‘creating customer loyalty’‘creating customer loyalty’104.238.100.187 › ... › 06 ›...

. Acquisition . Retention . Frequency .

Loyalty Solutions LtdLoyalty Solutions Ltd

‘CREATING CUSTOMER LOYALTY’‘CREATING CUSTOMER LOYALTY’

A Paper byMr. Adekolapo Ademola

CEO, Loyalty Solutions Limited



A PARADIGM SHIFTA PARADIGM SHIFT

Buy a car, choose

your color

Buy any car you want, as long as its ‘black’



Loyalty marketing

Loyalty Marketing



CREATING CUSTOMER LOYALTY:THE IMPACT ON BUSINESS

CREATING CUSTOMER LOYALTY:THE IMPACT ON BUSINESS

The handle of the process is the “driver” of the corporate strategy that gives the “direction” to the company. In turn, the strategic direction moves the two “enablers”: people and technology. The “interaction” of thoseelements is the business processes that sit behind successful customerrelationship management & customer loyalty.



THE STRATEGIC NEEDS:THE STRATEGIC NEEDS:

• Management Commitment

• Defined Objectives

• Measurable Criteria

• Long term outlook



HOW CUSTOMER LOYALTY DEVELOPSHOW CUSTOMER LOYALTY DEVELOPS

By Steve Hoisington & Earl Naumann



Continuous Customer DevelopmentContinuous Customer Development

CustomerMember

Collaborator

Advocate

TotalRevenue

Share of customer

TIME



The Customer Purchase Cycle

Re-purchase Decision to re-purchase

The Re-Purchase

Loop

Post purchase evaluationFirst Time purchaseAwareness



CUSTOMER LOYALTY:How To Identify It

CUSTOMER LOYALTY:How To Identify It

• Transactional Behavior

• Transactional Value

• Communication behavior

• Cost to Serve

RFMRFM



CUSTOMER LOYALTY:WHY ITS IMPORTANTCUSTOMER LOYALTY:WHY ITS IMPORTANT

• Enhances Cross-Sell & Up-Sell opportunities

• A 5% improvement in retention rate can equal an 85% increase in PROFITS from yourcustomer base

• Improves Customer LTV

• Enhances customer feedback & interest

• Generates higher patronage & transaction values



The Retention Effect

Costs

Growth

Impact of a 5% improvement in retention rate on Customer Net Present Value (Total Lifetime Value)Source: Frederick Reichheld – The Loyalty Effect

Used by permission of Harvard Business School Press

Bank Cards

Bank Branch Deposits

86%76%

96%

Advertising

Agency

90%

Life Ins.



The Retention Effect

GrowthNumerical Example: 10% vs 20%

Costs



Customer Lifetime Value (CLV) simple

Growth(AVT * NT) * L

CostsAVT = Average Value of Transactions per year

NT = Number of Transactions per year

L = Length of Relationship



Customer Lifetime Value (CLV) complex

Costs

Growth



Average LoyaltyLeader

100%85%

0

50

100

150

200

250%

Average LoyaltyLeader

100%

220%

0

50

100

150

200

250%

Loyalty Leaders: Lower Costs, Higher Growth

Costs

Growth



CUSTOMER LOYALTY:How To Create It

CUSTOMER LOYALTY:How To Create It



The Route to Customer Loyalty



DialogueEngage, Exchange, Evolve

DialogueEngage, Exchange, Evolve

Incentives, Rewards,Access, Service,etc.

Engage

Dialogue

Incentives, Rewards,Access, Service,etc.

Evolve

ExchangeChanging needs, attitudes, etc.

Relationship100101100101101010101100101101010101100101101010101100101101010101100101101010101100101101010101100101101010101100101101010101100101101010101100

Data



The Strategic MixThe Strategic Mix

Compelling Hard Benefits

Promotional CurrenciesTangible Rewards

Price Tiering“I get my money’s worth”

Defining Defining Soft BenefitsSoft Benefits

RecognitionPersonalization

Access“They know I’m important”

Create The Value Proposition



The Customer Loyalty Relationship ChainThe Customer Loyalty Relationship Chain

Add Value Add Value

Dialogue Dialogue

InsightInsight

AdvantageAdvantage

ProfitsProfits



CUSTOMER LOYALTY:The Benefits

CUSTOMER LOYALTY:The Benefits



Thank You!

‘creating customer loyalty’‘creating customer loyalty’104.238.100.187 › ... › 06 ›...

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