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Gaining Customer Loyalty – what does it take to succeed?

Gaining Customer Loyalty – what does it take to succeed?. Basker Rangachari Group Head, Strategic Alliances & Customer Loyalty Group Consumer Lending. Cards Asia Shanghai, China 16-17 Oct 2008. Agenda. What is loyalty? Does it really exist? Why does loyalty matter to growing profitably?

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Gaining Customer Loyalty – what does it take to succeed?

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  1. Gaining Customer Loyalty – what does it take to succeed? Basker Rangachari Group Head, Strategic Alliances & Customer Loyalty Group Consumer Lending Cards Asia Shanghai, China 16-17 Oct 2008

  2. Agenda • What is loyalty? Does it really exist? • Why does loyalty matter to growing profitably? • Why is my loyalty program ineffective? • Trends in Loyalty – inside / outside banking • What does it take to succeed ? • Conclusions

  3. What is Loyalty? Loyalty describes a customer’s commitmentto do business with a particular organization, purchasing their goods and services repeatedly, and recommending the services and products to friends and associates. (Barnett,2000) Loyal Customer = consistent source of revenue over years. Loyalty cannot be taken for granted. It will continue only as long as the customer perceives receiving better value than from another supplier.

  4. Gaining loyalty with Premium Customers Research has consistently highlighted the following key drivers of loyalty with premium customers: Product Features, Premium Positioning Superior Customer Service Recipe for Success Quality and Relevance of Merchant Benefits Comprehensive Rewards Program Status Recognition Status Affirmation Experiences • Sources: • MarketResearch.com report – US Market for Reward Cards 2005 • Jack Aaronson, ROI Marketing (Clickz.com) • TowerGroup Research reports

  5. What will loyal customers do ? • Behaviors: • Come back frequently • Buy most expensive products • Recommend to friends • Give important suggestions • Emotions: • Feel attached to provider / key staff • Trust the provider • Resist change despite competitors’ persuasion • Willing to forgive mistakes

  6. The Virtuous Cycle of Loyalty Deliver Superior Value Continuous investment in hard-to-match capabilities Increase customer satisfaction Right Products Relevant to Segments Consistent Responsive Service Efficient Processes Creative Rewards Demonstrate trustworthiness Increase customer loyalty / gain repeat business Tighten connections / create behavior change

  7. Why does Loyalty matter to profitability?

  8. Increasing focus on Loyalty • Mature Industries • increasing competition • High acquisition costs • Getting more transactions/volume • Market share vs. share of customer • Competitive advantage • Price • Service quality • Loyal relationships

  9. Impact of loyalty on profitability Empirical evidence shows: • It costs 5 times more to acquire a new customer than retain one • 20-40% of your customers bring 80% of your profits • Banks lose 22% of customers each year (1) • Improving retention by 5% increases customer NPV by 35%~90% (2) • Companies that have mastered loyalty management enjoy (3): • 38% higher profit margins • 40% higher revenue growth • 38% higher shareholder value creation • Caveat: Customer Satisfaction is NOT equal to customer loyalty • 90% of customers who love a company will repeat purchases but only 30% of customers who like the company will repeat (4) • 60% to 80% of lost customers were actually satisfied (King, 1996) • Breitkopf, David. “Mapping a Multi- Product Strategy for Points,” American Banker, 1 December 2004. • “US Loyalty Schemes Enter a New Phase,” Bank Marketing International, 31 October 2004. • Accenture Study 2005 • Opinion Research Corp.

  10. CEO’s See the Challenge In a recent survey by The Conference Board, customer loyalty was cited as one of the top ten challenges for CEOs worldwide.

  11. In Conclusion • Loyalty is not dead, its just more difficult to get • Balancing customer desires vs. profitable business • It’s an Art ….and a Science • Product + Service + Rewards + Emotion = Loyalty • Clear Strategy + Segment Focus + Adequate Investment + Consistent Execution + Continuous Enhancement = Success in Gaining Loyalty !! “Profit in business comes from repeat customers, customers that boast about your product and service, and that bring friends with them” (cited in Lowernstein, 1995)

  12. Thank You ! Basker Rangachari Group Head, Strategic Alliances & Customer Loyalty Group Consumer Lending

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