This document discusses customer loyalty programs and how businesses can foster loyal customer relationships. It defines loyal customers as those with a long history of purchases from a preferred provider due to an emotional bond. The document outlines two models - the Resource Investment Model which involves businesses and customers investing special resources in each other, and the Brand Community model where customers are united through a brand. It provides examples of how businesses can give special treatment to valuable customers, seek their input, and build an online community to encourage customer loyalty.

1. RETAILING
Customer Relationship Management
Loyalty Program

2. 2
Customer Relationship
Management (CRM)
Traditional Marketing CRM
Goal: Expand customer base,
increase market share by
mass marketing
Goal: Establish a profitable,
long-term, one-to-one
relationship with customers;
understanding their needs,
preferences, expectations
Product oriented view Customer oriented view
Mass marketing / mass
production
Mass customization, one-to-one
marketing
Standardization of customer
needs
Customer-supplier relationship
Transactional relationship Relational approach

3. Why talk about Loyalty
• Mature Industry
• increasing competition
• Focus on getting more customers
• Market share Vs. share of customer
• Competitive advantage
• Price
• Service quality
• Loyal relationships

4. The bottom line
• 90% of customers who love a company will repeat but
only 30% of customers who like the company will repeat
(Opinion Research Corp.)
• 20-40% of your customers bring 80% of your profits

5. What to expect from loyal customers
• Behaviors:
• Come back frequently
• Buy most expensive products
• Recommend provider to friends
• Give important suggestions
• Emotions:
• Are attached to the provider/staff
• Trust the provider
• Resist changing despite competitors’ persuasion
• Willing to forgive mistakes-relate to product harm crisis?
?

6. What is a Loyal Customer
• Definition: customers with a long record of purchases
from a preferred provider caused by their
psychological and emotional bond with that provider
• Are there various types of loyalty?

7. Types of Loyal Customers
Frequency of Purchases
Attachment
-
-+
High Loyals Latent Loyals
Spurious Loyals Low Loyals
+ Frequency of purchases -
-Attachment+

8. Differentiated Strategy to Loyalty
Segments
“Not all customers were created equal”
• High loyals – most profitable, make them feel like family
(20% of your customers)
• Latent loyals – find out why they can’t come more often,
find other ways they can help, don’t discount
• Spurious loyals – come but don’t care, make them connect
with you, make them wish for special treatment
• Low loyals – don’t get distracted with them, but make sure
they are satisfied (approx. 40-60% of your customers)
?

9. How to foster loyal relationships
• Current loyalty programs
• Ineffective in creating a bond
• Most are simply frequency programs
• Make people shop around and look for deals
• Make customers price sensitive
• Erode profits
We can identify loyal customers but we don’t know
how to generate customer loyalty

10. Foster Customer Loyalty
• RIM (Resource Investment Model)
• BC (Building Community)

11. R.I.M.
Resource Investment Model
Provider’s
investment of
special resources
Customer’s
investment of
special resources
Customer’s
loyalty to
provider
Protect customer’s
equity
Loyal relationships facilitate
special treatment
Morais, Dorsch, & Backman (2004)

12. Types of Resources
Love
Status
Information
Services
Goods
Money

13. Types of Investments
Give – to your valuable customers
1. Make sure that your special customers receive special treatment
2. Send cards for birthdays rather than just for the holidays
3. Make them feel unique (use name, compliment them for helping)
4. Educate them about front and back stage
Receive – from customers
1. Give them opportunities to get to know you (your staff)
2. Help them become advocates of your company (merchandize, web)
3. Seek their opinion
4. Allow them to commit to you with a long term program ?

14. B.C.
Brand Communities
• Definition: group of individuals united through the
consumption of your products
• Harley-Davidson’s “HOGs”
• Club Med’s “Gracious Members”
• Characteristics
• Communality – help and expect help from others
• Brandfests are used to share history (Brandfests are events that
bring consumers together in geo-temporally concentrated events and entail
coordinated activities and brand happenings.)
• Keep consumers to stay connected

15. Building a Community
Community
1. Use a newsletter to share news about customers
2. Develop an online forum for customers to stay in touch
3. Organize annual events “by invitation” for VIP customers
4. Facilitate picture / story sharing
5. Help customers help each other
6. Give a name to the community
7. …
?

16. Action Outline
1. Select your market segment
• Identify most valuable customers
• Identify customers who might become valuable
2. Design a relationship-building service culture
– Identify what type of treatment promotes customer loyalty
– Identify what loyal customers want to give to you
– Identify potential for the development of a brand community
3. Implement a loyalty treatment
– Design specific communication strategy and message
– Train staff to understand the importance and the process
– Create opportunities to invest and receive investments
– Generate a sense of community among your customers
4. Measure effects of program and redesign
– Maintain constant communication with your loyal customers
– Monitor costs and results of your program