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- 1. Because learning changes everything.® Chapter 10 Encouraging Customer Loyalty © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
- 2. © McGraw Hill LLC Learning Outcomes 10-1 Relate the role of customer and brand loyalty to organizational success. 10-2 Establish and maintain trust with customers. 10-3 Explain customer relationship management and its importance to quality service. 10-4 Develop the service provider characteristics that will enhance customer loyalty. 10-5 Describe the provider’s responsibility for establishing and maintaining positive customer relationships. 10-6 Identify strategies that can be used to make customers feel like they are number one. 10-7 Discuss strategies that can enhance customer satisfaction. 10-8 Define quality service. 2
- 3. © McGraw Hill LLC Customer Brand Loyalty 1 Customer brand loyalty is emotional rather than rational. Touch points each time customer and provider come together. Loyalty is based on customer interest in maintaining relationship. • Stems from organization’s concerted ongoing efforts. • Trust builds lasting customer relationships. • Some groups use loyalty or rewards programs. 3
- 4. © McGraw Hill LLC Customer Brand Loyalty 2 Customer loyalty has been impacted by mobile and other electronic communication. Technology important in researching products but varies generationally. • Impact on overall customer satisfaction and loyalty. • U.S. Millennials seek multiple sources of information. Organizations must still demonstrate to customers that they are important. 4
- 5. © McGraw Hill LLC Figure 10.2 Reasons That Customers Stay Loyal to a Brand According to an article in Forbes magazine on the importance of customer retention, customers stated that fast replacement of lost or damaged shipments, simple and quick refund policies, employee credibility and product and service knowledge, and personalized service were some of the main reasons they stayed loyal to a retailer. Access the text alternative for slide images. Source: Gia Swatz, “Don’t Spend 5 Times More Attracting New Customers, Nurture the Existing Ones.” Forbes, September 12, 2018. 5
- 6. © McGraw Hill LLC The Role of Trust 1 To build trust, customers must believe: • Organization has their best interest in mind. • Organization is honest and forthcoming. • Organization has quality products and services backed by a guarantee. Ultimate goal is customer satisfaction. • Customer relationship is very fragile. • Trust can be lost in seconds. 6
- 7. © McGraw Hill LLC Figure 10.3 Examples of Product and Service Breakdowns Examples of product and service breakdowns can be found in virtually any industry. Here are some of the more prominent ones that have caused severe financial and trust issues for companies in the past: Company Product Year Issue(s) Johnson & Johnson Tylenol 1982 Poison in product/death/ illness of consumers Bi Mar Foods Hot dogs 1998 Consumer deaths Sam's Clubs Beef 2007 E. coli illnesses Mattel Toys Various Chinese-made toys 2007 Small magnets/lead paint Toyota Multiple brands 2009 Sticking accelerator Kellogg's Mini-Wheats cereal 2012 Metal shavings in product Trader Joe's Peanut butter 2012 Salmonella outbreak Boeing B787 Dreamliner aircraft 2013 Battery fires GM Multiple models 2014 Faulty ignition Samsung Galaxy Note 7 2016 Overheating battery Boeing Boeing 737 Max 2019 Safety issues 7
- 8. © McGraw Hill LLC The Role of Trust 2 Communicate effectively and convincingly. Display caring and concern. Be fair. Admit errors or lack of knowledge. Trust your customers. Keep your word. Provide peace of mind. 8
- 9. © McGraw Hill LLC Demonstrate Caring Displaying caring and respect for customers is essential. What are some ways you can go “above and beyond” when providing customer service? DON EMMERT/Getty Images 9
- 10. © McGraw Hill LLC The Role of Trust 3 Be responsible for your customer relationships. Personalize your approach. Keep an open mind. Individualize service. Show respect. Elicit customer input. 10
- 11. © McGraw Hill LLC Figure 10.4 Customer Information-Gathering Techniques • Customer comment cards. • Toll-free numbers. • Verbal comments. • Follow-up telephone surveys. • Service contact surveys. • Automated surveys. • Online feedback surveys. • Exit interviews. • Shopper/customer surveys. • Focus groups. • Sales and service records. 11
- 12. © McGraw Hill LLC The Importance of Customer Relationship Management 1 Customer Relationship Management (CRM) Components • Operational. • Relational/Collaborative. • Technological web pages and automated voice response systems. • Analytical. 12
- 13. © McGraw Hill LLC Building Rapport Relationships are a crucial part of customer service. By working to build trust and getting to know customer needs, service providers increase their effectiveness. What techniques do you use to build rapport and trust with customers? Joey Foley/Payless ShoeSource/Getty Images 13
- 14. © McGraw Hill LLC The Importance of Customer Relationship Management 2 Customer Relationships Need a long-term perspective. Customer retention is crucial for survival of the organization. Churn rate indicates: • Customer dissatisfaction. • Better targeted marketing and sales efforts by competitors. • Better pricing by competitors. • Factors related to service provider relationships. 14
- 15. © McGraw Hill LLC Figure 10.5 The Price Premium of Good Customer Service Scale is out of 25% Q: How much would you pay for the following product or service if the company provides a great customer experience? Access the text alternative for slide images. Source: PwC Future of Customer Experience Survey 2017/18 15
- 16. © McGraw Hill LLC The Importance of Customer Relationship Management 3 Customer Relationships continued Customer acquisition marketing is costly. • Seeks new or replacement customers. Customer loyalty programs offer incentives. Small businesses can find it difficult to compete. • Must build interpersonal relationships and reinforce value of customers. 16
- 17. © McGraw Hill LLC Figure 10.6 Five Inexpensive Ways Small Businesses Can Build Customer Brand Loyalty 1. Distribute paper flyers. 2. Cross-promote your discounts and advertisements. 3. Provide discounts or freebies to repeat customers. 4. Follow up with customers through cold calls. 5. Ask for referrals. 17
- 18. © McGraw Hill LLC The Importance of Customer Relationship Management 4 Benefits of Customer Relationship Management • Repeat and referral business. • Less need to obtain new customers. • Reduced marketing costs. • Increased return on investment (ROI). • Enhanced customer loyalty. • Elevated profitability. • Ability to engage in targeted marketing. 18
- 19. © McGraw Hill LLC Figure 10.7 Loyalty Equation Effective product/service delivery + Proactive relationship building. + Elimination of dissatisfiers. + Resolution of problems. + Follow-up. = Customer satisfaction and loyalty. 19
- 20. © McGraw Hill LLC Figure 10.8 The Importance of Effective Complaint Handling For almost three decades, the research firm CX Solutions has conducted various studies to determine the effects of positive customer service and the importance of effective complaint handling. The research has revealed the following: • It will cost an organization at least five times more to acquire a new customer than to keep an existing one. • On average, 50 percent of consumers will complain to a frontline person. • For small-ticket items, 96 percent of consumers do not complain. • At least 50 percent of customers who experience problems will not complain; they will simply go elsewhere. • Customers who are dissatisfied will tell as many as 16 friends about a negative experience. • Average business loses 10 to 15 percent of customers per year because of bad service. 20
- 21. © McGraw Hill LLC The Role of Channel Partner Relationships on Customer Loyalty Three Types of Channel Partners • Transactional or indirect. • Tactical. • Strategic. 21
- 22. © McGraw Hill LLC Provider Characteristics Affecting Customer Loyalty 1 Responsiveness Adaptability Communication Skills Decisiveness Enthusiasm Ethical Behavior • Code of ethics. 22
- 23. © McGraw Hill LLC Positive Image Customers have many choices for service. Each person in the organization must go out of his or her way to project a positive image and work to project a “can-do” attitude with customers. What do you do to show that you are worthy of your customers’ patronage and support? Mangostock/Age Fotostock 23
- 24. © McGraw Hill LLC Provider Characteristics Affecting Customer Loyalty 2 Initiative Knowledge Perceptiveness Planning Ability • Contingency plans. • Planning process model. Problem-Solving Ability Professionalism 24
- 25. © McGraw Hill LLC Figure 10.11 Planning Process Model Access the text alternative for slide images. 25
- 26. © McGraw Hill LLC Making the Customer Number One Regard moment of truth or contact points as opportunities to provide excellent service. Establish Rapport Identify and Satisfy Customer Needs Quickly Exceed Expectations Follow Up 26
- 27. © McGraw Hill LLC Providing for Special Needs Customers You win customer loyalty by providing extra service to the customer. Organizations must assess individual needs and determine how to meet those needs better than the competition does. In this case, customers who have mobility impairments or limitations will keep coming back to this establishment because they have provided transportation for those with disabilities. How can you provide extra service for customers with special needs? Libby Welch/Alamy Stock Photo 27
- 28. © McGraw Hill LLC Enhancing Customer Satisfaction as a Strategy for Retaining Customers 1 Provide Quality Service To Customers • Pay attention. • Deal with one customer at a time. • Know your customers. • Give customers special treatment. • Service each customer adequately. 28
- 29. © McGraw Hill LLC Great Service Getting customers to visit or contact your organization is just the first step in the customer– provider relationship. Each person must strive to make the experience a positively memorable one so that he or she continues to return and tells others about the great service that he or she received. What is your role in creating memorable experiences that help retain customers? Fotosearch Premium/Getty Images 29
- 30. © McGraw Hill LLC Enhancing Customer Satisfaction as a Strategy for Retaining Customers 2 Provide Quality Service To Customers continued • Do the unexpected. • Handle complaints effectively. • Sell benefits, not features. • Know your competition. • Cost of dissatisfied customers. 30
- 31. © McGraw Hill LLC Strive for Quality Quality of Service • Customer’s perception of quality is prime reason their return. • Total quality management (TQM) and continuous quality improvement (CQI). • Work to achieve an exemplary rating on the relationship-rating point scale. 31
- 32. Because learning changes everything.® www.mheducation.com © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Editor's Notes
- This chapter mentions the importance of establishing and maintaining trust with customers, related the role of customers and brand loyalty to organizational success, explains customer relationship management its importance to quality service, and develops the service provider characteristics that will enhance customer loyalty.
- customer brand loyalty Describe the tendency of customers to return to a product or organization regularly because of the service and satisfaction they receive. touch point Any instance in which a service provider or organization (e.g., face-to-face, in writing, through technology) interacts with a customer. It is an opportunity to influence customer loyalty and enhance the customer relationship.
- Customer loyalty has been impacted to some degree by the advent of mobile and other types of electronic communication devices. These allow consumers to easily find a way to provide feedback on products and services to others. They also help consumers reach out for information that aids them make a buying decision. With competing products being only a mouse click away, a customer can research numerous sources and make a buying decision within a matter of minutes.
- Through words and actions, service providers can show that they are truly there to assist customers meet their needs, wants, and expectations. Figure 10.2 provides statistics from an article on reasons that customers remain loyal to a brand.
- trust Key element in cementing interpersonal relationships. customer satisfaction A marketing term that is used to describe how well an organization is doing in providing products and services that meet or exceed a customer’s needs and expectations. To gain and maintain trust, you and the organization must actively work toward incorporating positive values and beliefs into daily actions. Failure to do so can send a message that you are not trustworthy or that you act according to a double standard of saying one thing but doing another.
- Recalls of products that consumers have used for years can immediately take away most or all consumer confidence in the safety and/or reliability of familiar brands.
- Communicate effectively and convincingly: As you communicate, project your feelings and emotions by being positive and enthusiastic. Display caring and concern: Work to demonstrate that you are willing to assist in satisfying their needs. Be fair: Make sure that you treat all customers with respect and consistency. Admit errors or lack of knowledge: Recover from errors by apologizing, accepting responsibility, and then quickly and appropriately solving the problem. Trust your customers: Customers want the best value and service for their money and expect you to provide it. Keep your word: When you tell customers you will do something, do it. Provide peace of mind: Let them know that their calls or messages, questions, and needs will be addressed professionally and in a timely manner.
- Be responsible for your customer relationships: Taking a concerned, one-on-one approach to working with customers helps satisfy immediate needs and build long-term relationships. Personalize your approach: Treating customers as individuals and not as a number or one in a series is very important. Keep an open mind: Make sure that you are positive, objective, prepared, and focused. Individualize service: A simple way of accomplishing individualized service is to ask what else the customer would like. Show respect: When addressing the customer, use his or her last name and title. Show up on time for scheduled meetings. Elicit customer input: Take the time to ask the customer, and then listen and act upon what you are told.
- Customer comment cards Questionnaires that gather customer reactions to service experiences. Toll-free numbers Used to obtain customer opinions after a service encounter. Verbal comments Can be elicited from customers and logged in by service providers. Follow-up telephone surveys Can be done by employees or consultants using a written list of questions. Service contact surveys Mailed or e-mailed to people who have contacted an organization to get information, make a purchase, or use a service can gather more in-depth information. Automated surveys Can be sent to targeted customers and taken through a link to a website following transactions or events in order to get their opinion. Exit interviews Typically one or two quick questions for future reference. Shopper/customer surveys Longer and more detailed than a comment card. Focus groups Six to eight internal or external customers can be formed to do in-depth, face-to-face or online surveys. Sales and service records Can reflect whether customers are returning and what products and services are being used most, and can show patterns of purchases.
- Customer relationship management (CRM) Concept of identifying customer needs; understanding and influencing customer behavior through ongoing communication strategies in an effort to acquire, retain, and satisfy the customer. Components in the CRM process: Operational - Involving sales and service representatives. Relational/Collaborative - Involving interaction with customers through such means as e-mail. Web pages and automated voice response, or AVR, systems. Analytical - Involving analyzing customer data for efforts like marketing and financial forecasting.
- Customer relationships Ongoing friendships with customers focused on making them feel comfortable with an organization and its service providers and enhancing customer loyalty. Customer retention: The ongoing effort by an organization to meet customer needs and desires in an effort to build a long-term relationship and keep the customer for life. Churn rate: Refers to the number of customers who leave a supplier during a given time period.
- Figure 10.5 provides data from a survey on what customers are willing to pay for excellent customer service.
- customer acquisitional marketing Process and systems (e.g., loyalty programs, websites, live events, or customer referrals) used by companies to convert existing prospects or attract and acquire new customers. customer loyalty program An incentive program offered by an organization to reward customers for spending money and purchasing products and services.
- Figure 10.6 shows five simple marketing strategies that small business owners and employees can employ to accomplish marketing goals.
- Benefits of customer relationship management: Organizations with a high degree of brand recognition and a reputation for providing quality products and services at a competitive price are typically rewarded with customer loyalty and repeat and referral business. Less need to obtain new customers through marketing because current customers are aware of offerings and take advantage of them. Reduced marketing costs because direct mail, follow-up, and other customer recruitment activities are reduced. Increased return on investment (ROI) because marketing can target specific customer needs. Enhanced customer loyalty due to pricing and product service offerings that meet current customer needs. Elevated profitability due to increased sales, customer referrals, and longer customer retention during life cycle. Targeted marketing based on statistics on which customers buy more and on high-ticket item sales.
- Figure 10.7 shows an equation that conveys the loyalty concept.
- CX Solutions Arlington, Virginia–based firm specializing in customer service research studies for call centers and many other industries. According to CX Solutions (formerly Technical Assistance Research Program [TARP] Worldwide), many organizations have found that effective complaint handling is crucial for maintaining customer loyalty and business success. Figure 10.8 shows the connection between effective complaint handling and brand loyalty.
- Channel partner: Relationship of two organizations through which partners are able to build a larger and stronger competitive presence in the marketplace. Transactional or indirect: This type of organization provides a distribution outlet or link for your company’s products and services. They maintain no specific loyalty and when the opportunity arises to obtain a newer product or service line, or one that is less expensive, they may move to other suppliers or vendors. Tactical: Includes organizations that are intricately meshed with your company’s internal operations. Strategic: Involves signing agreements through which one organization creates a long-term alliance with another organization to brand, develop, or produce each other’s products or services.
- Responsiveness Be enthusiastic and show appreciation. Use the customer’s title and name. Engage in small talk and offer compliments. Adaptability Keep in mind that you cannot change the customers; however, you can adapt to them and their approach to a situation. Communication skills Continually strive to improve your ability to interact and communicate with a variety of people. Decisiveness Decisiveness relates to being able and willing to make a decision and take necessary actions to fulfill customer needs. Enthusiasm People react positively to enthusiastic employees who appear to be enjoying themselves as they work. Ethical behavior Code of ethics: A set of standards, often developed by employees, that guide the conduct of all employees.
- Initiative Ensures that your customer’s needs are identified and met in a timely fashion. Knowledge Develop a network with other employees throughout the organization and use that network to gain access to information. Perceptiveness Stay focused on customers and the signals they send. Planning ability Contingency plans: Backup systems or procedures that are implemented when regular ones break down or fail to function as intended. planning process model Five-step process for creating contingency or backup plans to better serve customers when problems arise or things do not go as expected. Problem-solving ability Identify and implement appropriate solutions to the extent that you are authorized to do so. Professionalism Conveyed through your manner of dress, knowledge, appearance of your work area, and your mental attitude.
- Five-step process for creating contingency or backup plans to better serve customers when problems arise, or things do not go as expected. Set a goal Prevent problems from occurring and successfully address customers’ needs. Examine and evaluate the situation Look at all possible factors that could affect a customer interaction and work with your peers and supervisor or team leader to establish criteria for selecting acceptable actions. Identify alternatives Meet with peers and supervisors or team leaders to develop a list of alternatives for dealing with various customer situations. Select the best alternatives After reviewing all the options, select the one that best addresses the targeted goal of providing quality service to customers. Create an implementation plan Develop a system for evaluating success.
- Moment of truth: Any instance when a customer comes into contact with any element or representative of an organization. Contact points: Instances in which a customer connects with a service provider or some other aspect of an organization. Establish rapport Throughout your interaction, continue to be helpful, smile, listen, use the customer’s name frequently, and attend to the customer’s needs or concerns. Identify and satisfy customer needs quickly Use the questioning, listening, observing, and feedback skills to accomplish this. Exceed expectations The result could be the reward of continuing patronage or loyalty from the customer. Follow up After you have satisfied a customer’s needs, follow up with the customer on his or her next visit or via mail, e-mail, or telephone to ensure that he or she was satisfied.
- cost of dissatisfied customers Phrase that refers to any formula used to calculate the cost of acquiring a new customer or replacing a current one as a result of having a dissatisfied customer leave an organization.
- Total quality management (TQM) and continuous quality improvement (CQI) Systematic approaches to identifying and quantifying best practices in an organization and/or industry in order to make improvements in effectiveness and efficiency. A customer’s perception of quality service is often one of the prime reasons for his or her return. Quality service involves efforts and activities that are done well and that meet or exceed customer needs and expectations.