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Managing Relationships and Building Loyalty

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9- 1

Four Stages of Brand Loyalty in a Consumer

Cognitive loyalty perception from brand attribute


information that one brand is preferable to its alternatives

Affective loyalty developing a liking for the


brand based on cumulatively satisfying usage occasions

Conative loyalty commitment to rebuying the


same brand

Action loyalty exhibiting consistent repurchase


Slide 2004 by Christopher Lovelock and Jochen Wirtz

behavior

Services Marketing 5/E

9- 2

What Makes Loyal Customers More Profitable?

Tend to spend more as relationship develops


customers balances may grow may consolidate purchases to one supplier

Cost less to serve


less need for information and assistance make fewer mistakes

Recommend new customers to firm (act as unpaid sales


people)

Trust leads to willingness to pay regular prices vs. shopping


for discounts
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

9- 3

Customer-Firm Relationship
Todays marketers seek to develop long-term relationships with customers. Relationship marketing includes:

Database Marketing: Involves the use of technology by


delivering differentiated service levels to consumers and subsequently tracking the relationship.

Interaction Marketing: Usually in B2B context where people and


the social process also add mutually beneficial value.

Network Marketing: Common in B2B context where companies


commit resources to develop positions in a network of relationships with the stakeholders and relevant agencies.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9- 5

Types of Relationships with Customers

(Table 12.1)

Type of Relationship--Firm and Customer


Nature of Service Delivery
Membership No formal relationship Continuous Cable TV Radio station Insurance Police College enrollment Lighthouse

Discrete transactions Subscriber phone Pay phone Theater subscription Movie theater Warranty repair Public transport

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9- 6

Basic Segmentation Issues: Building an Appropriate Customer Portfolio

Target customers whose needs match firms capabilities Focus on value of prospective customers within each
segment, not just numbers

Avoid targeting customers who might abuse:


our employees, facilities other customers

Create a mix of segments to reduce risks of volatility during


swings of economic cycles

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9- 7

Service-Relevant Segmentation Variables

Timing of service use (e.g., by hour, day, season) Level of skill and experience as co-producer/selfserver

Preferred language in face-to-face contact Access to electronic delivery systems (e.g., Internet) Attitudes toward use of new service technologies

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9- 8

Identifying and Selecting Target Segments


(Mgt Memo 12.2)

User characteristics

demographics psychographics geographic location benefits sought when, where, how services used quantity/value of purchases frequency of use profitability of relationship sensitivity to marketing variables

User behavior

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9- 9

How Customers See Relational Benefits in Service Industries (Research Insights 12.1)

Confidence benefits
less risk of something going wrong, less anxiety ability to trust provider know what to expect get firms best service level

Social benefits
mutual recognition, known by name friendship, enjoyment of social aspects

Special treatment benefits


better prices, discounts, special deals unavailable to others extra services higher priority with waits, faster service

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9 - 12

Common CRM Applications (Mgt Memo 12.2)

Signifies the whole process by which relationships with


customers are built and maintained.

CRM as an enabler, offering a unified customer interface


and allow firms to better understand and segment the customers etc. Applications include:
Data collection
Data analysis Sales force automation Marketing automation Call center automation

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9 - 13

Customer Relationship Strategies with CRM Systems: Key Questions

How should our value proposition change to increase customer


loyalty?

How much customization or one-to-one marketing and service


delivery is appropriate and profitable?

What is the incremental profit potential of increasing share of


wallet with current customers? How much does this vary by customer tier and/or segment?

How much time and resource can we allocate to CRM right now? If we believe in CRM, why have we not taken steps in that
direction before? What can we do today to develop customer relationship without spending on technology?

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

9 - 14