Service-Loyalty models

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  • 1. Service and Loyalty Models Prepared by Steve Raybould 1
  • 2. Service / Loyalty Models:• Jones and Sasser: Apostle Model• Christopher, Payne and Ballantyne: Segmented Service Strategy• HBR’s Service-Profit Chain (Heskett & Sasser)• Gallup’s ‘Human Sigma’ © Chain• Hay Group’s 7-circle business model Prepared by Steve Raybould 2
  • 3. The ‘Apostle’ Model Source: "Why Satisfied Customers Defect" by Thomas O. Jones and W. Earl Sasser, Jr.in Harvard Business Review, November-December 1995. Prepared by Steve Raybould 3
  • 4. Is every ‘loyal’ customer a satisfied customer?• Is customer loyalty always a product of customer satisfaction and the successful handling of complaints?• Jones and Sasser say it’s not necessarily so.• Their model suggests that we need to understand a customer’s real reason for staying with us.• Their idea has become known as the ‘Apostle Model’ Prepared by Steve Raybould 4
  • 5. Customer types in the ‘Apostle Model’ Satisfaction High Loyalist / Hostage Apostle Loyalty Defector / Mercenary Terrorist Low High Prepared by Steve Raybould 5
  • 6. Customer Types:• Loyalist/Apostle - high loyalty, high satisfaction - "staying and supportive"• Mercenary - low to medium loyalty, high satisfaction - "coming and going; low commitment"• Defector/Terrorist - low to medium loyalty, low to medium satisfaction - "leaving or having left and unhappy"• Hostage - high loyalty, low to medium satisfaction - "unable to switch; trapped" Prepared by Steve Raybould 6
  • 7. Some examples:• Loyalist/Apostle – Customers that keep coming back, even though they may try others.• Mercenary – Customers may be ‘satisfied’, but are still on the look out for a better deal.• Defector/Terrorist – Customers with higher expectations or generally not happy and constantly change product / brand.• Hostage – Customers tolerating ‘the best of a bad lot’, or high costs of changing supplier. Prepared by Steve Raybould 7
  • 8. For which products do you fit the customer types?• Loyalist/Apostle –• Mercenary –• Defector/Terrorist –• Hostage – Prepared by Steve Raybould 8
  • 9. The segmented service strategy Source: : ‘Relationship Marketing’ by Christopher, Payne and Ballantyne. Published by Butterworth Heinemann Prepared by Steve Raybould 9
  • 10. What is the segmented service strategy?• It is a way of identifying, prioritising customer requirements.• The segmented service strategy consists of four stages Prepared by Steve Raybould 10
  • 11. The four stages of the segmented service strategy 1: Define the market structure 2: Segment customer base and determine segment value 3: Identify segments’ service needs 4: Implement segmental service strategy Prepared by Steve Raybould 11
  • 12. Step One: Define the market structure Construct a market map to show relationship of suppliers/producers, intermediaries and the final users. Prioritise channels and channel strategy. Insurance company15% of profits 30% of 10% of profits 30% of profits profits Channel: Channel: Channel: Channel: Insurance Call centre High street e-commerce broker branches Customer Customer Customer Customer Group One Group Two Group Three Group Four Prepared by Steve Raybould 12
  • 13. Step Two: Segment the customer base and determine segment valueIdentify your most suitable segments.Segmentation techniques can include: • Service options • Psychographic • Value sought • Benefit • Industry type • Usage • Geographic • Loyalty • Demographic • Occasion Prepared by Steve Raybould 13
  • 14. Determining segment value1. Determine profit projections for each segment2. Identify potential for increasing customer retention with in each segment3. Determine how much it would cost to improve customer service to levels necessary to achieve desired retention – in each segment4. Calculate net profit per segment – and prioritise Prepared by Steve Raybould 14
  • 15. Step Three: Identify segments service needs Importance to Service Elements Performance Customer Low Medium High Poor Satisfactory Good SPEEDA Segment PRICING OPTIONCompetitorProfile RESPONSIVENESS INFORMATION QUALITY HOURS OF ACCESS CLAIMS HANDLING Prepared by Steve Raybould 15
  • 16. Importance to Low customer HighA SegmentPerformance Chart(For each segment) Low Your perceived performance A B A = Speed B = Pricing C F C = Response D = Information E = Access D F = Claims E High Prepared by Steve Raybould 16
  • 17. Step Four: Implement segmented service strategy Importance to Low customer High1: Identify areas of Lowover-performance andunder-performance. Your perceived performance Service Under SERVICE Performance TARGET CORRIDOR Service Over Performance High Prepared by Steve Raybould 17
  • 18. 2: Identify costs of improvingselective service levels and fit withorganisation’s capabilities. Five areas for developing strategies: 1. Good performance in services valued by attractive customer segments 2. Invest in potentially profitable areas 3. Reduce investment in less attractive segments 4. Withdraw from areas of poor performance in low profitable segments 5. Decide whether to commit in areas of poor performance in attractive segments Prepared by Steve Raybould 18
  • 19. Factors to consider:• Matching segment performance to the organisations capabilities• Identify savings by reducing levels of service in areas of over-performance• Re-allocate expenditure to improve levels of service in areas of under performance• Estimate the additional costs required to achieve the customer retention targets identified in Step Two• Identify potential lifetime profits of segments in net terms. (Potential gross profits minus the expenditure needed to improve customer retention)• Determine segment prioritisation Prepared by Steve Raybould 19
  • 20. 3: Finalise the segmented servicestrategy Identify: • Your organisations offer in strategic terms, and the rationale behind it. • Which segments are you going to focus on, within each channel • The overall lifetime profit improvement based on the selective improvement of service, and the resulting improved customer retention • A clear way of measuring your service performance, so that levels of customer service can be monitored and reviewed Prepared by Steve Raybould 20
  • 21. Harvard Business ReviewArticle “Putting the Service-Profit Chain toWork” published in 1994 and 1998.(Authors: James L. Heskett, Thomas O. Jones,Gary W. Loveman, W. Earl Sasser, Jr., andLeonard A. Schlesinger)Emphasises value of designing a workplaceenvironment that creates satisfied, productiveemployees. Prepared by Steve Raybould 21
  • 22. Prepared by Steve Raybould 22
  • 23. The Gallup ‘Employee Engagement’• Great managers contribute to engaged employees• Emphasizes the human / employee element as the gate to stronger profits.• Uses Gallup’s ‘Human Sigma’© concept which focuses on managing the employee-customer encounter Prepared by Steve Raybould 23
  • 24. Prepared by Steve Raybould 24
  • 25. 5 Rules of ‘Human Sigma’ ©RULE #1: E Pluribus Unum. Employee and customer experiences must be managedtogether -- not as separate entities.RULE #2: Feelings Are Facts. Emotions drive and shape the employee-customerencounter.RULE #3: Think Globally, Measure and Act Locally. The employee-customer encountermust be measured and managed at the local level.RULE #4: There Is One Number You Need to Know. Employee and customerengagement interact to drive enhanced financial performance. And this interactioncan be quantified and summarized with a single performance metric.RULE #5: If You Pray for Potatoes, You Better Grab a Hoe. Have a plan. Sustainableimprovement in the employee-customer encounter requires disciplined local actioncoupled with a companywide commitment to changing how employees are recruited,positioned in roles, rewarded and recognized, and importantly, how they aremanaged. Prepared by Steve Raybould 25
  • 26. The Hay Group 7-circle business model• Reinforces the importance of leaders’ styles and competencies when creating an engaging organizational climate for employees.• Hay Group’s research shows that 20 to 30% of the variance in revenue and profit in organizations can be attributed to the differences in organizational climate. (Leadership competencies, leadership styles, etc.) Prepared by Steve Raybould 26
  • 27. Prepared by Steve Raybould 27