Culture To Build Loyalty 090920

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Tim Tyler's presentation at Loyalty Marketing Day 29th September 2009

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Culture To Build Loyalty 090920

  1. 1. Beyond the Marketing Department:Creating an Organizational Culture that Builds Loyalty<br />Thinking of bolting on a Loyalty Program? <br />Be careful…<br />
  2. 2. Do you think this is an issue? Do Loyalty Programs always work?<br />
  3. 3. Physics envy<br />“In physics, it takes three laws to explain 99% of the data; in finance, it takes more than 99 laws to explain about 3%...Economists consequently suffer from physics envy.”<br />Emanuel Derman “Beware of Economists Bearing Greek Symbols” HBR October 2005<br />marketing<br />1<br />Marketers<br />
  4. 4. Loyalty physics – the dream<br />Loyalty <br />Program<br />Marketing <br />Strategy<br />Loyalty <br />Program<br />Marketing <br />Strategy<br />
  5. 5. Customer Response<br />
  6. 6. Making relationship marketing like this…<br />
  7. 7. Alleviating Physics Envy<br />Marketing’s Quantum mechanics<br />Or – why should a Loyalty Program even be considered as part of my marketing strategy? <br />
  8. 8. Underlying customer mechanism? <br />Reciprocity<br />
  9. 9. The type of gift matters<br />Love <br />Status<br />Information<br />Service <br />Goods <br />Money<br />Particular<br />Tangible<br />
  10. 10. Obligation to return the gift in kind<br />Receive discounts – repay with a transaction<br />Tangible repays tangible<br />Receive great service – repay with tendency to loyalty<br />Intangible repays intangible<br />Receive personalised relevant status gifts – repay with loyalty and recommendations<br />Particularist repays particularist<br />
  11. 11. Intangible, particularist gifts create advocates<br />Particularist gifts require trust. It matters who gives the gift, both parties must know each other. This takes time and interaction, making these gifts more expensive than cash discounts. <br />This is where loyalty programs fit – but ‘hands-off’ points & prizes not enough because Intangible gifts must be relevant to have value to the customer; insight into needs and preferences is required.<br />“Loyalty programs are the price you pay for customer data. You make money through the careful use of this data.” Traditional<br />
  12. 12. Customer loyalty; here’s the payload<br />Impact of improving retention, acquisition cost, and margins on customer value<br />Base Case: 70% customer retention<br />Gupta, Lehmann & Stuart “Valuing Customers” Marketing Science Institute No. 01-119<br />
  13. 13. Alleviating Physics Envy<br />Marketing’s Quantum mechanics is reciprocity<br />Marketing’s chain reaction<br />
  14. 14. New Model of Value Creation<br />Influenced to visit community. Some pass along.<br />Pass<br />Along<br />No community visit, but positively influenced. Some pass along.<br />New model:<br />C2C<br />Old model:<br /> B2C<br />Each interaction is an impression<br />1000 impression = $10<br />$10 CPM = $0.50 CPI<br />Pass along continues<br />
  15. 15. Coca Cola, MSI presentation May 2008<br />From… to<br />
  16. 16. Payload<br />Recommendation<br />Loyalty program customers are 70% more likely to advocate for the brand (Colloquy)<br />55%<br />32%<br />Not in program<br />In Program<br />Loyalty Programs can help if WOM is your strategy<br />
  17. 17. Alleviating Physics Envy<br />Marketing’s Quantum mechanics is reciprocity<br />Marketing’s chain reaction is WOMM<br />Marketing’s Uncertainty Principle<br />
  18. 18. Customer engagement & measurement changes behaviour<br />“…customers we surveyed were more than three times as likely to have opened new accounts, were less than half as likely to have defected, and were more profitable than the customers who hadn’t been surveyed.”<br />Paul M. Dholakia and Vicki G.Morwitz“How Surveys Influence Customers” HBR 2002<br /> Hawthorne is a place in the UK and an important Marketing Principle<br />
  19. 19. Some Australian brands are talking to their loyalty program members…<br />
  20. 20. Some Australian brands are talking to their loyalty program members…<br />
  21. 21. Some Australian brands are talking to their loyalty program members…<br />
  22. 22. Some Australian brands are talking to their loyalty program members…<br />
  23. 23. Question…<br />If you have an online community for your organisation, where customers talk to and about you…<br />What sort of things will they ask you to do?<br /><ul><li>Use less comic sans in your email offers? (Marketing can do this alone) or…
  24. 24. Change products, prices, services – takes a company wide response…</li></li></ul><li>Alleviating Physics Envy<br />Marketing’s Quantum mechanics is reciprocity<br />Marketing’s chain reaction is WOMM<br />Marketing’s Uncertainty Principle is the positive impact ‘conversations’ have on customer loyalty<br />But in the real world, where Aussies<br />“… average16 programs in their wallets and are aware or use no more than five (women) or three (men).” Perkler<br />
  25. 25. Customers are not paying attention to us<br />Coca Cola, MSI presentation May 2008<br />
  26. 26. They prefer to talk to each other…<br />What happens in Vegas stays on YouTube, Flickr, Twitter, Facebook…<br />There are over 200,000,000 Blogs<br />54% = Number of bloggers who post content or tweet daily<br />Because of the speed in which social media enables communication, word of mouth now becomes world of mouth<br />25% of search results for the World’s Top 20 largest brands are links to user-generated content<br />34% of bloggers post opinions about products & brands<br />People care more about how their social graph ranks products and services  than how Google ranks them<br />  78% of consumers trust peer recommendations<br />  Only 14% trust advertisements<br />
  27. 27. Customers are generally less loyal<br />52% of high loyal consumers in 2007 had either reduced their loyalty or completely defected from the brand in 2008. <br />© CMO Council & Pointer Media Network. 2009.<br />
  28. 28. Good service is not enough<br />“…75% of customers that defect to a competitor claim that they were satisfied with the enterprise [service] from which they defected.”<br />Gartner Group, CRM analytics and personalization<br />&quot;No one wants to hear this, but there is very little evidence that customer satisfaction is related to loyalty. In our studies, 65-70 percent of all people dissatisfied with a call still will repurchase from that company. However, 40-50 percent of satisfied customers will go on to purchase from someone else.&quot; <br />Yankee Group, reported in CRMDaily.com <br />
  29. 29. “Consumers are like roaches, we spray them with marketing and for a time it works. Then inevitably they develop a resistance.”<br />Bond & Kirshenbaum – “Under the Radar– Talking to Today’s Cynical Consumer”<br />What’s the answer?<br />
  30. 30. 97 empirical studies, 17 years of research<br />These <br />Customer<br /><ul><li>Expectation of continuity
  31. 31. Word of Mouth
  32. 32. Customer loyalty</li></ul>Customer<br /><ul><li>Relationship benefits
  33. 33. Dependence on seller </li></ul>Produce <br /><ul><li> Commitment
  34. 34. Trust
  35. 35. R satisfaction
  36. 36. R quality</li></ul>Seller<br /><ul><li> Relationship investment
  37. 37. Seller expertise </li></ul>Seller<br /><ul><li> Objective performance</li></ul>Customer & Seller<br /><ul><li> Communication
  38. 38. Similarity
  39. 39. Relationship duration
  40. 40. Interaction frequency
  41. 41. Conflict</li></ul>Customer & Seller<br /><ul><li> Cooperation </li></ul>To achieve these results<br />Palmatier, Dant, Grewal & Evans “Leveraging Relationship Marketing Strategies for Better Performance: A Meta-analysis”<br />MSI No. 05-003, October 2005<br />
  42. 42. Relational mediators; largest impact on WOM<br />These <br />Customer<br /><ul><li>Expectation of continuity
  43. 43. Word of Mouth
  44. 44. Customer loyalty</li></ul>Customer<br /><ul><li>Relationship benefits
  45. 45. Dependence on seller </li></ul>Produce <br /><ul><li> Commitment
  46. 46. Trust
  47. 47. R satisfaction
  48. 48. R quality</li></ul>Seller<br /><ul><li> Relationship investment
  49. 49. Seller expertise</li></ul>Seller<br /><ul><li> Objective performance</li></ul>Customer & Seller<br /><ul><li> Communication
  50. 50. Similarity
  51. 51. Relationship duration
  52. 52. Interaction frequency
  53. 53. Conflict</li></ul>Customer & Seller<br /><ul><li> Cooperation </li></ul>To achieve these results<br />Palmatier, Dant, Grewal & Evans “Leveraging Relationship Marketing Strategies for Better Performance: A Meta-analysis”<br />MSI No. 05-003, October 2005<br />
  54. 54. Objective performance – satisfaction – seller expertise<br />These <br />Customer<br /><ul><li>Expectation of continuity
  55. 55. Word of Mouth
  56. 56. Customer loyalty</li></ul>Customer<br /><ul><li>Relationship benefits
  57. 57. Dependence on seller </li></ul>Produce <br /><ul><li> Commitment
  58. 58. Trust
  59. 59. R satisfaction
  60. 60. R quality</li></ul>Seller<br /><ul><li> Relationship investment
  61. 61. Seller expertise</li></ul>Seller<br /><ul><li> Objective performance</li></ul>Customer & Seller<br /><ul><li> Communication
  62. 62. Similarity
  63. 63. Relationship duration
  64. 64. Interaction frequency
  65. 65. Conflict</li></ul>Customer & Seller<br /><ul><li> Cooperation </li></ul>To achieve these results<br />Palmatier, Dant, Grewal & Evans “Leveraging Relationship Marketing Strategies for Better Performance: A Meta-analysis”<br />MSI No. 05-003, October 2005<br />
  66. 66. Loyalty – commitment – seller expertise<br />These <br />Customer<br /><ul><li>Expectation of continuity
  67. 67. Word of Mouth
  68. 68. Customer loyalty</li></ul>Customer<br /><ul><li>Relationship benefits
  69. 69. Dependence on seller </li></ul>Produce <br /><ul><li> Commitment
  70. 70. Trust
  71. 71. R satisfaction
  72. 72. R quality</li></ul>Seller<br /><ul><li> Relationship investment
  73. 73. Seller expertise</li></ul>Seller<br /><ul><li> Objective performance</li></ul>Customer & Seller<br /><ul><li> Communication
  74. 74. Similarity
  75. 75. Relationship duration
  76. 76. Interaction frequency
  77. 77. Conflict</li></ul>Customer & Seller<br /><ul><li> Cooperation </li></ul>To achieve these results<br />Palmatier, Dant, Grewal & Evans “Leveraging Relationship Marketing Strategies for Better Performance: A Meta-analysis”<br />MSI No. 05-003, October 2005<br />
  78. 78. Cooperation – trust – similarity- (conflict)<br />These <br />Customer<br /><ul><li>Expectation of continuity
  79. 79. Word of Mouth
  80. 80. Customer loyalty</li></ul>Customer<br /><ul><li>Relationship benefits
  81. 81. Dependence on seller </li></ul>Produce <br /><ul><li> Commitment
  82. 82. Trust
  83. 83. R satisfaction
  84. 84. R quality</li></ul>Seller<br /><ul><li> Relationship investment
  85. 85. Seller expertise</li></ul>Seller<br /><ul><li> Objective performance</li></ul>Customer & Seller<br /><ul><li> Communication
  86. 86. Similarity
  87. 87. Relationship duration
  88. 88. Interaction frequency
  89. 89. (Conflict)</li></ul>Customer & Seller<br /><ul><li> Cooperation </li></ul>To achieve these results<br />Palmatier, Dant, Grewal & Evans “Leveraging Relationship Marketing Strategies for Better Performance: A Meta-analysis”<br />MSI No. 05-003, October 2005<br />
  90. 90. The clear lesson <br />Relationships depend on customer benefits and your people. You need both firing…<br />Customer<br /><ul><li>Relationship benefits
  91. 91. Dependence on seller </li></ul>#1<br /><ul><li> Commitment
  92. 92. Trust
  93. 93. R satisfaction
  94. 94. R quality</li></ul>Seller<br /><ul><li> Relationship investment
  95. 95. Seller expertise</li></ul>#2<br />Customer & Seller<br /><ul><li> Communication
  96. 96. Similarity
  97. 97. Relationship duration
  98. 98. Interaction frequency
  99. 99. Conflict</li></ul>#3<br />
  100. 100. Pesky customers not as predictable as sub-atomic particles<br />Loyalty Programs work well here<br />Personalisation required here<br />Marketing Strategy<br />
  101. 101. Building a customer loyalty culture<br />
  102. 102. Customer relationship capability, a corporate competence, depends upon;<br />Orientation: an organization’s priorities towards customer relationships & decision making criteria<br />Information: including databases and CIF<br />Configuration: the alignment of organization structures, accountabilities and incentives for customer retention.<br />Day & Van den Bulte “Superiority in Customer Relationship Management: Consequences for Competitive Advantage and Performance”. Marketing Science Institute No. 02-123<br />
  103. 103. Simply put -<br />Customer<br />Strongest link<br />Minimise link<br /><ul><li>Customer recognised everywhere, by all
  104. 104. Company memory
  105. 105. Consistent treatment across touchpoints
  106. 106. Shared objectives & customer insights
  107. 107. Integration of processes & systems</li></ul>Strong link<br />Sally in the Call Centre<br />Company<br />
  108. 108. Loyalty<br />Remember<br />The “virtuous cycle”<br />Remember<br />CustomerInteraction<br />Customer Interaction(better)Customer tells you more<br />Customer Interaction(even better)Sales more efficient,less waste, more profit<br />Increasing convenience for<br />Customer, “switching costs”<br />escalate over time.<br />
  109. 109. d<br />i<br />c<br />i<br />Relationships: Four implementation tasks<br />1. Identifycustomers, individually and addressably<br />2. Differentiate them, by value and needs<br />3. Interactwith them more cost-efficiently and effectively<br />4. Customisesome aspect of the enterprise’s behavior<br />Peppers and Rogers <br />
  110. 110. “Ten Lessons for Improving Service Quality” Leonard Berry, A. Parasuraman, V.A. Zeithaml Marketing Science Institute<br />No. 03-001, 2003<br />Customer satisfaction still has a role<br />
  111. 111. Making the relationship sequence critical<br />CustomerAdvocacy<br />RelationshipMarketing<br />CustomerSatisfaction<br />Quality<br />Glen L. Urban, “Customer Advocacy – is it for You?”<br />eBusiness@MIT Sloan School of Management<br />Paper 175<br />Personalise for loyalty<br />Pre-requisite: Trust<br />
  112. 112. Simplified Checklist of critical elements<br />
  113. 113. IBM Research found: companies with a customer loyalty Orientation have 5 elements<br />CRM done right: executive handbook for realizing the value of CRM<br />By: Steve LaValle and Brian Scheld<br />
  114. 114. 1. A Business Case:<br />Why a customer loyalty strategy?<br />Return on investment; where is the money & how much?<br />Where customer plans fit with other strategic projects; enough corporate resources for success? <br />
  115. 115. 2. Change Management Plan<br />Data<br />driven<br />System<br />thinking<br />Courage<br />Letting go of old<br />behavior<br />Strategic<br />Context for <br />thinking<br />Strategy<br />Customer<br />focused<br />Trust<br />Process<br />Management<br />Improvement<br />Scorecard<br />Trust<br />Balanced<br />view<br />Blame-free<br />environment<br />Employee Behaviors<br />Personalaccountability<br />Open<br />communication<br />Management Behaviors<br />Senior Executive Buy-in<br />Explicit Change <br />Management Project Plan<br />
  116. 116. People make the difference: “Change Roles”<br />Change Agent<br />Change Target<br />Change Advocate<br />Change Sponsor<br />Individual/group who legitimizes the change<br />Individual/group responsible for change implementation<br />Individual/group who actually changes (stakeholders)<br />Individual/group who wants change, but lacks legitimization power<br />
  117. 117. 3. Treatment Plans<br />What types of customers do you have? Which are most valuable? How do they behave differently?<br />How will we treat each type to optimise value to them and the company?<br />What parts of the treatment plans can we deliver through<br />Loyalty Program, eDM, DM, Contact Centre, Office staff etc<br />What do our staff need, where is the value for them?<br />What do our partners need, where is the value for them?<br />Internal Stakeholder assessment & alignment<br />
  118. 118. 4. Ideal Customer State:What work is to be done?<br />A picture of strategy execution in the future, a blue print for,<br />Organisation; the structure, support and development of our staff. Aligned reward systems.<br />Process; the “way we do things around here”. Includes “what we measure”.<br />Information; what data & insight do we provide to help our staff provide the optimum experience to customers<br />Technology; what infrastructure support features do we need<br />Capability gaps between current state and Ideal Customer State; this shows where the work is required to implement the strategy<br />Risks; in closing the gaps<br />Gaps and Risks are specific input into the next requirement…. <br />
  119. 119. 5. Customer Roadmap:Plan the work<br />Plan to implement, task priority and ownership assigned. Project Governance formally in place.<br />
  120. 120. <ul><li>Portfolio managers are “in charge” of devising and executing treatments for different types of customers
  121. 121. Portfolio managers: authority versus responsibility
  122. 122. Authority for pricing, offer, communication flows
  123. 123. Responsibility for customer equity improvement</li></ul>Customer portfolio managers worth a thought<br />
  124. 124. Loyalty Marketing is not yet physics<br />
  125. 125. Happy to take questions<br />www.linkedin.com/in/timwtyler<br />www.twitter.com/timwtyler<br />Skype timwtyler<br />tim@amateras.net<br />www.strikeachord.com.au<br />

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