Acquisition & Winback Mod 5

Name of Institution

Customer loyalty, retention, acquisition & winback strategies

CRM Module VMBA (GEN) semIV

Sunetra Saha

Name of InstitutionCustomer loyalty

• Customer’s commitment or attachment to a brand, store, manufacturer, service provider or other entity based on favorable attitudes & behavioral responses, such as repeat purchases.

Name of InstitutionProfitability of loyal customers

• Lower costs of service

• Increased purchases

• Less price sensitivity

• Favorable word of mouth

• Sustainable advantages – durability factor

Name of InstitutionBrand Loyalty as behavior

• How consistent customers are in repurchasing brands – proportion of purchases = the no. of times the most frequently purchased brand is purchased, divided by the total no. of times the product category is purchased

Undivided loyalty Occasional switcher Switched loyalty Divided loyalty Indifference

Name of InstitutionBrand loyalty as Attitudes

• Loyalty involves much more than repeat purchase – includes a favorable attitude that reflects a preference or commitment expressed over time

• A psychological process that involves evaluation, decision making, and awareness of a strong predisposition toward purchase as well as an overall liking of the brand.

Name of InstitutionLoyalty vs Inertia

Repeat PurchaseBehavior

StrongCommitment

Lowcommitment

Inertia

Loyalty

Spuriousloyalty

Latent Loyalty

Name of InstitutionRelationship commitment

• An enduring desire to maintain a valued relationship

Transactions Relationships

Objective Make a sale Create a customer

Characteristic Anonymity interdependence

Criteria of success Volume, price, new customers

Value enhancements, repeat exchanges

Interaction tone Sale as a conquest, discreet event

Sale as an agreement, continuing process

Name of InstitutionFactors that affect customer loyalty

Satisfaction

Emotionalbonding

Trust, riskreduction

Choice reductionhabit

History with The company

Attitudinalloyalty

Behavioral loyalty

Degree of Customer loyaltyOr commitment

Name of InstitutionLoyalty & organizational options

• Customer loyalty to

Brand Product

Company

Customers Price

Place

Variety

• Organizational options Brand image/positioning/extensions …

promotion Accessories, complimentary items …

production Personal connections/ reinforcements…

public relations Interpersonal meetings/ chats… target

markets Discounts/ coupons/ everyday low pricing…

efficiencies Outlets/ aromas/ sounds … atmospherics New options/ variations… production

Name of InstitutionLoyalty & CRM Systemsguidelines

Goal: one to onerelationship

Recognize: names & history

of each customer

Cultivate: interactions &Delight with outcomes

From each

Develop: relationships With the organization& the community of

customers

Outcome: customer Loyalty & commitment

Name of InstitutionLoyalty based relationship building strategy

• Defining objectives – set in quantifiable terms • Development – identification of the desired

aspects of the marketing & service mix which can be deployed most effectively to reinforce & build loyalty

• Defining the qualification levels, segments, implement the capabilities & measure – detailed analysis of the profile of the firm’s best customers – Relationship marketing audit

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• “Loyalty Programme” can be defined as a programme that allows consumers to accumulate free rewards when they make repeated purchases with a firm. (Yuping Liu, 2007). With a careful design of rewards against predetermined thresholds, consumers are encouraged to repeat purchase, allocate greater share of their wallet, increase the frequency of their visits to the store and advocate and spread positive word of mouth.

• Satisfaction, switching barriers, attractiveness of alternatives and interpersonal relationships affect loyalty

Name of InstitutionDeveloping a Loyalty Program

• Integrate Loyalty Efforts Into Existing Marketing Communications

• Ask Customers to Help• Target Specific Messages to Specific

Target Audiences• Be Realistic• Track Results and Build Database• Consider Exit Strategies

Name of InstitutionRelationships basedon types of loyalty

Mercenaries: happy, contendedCustomers, not loyal,Tend to shop around

Terrorists/defectors: Disappointed, leave without

informing, lost

Hostages: disgruntled Customers, exit barriers,

Unable to change company

Apostles: highly contended,Loyal customers

Low loyalty high

High satisfaction low

Name of InstitutionCustomer satisfaction/loyalty relationship

Zone of defection

Zone of indifference

Zone of affection

apostles

terrorist

Loyalty

Satisfaction

Name of InstitutionFoundations of customer loyalty

• Build a foundation for loyaltySegment the market to match customer

needs & firm capabilities Be selective: acquire only customers who

fit the core value propositionManage the customer base via effective

tiering of productsDeliver quality products


• Create loyalty bonds Deepen the relationship via: Cross – selling Bundling Give loyalty rewards: Financial Non-financial Higher tier product levels Recognition & appreciation Build higher level bonds Social Customization Structural


• Reduce churn drivers Conduct churn diagnostics & monitor declining/

churning customers Address key churn drivers Proactive retention Reactive retention Put effective complaint handling & service

recovery processes in place Increase switching costs

Name of InstitutionFactors that maylessen customer loyalty

• Competitive Parity

• Variety – seeking behavior

• Low involvement

Name of InstitutionCustomer life cycle

Suspect

Prospect

Customer1st transaction

Loyal advocate

Repeat customer

Inactive Regular

customer

Lostcustomer

Acquisition Retention Winback

Name of InstitutionCustomer Retention

• The capability of the business firm’s offer to its customers to purchase or patronage its product or service over a period of time

Name of InstitutionCustomer Retention Determinants

• Seven determinants of customer retention: 1. Customer expectations versus the

delivered quality of the product or service 2. Value 3. Product uniqueness and suitability 4. Loyalty mechanisms 5. Ease of purchase 6. Customer service 7. Ease of exit (lock-out provisions

Name of InstitutionReasons for lostcustomers

• Novelty seeking

• Dissatisfaction

• Relative advantage

• Conflict

• Loss of trust

• Cease to need

Name of InstitutionCustomer retention strategy

• A plan identifying what basic retention objectives to be pursued & how they will be achieved in the time available

• Attrition rate= percentage of customers lost in a given period

• Hence retention rate = 1- attrition rate (%age of customers expected to keep doing business with the firm)

Name of InstitutionRetention strategy

• Welcome: acknowledges the organisation’s appreciation for the initiation of a relationship or for the exchange.

Opportunity to create a delightful surpriseMaking a good first impressionFirst touch point where additional customer

information may be collected Opportunity to reassure that he/she has made

the correct choice Reduce cognitive dissonance


• Reliability: the organisation can repeat the exchange time & time again with the same satisfying results.

• Companies must keep their promises

• Show consistent performance

• Ensure consistent quality


• Responsiveness: organisation shows customers it really cares about their needs & feelings

• Making it right every time a customer makes contact with the company

• Loyal employees create loyal customers – internal marketing

• Recognition: special attention or appreciation that identifies someone as having been known before – help maintain & reinforce relationships


• Personalisation: tailor promotions & products to specific customers

• Cultivation & development aspect of CRM• Offer engine – rules based series of

computer algorithms & templates – takes customer data after it is analysed & applies it to create the offer or message that is appropriate to the individual customer- programmed to be goal oriented


• Reward: reward customers for their loyalty – provides best customers with preferential treatment or special incentives

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ExcellentQuality

andValue

Levels of Retention Levels of Retention StrategiesStrategies

I. Financial Bonds

II. Social Bonds

IV. Structural

Bonds

III. CustomizationBonds

Volume and Frequency Rewards

Bundling and Cross Selling

Stable Pricing

Social Bonds Among Customers

Personal Relationships

Continuous Relationships

Customer Intimacy

Mass Customization

Anticipation/ Innovation

SharedProcesses and Equipment

Joint Investments

Integrated Information Systems

Name of InstitutionWinback strategies

Win-back programs enables a firm to:• Realize potential sales/profits by rebuilding customer

relationships• Minimize new customer acquisition costs• Reduce negative word-of-mouth• Better understand the customer process for relationship

termination so that appropriate intervention and recovery steps can be taken• Develop a profile for lost customers that can help detect

‘at risk’ customers• Build customer recovery into the customer-focused

culture

Name of InstitutionCRM questions of winback

LostCustomer(s)

Questions & information for the CRM systemWho is about to leave?

What is the lifetime value?Why is the customer leaving?

How can we best recontact & reconnect?How much will it take to reactivate the account?

1st time repeat after relapse lost:Thank you for your trust to Thank you for your pastreconnect patronage

Name of InstitutionSteps to winback

• Identify who is about to terminate• Consider customer lifetime value• Establish why customers terminateCustomer exit interviewsFocus group interviewsListening posts• Re-contact lost customers• Provide a reactivation offer

Name of InstitutionCRM Aspects of acquisition

Objectives for Lifetime value

Strategy for Targets & mixes

Natural referrals

Affinity programs

Entry reassurance

No switching costs

Relative advantage

Affiliate networks

Prospectivecustomers

Name of InstitutionAcquisition Strategies

• Objectives: choosing goals that focus on customers lifetime value

• Strategy: selecting targets & designing mixes

Name of InstitutionCustomer satisfactionsurvey

1. Defining the problem & objectives: outline the information needed to solve the dissatisfaction problem – purpose of conducting the study

2. Planning the survey design: specific techniques & procedures that will be used to collect & analyse data relevant to the satisfaction issue – basic research designs – exploratory, descriptive & causal.

3. Designing the questionnaire: ask relevant questions, simple language usage


4. Selecting a sample: portion/ subset of a larger population, people, organisations, households or other groups of interest – specifying the target group, probability sample/random sample

5. Collecting data: one to one interaction, telephone interview, mail survey, internet survey

6. Analysing the data: statistical/ qualitative analysis


7. Drawing conclusions & preparing the reports:

8. Following up:

Name of InstitutionSatisfaction & quality measures

• Comparison between what customers expect from a product or service and the actual performance received.

• Affected by consumers response to tangible aspects of the product/store, intangible perceptions of the product brand name/image, as well as the drivers of strength of the relationship with the customer.

Name of InstitutionQuality of tangible goods

• Performance

• Features

• Conformity to specifications

• Reliability

• Durability

• Aesthetic design

• Serviceability

Name of InstitutionService quality

• Tangibles

• Reliability

• Responsiveness

• Assurance

• Empathy

Servqual

Name of InstitutionMeasurement of brand loyalty

• Traditional behavioral measure: proportion of purchases= the no. of times the brand is purchased divided by the no. of times the product category is purchased

• Attitudinal interface: customer’s willingness to repurchase and likelihood of recommending the brand or organisation to a family member, friend or associate.

Name of InstitutionMeasurement at Hewlett Packard

• The classical survey of existing customers, customers and non-customers

• Process performance online measurement• Complaints process• Relationship measurement• Comparative surveys from market researchers• Project quality teams with customers• Partnership programs with select customers

Acquisition & Winback Mod 5

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