Consumer Behavior

Loyalty
Prepared by: Asmaa El-Hefnawy Mohesn KhairAllah

Islam Bassem

Nader Natout

Mohamed Abo-Elkomsan

Professor: Ehab Mohamed Abou Aish

Agenda
Loyalty Definition & Model Complementary theories of customer loyalty Loyalty Programs Building Loyalty Strategies Market Share Strategies Loyalty & Profit

Consumer Behavior Imperatives

Consumer Behavior Imperatives

Loyalty

Switching

Satisfaction

Loyalty Definition & Model

Customer Loyalty Definition

Nonrandom purchase overtime of one brand from a set of brands by a consumer using deliberate evaluation process

Loyal customers buy more, buy longer and tell more people - that's true customer loyalty."

Aims of customer Loyalty Programs

Sales Revenue
Increased by raising purchase rate or amount

Customer Base
Maintained by building a closer bond between the brand& existing customer

Customer Loyalty Models

An attitude that sometimes leads to a relationship with brand

Expressed in terms of revealed behavior pattern of past purchase

Buying moderated by individuals characteristics, circumstances, purchase situation

An attitude that sometimes leads to a relationship with brand

Attitudinal-loyalty to the brand mainly seen as single brand loyalty

Strong attitude & positive believes towards the brand

Other influence

Expressed in terms of revealed behavior

Habitual revealed behavior

Behavioralloyalty to the brands, mainly divided to few brands

Satisfactory experience & weak commitment to brands

Buying moderated by individuals characteristics, purchase situation

Purchase situation, variety seeking

Codeterminants of buying brands

Individuals characteristics

Complementary theories of customer loyalty

Attitude Approach Behavioral Focus Approach Contingency Approach

Attitude Approach

Aim to increase sales by enhancing beliefs about the brand

Strengthening the emotional commitment of customers to their brand

This is through persuasive advertising and personal service programs Finally marketers bond customer to their brands

Behavioral Focus Approach

Focus on customer loyalty of habitually bought brands

Markers only seek reinforcement of consumer awareness about the brand

Less affected by persuasive advertising than the attitude model Loyalty Programs are usually defensive for example, keep its market share

Contingency Approach

Marketers work on unusual factors such as extending working hours, having 24 hours customer support

they also offers price promotions, deals and special offers

Marketers create the above contingency factors to attract customer loyalty rather than developing loyalty programs

Summary of approaches

CBC : Customer Brand Commitment CBA : Customer Brand Acceptance CBB : Customer Brand Buying

LOYALTY PROGRAMS

Examples of loyalty programs

Loyalty program from an individuals prospective Loyalty program from a market prospective

Loyalty program and profitability pitfalls

Loyalty program from an individuals prospective

Loyalty program for individual customer is the Vehicle to

Increase single brand loyalty Decreases price sensitivity Induce customer resistance to counter offers or counter arguments Dampen the desire to consider alternative brands Encourage word of mouth support and endorsement Attract larger pool of customers Increase the amount of product bought

Loyalty program from a market prospective

There are four different strategies

To try to grow the size of the brand To create a niche brand Big brands to become a super-loyalty brands DJ effect is to exploit the desire of customers for change-of-pace

Loyalty program and profitability pitfalls

Factors affecting loyalty programs

Provide vast amount of data Few of this programs collect data about the complete customer experience Data come from two sources Evaluation on sales effectiveness of loyalty program are often based on a poor quasiexperimental design The choice of benchmark

Whither loyalty programs

Assessing customer loyalty Assessing loyalty programs

Assessing major traps

The choice of benchmark

Level of Loyalty programs

Building Loyalty Stratgy

Action Outline
1. Select your market segment

Identify most valuable customers (what criteria?) Identify customers who might become valuable

2. Design a relationship-building service culture

Identify what type of treatment promotes customer loyalty Identify what loyal customers want to give to you Identify potential for the development of a brand community Design specific communication strategy and message Train staff to understand the importance and the process Create opportunities to invest and receive investments Generate a sense of community among your customers Maintain constant communication with your loyal customers Monitor costs and results of your program

3. Implement a loyalty treatment

4.

Measure effects of program and redesign

Building Strategy- Graphic Depiction

Product Performance

Service Performance

Customer Satisfaction

Retention / Loyalty

Revenue / Profit

Employee Performance

Difficulty in Building true loyalty

According to a report from Mintel Research:

Only 15% of all grocery shoppers are completely loyal to the store where they do their main grocery shopping 29% use one other store 22% use two others

Men are more likely than women to be loyal to a single store

46% of men shop in just one or two main stores

This study helps us to understand that merely spending millions does not creates Loyalty. A continous approach is essential.

Customer Recognition

Customer Recognition is an important aspect of any business or for any Organization. With each loyalty programs Recognition aspect comes into pivotal role. Each customer wants an attention or recognition whom he/she enters into relation with.

The recognition can be Tangible or Intangible.

Dont underestimate Customer recognition.

Economic Value of a Loyal Customer

Understanding loyalty program economics is essential. A loyalty program incurs a cost to an organization which is of prime importance as running these programs is isnt cheap. According to a study by Mckinsey & Company estimated for any Fortune 500 organization a programs 1st year cost makes up for a large amount simultaneously costing in marketing and maintenance. Understanding the economic value of your customers, not just your loyal customers can save tremendous amounts of revenue and effort.

Future of Loyalty Programs

Companies should look for ways to differentiate their loyalty programs while balancing the revenue and the costs.

Focus should be made more specific or segmented like targeting life-style, or interests.
Concentrating resources on high potential and high value customers. Organization's focus should be on broadening customer relationship rather than rewarding.

Coalition programs a new trend will be seen as new concept in the loyalty programs.

Contd ...

Thus we have seen that loyalty programs are of immense value to any organization irrespective of geographical distribution. Providing a better product an impeccable service should be the major objective for any organization. Recognizing the customer and his spending behavior can enable to make more specific rewarding structure. Loyalty programs should not be limited to Rewarding but to broaden relationship with the customer and offering them more liberty.

Market Share Strategies Loyalty & Profit

Market Share Strategies

Managerial Strategy
Generate New Customers
Expand market size Capture share from competitors

Retain Existing Market

Erect switching barriers Increase customer loyalty and satisfaction

Loyalty and Profit

Quality
Quality
Higher premiums Higher margins

Satisfaction
Greater retention Increased purchasing

Loyalty
Guaranteed customer base More accurate budgeting

Satisfactio n

Higher reputation
Higher awareness

Higher price tolerance

Higher firm specific advertising vigilance Higher competitive insulation

More strategic planning

Decreased marketing costs

Loyalty

More positive word of mouth Lower new customers costs

Profit

Higher market expectations

The Value of Loyalty

150 top satisfaction dealers were compared to bottom 150 Higher salesperson retention 30 % lower in advertising costs Higher profit Higher ROI

The Value of a Lost Customer

According to a study conducted by

Visits 4 times more Spending 1000$ per visit Profit margin is 60% Potential profit is 2400$ 2400$ loss if not satisfied

Conceptual Perspective of a Lost Customer

Lost customer status Behavior Outcome New customer status Word of mouth Profit impact

Out product category Essentially satisfied Better alternative

No contact
Dissatisfied Complained Identified

None

Lost for good

Negative
Agitated Unknown Enthused

Negative
Negative None Positive

Failed Reinstated Recovery Transformed

Case Study

INTRODUCTION

Jetstar Airways is a low-cost airline headquartered in Melbourne.

It operates an extensive domestic network as well as regional and international services.

Its main base is Melbourne Airport. Parent company Qantas also has stakes in sister companies Jetstar Asia and Valuair in Singapore

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Key Points

No CRM Lack of Technological related Infrastructure No Segmentation of IA customers No govt. support Innovators but overtaken by Competitors

Customer Service Standards

No Service Manuals Avg. of 4 complaints daily 5% of Dissatisfied Customers voice their dissatisfaction. Poor Complaint Handling Procedures Complaint handling through Excel

CUSTOMER SATISFACTION SURVEY

Customer Satisfaction Survey Results

Correlation between frequency of Travel with IA and Overall Customer Satisfaction. Correlation between the years of travel with IA and Overall Customer Satisfaction. No Correlation between the sex and age of the customer and Overall Customer Satisfaction. Correlation b/w Overall Customer Satisfaction and Business Class Travelers

Overall Customer Satisfaction

30 25 20 15 10 5 0 7 3 18 Neutral Satisfied Very Satisfied 27 26 Very Dissatisfied Dissatisfied

Customer satisfaction and the effect on customer loyalty

100 Zone of loyalty 80
Loyalty (Retention)

60 40 20 Zone of defection 10 Poor Fair Good Satisfaction Score Excellent Zone of indifference

Source: JL Heskett, The Service Profit Chain; The Free Press; New York 1997

Customer Relations Travel Agents Punctuality of Flights Response to Queries Complaint resolution Responsiveness to enquiries Value for Money

35 30 25 20 15 10 5 0 Neutral Satisfied Very Dissatisfied Dissatisfied Very Satisfied

Customer Satisfaction of Individual Factors

Discriminant Analysis Output

1. 2. 3. 4. Bookings Relations Service Quality Value Added

Management Intervention

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