Customer Loyalty

A Loyal Customer is One Who...

Shows Behavioral Commitment Buys from only one supplier, even though other options exist Increasingly buys more and more from a particular supplier Provides constructive feedback/suggestions Exhibits Psychological Commitment Wouldnt consider terminating the relationship psychological commitment Has a positive attitude about the supplier Says good things about the supplier

Lifetime value of customer

Profit from reduced operating costs Profit from price premiums

Profit

Profit from increased purchases Profit from referrals

Base profit Acquisition

0 1 2 3 4 5 6

Year of customer life

Source: Service Management Interest Group, Harvard Business School

Drivers of loyalty
Operating strategy and service delivery system Service concept: results for customers

Internal service quality

Employee retention Employee satisfaction Employee productivity

External service value

Revenue growth Customer satisfaction Customer loyalty Profitability

Workplace design Job design and decision-making latitude Employee selection and development Employee rewards and recognition Adequacy of tools for serving customers

Service quality/costs to customer, resulting from quality and productivity improvements

Attractive Retention value Repeat (quality/cost business ratio) Referral Service designed and delivered to meet targeted customers needs

Source: Service Management Interest Group, Harvard Business School

Customer Loyalty Measures

Retention Recency Frequency Longevity Amount Referrals

Percent retained over period Most recent event date Average gap/number events over period Start date/total number events Average per order over period Customer gets a customer promotional/ acquisition source

Levels of Retention Strategies

Volume and Frequency Rewards Integrated Information Systems Stable Pricing Bundling and Cross Selling

I. Financial Bonds
IV. Structural Bonds
Excellent Quality and Value

Continuous Relationships

Joint Investments

II. Social Bonds

Personal Relationships

Shared Processes and Equipment

III. Customization Bonds

Social Bonds Among Customers

Anticipation / Innovation Mass Customization

Customer familiarity

WAYS TO WOO Types of loyalty program

Rewards Program Awards points for purchases. Points can be exchanged for rewards unrelated to the brand Rebate Program Awards a gift certificate, redeemable against new purchases, when a customer reaches a spending threshold Appreciation Program Offers a reward selection of your company's products and services in exchange for accumulated points. Partnership Program Rewards a customer's accumulated purchases with a partner company's products or services. Situation Limited product categories for rewarding customers Need for new customer acquisition Need to differentiate from competitors' brands Situation Product line represents a wide retail selection. Rewards to motivate incremental purchases. Rewards to increase in-store traffic. Situation Only to increase customer LTV Rewards encourage customers to sample other products & services Situation Only to acquire new customers Opportunity to prospect a partner company's database Partner company's have similar TA Situation Brand strongly represents a specific customer lifestyle Customers are interested in learning more about your products Rewards not needed to cultivate long-lasting relationships.

Affinity Program Offers special communications, value-added benefits and recognition to valued customers

1% Customers = 24% revenue 114% ROI

4% Customers = 27% revenue 139% ROI

15% Customers = 29% revenue 74% ROI

80% Customers = 20% revenue 53% ROI

Blue Membership Qualification:

Silver VIP Membership

Enroll online or, Contact HHonors

Customer Service Benefits: HHonors Rate at Shops Complimentary Sauna HHonors Meetings 20% Weekend Restaurant Discount

Qualification: 4 qualifying stays 10 qualifying nights American Express Hilton HHonors Platinum Credit Card membership Benefits: 15% bonus on HHonors Base points Complimentary Health Club Privileges VIP-only rewards

Gold VIP Membership

Diamond VIP Membership

Qualification:

Qualification:

16 qualifying stays 36 qualifying nights 60,000 Base points American Express Platinum charge Card membership 25% bonus on HHonors Base points Upgraded Accommodation/Amenities Complimentary Health Club Privileges VIP-only rewards

28 qualifying stays 60 qualifying nights 100,000 Base points 50% bonus on HHonors Base points Reservations Guarantee Upgraded Accommodation/Amenities Complimentary Health Club Privileges VIP-only rewards Reward Planner Service

Benefits:

Benefits:

General benefits

Double Dip Earnings Style Dedicated HHonors reservation service Expedited Check-In Late check-out upon request Express Check-Out Spouse stays free HHonors Guest Manager Free weekday newspaper Ongoing communications eFolio Online Reward Reservations

Enrollment form

Benefits to the Organization

Loyal customers tend to spend more with the organization over time On average costs of relationship maintenance are lower than new customer costs Employee retention is more likely with a stable customer base Lifetime value of a customer can be very high

Benefits to the Customer

Inherent benefits in getting good value Economic, social, and continuity benefits Contribution to sense of well-being and quality of life and other psychological benefits Avoidance of change Simplified decision making Social support and friendships Special deals

Jet Airways recommendation