2. “Targeting, acquiring and retaining “right”
customers is the core of many successful service
firms”.
Loyalty in business context used to describe a
customer’s willingness to continue patronizing a
firm over a long term, preferably on an exclusive
basis, and recommending the firm’s products to
friends and associates.
3. 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
4. What Makes Loyal Customers More
Profitable?
• Tend to spend more as relationship develops
– customer’s demand 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
5. Analyzing Why Customers Are
More Profitable over Time (Fig. 12.2)
1 2 3 4 5 6 7
Year
Profit from price
premium
Profit from references
Profit from reduced
op. costs
Profit from increased
usage
Base Profit
Source: Reichheld and Sasser
6. According to Philip Kotler, there are 4 patterns of
Loyalty:
1.Hard-core Loyals: Who buys the brand all the
time.
2.Split Loyals: Who are loyal to two or three
brands
3.Shifting Loyals: Who move from one brand to
another.
4.Switchers: Who have no loyalty to any brand.
7. Customer-Firm Relationship
• 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.
Today’s marketers seek to develop long-term relationships
with customers. Relationship marketing includes:
12. Searching forValue—Not JustVolume
• Focus on number of customers served as well as value
of each customer
– Heavy users who buy more frequently and in larger volumes
are more profitable than occasional users
– Avoid targeting customers who buy based on lowest price
• Firms that are highly focused and selective in their
acquisition of customers grow faster
• “Right customers” are not always high spenders
– Can come from a large group of people that no other
supplier is serving well
• Different segments offer different value
14. Loyalty Bonds with Customers
Excellent
Service andValue
1. Financial Bond
2.SocialBond
3. Customization Bond
4.StructuralBond
Stable
Pricing
Personal
Relationships
Joint
Investments
Shared
processes
and
equipment
s Anticipation/
Innovation
Mass
customization
Customer
Intimacy