BUILDING CUSTOMER LOYALTY

Watch the video and take notes of the tips given

• http://www.youtube.com/watch?v=inhsMlIBGXk

“Creating Customer Value, Satisfaction and Loyalty”

What is Value?

What is Value?

Value = Benefits – CostsAdditional benefits are added while costs remain the same, or costs of the current benefits provided are reduced.

Whose Definition of Value is Important?

The Buyer?The Seller/ Provider?

Whose Definition of Value is Important?

The Buyer?The Seller/ Provider?

The Buyer might find value in the acquisition process itself: the ease, convenience, timeliness, etc. The buyer might also find value in the relationship with a particular provider.

The provider may see value in the exchange: the money received for the service provided. Providers are hoping the first exchange will lead to repeated business and long term commitment.

Value as a Competitive Advantage

• Competitive companies have traditionally compete based on value as perceived by the customer.

Example : Company A vs. Company B and Company C

• Competitive Advantage is achieved in two basic customer perceptions of value: Differentiation and Lowest Price.

• Competitive Advantage In the 80`s - TQMIn the 90`s - Reengineering

Value as a Competitive Advantage

• Is quality is value-added benefit?

Value as a Competitive Advantage

• Today most products and services are of high quality and offered at very efficient pricing. Thus, a seller is mistaken when he/she believes that quality is a value-added benefit.

• Today quality is expected.

Value as a Competitive Advantage

What are motivationalfactors?

Why do we need newmotivational factorsconstantly?

Value as a Competitive Advantage

“Motivation requires exceeding expectations”“Companies must continually search for new motivational factors since factors than once gave a competitive advantage were rapidly copied and customers expectations continually arise”

Value as a Competitive Advantage

• It is time to link value obtained in the exchange process with customer satisfaction. – Relationships– Repeats– Referrals

Customer Satisfaction

Product Service – Customer = Customer Performance Expectations Satisfaction

Watch the video

• What kind of customer service do you observe?

What is Loyalty?

Loyalty

A commitment to rebuy or re-patronize a preferred product or service.

Dimensions of Customer Loyalty

What’s the difference between Behavioral LoyaltyAnd Attitudinal Loyalty?

Dimensions of Customer Loyalty

• Behavioral Loyalty(Repeated purchases)

• Attitudinal Loyalty( Commitment)

Both dimensions could be use to identify truly loyal customers and to customized loyalty strategies according to the level of loyalty.

Attitude

Low High

Behavior

High Spurious Loyalty True Loyalty

Low Low Loyalty Latent Loyalty

Dimensions of Customer Loyalty

• Focusing in behavior alone cannot capture the reasons behind the purchase.

• The two dimensional loyalty approach can help us to identify loyalty segments and suggest marketing strategies to reach those segments.

Customers Motivation for Maintaining Relationships

According to Bendapudi and Berry customers motivation to maintain relationships with service providers are divided in:

Constraint Based (they have to stay, high switching cost) Dedication Based ( they want to stay, trust and affective

commitment)

Switching cost: Time, effort and expense associated with switchingfrom one company to another.Example: Movistar - Claro

Creating Value Towards Loyalty• Building high switching barriers can

increase both Behavioral and Attitudinal Loyalty.

• Outperfom the competition.• Use value added strategies to

augment the service delivery system and outperform the competition.Example: Supermarket employees taking your purchases to the car.

Creating Value Towards LoyaltyThe value added strategies could involved personalized service and building relationships at employees levels.

Reward Attitudinal Loyalty.Emotional attachment, trust and value added strategies will help build brand loyalty.

ActivityUpload your answers in the assignment “Building Customer Loyalty” till Monday. This activity can be done in groups of 4 or 5

1. Choose between the following services:a. Discob. Supermarketc. Movie Thatre

2. Describe your behavior and attitude towards the service chosen3. Describe your relationship with this kind of service. (Constrained

Based, Dedication Based)4. What would you suggest to improve the relationship with the

service provider.5. Explain an example of a loyalty program.(Example: Frequent

Flying program)6. Explain how that loyalty program help to build true customer

loyalty.