Class on Managing Customer Loyalty

Introduction

• Question: How much better do you have to be than the competition to make customers loyal?
• Case Study: Personal story about staying with a bad bank due to high switching costs.

Key Concepts

• Behavioral Loyalty: Share of wallet; customers give you a large share of their spending.
• Attitudinal Loyalty: Share of heart; customers love you, give referrals, defend you on social media.

Importance of Customer Loyalty

• Study by Bain Consulting: Analyzed customer profitability over time across 20 industries.
  • Key Insight: Profitability increases over time if targeting the right customers.

Strategies for Customer Retention

• Lifetime Value: Retaining customers is more profitable than acquiring new ones due to initial losses.
• High Switching Costs: Lead to customer stickiness.
• Customer Satisfaction: Key driver of retention; however, not enough in highly competitive sectors.

Customer Loyalty Types

1. Behavioral Loyalty: Based on rational, financial metrics.
2. Attitudinal Loyalty: Emotional connection with the brand.

Retention and Acquisition Strategies

• Tiering of Customers:
  • Platinum Customers: High revenue but often not high wallet share.
  • Lead Customers: Often cost more to serve; strategies include cost reduction or exit.
• Acquisition Strategies: Tailored to customer tiers.

Loyalty Programs

• Financial Rewards: Points, freebies.
• Non-Financial Rewards: Recognition, priority services.
• Customizations: Personalized experiences based on customer preferences.

Creating Loyalty Bonds

• Cross-Selling and Bundling: Increase stickiness.
• Social Bonds: Building relationships with customers.
• Structural Bonds: Integrating into customer processes.

Churn Analysis

• Exit Interviews: Understanding why customers leave.
• Proactive Measures: Tailor responses based on churn drivers.

Conclusion

• Wheel of Loyalty: Framework for building customer loyalty.
• Reflection: Identify key takeaways, challenges, and opportunities in managing customer loyalty.