Loyalty Myths-truth 1 (PPT)

8/2/2019 Loyalty Myths-truth 1 (PPT)

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Presented byDept. of Business Administration

National Dong Hwa University

610032004 Lin, Kuan-hsin

69933029 Dashdeleg Altan-Uya

2011/12/06

Keiningham, T. L., Vavra, T. G., Aksoy, L., & Wallard, H. (2005).

Loyalty myths: hyped strategies that will put you out of

business

and proven tactics that really work: Wiley.


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Myth 1Myth 2

Myth 3

Myth 4

Myth 5

Myth 6

Myth 7

Myth 8

Myth 9

Myth 10

Myth 11

Truth 1

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The organization must learn to think of itself not as

producing goods or services but as buying customers, as

doing the things that will make people want to dobusiness with it.

Theodore Levitt

Myth

Customer loyalty is number one goal of any

firm.

Fact

Loyalty customers but no profits (dot-com)

Fundamental purpose of any business is to identify

and satisfy customer needs at a profit.

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s The trade-off between the costs of acquiring new

customers and the costs of maintaining current ones.

Like a broken clock it is correct at some times of the day.

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Ex: Apple (before 1990s)

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s All customers are or can be made to be profitable for a

firm.

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Desired customers

(20%)150%-300% of profits

Break-even customers

(60%-70%)Break even

Costly customers

(10%-20%)

50%-200% loss of

total profits

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Myth

All customers are or can be made to be

profitable for a firm.

Fact Target your loyalty efforts to right customers.

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In a heterogeneous markets, market share leadership

will not be associated with the largest level of loyalty.

The niche player who address the unique needs of

smaller segments will naturally enjoy a more loyal

following at the expense of being less attractive to the

total market.

May the force of operating system be with you

Macintosh devotion as implicit religion.

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If customer loyalty drives profitability, then maximizing

profit comes from making all customer loyal.

Different customer types derive value from their

shopping experience for different reasons.

Myth 3

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Variety seekers are motivated by curiosity about andthe desire for new experiences in product types and

brands.

Deal seekers are primarily motivated by price.

The customers in this groups are who they are; they

are unlikely to change.

Many firms offer sales promotion, and overuse this

tactic.Customers

Deal

seekersVariety

seekers

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Customer-centric

Make an effort to improve customers perception of

their experience with a firms products or services,

or with the firm itself.

Brand-centric

Manipulating the elements of marketing mix to

improve brand equity.

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Firms need to find a

way to manage both

of Brand-centric andCustomer-centric

measures

simultaneously.

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sFlaws of the promise

The firm need to be generating small profits. (And

other assumptions.)

There will be diminishing return.

5% wont make money unless they are right customers.

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Flaws of the promise

The fundamental financial underpinnings of the

argument are not adequate.

The assertion ignores the life cycle of products,

services, and institutions.

It ignores the fact that customers vary in cost to

acquire and to retain.

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For many product categories, share-

of-wallet is the most relevant

behavioral loyalty metric.Myth

Sometimes share for the customer is

entirely driven by their propensity to

seek deal.

Fact

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Without question companies should ensure that theirprofitable customers are cherished.

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Directing loyalty efforts to those customers who has past

good record is not the best economic decision.

Focusing on volume of past purchasing activity doesntnecessarily help us to understand the underlying

purchase pattern. (RFM)

There are also some life-changing factors. (Ex: Better-

paying job)

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There is no such thing as a pure product company.

Product

companiesElimination of

variation

Service companies Maximizingvariation

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Dont manage for customer retention

before you manage for customer selection.

You probably dont want to keep all of your

customers; create apply loyalty strategies and

tactics selectively. Make sure your loyalty

efforts are directed primarily to those who wish

to keep, and make offers that are relevant tothese desired customers.

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Customer loyalty maybe meaningful corporate goal, but

only under the proper circumstances and only when

directed at a group of customers known to be profitable,

and therefore desirable to be retained.

Do loyalty when you are in declining cycle.

Dont try to change customers. Customers are who they

are.

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Loyalty Myths-truth 1 (PPT)

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