CRM and Loyalty

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CRM and Loyalty

• 2001017 Kim, Mi Young
• eCommerce ICE720, 2002

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Contents
Part 1. Customer Relationship Part 2. Customer
Loyalty Part 3. Approach to Loyalty Program Part
4. Loyalty Program case study Part 5. Summary and
Conclusions Part 6. References
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Part 1. Customer Relationship

• CRM
• Relationship Marketing
• CRM and Behaviour Type

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What is CRM?
What is CRM?Simply stated, Customer
Relationship Management (CRM) is about finding,
getting, and retaining customers.CRM is at the
core of any customer-focused business strategy
and includes the people, processes, and
technology questions associated with marketing,
sales, and service. In today's hyper-competitive
world, organizations looking to implement
successful CRM strategies need to focus on a
common view of the customer using integrated
information systems and contact center
implementations that allow the customer to
communicate via any desired communication
channel. Lastly, CRM is a core element in any
customer-centric eBusiness strategy. From
www.realmarket.com
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Effect of CRM
repurchase
Loyal customization
Increase revenue
Satisfaction
Creating new customer
Good word of mouth
Service/ Product
Losing customer
Brand switch
Decrease Revenue
dissatisfaction
Bad word Of mouth
losing potential customer
CS Guarantees Companys Revenue?
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CRM and Customer Loyalty
Acknowledgement about Relationship
Departure Route Destination
Products Control Result Secret Sales Volume
Customers Communication Continuity Public Loyalty
CRM (Customer Relationship Management)
CM (Customer Management)
There is always the risk that a customer will
defect when a competitor offers better value or a
wider range of value added options. -gt Loyalty
Programs must motivate loyal buyers to repurchase.
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Relationship Marketing
Profit in business comes from repeat customers,
customers that boast about your product and
service, and that bring friends with them ( cited
in Lowernstein, 1995)

• Relationship Marketing
• Focuses on getting and keeping customers
• Concerned with customer loyalty
• Aimed at developing long-term, cost-effective
  links between an organization and its customers
• All customer relationships are worth keeping
• Customer retention
• Impact on profitability and past research has
  claimed that it can be 5 times more expensive to
  obtain a new customer.
• The Pareto rule

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Customer satisfaction and Behaviour type
Proliferation of Loyalists
Hostages
Possibility of Loyalist (expectation lt
experience)
Terrorists
Mercenaries (Expensive to Acquire, Quick to
Depart)
Whove had Bad Experiences with the Company The
Company didnt respond to them.
Defectors
Competitors discounts offering or benefits
1 2 3
4 5
(1050)
Strong dissatisfaction
so so
Strong satisfaction
Source Keki R. Bhote, Beyond Customer
Satisfaction to Customer Loyalty, 1996
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Why customers leave even they are satisfied?
In US, survey of CS about Cars, Almost 90 of
answers are satisfied. Repurchase rate of same
brand car company is below 30.

• Hard for finding rule of relationship between CS
  and customer break away.
• CS does not guarantee repurchase of customers
• Customer loyalty is needed.

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CS strategy
Step 1
Issue Discovery
Customer DB analysis/ Define marketing issues
Step 2
Value Identification
Customer investigation/analysis
Step 3
Needs Differentiation
Customers needs finding / customer value
segmentation
Customer Segmentation
Step 4
Customization
Product/service, channel, reward strategy
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Part. 2 Customer Loyalty

• What is Customer Loyalty?
• Customer Satisfaction Strategy
• Why Customer Loyalty?
• Case Study (online and offline)

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What is Loyalty?
The key to the successful adoption of
relationship marketing lies in the building of
client loyalty in dynamic business environments.
(Morris, 1999)
In a business context loyalty has come to
describe a customers commitment to do business
with a particular organization, purchasing their
goods and services repeatedly, and recommending
the services and products to friends and
associates. (Barnett,2000)
Loyal Customer can mean a consistent source of
revenue over a period of many years. However,
this loyalty cannot be taken for granted. It will
continue only as long as the customer feels they
are receiving better value than they would obtain
from another supplier.
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Why Customer Loyalty?
Relationship between Loyalty and Profitablity
Relationship between CS and C Loyalty
Loyalty (Retention Rate ()
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Profitability ()
Source Keki R. Bhote. Beyond customer
satisfaction to customer loyalty, 1996
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How to build Loyalty?
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Case Study Amazon.com (online case)
Customer Strategy
Building customer loyalty

• Suggest and find what customers wants positively
• Remind customers of relationship and be concerned
  about customers continuously
• Never forget customers who visit before

• Differentiated customer value suggestion
• Intensify reward program

Mis Gold Box without any input my information
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Case Study ScrubaDub (offline case)

• Automotive carwash business Differentiated
  strategy based on CRM

• Differentiated approach to Customers focus on
  quality than customer quantities
• Investigated all costs in terms of customers
  washing times and expenditure per customers

• Findings

1. 75 of whole customers are below 6 times, low
visit rate in a year. Therefore, rest 25 are
visit rate over 60
2. Segmented 5 level in terms of annual visit
rate (the lowest level /low
level/average/high level/the highest level)
Between visit rates and spending money, there is
relationship something.
3. So, relationship marketing need to invest high
on customers who has low revenues and invest low
vice versa.
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ScrubaDub Strategy
Who is the highest value customer? -gt high visit
rates customer Not a customer who owns a large
car
? high income customers ? Jeep or compact car
owners ? A driver who has a car below 3 year
Relationship marketing

• New display design Offer resting place with free
  coffee, snacks
• Building Personal relationship
• Increasing staffs at peak time for saving
  customer waiting time
• Discount scheme(Offering free washing coupon)
• Car washing guarantee
• (free car washing if there is rainy or snowy
  within 3 days after car washing)

Effects average growth rate 12.5 (cf. others
7)
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Part 3. Approach Customer Loyalty Programs

• Loyalty programs
• Strategic reward programs
• Core strategies building reward programs

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Loyalty program Reward

• The plan objectives for this program are
• Effectiveness, cost savings, profitability, etc.
• Develop a greater sense of concern and loyalty
  about the company or brand
• Strengthen communications between customers and
  companies.
• Provide financial rewards to customers who have
  demonstrated performance or contribution
• Enhance the Companys ability to meet or exceed
  its target goals.

Campaign and Reward

• Discrete Communication Model
• individual Approach

• Continuous Communication Model
• Mass Approach

Loyalty
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Reward types
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4 characters to differentiate
4 Attributes
(Accomplishment)
(Continuity)
(Attraction)
(Acquisition)

• Points acquisition
• Reward offering cycle and
• Getting Reward gifts

• Not for short term events
• Induce repurchase

• Based on customer needs
• for offering rewards
• Offering diverse
• Reward options

• For acquiring
• new customer
• For acquiring customers
• from competitors

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Loyalty Program Reward Schedules
(A) Typical Response Functions
(B) An Alternative Response Function

• (Airlines Mileage Card)
• Airlines often use a variation of this scheme
  where an economy class airfare attracts 1 point
  per kilometer or dollar spent
• (GM Auto Card)

• (Citibank)
• Citigold banking, Citibanking , General
• DB According to Household ( offspring get same
  level with parents)

Access to Rewards
point
Accumulated Spending
of Spent
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Part 4. Case Study One of International Hotel in
NZ
Background in Palmerston North, NZ 1. Location
A provincial city, with approximately 75,000
people It is not a major destination for
international visitors to NZ. But it does host a
large number of conferences each year 2.
Objective The one of an international larger
chain of hotels. The business manager believes
that if it were not for the revenue from the
other facilities, the hotel would struggle to
remain open on accommodation revenue alone. 3.
Marketing Corporate marketing programs initiated
by head office have not always worked in the
hotel, so local marketing initiatives have been
launched in Palmerston North. Some specific
events marketing to improve its weekend occupancy
rates and this seems to have been successful.
Follow-up letters. The latest marketing push a
Gold Card to increase new customers and entice
past customers to return.39.50, provides various
discounts and special occasion offers 4.
Methodology A mail survey was sent to all
customers on the hotel Gold Card DB. A 4 page
questionnaire to 700 customers.
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Data Analysis and discussion

• Card purchase and features
• For personal use
• Because good range of benefits offered
• Because good value for money
• The data show that 2/3 purchasers were new
  customers of the hotel.1/3 said they purchased
  the card because of persuasive sellers.
• Purchasers of card were more interested in the
  local facilities like the, bar, family restaurant
  and health club.
• Percent of respondents using the services was
  fairly low, except for the family restaurant to
  cheap deals. As a customer retention strategy its
  success is therefore doubtful.
• There were a number of comments from respondents
  that referred to their dissatisfaction.
  Customers are unlikely to return or become loyal
  if they are dissatisfied with the service
  provided. (Dube, 1994)
• This highlights the point that satisfaction is
  not an accurate indicator of customer loyalty.

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Part 5. Summary Conclusion
Summary
The customers of the hotel who purchased a card
and responded to the questionnaire, exhibit the
characteristics of Morgans mercenaries (1996 ).
High satisfaction, low to medium loyalty and low
commitment to the company. In order to succeed,
loyalty programs need to develop loyalists
(Morgan, 1996)- customers who have high
satisfaction, high loyalty and who will stay and
be supportive of the company.
Conclusion
The hotel case study to build customer loyalty
and therefore retention by selling a discount
card in Palmerton North. Discount card does not
appear to increase customer loyalty and that many
customers buy the card because they perceive it
to be good value for money.
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Part 6. References

• Dowling, Uncles 1997, Do customer loyalty
  programs really work?,
• Sloan Management Review, Vol. 38
• McIlroy, Barnett 2000, Building customer
  relationships do discount cards work?
  Managing Service Quality Journal Vol. 10 2000
• Gustafsson 2000, Improving Customer
  Satisfaction, Loyalty, and Profit Jossey-Bass
  Inc.

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Q
A