Customer Loyalty

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Customer Loyalty

• Stowe Shoemaker, PhD
• University of Houston
• sshoemaker_at_uh.edu
• www.stoweshoemaker.net

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Customer Loyalty Marketing Does Not Equal
Frequency Marketing
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Frequency . . . Focusing on Behavior
When customers give you a greater share of their
transactions than they might have without the
program, usually in exchange for accumulating
miles, points, or other surrogate discounts. You
ask Arent we quibbling here, isnt that
loyalty?
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Rewards Program Commerical
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Loyalty . . . Focusing on Emotion
When the customer feels so strongly that you can
best meet his or her relevant needs, your
competition is virtually excluded from the
considered set, and the customer buys almost
exclusively from you referring to you as their
restaurant or their hotel. Winning maximum
share of heart, mind and wallet.
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Loyalty Program Commerical
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The Evolution of Building Loyalty
Knowledge Relationships
Profitability
Brand Relationships
Frequency Programs
Targeted Promotions
Sales
Strategic
Tactic
Price driven, segmented, transaction based.
Added value to product, support price,
customized, strengthen brand.
Knowledge, Help support VAR in loyalty
Push traffic, no targeting, discounts,
little measurement.
Still push, discounts, some measurement.
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Loyalty Circle
Process
Exit
Exit
Exit
Value (Added and Recovery)
Communication
Exit
Fluid
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Value

• Seeks to create new value for customers and then
  share the value so created between producer and
  consumer.
• Value is created with customers, not for
  customers.
• Requires that a company design and align its
  business processes, communications, technology
  and people in support of the value individual
  customers want.
• Types of Value
• Value Added
• Value Recovery

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Perceived Benefits Perceived Price
Perceived Value
Perceived Price total cost to buyer purchase
pricestartup (e.g., acquisition,
transportation, etc.)post- purchase
(e.g., risk of poor performance)
Perceived Benefits some combination of physical
attributes, service attributes, ease
of use, etc.
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Components of Value -continued

• Financial
• Temporal
• Functional
• Emotional/Psychological
• Experiential
• Social
• Trust
• Identification with organization

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Functional

• Does the product or service do what is suppose to
  do?
• Do we convey the functional value to the
  consumer?
• RATER SYSTEM

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Dimensions of Service Quality

• Reliability
• Assurance
• Tangible
• Empathy
• Responsiveness

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Components of Value -continued

• Financial
• Temporal
• Functional
• Emotional/Psychological
• Experiential
• Social
• Trust
• Identification with organization

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Identification with Organization

1. Dedication to the customer
2. Customer support groups
3. Opportunities for public displays of association
4. Active alignment with and support of social
   causes
5. Provide opportunities for contact
6. Distinctive human resource policies

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Critical Questions for Understanding Value

• What customers do business with us (directly or
  indirectly)?
• What do they buy or use and what actions must
  they take to do so?
• What are the best alternatives they perceive? If
  they did not do business with this organization,
  what would they likely do instead?
• What is the overall value of my offer to the
  customer?
• Which product attributes have the biggest
  potential to increase the value?
• Where do I really increase value by increasing
  performance and which improvements are simply
  nice to have?

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Value Recovery

• Complaint Management

Complaints Define What Customers Want
Easier To Complain
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Two Videos on Complaints
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Guest Comment
In fact, I told the management there I was
putting a review on your website about their poor
service and they laughed at me and said go right
ahead, nobody reads the tripadvisor site
Guest comment from TripAdvisor.com
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• Oct. 2005
• 2.5 million visits
• Dec. 2007
• 30 million
• Daily Visits
• Approximately 4 million
• 40 of visits are international

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Lunch-bag Letdown
A phenomenon that occurs when a guests positive
impression of a brand is tarnished by an actual
stay experience.
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Problem Impact Tree
Please indicate if you reported any problems
during your visit and how they were resolved.
No problems experienced . . . . . . . . .
. . . . . . . . . . .1 SKIP X Problems
reported and were resolved in a friendly
effective manner . . . . . . . . . . . .
. . . . . . . . . . 2 Experienced
problems, but didnt report to staff . 3
Problems reported and were not resolved in a
friendly, effective manner. . . . .
. . . . . . . . . . . . 4
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FIGURE II TOTAL SAMPLE (n4259, 100)
Experienced Problems (n683, 16)
No Problems Experienced (n3576, 84)
Problems Reported (n421, 61.6)
Problems Not Reported (n262, 38.4)
Problems resolved in a friendly and effective
manner (n295, 70.1)
Problems not resolved in a friendly effective
manner (n 126, 29.9)
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Loyalty Circle
Process
Exit
Exit
Exit
Value (Added and Recovery)
Communication
Exit
Fluid
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Process

• Focuses on the processes and whatever else is
  needed to advance the customer relationship.

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GAP Model of Service Quality

• Performance gt Expectation ?
• Performance Expectation ?
• Performance lt Expectation ?

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GAPS Model of Service Quality
CUSTOMER
Expected Service
GAP 5
Perceived Service
External Communications to customers
Service Delivery
COMPANY
GAP 4
GAP 1
GAP 3
Customer-driven service designs and standards
GAP 2
Company perceptions of consumer expectations
(from Zeithaml, A. Valerie and
Mary Jo Bitner (1996). Services Marketing. New
York McGraw Hill p. 48.)
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The Four Components of the Process
Physical Product

• Whatever the organization transfers to the
  Customer that can be touched
• Must be Customer-Oriented (create value)

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The Four Components of a Service
Process
Process
ServiceProduct
Physical Product

• Core performance purchased by the Customer
• Includes all interactions with the Customer
• Plan Your Work
• Incorporate RATER system into each plan e.g.
  in-room dining

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Plan Your Work

• Scripts for each service encounter
• Hostess
• We will be asking you throughout your visit how
  we can do things better. Please be aware that
  our goal is to provide a wonderful dining
  experience if we fall short of that goal, please
  do not hesitate to tell us.
• Wait person
• We have great desserts here. They are made
  locally by a woman named Cynthia. Cynthia has
  lived in area for ages and follows a family
  recipe.

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Plan Your Work

• Scripts for each service encounter
• About Our Fish
• As you may know, one should not eat oysters in
  months that have an R. Therefore, we will not be
  serving oysters tonight as we only serve the
  freshest fish here.

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The Four Components of a Service
Process
People
ServiceProduct
ServiceDelivery
Physical Product

• Refers to what happens when your Customer
  interacts with employee
• Work Your Plan
• Example What is said to the customer

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Work Your Plan

• Goal is to incorporate some aspect of the RATER
  system in each interaction

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The Four Components of the Process
ServiceProduct
ServiceDelivery
Physical Product
Service Environment

• The physical backdrop that surrounds the service
• 3 Elements ambient conditions spatial layout
  and signs, symbols, artifacts

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Loyalty Circle
Process
Exit
Exit
Exit
Value (Added and Recovery)
Communication
Exit
Fluid
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Communication

• Sales force
• Outlets
• Reservations
• Direct Marketing
• Electronic Commerce
• Mobile Commerce
• Employees

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Questions?

• sshoemaker_at_uh.edu
• www.stoweshoemaker.net