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12. MANAGING RELATIONSHIPS AND BUILDING LOYALTY - Coggle Diagram
12. MANAGING RELATIONSHIPS AND BUILDING LOYALTY
The Search for Customer Loyalty
Why Is Customer Loyalty Important to A Firm’s Profitability?
Customers become more profitable the longer they remain with a firm:
Increase purchases and/or account balances
Reduced operating costs
Referrals to other customers
Price premiums
Assessing the Value of a Loyal Customer
Must not assume that loyal customers are always more profitable than those making one-time transactions
Measuring Customer Equity: Lifetime Value of Each Customer
Acquisition revenues less costs
Projected annual revenues and costs
Value of referrals
Net Present Value
Why are Customers Loyal?
Customers stay loyal when we create value for them through social benefits and special treatment
The Wheel of Loyalty
Building a Foundation for Loyalty
Targeting the Right Customers and Searching for Value, Not Volume
Target the right customer and match them to what firm can deliver
Focus on number of customers served as well as value of each customer
“Right customers” are not always high spenders
Strategies for Developing Loyalty Bonds with Customers
Deepening the relationship
Reward Based Bonds
Social Bonds
Customization Bonds
Structural Bonds
5 Strategies for Reducing Customers Defections
Address Key Churn Drivers
Deliver quality service
Reduce inconvenience and non-monetary costs
Have fair and transparent pricing
Industry-specific drivers
Take active steps to retain customers
Other Ways to Reduce Churn
Implement Effective Complaint Handling and Service Recovery Procedures
Increase Switching Costs
CRM: Customer Relationship Management Systems
Comprehensive CRM Strategy
Integrated Framework for CRM Strategy Development
- Strategy Development
-- Assessment of business strategy
-- Business strategy guides development of customer strategy
- Value Creation
-- Translates business and customer strategies into specific value propositions for both customers and firm
- Multi-channel Integration
-- Serve customers well across many potential interfaces
-- Offer a unified interface that delivers customization and personalization
- Performance Assessment
- Information Management
-- Collect customer information from all channels
-- Integrate it with other relevant information
-- Make useful information available to the frontline
Common Failures in CRM Implementation
-- Viewing CRM as a technology Initiative
-- Lack of customer focus
-- Inadequate support from top management
