The organization shows customers it really
cares about their needs and feelings.
 Loyal employees create loyal customers.
Internal marketing.
 Customer-contacted employees should
have the authority as well as the
responsibility for date to date operational
activities and CRM decision.
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Recognition
 Special attention or appreciation that
identifies someone as having been known
before.
 People respond to recognition.
 Recognition and appreciation help
maintain and reinforce relationships.
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Personalization
Use CRM system to tailor promotions and
products to the specific customers.
 Offer engine: take customer data after it is
analyzed and applies it to create the offer
or message that is appropriate to the
individual customer. Ex., My site, Click
stream analysis, free ride, etc.
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Access strategy
 Identify how customers will be able to
interact with the organization.
 General contact, product return, technical
report, service representative, change a
mailing address
 Is the access quick and easy?
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A Communication process
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Organization vs. customer initiated
communication
 In organization-initiated communication,
organizations must consider the intended
message, channel (medium), and receiver
characteristics.
 In customer-initiated communication,
consider the establishment of toll free calls,
web sites, priority access for providing
services and collecting customer data.
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Customer-initiated communication
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Reward strategies
 Frequent, best customers
 Partnership Management Program
 Switching costs: financial penalty, time loss,
psychological barrier
 Termination Penalty
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Problem Identification and Management
 Rather tell the company than switch to a
competitor or tell someone else. Acting
rather than reacting.
 Build numerous mechanism for identifying
customer problems.
– Customer satisfaction survey
– Mysterious shoppers
– Websites, other contacts points
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Conflicts and Customer Complaints
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Level of dissatisfaction
Attrition of blame
Cost/benefits of actions
Personal characteristics:
– highly educated,
– self-confident,
– aggressive,
– Older women.
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Dealing with complaints
Having the skill to interact with different types of
people. Trained in methods of interaction and in
different style of communication.
 Be customer-centric. Let the customers know that
they have been understood.
 Express regret
 Resolve conflict
– Accommodation, Compromise, Termination
 Follow-up and prevent recurrence
 Keep in touch and listen to customer
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Resolve conflict
A disagreement in which the views of the
customer and the organization appear to
be incompatible.
 Accommodation: a settlement that
emphasizes cooperative behavior.
 Compromise: mutually acceptable middle
ground that is somewhat satisfactory to
both parties.
 Termination
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