Module 11 Session 9 - Managing Customer Relationship

Managing Relationships and Building Loyalty
Slide 2004 by Christopher Lovelock and Jochen Wirtz
Services Marketing 5/E
12 - 1
The search for customer loyalty
Targeting, acquiring & retaining the right customers is at the core of many
successful service firms.
All businesses aspire to have a database of loyal customers.
Loyalty is described as a customers willingness to continue patronizing a

firm over the long term, purchasing & using its goods & services on a repeated & preferably exclusive basis & recommending the firms products to friends & associates.
12 - 2
What Makes Loyal Customers More Profitable?
Tend to spend more as relationship develops

customers balances may grow may consolidate purchases to one supplier
Cost less to serve

less need for information and assistance make fewer mistakes
Recommend new customers to firm (act as unpaid sales

people or Customer Advocates)
Trust leads to willingness to pay regular prices vs. shopping

for discounts
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E
12 - 3
Analyzing Why Customers Are More Profitable over Time

Profit from price premium
Profit from references

Profit from reduced op. costs Profit from increased usage Base Profit
7
Source: Reichheld and Sasser
Year
12 - 4
Understanding the customer/firm relationship
Relationship
strategies could be focused towards creating single transaction or extended relationships with the customers.
Research by Nichole Coviello, Roderick Brodie, & Hugh Munro suggests

that there are, 4 distinct types of marketing:
1.Transactional
marketing: A transaction is an event during which an exchange of value takes place between two parties. But even a series of transactions does not necessarily constitute a relationship, which requires mutual recognition & knowledge between the parties. When each transaction between a customer & a supplier is essentially discrete & anonymous, with no long-term record kept of a customers purchasing history & little or no mutual recognition between the customer & employees, no meaningful marketing relationship can be said to exist.
12 - 5
Cont..
2. Data base marketing: The focus is on the market transaction but also includes information exchange. Marketers rely on information technology, usually in the form of a database, to form a relationship with targeted customers & retain their patronage over time.
However, the nature of these relationships is often not a close one, with
communication being driven & managed by the seller.
Technology is used to :
a. Identify & build a database of current & potential customers b. Deliver differentiated messages based on consumers characteristics &
preference c. Track each relationship to monitor the cost of acquiring the customer & the life-time value of the resulting purchases.
12 - 6
Cont.
3. Interaction marketing: A closer relationship exists when there is face-toface interaction between customers & representatives of the supplier.
Although
service remains important, value is added by people & social processes. Interactions may include negotiations & sharing of insights in both directions.
Both the firm & the customer are prepared to invest resources to develop a
mutually beneficial relationship. This invest may include time spent sharing & recording information. 4. Network marketing: This type of marketing occurs primarily in a business-to-business context, where firms commit resources to develop positions in a network of relationships with customers, distributors, suppliers, the media, consultants, trade associations, govt. agencies.
The concept is also relevant in consumer marketing environment.

12 - 7
Creating Membership relationships
It is a formalized relationship between the firm & an identifiable customer,

may offer special benefits to both parties.
Services
The
involving discrete transactions can be transformed into membership relationships either by selling the service in bulk or by offering extra benefits to customers who choose to register with the firm.
advantage to the service organization of having membership relationships is that it knows who is its current customers & what use they make of the services offered.
This
information can be valuable for segmentation purposes if good records are kept & the data are readily accessible for analysis.
Knowing
the identities & addresses of current customers enables the organization to make effective use of direct mail, telephone selling- all highly targeted methods of marketing communication.
12 - 8
Types of Relationships with Customers
Type of Relationship--Firm and Customer Nature of Service Delivery

Continuous Membership Cable TV Insurance College enrollment Subscriber phone Theater subscription Health Treatment for corporate member employee No formal relationship Radio station Police Lighthouse Pay phone Movie theater Public transport
Discrete transactions
12 - 9
Identifying and Selecting Target Segments
User characteristics

demographics psychographics geographic location benefits sought
User behavior
when, where, how services used quantity/value of purchases frequency of use
12 - 10
Targeting the right customers

1. Good relationships start with a good fit:
If they want to build successful customer relationships, companies need to

be selective about the segments they target.
Matching customers to the firms capabilities is vital.
Managers also need to consider how well their service personnel can meet
the expectations of specific types of customers , in terms of both personal style & technical competence.
Finally,
managers need to ask themselves whether their company can match or exceed competing services that are directed at the same types of customers.
12 - 11
Cont.
2. Searching for value, not just numbers:
Many service firms still focus on the number of customers they serve without giving
sufficient attention to the value of each customer.
Service
customers who buy based strictly on lower price are not good target customers for relationship marketing at the first place. These deal-prone customers continually seek the lowest price offer.
Acquiring the right customers can bring in long-term revenues, continued growth
from referrals, & enhanced satisfaction.
Attracting the wrong customers typically results in costly churn.
Marketers shouldnt assume that the right customers are always high spenders.
Marketers also need to recognize that some customers simply are not worth serving
because they are too difficult to please or unable to decide what they want.
12 - 12
Cont.
3. Selecting an appropriate customer portfolio:
We can apply the concept of portfolio management
to service businesses with an established base of customers. Different segments offer different value for a service firm.
Like investments, some types of customers may be more profitable than

others in the short term, but others may have greater potential for long-term growth.
Similarly,
the spending patterns of some customers may be stable over time, whereas others may be more volatile.
A wise firm may seek a mix of such segments in order to reduce the risks
that various types of customers might be affected.
12 - 13
Analyzing & managing the customer base
Marketers
should adopt a strategic approach to retaining, upgrading & even terminating customers. Research has confirmed that most firms have several tiers of customers in terms of profitability & that these tiers often different service expectations & needs
12 - 14
The Customer Pyramid

Good Relationship Customers
Platinum Gold Iron Lead

Poor Relationship Customers
Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?
Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?
12 - 15
Tiering the customer base
1.
Platinum: These customers constitute a very small percentage of a firms customer base, are heavy users & contribute a large share of the profits generated. Typically, this segment is less price sensitive but expects highest service levels in return & is likely to be willing to invest & try new services. Gold: It forms a larger percentage of customers than the platinum, but individual customers contribute less profit than do platinum customers. It tend to be slightly more price-sensitive & less committed to the firms. Iron: These customers provide the bulk of customer base. Because their numbers give the firm economies of scale, they are often important so that a firm can build & maintain a certain capacity level & infrastructure, which is often needed for serving gold & platinum customers. Lead: They generate low revenue for the firm.
2. 3.
4.
12 - 16
Retaining, upgrading & terminating customers

Each segment receives a customized service level, based on its requirements &
value to the firm.
The
platinum tier will receive some exclusive benefits not available to other segments. The benefit levels for platinum & gold customers are often designed with retention in mind, because these customers are the ones that competitors would like to entice to switch.
Marketing
efforts can be used to encourage an increased volume of purchase, upgrading the type of service used, or cross-selling additional services to any of the 4 tiers.
For lead- customers, the options are to either migrate them to the iron segment or
terminate them.
Terminating customers comes as a logical consequence of the realization that not

all existing customer relationships are worth keeping. Many relationships are no longer profitable for the firm as they may cost more to maintain the revenues.
12 - 17
The foundations of customer loyalty
The
foundation for true loyalty lies in customer satisfaction. Highly satisfied or even delighted customers are more likely to become loyal apostles or a firm, consolidate their buying with one supplier & spread positive word of mouth.
In contrast, dissatisfaction drives customers away. The zone of defection is at low satisfaction levels. Customers will switch
unless switching costs are high or there are no viable or convenient alternatives. Extremely dissatisfied customers can turn into terrorists
The
zone of indifference is at intermediate satisfaction levels. Here, customers are willing to switch if they find a better alternative.
The zone of affection is at very high satisfaction levels, & customers here
can have such high attitudinal loyalty that they do not look for alternative service providers. Customers who praise the firm in public & refer others to the firm are described as apostles.
12 - 18
The Customer Satisfaction-Loyalty Relationship

Apostle
100
Loyalty (Retention)
Zone of Affection
80
Near Apostle
60
Zone of Indifference Zone of Defection
40
20
Terrorist 0
1
Very dissatisfied
5
Very Satisfied
Neither satisfied Dissatisfied Satisfied nor dissatisfied
Satisfaction
12 - 19
The Wheel of Loyalty

3. Reduce Churn Drivers
Conduct churn diagnostic
1. Build a Foundation for Loyalty

Segment the market Be selective in acquisition Use effective tiering of service.
Address key churn drivers

Enabled through: Frontline staff Account managers Membership programs CRM Systems
Implement complaint handling & service recovery Increase switching costs
Customer Loyalty
Deliver quality service.
Build higher level bonds
2. Create Loyalty Bonds

Give loyalty rewards
Deepen the relationship
12 - 20
Customer Feedback and Service Recovery
12 - 21
Key Questions for Managers to Ask about Customer Complaining Behavior
Why do customers complain? What proportion of unhappy customers complain? Why dont unhappy customers complain? Who is most likely to complain? Where do customers complain?
12 - 22
Customer Response categories to service failures
Complain to the service firm Take some form of public action Take some form of private action Complain to a third party Take legal action to seek redress Defect (switch provider) Negative word-ofmouth
Service Encounter is Dissatisfactory
Take no action
Any one or a combination of these responses is possible

12 - 23
Understanding failures
customer
responses
to
service
To be able to deal effectively with dissatisfied & complaining customers,

managers need to understand key aspects of complaining behavior
Why do customers complain?

a.Obtain restitution or compensation: Often consumers complain to recover some
economic loss by seeking a refund, compensation, &/or have the service performed again.
b.Vent
their anger: Some customers complain to rebuild self-esteem &/or to vent their anger & frustration. When service processes are unreasonable or when employees are rude or uncaring.
c. Help to improve the service: When customers are highly involved with a service,
they give feedback to try & contribute toward service improvements. These customers are motivated by the prospect of getting better service in the future.
d. For
altruistic reasons: These customers want to spare other customers from experiencing the same problems.
12 - 24
Cont..
2. What proportion of unhappy customers complain?
Research shows that an average, only 5-10% of customers who have been
unhappy with a service actually complain.
Although
generally only a minority of dissatisfied customers complain, there is evidence that consumers across the world are becoming better informed, more self- confident, & more assertive about seeking satisfactory outcomes for their complaints.
12 - 25
Cont..
3. Why dont unhappy customers complain?
Some dont wish to take the time to write a letter, fill out a form, or make a
phone call, especially if they dont see the service sufficiently important to merit the effort. be concerned about their problem or willing to resolve it.
Many customers see the payoff as uncertain & believe that no one would
In some situations, people simply do not know where to go or what to do
Additionally, many people may feel that complaining is unpleasant.
12 - 26
Cont
4. Who is most likely to complain?
Research findings consistently show that people in higher socioeconomic

levels are more likely to complain than those in lower levels.
Better education, higher income, & greater social involvement give them
the confidence, knowledge & motivation to speak up when they encounter problems. 5. Where do customers complain?
Studies show that majority of complaints are made at the place where the
service was received.
12 - 27
Customer expectations about their complaints
When a service failure occurs, people expect to be adequately compensated in a fair manner. It was found in a research, that satisfaction with a service recovery was determined by the 3 dimensions of fairness:
Procedural justice: It deals with the policies & rules that any customer will have to go through in order to seek fairness. Customers expect the firm to assume responsibility, which is the key to the start of a fair procedure
1.
2.
Interactional justice: It involves the firms employees who provide the service recovery & their behavior towards the customer. Giving an explanation for the failure & making an effort to resolve the problem are very important. The recovery effort must be perceived as genuine, honest & polite.
Outcome justice: The compensation that a customer receives as a result of the losses & inconvenience incurred because of the service failure. It includes compensation for time & effort spent during service process recovery.
3.
12 - 28
Dimensions of Perceived Fairness in Service Recovery Process

Complaint Handling & Service Recovery Process
Justice Dimensions of the Service Recovery Process Procedural Justice Interactive Justice Outcome Justice
Customer Satisfaction with the
Service Recovery
Source: Tax and Brown Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E
12 - 29
Customer responses to effective service recovery
Service
recovery is an umbrella term for systematic efforts by a firm to correct a problem following a service failure & retain a customers goodwill.
Service
recovery efforts play a crucial role in achieving customer satisfaction.
The true test of a firms commitment to satisfaction & service quality is not
in the advertising promises but in the way it responds when things go wrong for the customer.
Effective
service recovery requires thoughtful procedures for resolving problems & handling dissatisfied customers.
12 - 30
Impact of Effective Service Recovery on Retention
No Problem
Problem, but effectively resolved
84%
92%
Problem Unresolved
0%
46%
60%
10%
20%
30%
40%
50%
70%
80%
90% 100%
Customer Retention
Source: IBM-Rochester study Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E
12 - 31
Principles of effective service recovery systems
Make it easy for customers to give feedback: Many companies have improved their complaint- collection procedures by adding special toll-free phone lines, links on the Web sites, prominently displayed customer comment cards in their branches.
In the customer newsletter, some companies feature service improvements that were the direct result of customer feedback under the motto you told us, & we responded
12 - 32
Strategies to Reduce Customer Complaint Barriers

Complaint Barriers for Dissatisfied Customers
Inconvenience Difficult to find the right complaint procedure. Effort, e.g., writing a letter.
Doubtful Pay Off Uncertain whether any action, and what action will be taken by the firm to address the issue the customer is unhappy with. Unpleasantness Complaining customers fear that they may be treated rudely, may have to hassle, or may feel embarrassed to complain.
Strategies to Reduce These Barriers

Make feedback easy and convenient by: Printing Customer Service Hotline numbers, e-mail and postal addresses on all customer communications materials.
Reassure customers that their feedback will be taken seriously and will pay off by: Having service recovery procedures in place, and communicating this to customers. Featuring service improvements that resulted from customer feedback. Make providing feedback a positive experience: Thank customers for their feedback. Train the frontline not to hassle and make customers feel comfortable. Allow for anonymous feedback.
12 - 33
Cont..
2. Enable effective service recovery:
Effective service recovery procedure should be:

a.Proactive:
Service recovery needs to be initiated on the spot, ideally before customers have a chance to complain. Service personnel should be sensitized to signs of dissatisfaction & ask whether customers might be experiencing a problem.
b.Planned: Contingency plans have to be developed for service failures, especially

for those that can occur regularly.
c.Recovery
skills must be taught: Effective training arms frontline staff with the confidence & competence to turn distress into delight.
d. Recovery requires empowered employees: Employees should be empowered to use their judgment & communication skills to develop solutions that will satisfy complaining customers. Employees need to have the authority to make decisions & spend money in order to resolve service problems promptly & recover customer goodwill.
12 - 34
Cont
3. How generous should compensation be? How much compensation should a firm offer when there has been a service failure? Or would an apology be sufficient instead? The following rules of thumb can help to answer these questions:
a.What is the firms market positioning?

b.How severe was the service failure?
Let the punishment fit the crime
c.Who is the affected customer?
Long term Loyal or discrete
12 - 35
Cont.
4. Dealing with complaining customers :
Both managers & frontline employees must be prepared to deal with angry customers who are confrontational & sometimes behave in insulting ways toward service personnel.
12 - 36
Cont..
The following guidelines provide specific guidelines for effective problem resolution, designed to calm upset customers & deliver a resolution.
Act quickly, Admit mistakes, but dont be defensive

Show that you understand the problem from each customers point of view Dont argue with customers
Acknowledge the customers feelings

Give customers the benefit of the doubt Clarify the steps needed to solve the problem
Keep customers informed of progress

Consider compensation Persevere to regain customer goodwill
12 - 37
Components of an Effective Service Recovery System
Do the Job Right the Do the Job Right the First Time First Time
Effective Complaint Effective Complaint Handling Handling
Increased Satisfaction Increased Satisfaction and Loyalty and Loyalty Conduct Research Conduct Research Monitor Complaints Monitor Complaints Develop Complaints Develop Complaints as Opportunity as Opportunity Culture Culture Develop Effective Develop Effective System and Training in System and Training in Complaints Handling Complaints Handling Conduct Root Cause Conduct Root Cause Analysis Analysis
Identify Service Identify Service Complaints Complaints
Resolve Complaints Resolve Complaints Effectively Effectively
Learn from the Learn from the Recovery Experience Recovery Experience
Close the Loop via Feedback
12 - 38
Service Guarantees
A growing number of
companies offer customers a satisfaction guarantee, promising that if service delivery fails to meet predefined standards, the customer is entitled to one or more forms of compensation, such as easy-toclaim replacement, refund or credit. is to lower the perceived risks associated with purchase.
From the customers perspective, the primary function of service guarantees
12 - 39
The power of service guarantees
Guarantees are powerful tools for both promoting &

for the following reasons:
achieving service quality
1.
2. 3.
Guarantees force firms to focus on what their customers want & expect in each element of the service.
Guarantees set clear standards, telling customers & employees alike what the company stands for. Guarantees require the development of systems for generating meaningful customer feedback & acting on it. Guarantees force service organization to understand why they fail & encourage them to identify & overcome potential fail points. Guarantees help in reducing the risk of the purchase decision & building long-term loyalty.
4.
5.
12 - 40
How to design service guarantees
Some guarantees are simple & unconditional. Others appear to have been
written by lawyers & contain many restrictions.
Service guarantees should be designed to meet the following criteria:

1. 2. 3. 4.
Unconditional Easy to understand & communicate Meaningful to customers Easy to invoke
5.
6.
Easy to collect
Credible
12 - 41
Types of Service Guarantees
Single attribute-specific guarantee one key service

attribute is covered
Multiattribute-specific guarantee a few important service

attributes are covered
Full-satisfaction guarantee all service aspects covered

with no exceptions
Combined guarantee like the full-satisfaction, adding

explicit minimum performance standards on important attributes
12 - 42
Is it always appropriate to introduce a service guarantee?
Managers
should think carefully about their firms strength & weaknesses before deciding to introduce a service guarantee.
Companies
that have a strong reputation for high-quality service may not need a guarantee.
In contrast, a firm whose service is currently poor must first work to improve
quality to level above that at which the guarantee might be invoked on a regular basis by most of its customers.
In a market where consumers se little financial, personal or physiological risk

associated with purchasing & using a service, a guarantee adds little value but still costs money to design, implement & manage.
Where
little perceived difference in service quality among competing firms exists, the first company to institute a guarantee may be able to obtain a firstmover advantage & create a valued differentiation for its services.
12 - 43
Key objectives of effective customer feedback systems
Many strategists have concluded that in increasingly competitive markets, the

ultimate competitive advantage for a firm is to learn & change more rapidly than competition.
Specific objectives of effective customer feedback systems typically fall into

three main categories:
1.
Assessment & benchmarking of service quality & performance: The objective is to answer the question, How satisfied are the customers? This objective includes learning about how well a firm performed in comparison to its main competitors? How it performed in comparison to the previous year?
12 - 44
Cont..
Whether investments in certain service aspects have paid off in terms of

customer satisfaction?
Often, a key objective of comparison against other units (branches, teams,

competitors) is to motivate managers & service staff to improve performance, especially when the results are linked to compensation. 2. Customer-driven learning & improvements: The objective is to answer:
Why our customers are unhappy? Where & how can we improve?
This objective is about gaining an understanding of the things that other

suppliers do well & those that make customers happy. 3. Creating a customer-oriented service culture
12 - 45
Customer feedback collection tools
Recognizing 1.
that different tools have different strengths & weaknesses, service marketers should select a mix of customer feedback collection tools that jointly deliver the needed information. Total market surveys, annual surveys & transactional surveys: Total market surveys & annual surveys measure satisfaction with all major customer service processes & products. The level of measurement is usually at high level, with the objective of obtaining a global index or indicator of overall service satisfaction for the entire firm.
Overall indices tell how satisfied customers are but not why they are happy or unhappy.
There is a limit to the number of questions that can be asked about each individual process or product.
12 - 46
Cont
In contrast, transactional surveys are typically conducted after customers

have completed a specific transaction & query them about this process in some depth.
All 1. 2.
three types are representative & reliable when designed properly. Representativeness & reliability are required for: Accurate assessment of where the company, a process, branch or individual stands relative to quality goals. Evaluation of individuals, staff, teams, branches &/or processes especially when incentive schemes are linked to such measures.
12 - 47
Cont
2. Service feedback cards:
This
powerful & inexpensive tool involves giving customers a feedback card following completion of each major service process & inviting them to return it by mail or other means to central customer feedback unit.
Although these cards are good indicator of process quality & yield specific
3. Mystery shopping 4. Focus group discussions & service reviews
feedback on what works well & what doesnt, the respondents tend not to be representative & are biased.
5.Unsolicited customer feedback: E.g. Singapore Airlines prints complaints & compliment letters in its monthly employee magazine, Outlook.
12 - 48
Strengths and Weakness of Key Customer Feedback Collection Tools
Multi-level Measurement
Collection Tools
Total Market Survey (inclu. competitors) Annual Survey on overall satisfaction Transactional Survey (process specific)
Service Process Satisfaction Satisfaction
Specific Feedback
Actionable
Represen Potential -tative, for Service Reliable Recovery
First Hand Learning
Cost Effective
Service Feedback Cards (process specific)

Mystery Shopping (service testers) Unsolicited Feedback Recd (Online feedback system) Focus Group Discussions Service Reviews
Meets Requirements:
Fully
Moderate
Little/Not at all
12 - 49
Entry Points for Unsolicited Feedback
Employees serving customers face-to-face or by phone Intermediaries acting for original supplier Managers contacted by customers at head/regional office Complaint cards mailed or placed in special box Complaints passed to company by third-party recipients
consumer advocates trade organizations legislative agencies other customers
12 - 50
Analysis, reporting & dissemination of customer feedback
Choosing Hence,
the relevant feedback tools & collecting customer feedback is meaningless if company is unable to disseminate the information to the relevant parties to take action. to drive continuous improvement & learning, a reporting system needs to deliver feedback & analysis to frontline staff, process owners, branch or department managers & top management.
The
feedback loop to the frontline should be immediate for complaints & complements as is practiced in a number of service businesses where complaints, compliments & suggestions are discussed with the staff.
There
are 3 types of service performance reports to provide information necessary for service management : 1. A monthly Service Performance update provides process owners with timely feedback on customer comments. Here the feedback is provided to the process manager who can discuss it with service staff.
12 - 51
Cont.
2. A quarterly service performance review provides process owners & branch or department managers with trends in process performance & service quality. 3. An annual service performance report gives top management a representative assessment of the status & long-term trends relating to customer satisfaction with the firms services.
The reports should be short & reader friendly, focusing on key indicators.
12 - 52

Module 11 Session 9 - Managing Customer Relationship

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Module 11 Session 9 - Managing Customer Relationship

Uploaded by

Copyright:

Available Formats

Managing Relationships and Building Loyalty

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

The search for customer loyalty

All businesses aspire to have a database of loyal customers.

Loyalty is described as a customers willingness to continue patronizing a

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

What Makes Loyal Customers More Profitable?

Tend to spend more as relationship develops

Cost less to serve

Recommend new customers to firm (act as unpaid sales

Trust leads to willingness to pay regular prices vs. shopping

Analyzing Why Customers Are More Profitable over Time

Profit from references

Understanding the customer/firm relationship

Research by Nichole Coviello, Roderick Brodie, & Hugh Munro suggests

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

The concept is also relevant in consumer marketing environment.

Creating Membership relationships

It is a formalized relationship between the firm & an identifiable customer,

Types of Relationships with Customers

Type of Relationship--Firm and Customer Nature of Service Delivery

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Identifying and Selecting Target Segments

demographics psychographics geographic location benefits sought

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Targeting the right customers

If they want to build successful customer relationships, companies need to

Matching customers to the firms capabilities is vital.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Attracting the wrong customers typically results in costly churn.

We can apply the concept of portfolio management

Like investments, some types of customers may be more profitable than

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Analyzing & managing the customer base

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

The Customer Pyramid

Platinum Gold Iron Lead

Services Marketing 5/E

Tiering the customer base

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

Retaining, upgrading & terminating customers

Terminating customers comes as a logical consequence of the realization that not

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

The foundations of customer loyalty

The Customer Satisfaction-Loyalty Relationship

Zone of Indifference Zone of Defection

Neither satisfied Dissatisfied Satisfied nor dissatisfied

The Wheel of Loyalty

1. Build a Foundation for Loyalty

Address key churn drivers