Day 6 CRM Loyalty theory and readings:

Develop Loyalty Program:

Mid-term writing: Điểm giữa kỳ 20%

Group develop and analyze the Loyalty program: 10-15 pages
Analyze the loyalty program in one industry of your choice:

Answer the following question for your guidelines:

1/ What are the key objectives of Loyalty program?
2/ Loyalty program design characteristics:
• Design Characteristics of Loyalty Programs
• Reward Structure
3/ Do companies profit by introducing LP?

4/ Analyze the Contribution, benefits and business case of Loyalty

program ?
–
Conclusion
Key issues and challenges
• Key objectives of Loyalty Programs:
 • Building true (attitudinal & behavioral) loyalty
• Efficiency profits:
• Effectiveness profits
• Value alignment

• Examples of Loyalty Programs

• Design Characteristics of Loyalty Programs
• Reward Structure

Review questions:
1. What are the key objectives of loyalty programs? Which of these objectives provide the
strongest competitive advantages?
2. Do companies profit by introducing loyalty programs? Is the success of a company’s
loyalty program dependent on its industry category?
3. How can you measure loyalty? How does loyalty relate to the profitability of a company?
4. Would low-ticket items (coffee, candy, sodas) benefit from loyalty programs? What kind
of incentives might work best?

Efficiency Profits
• Profits that result from a change in customer’s buying
behavior due to the loyalty program
• Change in buying behavior can be measured, in:
• Basket size
• Purchase frequency acceleration
• Price sensitivity
• Share of category requirements (SCR) or share-of-wallet
 • Retention
• Lifetime duration
• Measured in terms of the immediate profit consequences as
compared to profit consequences without loyalty programs –
net of the LP cost

Effectiveness Profits

• Measured in terms of the long-term profit consequences realized through

better learning about customer preferences over time
• Allows sustainable value creation for customers through customization of
products or communication
• Most likely to generate sustainable competitive advantage since it produces
the highest profits in the long run
• The strategy of using a LP to learn about customer preferences may result in
impressive gains for both customers and organizations
• Customers get more of what they truly want, and firms are safe in terms of
not having to engage in a costly mass marketing exercise

Value Alignment
• Goal of aligning the cost to serve a particular
customer with the value he/she brings to the firm
• Allows firms to serve their most valuable customers in the best manner
• The goal of value alignment is particularly critical when there is great
heterogeneity in the customer’s value and in the cost to serve the customer
Example: the airline business, the hospitality industry and the financial
services industry
Some examples:
• Frequent-Buyer programs
– City Bagels, a sandwich retail chain offers every 10th sandwich free
for customers who have nine stamps from previous purchases
– Volkswagen Club and Card
– Customers collect points from Volkswagen (VW) for servicing their
car or buying accessories and from partners of car rental companies
and tour operators
– The points can be redeemed for dealer services, price reductions on
car purchases, and catalog merchandise
– Star Alliance Frequent Flyer Program
– Any flight on any Star Alliance airline counts towards a members
frequent flyer program
• Webmiles.de
– Webmiles allows its members to collect and redeem assets in a
network of retail partners. Thus, the retailers become members in
Webmiles’ partner network
– Webmiles manages the program and the communication with more
than 1 million customers
• Neimann Marcus
– Offers its LP ‘InCircles’ to all customers. Using a shopping card,
customers accumulate points that can be redeemed for exclusive
rewards

• Buitoni Pasta Club

– Buitoni offers a platform for exchange among pasta enthusiasts:
sharing recipes, cooking experiences, and testing innovative product
concepts. The club offers an opportunity for Buitoni to get closer to
heavy end-users
How we keep customers loyal?

Manage Customer bases:

Customer satisfaction and loyalty
CRM:

Loyalty programs and CRM systems as enablers of

loyalty strategies
Loyalty Programs: Are They
for Customer Retention or
Acquisition?
Tamas OsziFebruary 7, 2021
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Here’s a tricky question: which task is a loyalty program most suited for, customer
retention or customer acquisition? From the name alone, you might vote on retention,
but don’t be too hasty. Next-gen loyalty solutions serve just as well to attract new
customers as they do to maintain existing ones. All you need is the right sentiment and
some innovative features.
Strive to Both Attract and Maintain
The reason I called my initial question “tricky” is because picking one over the other can
be detrimental to your business. Even though repeat customers are said to be 130%
more valuable—generating roughly 40% of the revenue for a brand—you should ensure a
healthy influx of new customers as well, because today’s new customers will become
tomorrow’s brand loyalists.

This sentiment was echoed by the participants of our latest webinar with dotdigital.
When asked in a survey about their top marketing priorities for 2021 and onwards, 64%
of respondents stated they would focus on both customer retention and acquisition.
The overwhelming majority of respondents in our survey voted for a combination of retention and acquisition as their main focus.

So we’ve dedicated this article to exploring the various ways you can gear your loyalty
program towards decade-long engagement, as well as achieving instant love that
prompts customers to hit the enrollment button right away.

Check out our full webinar recording with dotdigital to learn even more about the winning
strategies for 2021!
Loyalty Programs as Customer Retention Tools
Helping buyers reach the second or third purchase is often the primary reason
companies opt for a reward program. If you manage to get them invested in the program,
they will not only choose your brand to make business, but also perform actions that
drive additional value.

1) Tiers

Although the whole structure of a reward program is designed to to keep members

engaged, tiers take the cake in terms of longevity. Every purchase customers make adds
to their total, and they reach new levels and receive new benefits.

Most tiered programs have three levels, but if you’re aiming for long-term retention, we
recommend adding more. Tiers also keep members in the ring, because they may lose
their privileges if they don’t buy anything for over a year, which reduces the risk that
they switch to a competitor.

Love, Bonito  is a great example of how to generate interest with tiers: the  benefits are structured incrementally, and there are even
some secret surprises left for Gold members.

2) Birthday & Anniversary Rewards

A quintessential surprise & delight tactic, birthday and anniversary rewards provide great

motivation for most members to stick to a loyalty program. The recipe is easy: offer
customers a freebie or a personal discount during the month of celebration to make
them feel special.

There are only two rules to keep in mind:

 1. Change the reward each year to keep them guessing

2. To avoid freeloaders, let people know that only those who reach a certain tier or annual
spend are eligible

LuisaViaRoma’s surprise birthday email campaign was so popular that it ranked third among the company’s top-performing emails.
Read more about the campaign’s success in our  case study.

3) High-end Rewards

Unlike ordinary rewards, such as coupons or free product samples, experiential

rewards hold true value. They range from a picture signed by an influencer, to a one-of-
a-kind designer product, or even a luxurious weekend at a spa resort.

Receiving such a reward creates a lifetime memory for a loyalty program member.
Experiential rewards have a high perceived value, but also come at a high cost, so they
should be the most expensive listings in your reward catalog. The goal here is to create
incentives that require multiple high-volume purchases, or years of frequent, smaller
purchases.

MATCHESFASHION exemplifies what it means to have experiential rewards: seasonal gifts, early access, and even a VIP-only
lookbook.

4) VIP Clubs

As insider groups within the loyalty program, VIP Clubs are ideal tools for engaging your
most loyal customers. Unlike most brand communities, VIP Clubs require members to
pay an entry fee or reach a high lifetime spend milestone. In exchange, members can get
their hands on luxurious perks, such as early access to the hottest product drops.

As with experiential rewards, VIP Club memberships require prolonged engagement in

order to be redeemed. But because the benefits are often transaction-related (such as
early access, or free shipping), these memberships motivate members to keep spending
in order to make the most out of them.
Swarovski  operates a paid membership program, called the Swarovski Crystal society. In exchange for an annual fee, members are
rewarded with free jewelry each year and free shipping, among other perks.

5) Challenges & Badges

In case you wish to nurture customers in a more subtle manner, you can do so by
implementing challenges or badges into the loyalty program. Based on behavioral
science, these small feats of achievements offer small, incremental benefits for those
who perform an action regularly.

For instance, you can dedicate a badge to weekly sign-ins. That means members who
visit their account regularly can unlock bronze, silver and gold badges. In the meantime,
you ensure they remain up-to-date about the latest offers and campaigns.
German mountaineering product retailer  Bergzeit  integrates the Strava tracker in its loyalty program. This lets members receive
bonus points for completing workout milestones.

Loyalty Programs as Customer Acquisition Tools

But what about the other end of the spectrum? Rewards can be used as a carrot on a
stick to entice customers to join the program and start their journey as a member. Here
are the most effective features for acquisition.

1) Welcome Rewards

The most straightforward incentive is the welcome reward. Those who join receive an
instant discount, one-time free shipping, or another alluring reward. The value doesn’t
need to be high. The emphasis should be on giving something “free” to newly enrolled
members.

Welcome rewards are essential marketing tools you should prominently feature on the
loyalty program’s landing page. Just remember: the benefit should always tie into a
transaction to move people towards their first purchase.
Kellogg’s has a series of opportunities for new members to earn free points. This, in itself, is also a  strong incentive for enrollment.

2) Limited-time Freshman Campaigns

Freshman campaigns function similarly to welcome rewards, but they add FOMO to the
mix. Freshman campaigns are based on the idea that newly enrolled members earn
double points on purchases during their first month. This also ensures they won’t sit on
their discounts.

You don’t have to use freshman campaigns throughout the year. If you wish, you can
introduce a temporary campaign during the holiday seasons or Black Friday. Doing so
helps you capitalize on the holiday rush and gain an edge over the competition.
During a past holiday season campaign,  DSW  temporarily made free shipping available to everyone, saying that if customers wish to
keep using this privilege in the future, all they need to do is register.

3) Gamification
Gamified features are also great customer acquisition tools. Just imagine a prize wheel
on the loyalty program’s landing page. Visitors can spin it to get a random reward, but in
order to redeem their reward, they have to register.

You can also put a twist on existing systems as well. For example, you can use the prize
wheel to gamify people’s welcome reward. This feature works even better for apps,
thanks to solutions such as App Clips.

4) Referral Program

Word-of-mouth is responsible for 20-50% of purchasing decisions. Therefore people are

more willing to enroll if a recommendation comes from a friend. Referral programs are
built on this concept, but you can spice things up even more with an innovative reward
scenario.

For starters, you can ramp up the recruitment process with incremental benefits, where
customers receive more bonuses after the 5th, 10th or 20th friend they invite. Or you
can consider tying benefits to the seasonal freshman campaign, whereupon successful
recruiters are entitled to the double points event.
In its loyalty program, Dr. Brandt  not only uses referrals, but also incentivized reviews to get the word out on its offers.

5) Social Media Contests

Another way to generate buzz and word-of-mouth is to run a hashtag or comment

contest on Instagram. Those who upload their image posing with your products are
entered into a contest, and a few lucky winners receive the grand prize.

Social media contests not only boost your brand’s virality, but also help you discover
potential new influencers. Plus, a whole new community is exposed to the program, and
members of that community will most likely enroll.
An Instagram contest is probably one of the most effective ways to engage with the community, as participants will no doubt share
their experience with friends and family.

Get Ready to Rock & Enroll

Neither customer retention nor customer acquisition is a given, simply because you have
a loyalty program. Instead, you should design the system to excel in one (or both) of
these areas. Hopefully, this article helped you see loyalty programs in a new light.
Here’s our most popular content, a reward planning spreadsheet to set you on the right
track when it comes to brainstorming incentives

Read 2:

Analyzing 7 Well-known
Reward Programs: Amazon,
Kellogg’s, Uber and More
Klari NemethJune 7, 2020
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As life has started returning to normal after COVID-19, customers’ demand for
businesses to honor their loyalty is on the rise. However, when planning a rewards
program, you might feel overwhelmed by the myriad strategies and schemes to choose
from. If you would like to get a headstart on the competition, we will show you how
seven well-known brands approach loyalty and the different game mechanics they’ve
applied to keep their valuable customers by their side.

1. Amazon Prime – Shipping Convenience

Amazon, the largest e-retailer in the world, launched its subscription-based loyalty
program, Amazon Prime in 2005. Introducing a membership fee might feel
counterproductive in today’s competitive market, but it has allowed Amazon to offer
immediate and valuable privileges that free reward programs could never afford.

From the very first day of their memberships, Amazon grants Prime members unlimited
access to their streaming services and offers exclusive prices and savings. The key
benefit of their program, however, is shipping convenience. Members can enjoy free
next-day delivery with 100 million eligible items and no minimum spend threshold.
Furthermore more and more products are being added to the same-day delivery list. In
select regions, Amazon indulges members with a 2-hour grocery delivery
from AmazonFresh, which has been free for Prime members since October 2019.

The more purchases Prime members make, the more value they will get from their subscription in the form of free shipping.

To optimize the investment that the company puts into shipping benefits, Amazon has
introduced the ‘No-rush shipping’ option for members who are willing to wait six
business days to get their orders, instead of the standard two-day shipping that they are
eligible for. In exchange, members earn rewards on future purchases or immediate
discounts.
Currently, Amazon offers a $1.5 digital reward for each purchase delivered with No-Rush Shipping.

2. AutoZone Rewards – Easy-to-understand Rules

The American auto parts retailer AutoZone has a transaction-based loyalty scheme that
is very easy to understand. Each eligible purchase of $20 or more in the previous 12
months earns customers a credit. After members earn 5 credits, AutoZone gives them a
$20 reward, which they are free to use within 90 days.
The simplicity of rules is reflected in the promotion of the program as well. On May 20, 2020, AutoZone offered a $5 bonus reward
to new members.

To engage customers with your loyalty program, it’s really important to keep the rules
simple and clear so members will know what to expect. However, if you plan to
introduce limitations, you should be very cautious and make sure the communication of
changes is equally as digestible. AutoZone, which introduced new expiration rules for
their credits and rewards without notifying customers sufficiently, has incurred costs of
$48.9 million for their oversight.

The company is still doing great things with their program, though. As plastic cards are
being crowded out of customer’s wallets, AutoZone’s reward program is now accessible
online or in-app. The downside is, customers need to download it. A more seamless
alternative might be using digital cards made for Mobile Wallets, as they are available on
all phone systems from the get-go.
With the digital membership card in the AutoZone mobile app, customers can earn and use credits in store.

3. Kellogg’s Family Rewards – Engagement Through

Rewards
For FMCG brands that sell their products through retailers, it’s especially important to
find ways to communicate with customers directly. By building a standalone website for
its loyalty program, Kellogg’s is able to engage with Family Rewards members,
even outside of the buying cycle.
Kellogg’s was originally asking customers to enter codes that they could find inside
product packaging, but five years ago it was one of the first companies to implement
handier, receipt-based earning. Members can upload their online or in-store receipts via
text message, on KFR.com, or send them in via email.

Receipt uploads are not only rewarded with points, but members can support a good cause as well. After every Kellogg’s Frosted
Flakes purchase, Kellogg’s donates $1 to DonorsChoose.org through the Mission Tiger initiation.

To make it easier to earn points, Kellogg’s has partnered up with various retailers by
providing an option to attach retailers’ loyalty cards to Family Rewards accounts. As
soon as the loyalty card is added, customers won’t need to upload their receipts
anymore. Instead, points will automatically be issued every time their card is presented
to the cashier.

The heart of Kellogg’s Family Rewards program is the exceptionally wide range of
rewards they offer. This includes monthly sweepstakes, donations, free recipes, gift
cards, downloadable coloring pages, books, apparel, and free discount coupons, just to
name a “few”’.
The variety of rewards available to redeem guarantees that the program is equally rewarding for every member of the family.

4. The Vitamin Shoppe Healthy Awards –

Supercharging the Loyalty Ladder
Omnichannel nutrition supplement brand, The Vitamin Shoppe, revamped its reward
program a year ago. Healthy Awards is now a hybrid program that mixes the elements of
traditional earn-and-burn loyalty program mechanisms with spend-based tiers and
personalized rewards.

The program incentivizes repeat purchases with a complex program logic. While
customers can climb the loyalty ladder by spending more (Silver membership after $200
spent and Gold membership above $700), points also accumulate faster as customers
reach higher tiers.
Bronze level members need to spend $125 to earn a $5 reward, however as a Gold member the same coupon is available after
spending $83.

The Vitamin Shoppe offers educational content and nutritional coaching sessions as free
perks for each of their loyalty members. These rewards help customers to find the
Vitamin Shoppe products that support their personal fitness goals.
Nutritionists prepare customized meal plans for Silver and Gold members after an online coaching session.

Like other brands, The Vitamin Shoppe responded to the COVID-19 crisis by introducing
contact-free pickup and online community events, but the nutrition company didn’t
forget about their loyalty members and well-deserved rewards either. The validity of
rewards has been extended from 60 to 90 days to ensure that everyone can use their
coupons in time.

5. Uber Rewards and Uber Pro – Stress-free Rides with

Successful Drivers
Uber is constantly expanding its loyalty programs, Uber Reward and Uber Pro, to new
locations, targeting both potential customers and drivers.
Uber has implemented a point-based tier program for both audiences with tailored
incentives and benefits.

Employing the traditional earn-and-burn strategy, the Uber Rewards program offers
customers $5 in Uber Cash after collecting 500 points for eligible Uber rides and Uber
Eats deliveries.
Tiers are determined based on the spending of the last 6 months, even if it’s prior to joining Uber Rewards.

By earning points, members can level up to higher tiers, unlocking benefits that make
using Uber stress-free. Gold members are allowed to rebook their ride without a
cancellation fee, Platinum members get price protection between two of their favorite
destinations, while Diamond status indulges customers with complimentary upgrades
and 24/7 support.

To encourage drivers to provide customers with a great riding experience, Uber started
beta-testing Uber Pro two years ago. Drivers can advance to higher statuses not just
based on the number of rides accomplished, but also on the ratings they receive from
their customers. In addition to cashback on gas and 25% off car maintenance, drivers can
get access to roadside assistance, priority support, or even 100% tuition coverage.
Pro tiers are recalculated every three months to keep drivers motivated to provide high quality service.

As an act of goodwill during the coronavirus crisis, Uber added six months of gratis Uber
Rewards status to Gold, Platinum and Diamond members, and also showed their
generosity by transporting healthcare workers for free.

6. The North Face VIPeak – Million Ways to Earn

Outdoor lifestyle company The North Face has built a reward program that uses the
power of financial rewards to motivate customers to make repeat purchases, engage
with the brand and stay in touch at every channel – the behavior that every brand seeks.
Right after joining the program, members are encouraged to make their first purchase and start earning with a 10% off welcome
coupon.

The program divides the year into three, four-month-long Peak Points Windows, in
which customers can earn points in order to get a coupon at the end of each period. For
every $1 spent online or in-store, customers get 10 points, plus there are plenty of soft
actions to earn points with. Referring friends, downloading The North Face app,
checking in at stores, completing a survey, using a reusable bag or participating in a
campaign are all ways for members to earn additional points.
Just like the title of the program, the naming of membership levels – Basecamp, Halfdome and Summit – resonates with the brand
essence and the target audience.

Despite the innovative point earning options, VIPeak unfolds only one way to reward
customers: the discount coupon earned in the previous Peak Points Window. The
program terms proclaim that members might be offered with further opportunities to
use their points, however the details remain unclear.

7. The Home Depot Pro Xtra – Run Your Business with

Ease
To honor their best customers, The Home Depot launched a loyalty program for
professional customers who purchase work equipment and commodities at a high
volume. With all the benefits that it offers, the Pro Xtra program helps professionals
increase their profit margins by saving money, time and effort.

After logging in, customers can access My Pro Xtra Workbench to find and export all
historical purchase data and invoices, so the data can be easily imported in their
accounting software. Pros can issue buyer ID cards with spending limits for their
employees ensuring all company expenses are tracked on the same account, and with
the Text2Confirm solution in-store employee purchase authorization is quick and easy.

Pro Xtra Paint Rewards is a sub-program in which customers are not only rewarded with discount coupons, but they can get free
direct-to-job site paint delivery and a five-year color history by job.

The program helps save money on each project. A volume discount is applied on each
purchase of $1,500 or more, plus there are over 4,000 items available in The Home
Depot spread with bulk pricing.

Conclusion
Now what if we mix the list of companies and the description of their reward programs.
Would you be able to match them up again? I’m sure you would be. We’ve seen loads of
companies use traditional earn-and-burn solutions, adding perks or tiered discounts and
introducing point earning options of all kinds, but what do the above programs have in
common? They each reflect brand essence and reward customers with tailored benefits

Read 3:

The Profitability of
Customer Loyalty
Daniel HopperJune 12, 2020
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Loyal customers are profitable to a business. We need to look after them.

This week’s blog discusses the topic of customer loyalty, using marketing theory to first
define what loyalty is and how it relates to your relationships with customers.

Marketing strategies businesses can use to enhance the loyalty of their target customer
are also explored.

What is Loyalty?

The mass-marketing approaches of the ’60s and ’70s ignored the role of customer
loyalty as an important parameter of marketing activities. There has long been a shift
from this transaction based-approach into a relationship-based strategy.

The focus changes from acquisition to retention. The new goal is to enhance customer
loyalty by focusing on the lifetime value of existing customers, considered just as
important as attracting new customers.

Loyalty is the maintenance of trust in a person, a party, an institution; which fosters

strong feelings of support or allegiance. An individual has a sense of belonging to a
relationship. In business, this feeling of loyalty a customer feels with a brand or business
yields a deeply held commitment for consistent future consumption. Often, businesses
use repetitious purchase behaviour as an indicator of loyalty. I use the term customer
loyalty in this article as opposed to brand loyalty to emphasise that loyalty is a feature of
people, rather than a characteristic of a brand.

“Customer loyalty is difficult to define. In general, there are three distinctive approaches to
measure loyalty: behavioural measurements; attitudinal measurement; and composite
measurements.” (Nyadzayo & Khajehzadeh, 2016).
Conceptualisations of Customer Loyalty (Uncles, Dowling & Hammond, 2003)
Loyalty pays off
Customer loyalty is profitable. A study found that “when a company retains just 5
percent more of its customers, profits increase by 25 percent to 125 percent.” (Bowen
& Chen, 2001). Loyal customers provide more repeat business and are less likely to shop
around, this higher retention of existing customers reducing marketing costs.

When a brand has generated loyalty from customers, their customer base becomes less
sensitive to the marketing efforts of competitors. It makes sense that business focus
their energy into strengthening relationships with customers, to enhance their loyalty.

The effect of value-adding strategies in a long-term relationship (Ravald &

Grönroos,1996)
Relationship marketing
The foundation for a relationship marketing strategy is “a core service around which to
build a customer relationship, customizing the relationship to the individual customer,
augmenting the core service with extra benefits, pricing services to encourage
customer loyalty, and marketing to employees so that they, in turn, will perform well
for customers (Berry, 1983).

Relationship marketing is marketing activities that attract, develop, maintain, and

enhance customer satisfaction and fostering customer retention. The focus is the
lifetime value of the customer rather than the value of a single transaction –the
underlying assumption being that establishing and maintaining relationships with
customers will foster customer retention. Businesses use strategies to bond with their
customers to enhance their commitment.

As you can see in the model above, trust is a component that comes before loyalty. Trust
is one of the foundations of relationship marketing, and it is a customer’s willingness to
rely on a certain business or brand. This reduces uncertainty and vulnerability, so it gives
customers a good reason to stay in a relationship as they can value relationships that
they do not have to monitor.
Building a relationship is based on the formation of a bond. This bond is the
psychological, emotional, economic, or physical attachment that binds parties together.
The strength of this bond can determine a customers’ commitment and loyalty to a
brand.

Some customers will only bond with the company based on price. The first level of
relationship marketing relies primarily on pricing incentives to secure customers’ loyalty
where business bond with customers on the promise to save money. Service providers
often reward loyal customers with special price offers. This advantage is unsustainable,
and customer bond based on price will never foster true loyalty.
Practising higher levels of relationship marketing gives greater potential for sustained
competitive advantage. Level two is a social bond, and level three is a structural bond.
Structural bonds provide solutions to important customer problems, as discussed by
Berry (1995): “When relationship marketers can offer to target customers value-adding
benefits that are difficult or expensive for customers to provide and that are not readily
available elsewhere, they create a strong foundation for maintaining and enhancing
relationships.”

Targeting Profitable Customers

Certain customers will be more profitable to a business than others. Some are loyalty-
prone if they receive good service, happy to use one brand or business. Whereas other
customers are deal prone, always on the lookout for alternative and discount offers.

These types of customers are stayers and switches. Stayers have the possibility of
lifetime value, as their motivation is to reduce their available choices and repeatedly use
certain suppliers to simplify the process, and it reduces the perceived risks of
consumption. Switchers do not exhibit loyalty and have a repertoire of brands from
which they regularly choose. Having systems to recognize these characteristics of
customers is important to help us target customers who are more likely to stay.

Customer satisfaction
Customer satisfaction is one of the most important criteria for customer loyalty. When
satisfaction levels are high, the potential for loyalty is high; when satisfaction is low,
there is a very low chance of retaining customers. Satisfaction is a popular measurement
that marketers use to determine how happy customers are with their company’s services
and or products.

Businesses can use research such as customer surveys to determine how happy their
customers are and how to improve their experiences. Highly satisfied customers will also
be far more likely to tell friends about your business. There is a correlation between
higher satisfaction and positive word of mouth intent. The same also goes with loyalty — 
loyal customers are more likely to spread positive word-of-mouth and recommend your
business to others.

Tools to enhance loyalty

The cost of replacing defected customers is significantly higher than the cost of retaining
them. To enhance customer loyalty, there are several tools a business can use. I will
discuss four options: Loyalty programs, benchmarking performance, CRM, and branding.

Loyalty programs

A popular strategy for maintaining customer loyalty is through loyalty programs. For
example, a popular one is the coffee card at your local café, often getting the tenth
coffee free. This strategy only tends to work if the frequency of consumption is high.

Loyalty programs provide financial and relationship rewards to customers, and there are
two aims: · One is to increase sales revenues through increased purchase levels, and/or
increasing the range of products consumed. · The second is a defensive aim, to build a
closer bond between the brand and current customers, to maintain them in the current
customer base.

Benchmarking performance

The second strategy to enhance customer loyalty is by benchmarking service quality.

Improving service quality should increase customer loyalty. Relationship marketing and
service improvement go hand in hand. Businesses should do everything they can to keep
improving their customer experience. This service quality adds more value to the core
product, which improves customer satisfaction, strengthening relationship bonds and
increasing loyalty.

Benchmarking a level of performance you expect from your staff and/or systems helps
ensure to keep the level of quality high.

Use customer surveys to analyse your services and take the results of your loyal
customers. Use this as internal benchmarks for customers service quality. This means to
set a minimum standard of service quality. Holding your business to a strict standard
does not ensure every customer will return, but there will be an increase in loyalty.
Furthermore, often dissatisfaction is because of a negative customer service experience
rather than the product or service itself.

CRM — Customer Relationship Management

Advances in technology over the past thirty years has removed many of the barriers for
businesses to maintain relationships with clients and customers. CRM is the managing of
all your company’s relationships and interactions with customers and potential
customers. Email database management for example enables businesses to regularly be
in contact with customers. Because past experiences impact customer satisfaction, the
quality of a CRM can mediate how customer satisfaction translates into loyalty. When
customers perceive a higher quality of CRM, this strengthens relationships.
“CRM quality comprising of trust and commitment is crucial in building and maintaining long-
term relationships and enhancing customer loyalty.” (Nyadzayo & Khajehzadeh, 2016)
Model of customer loyalty (Nyadzayo & Khajehzadeh, 2016)

Brand image

The fourth way to increase customer loyalty is through investing in your branding, and
the image you portray in the minds of customers. Your brand can be a mediator of the
link between satisfaction and loyalty. The more customers connect with your brand, the
more they trust you. Research has shown (Nyadzayo & Khajehzadeh, 2016) that a
stronger brand image can lead to a higher perceived CRM quality, enhancing loyalty. Just
look at Apple around ten years ago!

A strong brand “increases customers’ trust of invisible products, while helping

them to better understand and visualise what they are buying” (Berry, 2000).
That is it for another week and blog — I hope you enjoyed this week’s topic about
customer loyalty and learnt something new that you can implement in your business