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CRM and LoyaltyCRM and Loyalty

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ContentsContents

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 RelationshipPart 1. Customer Relationship

1. CRM

2. Relationship Marketing

3. CRM and Behaviour Type

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What is CRM?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.

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Service/

Product

Satisfaction

dissatisfaction

repurchase

Good wordof mouth

Loyalcustomization

Creating newcustomer

Increaserevenue

Brand switch

Bad wordOf mouth

Losing customer

losing potentialcustomer

Decrease

Revenue

Effect of CRMEffect of CRM

CS Guarantees Companys Revenue?CS Guarantees Companys Revenue?

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CM

(CustomerManagement)

Products

ControlResultSecret

Sales Volume

Departure

Route

Destination

Customers

CommunicationContinuityPublic

Loyalty

Acknowledgement about Relationship

CRM

(Customer

Relationship

Management)

CRM and Customer LoyaltyCRM and Customer Loyalty

There is always the risk that a customer will defect when a competitor offers better

value or a wider range of value added options. -> Loyalty Programs must motivate loyal

buyers to repurchase.

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Relationship MarketingRelationship Marketing

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

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)

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Customer satisfaction and Behaviour typeCustomer satisfaction and Behaviour type

1 2 3 4 5

Strong dissatisfaction so so Strong satisfactio

Possibility ofLoyalist

(expectation 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, snacksBuilding Personal relationshipIncreasing staffs at peak time for saving customer waiting timeDiscount scheme(Offering free washing coupon)

Car washing guaranteeCar washing guarantee(free car washing if there is rainy or snowy within 3 days after car washing)(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 ProgramsPart 3. Approach Customer Loyalty Programs

1. Loyalty programs2. Strategic reward programs

3. Core strategies building reward programs

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Loyalty program: RewardLoyalty program: Reward

The plan objectives for this program are:

2. Effectiveness, cost savings, profitability, etc.

3. Develop a greater sense of concern and loyalty about the company or brand

4. Strengthen communications between customers and companies.

5. Provide financial rewards to customers who have demonstrated performance or

contribution

6. Enhance the Companys ability to meet or exceed its target goals.

Campaign and Reward

Discrete CommunicationModel

individual ApproachLoyalty

Continuous CommunicationModel

Mass Approach

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Reward typesReward types

Promotion

(Price)

Airline Mileage,

Coupon

Lotteries

(Instant Scratchies)

Multi-product

Frequent-buyer

DirectlyDirectly

SupportsSupports

ValueValue

PropositionProposition

OtherOther

indirectindirect

TypesTypes

of rewardof reward

ImmediateImmediate DelayedDelayed

Dowling.,Mark Uncles, 1997

Timing of RewardTiming of Reward

Typeofrewa

rd

Typeofrewa

rd

Continuity

Reward

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4 characters to differentiate4 characters to differentiate

4 Attributes

((AAccomplishment)ccomplishment) (Continuity)(Continuity) (Attraction)(Attraction) (Acquisition)(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 customer

from competitors

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Loyalty Program Reward SchedulesLoyalty Program Reward Schedules

(A) Typical Response

Functions

(B) An Alternative Response

Function

(Airlines Mileage Card)Airlines often use a variation of thisscheme where an economy class airfareattracts 1 point per kilometer or dollar spent

(GM Auto Card)

point

#of $SpentAccumulated

Spending

Accessto

Rewards

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

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Part 4. Case Study: One of International Hotel in NZPart 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 toremain 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 discussionData Analysis and discussion

Card purchase and features

2. For personal use

3. Because good range of benefits offered

4. 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 & ConclusionPart 5. Summary & Conclusion

The customers of the hotel who purchased a card and responded to the questionnaire, exhibit thecharacteristics 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.

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.

Summary

Conclusion

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Part 6. ReferencesPart 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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A&Q