Customer Loyalty

Customer Loyalty Stowe Shoemaker, PhD University of Houston sshoemaker@uh.edu www.stoweshoemaker.net Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Customer Loyalty Marketing Does Not Equal Frequency Marketing Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Frequency . . . Focusing on Behavior When customers give you a greater share of their transactions than they might have without the program, usually in exchange for accumulating miles, points, or other surrogate discounts. You ask:Aren’t we quibbling here, isn’t that loyalty? Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Rewards Program Commerical Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Loyalty . . . Focusing on Emotion When the customer feels so strongly that you can best meet his or her relevant needs, your competition is virtually excluded from the considered set, and the customer buys almost exclusively from you — referring to you as “their restaurant” or “their hotel.” Winning maximum share of heart, mind and wallet. Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Loyalty Program Commerical Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

The Evolution of Building Loyalty Knowledge Relationships Profitability Brand Relationships Frequency Programs Targeted Promotions Sales Strategic Tactic “Price” driven, segmented, transaction based. Added value to product, support price, customized, strengthen brand. Knowledge, Help support VAR in loyalty Push traffic, no targeting, discounts, little measurement. Still push, discounts, some measurement. Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Loyalty Circle Process Exit Exit Exit Value (Added and Recovery) Communication Exit Fluid Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Value • Seeks to create newvalue for customers and then share the value so created between producer and consumer. • Value is created with customers, not for customers. • Requires that a company design and align its business processes, communications, technology and people in support of the value individual customers want. • Types of Value • Value Added • Value Recovery Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Perceived Benefits Perceived Price Perceived Value = Perceived Price = total cost to buyer: purchase price+startup (e.g., acquisition, transportation, etc.)+post- purchase (e.g., risk of poor performance) Perceived Benefits = some combination of physical attributes, service attributes, ease of use, etc. Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Components of Value -continued • Financial • Temporal • Functional • Emotional/Psychological • Experiential • Social • Trust • Identification with organization Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Functional • Does the product or service do what is suppose to do? • Do we convey the functional value to the consumer? • RATER SYSTEM Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Dimensions of Service Quality • Reliability • Assurance • Tangible • Empathy • Responsiveness Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Components of Value -continued • Financial • Temporal • Functional • Emotional/Psychological • Experiential • Social • Trust • Identification with organization Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Identification with Organization • Dedication to the customer • Customer support groups • Opportunities for public displays of association • Active alignment with and support of social causes • Provide opportunities for contact • Distinctive human resource policies Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Critical Questions for Understanding Value • What customers do business with us (directly or indirectly)? • What do they buy or use and what actions must they take to do so? • What are the best alternatives they perceive? If they did not do business with this organization, what would they likely do instead? • What is the overall value of my offer to the customer? • Which product attributes have the biggest potential to increase the value? • Where do I really increase value by increasing performance and which improvements are simply “nice to have”? Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Value Recovery • Complaint Management Complaints Define What Customers Want Easier To Complain Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Two Videos on Complaints Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Guest Comment “In fact, I told the management there I was putting a review on your website about their poor service and they laughed at me and said go right ahead, nobody reads the tripadvisor site” Guest comment from TripAdvisor.com Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Oct. 2005 • 2.5 million visits • Dec. 2007 • 30 million • Daily Visits • Approximately 4 million • 40% of visits are international Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Lunch-bag Letdown A phenomenon that occurs when a guest’s positive impression of a brand is tarnished by an actual stay experience. Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Problem Impact Tree Please indicate if you reported any problems during your visit and how they were resolved. No problems experienced . . . . . . . . . . . . . . . . . . . .1 SKIP X Problems reported and were resolved in a friendly effective manner . . . . . . . . . . . . . . . . . . . . . . 2 Experienced problems, but didn’t report to staff . … 3 Problems reported and were not resolved in a friendly, effective manner. . . . . . . . . . . . . . . . . 4 Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

FIGURE II: TOTAL SAMPLE (n=4259, 100%) Experienced Problems (n=683, 16%) No Problems Experienced (n=3576, 84%) Problems Not Reported (n=262, 38.4%) Problems Reported (n=421, 61.6%) Problems resolved in a friendly and effective manner (n=295, 70.1%) Problems not resolved in a friendly effective manner (n= 126, 29.9%) Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Process • Focuses on the processes and whatever else is needed to advance the customer relationship. Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

GAP Model of Service Quality Performance > Expectation Performance = Expectation Performance < Expectation Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

GAPS Model of Service Quality CUSTOMER Expected Service GAP 5 Perceived Service External Communications to customers Service Delivery COMPANY GAP 4 GAP 1 GAP 3 Customer-driven service designs and standards GAP 2 Company perceptions of consumer expectations (from Zeithaml, A. Valerie and Mary Jo Bitner (1996). Services Marketing. New York: McGraw Hill p. 48.) Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

The Four Components of the Process • Whatever the organization transfers to the Customer that can be touched • Must be Customer-Oriented (create value) Physical Product Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

The Four Components of a Service Process Process ServiceProduct • Core performance purchased by the Customer • Includes all interactions with the Customer • “Plan Your Work” • Incorporate RATER system into each plan; e.g. in-room dining Physical Product Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Plan Your Work • Scripts for each service encounter • Hostess: • “We will be asking you throughout your visit how we can do things better. Please be aware that our goal is to provide a wonderful dining experience; if we fall short of that goal, please do not hesitate to tell us.” • Wait person: • “We have great desserts here. They are made locally by a woman named Cynthia. Cynthia has lived in area for ages and follows a family recipe.” Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Plan Your Work • Scripts for each service encounter • About Our Fish • As you may know, one should not eat oysters in months that have an R. Therefore, we will not be serving oysters tonight as we only serve the freshest fish here. ” Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

The Four Components of a Service Process People ServiceProduct ServiceDelivery • Refers to what happens when your Customer interacts with employee • “Work Your Plan” • Example: What is said to the customer Physical Product Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Work Your Plan • Goal is to incorporate some aspect of the RATER system in each interaction Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

The Four Components of the Process ServiceProduct ServiceDelivery • The physical backdrop that surrounds the service • 3 Elements: ambient conditions; spatial layout; and signs, symbols, & artifacts Physical Product Service Environment Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Communication • Sales force • Outlets • Reservations • Direct Marketing • Electronic Commerce • Mobile Commerce • Employees Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Questions? • sshoemaker@uh.edu • www.stoweshoemaker.net Customer Loyalty --- Eye For Travel January 2008 (c) Stowe Shoemaker, Ph.D

Customer Loyalty