Seven Questions of Customer Analysis

1. Who are they?

2. What do they do with our product?
3. Why and how do they buy?
4. When do they buy?
5. Where do they buy?
6. Will current customers buy again?
7. Why do potential customers not buy?

BRAND and CRM

Objective
Process- Outcome Measurement
Link between the two e.g.
Brand- Acquiring customers
CRM- Retaining- strengthening Brand in Mind
Space- Beyond Value Proposition Helps in Brand
Extension

Visibility vs. Credibility

Rethinking Marketing
Idea in Brief
Because companies can now interact directly with customers,
they must radically reorganize to put cultivating relationships
ahead of building brands.
The marketing department must be reinvented as a customer
department that replaces the CMO with a chief customer
officer, makes product and brand managers subservient to
customer managers, and oversees customer-focused functions
including R&D, customer service, market research, and CRM.
These changes shift the firms focus from product profitability
to customer profitability, as measured by metrics such as
customer lifetime value and customer equity.

Loyalty

Trust- Proof of Trust or Compulsions- I have no

choice hence repeat purchase
Daily Objective Profit
Periodically- Relationships
Long run Beneficial for Society
(Priye, Haet, Laabh to Nyaya dharm and Satya
Dristi)
Expectation for Justice (Nyaya)- Fulfillment
leads to Relationship building
Relationships with just Grahak, Samaj aur
Sristhi- Nitya Vartamaan

Brand Building- Loyalty

Meri Chahna- I desire
Expectation from the product or Service (
Vastu)
Expectation fulfilled and enhanced by
Vyaktitav ( Personality of employee) and
Vahvar ( Behaviour) --- Ashwast hona i.e
Vishwas or TRUST--- Company policies and
Processes to support this trust Building
Fairness and Justice will be delivered. Har
Manav mein Nyaya ki Apeksha hoti Hai

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
behavior

Apostle

Terrorist

Hostage

High
Low

Satisfaction

Mercenaries

High

Low

Loyalty

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?
9

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.
Incentive to maintain Loyalty Patronage
Loyalty SchemesIs it Antidote to Commodization -Unprecedent level of Sameness
10

Traditional
Frequency

Real
Loyalty

Objectives

Build traffic,
sales and
profits.

Build sales, profits

and the brand.

Strategy

Incentive
repeat
transactions.

Build personal
brand
relationship.

Focus

A segments
behavior and
profitability.

An individuals
emotional and
rational needs,
and their value.

Objectives

Tactics

Traditional
Frequency

Real
Loyalty

Segmented rewards:

Customized recognition:

Transaction status
Free/discounted product
Collateral product discounts
Rational rewards: points, miles
Rewards menu

Measurement

Transactions
Sales growth
Cost structure

Individual value, tenure

Preferred access, service, inside
information
Value-added upgrades, add-ons
Emotional, trophy rewards
Tailored offers/messages

Individual LTV
Attitudinal change
Emotional response

loyalty currencies
Points-led

Discount-led

Encourage members to
collect and spend their
units of value
Marketed as points, miles,
stars etc.
Customer view these
points as operating
currency

Tiered/Preferential
pricing: the more you
shop, the less you pay
Lead to spend
substitution: most loyal
customer cease to be most
profitable

Information-led

Privilege-led

Loyalty scheme customers

value help & advice as
much as cash
By providing information
that is objective and
useful, it deepens the trust
among customers

Customers prize access to

services/facilities that
have a rarity value
Benefits are non-cash, and
ongoing depending on the
customer maintaining his
side of the deal, i.e.
spending at required level

Data into action: From raw data

to results
Customer
data

enables

Loyalty
programme data
EPOS(Electronic
Point Of Sales)
data
Traditional
research
methods

Customer
Insight

informs

Basket
segmentation
Basket size/
value
Affluence
Shopping
missions

Customer
segmentation
Value & Loyalty
Lifestyles
Lifestages

Customer
experience

drives

Enabling better
business
decisions

Pricing
Promotions
Ranging
Availability

Building
relationships with
customers
Rewards
Relevant
marketing

* Source: http://www.dunnhumby.com/admin/files/dunnhumbyonloyaltyUK.pdf

Desired
behavior
Increased
customer lifetime
value
Sales growth
Margin growth
Market share

Category

Profitability/Loyalty

Loyalty Strategy

True Friends

Profitable and Loyal

Approach Softly. Reward

with exclusive access to
special events and high
quality limited supply
products

Butterflies

Profitable but disloyal

Milk them with shortterm, hard offers

Barnacles

Unprofitable but very

loyal

Offer them products

related to those they
have purchased

Strangers

Neither Profitable nor

Loyal

Identify early. Invest

nothing

Claim

Contrary Finding

Loyal customers cost less to

serve

Loyal high volume customers

know their value to you and
exploit to get premium service
and discounts
Loyal Customers pay more than Experienced customers believe
other customers
they deserve lower price

Loyal Customers attract more

customers through word of
mouth

Customers spread the word only

if they feel as well as act loyal.
To spot apostles, measure
customer attitude as well as
purchasing power

Some Questions
1. What are the characteristics of Cabo San Viejos
customer base? How healthy is this customer base?
2. Should Cabo San Viejo adopt a rewards program?
3. If the firm were to adopt a rewards program, what
should its strategic objective be? What problem
should the firm be trying to solve? What is the biggest
problem facing this firm (in terms of customer
management)?
4. If the firm were to adopt a rewards program, how
should it be structured? On what basis should points
be awarded? What types of rewards should the firm
offer?

Some Thing to reflect on

Biggest problems facing the firm?
How healthy is the firms customer base? How
well is the firm managing its customer base?
How could a rewards help solve these
problems?
Arguments against program
How to define loyalty?

Financials- CABO
Accommodation

$ 455.97

Additional Services

$ 165.36

Total

$ 621.33

Average Visit

7 days

Average spending in each visit

$ 4349.31

Guests in 2004

8698

Marketing cost

$2.7 million

Acquisition cost

2.7million/8698= $317

Loyalty: 60% of total visits (case exhibit 7) BUT churning through 68% of its new
customer acquisitions every year (case exhibit 6) in spite of High Satisfaction
Average Age: 47 in 1992 to 57 in 2004
Low Occupancy: 60%
67% word of mouth so how effective marketing promotion
little cross-marketing between its resorts and the Cabo DaySpas

A Cycle of Mutual Investment

How Rewards Programs Can Reinforce the Cycle of Mutual Investment

Intrinsic: add value to the firms core

product offering;
Extrinsic: offer rewards that are external to the
firms core offering

Negative scenario
When the fairness of the program is not transparent
to all customers.: Complex rules and see firm as an
opponent to be outplayed.
When the rewards program is overly-dependent on
extrinsic benefits: loyalty to the rewards program
itself, but this does not necessarily translate into
loyalty to the firms core value proposition.
When the rewards program neglects to make
customers feel personally rewarded: deliver a more
personalized consumption experience