MANAGING RELATIONSHIP

AND BUILDING LOYALTY

Submitted By: Pooja
Roll no : 181325
 WHAT IS CUSTOMER LOYALTY

Customer loyalty is positively related to customer

satisfaction as happy customers consistently favor the
brands that meet their needs. Loyal customers are
purchasing a firm’s products or services exclusively,
and they are not willing to switch their preferences
over a competitive firm.
 STAGES OF CUSTOMER LOYALTY
◦Awareness – customer is aware of company and what it offers
◦Research – customer is considering purchasing, and has
visited website, downloaded resources, etc.
◦Buy – customer has bought product or service
◦Use – customer uses the service that they purchased
◦Repeat – customer purchases from company again
◦Refer – customer refers friends or family members to company
 WHY IS CUSTOMER LOYALITY IS
IMPORTANT TO A FIRM’S PROFITABILITY
◦Customers become more profitable the longer they remain
with a firm
◦Customers / families purchase in greater quantities as they
grow
◦Reduce operating cost
◦Referrals to other customers
◦Price Premiums
THE WHEEL LOYALTY
 BUILDING A FOUNDATION FOR
LOYALTY
◦Targeting the right customers
◦Searching for value , not just for volume
◦Managing the customer base through effective tiering of
service
◦Customer Satisfaction and service Quality are prerequisites
for loyalty
 Targeting the right customers

◦ Loyalty management starts with segmenting the market to match customer needs and firm capabilities.
“Who should we be serving?” is a question that every service business needs to raise periodically. Not
all customers offer a good fit with the organization’s capabilities, delivery technologies, and strategic
direction. Companies need to be selective about the segments they target if they want to build
successful customer relationships. Managers must think carefully about how customer needs relate to
operational elements such as speed and quality, and the physical features and appearance of service
facilities. They also need to consider how well their service personnel can meet the expectations of
specific types of customers, in terms of both personal style and technical competence.
Searching for value , not just for volume
Too many services firms continue to focus on the number of customer they serve without giving
sufficient attention to the value of each customer. Generally speaking heavy users who buy more
frequently and in large volume are more profitable than occasional users.
A bank’s population of customers undoubtedly contain individuals who either cannot be satisfied
given the service level and pricing the bank is capable of offering or will never be profitable given
their banking activity.
“Any bank would be wise to target and serve only those customers whose need it can meet better
than its competitor in a profitable manner. These are the customer who are most likely to remain
with that bank for long period who will purchase multiple products and services, who will
recommend that bank to their friends and relations , and who may be the source of superior
returns to the bank’s shareholder.” Roger Hallowell
Managing the customer base through effective tiering of
service

Marketers should adopt a strategic approach to retaining , upgrading , and even ending
relationship with customers. Customers retention involves developing long- term, cost effective
links with customer for the mutual benefits of both parties , but these efforts need not necessarily
target all the customers of a firm with the same level of intensity.
Levels of customer pyramid: Platinum, Gold , iron , Lead.
Platinum : This type of customer are in very low %age . Contribute large profit share. Less price
sensitive but high service expectation.
Gold: Large customer but individual customer contribute very less in profit to the firm.
Iron : Important to firm to serve gold and platinum customers.
Lead : Generate low revenue to the firm but still require the same level of service as iron
customers.
Customer Satisfaction and service Quality
are prerequisites for loyalty
The satisfaction –loyalty relation can be divided into three main zones: defection , indifference
and affection
Zone of defection: Occurs at very low satisfaction level
Zone of indifference : Occurs at moderate satisfaction level
Zone of affection : Occurs at high satisfaction level.
 STRATEGIES FOR DEVELOPING
LOYALTY BONDS WITH CUSTOMER
◦Deeping the Relationship
◦Encouraging Loyalty
◦Financial Reward
◦Non financial reward
◦Building Higher – level Bound
◦Social Bond
◦Customization
◦Structural Bonds
 STRATEGIES FOR REDUCING
CUSTOMER DEFECTION
◦Analayze Customer Defections and Monitor Declining
Account
◦Address Key Churn Drivers
◦Implementing Effective Complaint handling and service
recovery procedure
◦Increasing Switching cost
Analayze Customer Defections and Monitor Declining
Account

A first step is to understand reasons for customer swithching . These were:

 Core service failure (44% of respondents )
Dissatisfactory service encounter (34% of respondents)
High deceptive or unfair pricing (30% respondents )
Inconvenience in term of time , location or delays (21% of respondents)
Poor response to service failure (17 % of respondents)
Address Key Churn Drivers
◦ Keaveney’s findings underscore the importance of addressing some general churn drivers by
delivering quality service, minimizing inconvenience and other non-monetary costs, and having
fair and transparent pricing. In addition to these generic drivers, there are often industry-specific
churn drivers as well. For example, handset replacement is a common reason for cellular phone
service subscribers to discontinue an existing relationship, as new subscription plans usually
come with heavily subsidized brand-new handsets. To prevent handset-related churn, many
providers now offer proactive handset replacement programs, where their current subscribers
are offered to buy heavily discounted handsets at regular intervals. Some providers even
provide handsets for free to high-value customers or against the redemption of loyalty points.
Implementing Effective Complaint handling and service
recovery procedure

Effective complaint handling and excellent service recovery are crucial for keeping
unhappy customers from switching providers. Well-managed firms make it easy for
customers to voice their problems and respond with suitable service recovery
strategies. In that way, customers will remain satisfied, and this will reduce the intention
to switch.
Increasing Switching cost

Another way to reduce churns is to increase switching costs. Many services have
natural switching barriers. For example it is lot of work for customer to change their
primary bank account. To reduce switching firm can increase switching charges to
create a barrier for switching. A firm with poor service and high switching barriers likely
to generate negative attitude and bad word of mouth.
REFERENCE
◦ Service marketing by (Jochen Wirtz and Chirstopher lovelock)
◦ Google
 OU
K Y
AN
TH