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SVCM C13 Managing r/s and building loyalty (retention strategies (create…
SVCM C13 Managing r/s and building loyalty
segmentation of
relational markets
Simon Knox's
diamond of loyalty
Loyals - highest profit potential, active preference for brand, strong emotional connection and advocate, high perceived risk in switching brands
Place at centre of comm strategy, develop partnership programs and preferred access, continuous improvement of service quality and experience. "Protect" strategy
Habituals - passive loyals out of habit or inertia, passive advocates, at risk of defecting when there is a service failure or promotional deal, retention is based on convenience and switching costs
Multichannel integration and access, P.O.S.comm and convenience of purchase."Build "strategy- identify those with potential to grow and then target them with the aim of getting more business
Multibranders- active search based on quality and price, little involvement with brand, unlikely to defect permanently, seek variety for its own sake
Continuous service improvement, multi channel integration and access, strategic and tactical comm."Danger zone"- are there reasons for keeping them? ways to improve sales or reduce cost of serving them?
Switchers - large and varied portfolio of brands, sensitive to price and promotions, low risk in switching.
Manage for transactions not r/s, short-term hard sell, divest problematic switchers "Cost re-engineer"- reduce the cost to serve them
Zeithaml et al Four
Level Pyramid
Platinum- small % of firm's customer base, heavy users, contribute large share of firm's profits, less price sensitive but high expectations of service, likely to invest and try new services
Exclusive benefits that are not available for other segments, focus on retention
Gold- contribute less profit than Platinum, more price sensitive and less committed.
focus on retention
Iron- bulk of customer base, give the firm economies of scale, marginally profitable, level of business does not warrant special treatment
focus on retention
Lead- low revenue earners for firm, require same level of service as Iron, a loss-making segment of the firm
migrate them to iron segment or terminate them
retention strategies
create loyalty bonds
Confidence benefits - sense of reduced anxiety and comfort in knowing what to expect. Because you are recognised as a regular customer, you believe the service provider will ensure they perform the core service in a quality manner.
Social benefits/bonds- being recognised, welcomed and developing rapport with service provider.developing personal r/s
Special treatment benefits- getting the benefit of the doubt, being given a special deal or price or preferential treatment
reward-based bonds- incentives that reward frequency of use, value of use or a combination, discounts on purchases, loyalty program rewards or non-financial such as priority queue or access to special services
structural bonds- integrating customers way of doing things with the firm's processes.
build in switching barriers
economic- financial disincentives from defecting- early cancellation fees or penalty for withdrawal, providing larger discounts or premiums the longer customers stay or the more services the customers subscribe to.
the perception of the magnitude of the additional costs required to terminate a current r/s and secure an alternative
psychological- see social benefits/bonds
reduce customer churn
Churn diagnostics to understand the reasons customers switch providers. Exit interviews and in-depth interviews of former customers by 3rd party research agencies
churn alert systems to monitor individual customer accounts and predict impending customer switching for the firm to take proactive retention efforts.
develop a unique selling point to regain lost customers or using "save" teams.
implement effective complaint handling and service recovery procedures
tiering of customers
LEVEL 1- customer linked to firm by financial incentives
LEVEL 2- Financial incentives and social bonds
LEVEL 3- financial incentives, social bonds and structural bonds