Building Customer Building Customer LoyaltyLoyalty

By By

Bolaji OkusagaBolaji OkusagaManaging Director, The Quadrant CompanyManaging Director, The Quadrant Company

Who is the Customer?Who is the Customer?

The Customer is that person or Institution that The Customer is that person or Institution that makes a demand for your products or service makes a demand for your products or service offering.offering.

A Customer is the target for specific products A Customer is the target for specific products or service and helps add value to an enterprise or service and helps add value to an enterprise through the demand he / she makes of specific through the demand he / she makes of specific offerings.offerings.

The Customer is the most crucial actor in the The Customer is the most crucial actor in the marketing process because there can be no marketing process because there can be no marketing without the Customer.marketing without the Customer.

What does the Customer What does the Customer Want?Want?

The CUSTOMER seeks for the satisfaction of The CUSTOMER seeks for the satisfaction of his / her needs in the market.his / her needs in the market.

The PRODUCERS of goods and services seek The PRODUCERS of goods and services seek to satisfy the desire of Customers for value in to satisfy the desire of Customers for value in return for profit.return for profit.

The CUSTOMER demands the value inherent The CUSTOMER demands the value inherent in the consumption of products or services and in the consumption of products or services and also gives value to the PRODUCER in the also gives value to the PRODUCER in the process.process.

Perfect Market: The Old Perfect Market: The Old OrderOrder

In an imperfect market, where the DEMAND for In an imperfect market, where the DEMAND for specific products or services outweighs specific products or services outweighs SUPPLY, producers are usually price-makers, SUPPLY, producers are usually price-makers, who make little effort to woo the Customer.who make little effort to woo the Customer.

This situation occurs in a monopoly or an This situation occurs in a monopoly or an oligopoly.oligopoly.

Here, producers dictate their terms and Here, producers dictate their terms and Customers strive to meet these terms.Customers strive to meet these terms.

Enter the Era of Enter the Era of Imperfect MarketsImperfect Markets

With globalization, increased innovation and its With globalization, increased innovation and its attendant atmosphere of fierce competition, attendant atmosphere of fierce competition, where monopolies like Microsoft and where monopolies like Microsoft and Oligopolies such as Coca-Cola, IBM, Nestle Oligopolies such as Coca-Cola, IBM, Nestle and PepsiCo are now facing stiff competition and PepsiCo are now facing stiff competition from emerging enterprises in China and India, from emerging enterprises in China and India, the era of price-makers in perfect markets are the era of price-makers in perfect markets are over.over.

The death of perfect markets has led to a new The death of perfect markets has led to a new era where competitive edge is not only driven era where competitive edge is not only driven by product quality but by distribution, delivery by product quality but by distribution, delivery and customer service innovation.and customer service innovation.

The Demands of a The Demands of a Customer Service CultureCustomer Service Culture Global exposure to technology and skilled Man power, Global exposure to technology and skilled Man power,

led to the advent of product parity in most industry and led to the advent of product parity in most industry and the consequent erosion of rigid customer loyalty.the consequent erosion of rigid customer loyalty.

Price now became a big consideration in choosing Price now became a big consideration in choosing between competing brands and products.between competing brands and products.

In this dispensation, consumers became price-In this dispensation, consumers became price-grabbers, shopping for price and not out of loyalty.grabbers, shopping for price and not out of loyalty.

However given the need for differentiation beyond price However given the need for differentiation beyond price and product quality, companies now started to innovate and product quality, companies now started to innovate in the area of product delivery, turn-around time and in the area of product delivery, turn-around time and Customer service.Customer service.

This shifted emphasis away from This shifted emphasis away from Total Quality Total Quality Management Management (TQM) to (TQM) to Total Relationship CommitmentTotal Relationship Commitment (TRC) and redefined the whole concept of Marketing.(TRC) and redefined the whole concept of Marketing.

Enter the Era of Enter the Era of Maxi-Marketing...Maxi-Marketing...

Noting that traditional marketing with its emphasis on Noting that traditional marketing with its emphasis on Product, Place, Price and PromotionProduct, Place, Price and Promotion, does not , does not adequately address Customer needs, adequately address Customer needs, Maxi-marketing Maxi-marketing a blueprint centered around Customer Relationship a blueprint centered around Customer Relationship Management (CRM) emerged.Management (CRM) emerged.

Customer Relationship Management is a process or Customer Relationship Management is a process or methodology used to learn more about customers' methodology used to learn more about customers' needs and behaviours in order to develop stronger needs and behaviours in order to develop stronger relationships with them. relationships with them.

CRM as a process which brings together pieces of CRM as a process which brings together pieces of information about customers, sales, marketing information about customers, sales, marketing effectiveness, responsiveness and market trends, effectiveness, responsiveness and market trends, helps to shape a Company’s Business Strategy helps to shape a Company’s Business Strategy

CRM: The New RealityCRM: The New Reality

Customer Loyalty is crucial in the drive at year Customer Loyalty is crucial in the drive at year on year profit.on year profit.

For a company to stay solvent and profitable, it For a company to stay solvent and profitable, it must manage its customer churn rate and must manage its customer churn rate and increase its customer retention capacity. increase its customer retention capacity.

To drive this strategic intent, Companies must To drive this strategic intent, Companies must court the Customer by meeting or surpassing court the Customer by meeting or surpassing his expectations through availing the Customer his expectations through availing the Customer a robust value proposition well beyond the a robust value proposition well beyond the competition. competition.

What is Customer What is Customer Loyalty? Loyalty?

Customer loyalty describes the Customer loyalty describes the tendency of a tendency of a Customer to chooseCustomer to choose a product or service over a product or service over another.  Note the use of the word another.  Note the use of the word "choose""choose" . .

Though; customer loyalty becomes evident when Though; customer loyalty becomes evident when choices are made and actions taken by Customers.  choices are made and actions taken by Customers.  Customers may express high satisfaction levels with Customers may express high satisfaction levels with a company in a survey, but satisfaction does not a company in a survey, but satisfaction does not equal loyalty. equal loyalty. 

Loyalty is demonstrated by the actions of the Loyalty is demonstrated by the actions of the Customer; Customers can be very satisfied and still Customer; Customers can be very satisfied and still not be loyal. not be loyal.

Retaining the Loyalty of Retaining the Loyalty of the Customer – What the Customer – What Imperatives?Imperatives? If your Customer could compare you with your If your Customer could compare you with your

competitor in terms of your product and price, competitor in terms of your product and price, would you be better off?would you be better off?

Companies generally need to know two key Companies generally need to know two key principles about customer decision making:principles about customer decision making:

1. Customers never buy solely on price 1. Customers never buy solely on price even tough we think they do. even tough we think they do.2. Prices may be transparent to 2. Prices may be transparent to

Customers, Customers, but value is usually but value is usually opaque. By building opaque. By building a Customer service a Customer service culture, companies culture, companies

build added value to their offerings.build added value to their offerings.

Moving the Conversation Moving the Conversation away from Price to Valueaway from Price to Value

PRODUCER / SERVICE PROVIDER CUSTOMER

VALUE-SELLING

A CustomerRelationship driven Value

Proposition

An EfficiencyExpectant Value Equation

PROFIT

How To Sell on ValueHow To Sell on Value

Value delivery is the basis of the existence of Value delivery is the basis of the existence of businesses.businesses.

However, given the gradual decline in the However, given the gradual decline in the differentiation of offerings based on quality, differentiation of offerings based on quality, value delivery in most industry began to wear value delivery in most industry began to wear the toga of monotony and stasis.the toga of monotony and stasis.

Value delivery soon became defined in terms Value delivery soon became defined in terms of product delivery, distribution and Customer of product delivery, distribution and Customer service innovation.service innovation.

Product and Service delivery based on the Product and Service delivery based on the understanding of Customers changing needs understanding of Customers changing needs and attitude became the order of the day.and attitude became the order of the day.

Selling on Value: Cases Selling on Value: Cases from the Mastersfrom the Masters

DELLDELL Cut off the middleman in the distribution of Computer Cut off the middleman in the distribution of Computer

Hardware and Customized offerings to suit Hardware and Customized offerings to suit individual Consumers, thereby beating competitors individual Consumers, thereby beating competitors like HP, Compaq and IBMlike HP, Compaq and IBM..

PEPSICOPEPSICO Shifted emphasis from the production of carbonated

soft drinks to production of energy drinks and other related offerings in order to take advantage of changes in trends and consumption attitude, thereby beating a competitor like Coca-Cola in terms of profit.

Selling on Value: The Selling on Value: The Nigerian ExperienceNigerian Experience

ZENITH BANKZENITH BANK Redefined the concept of Banking in Nigeria by Redefined the concept of Banking in Nigeria by

introducing On-Line-Real-Time Banking and introducing On-Line-Real-Time Banking and Convenience Banking before it became the minimum Convenience Banking before it became the minimum standard of entry thereby beating Competitors like standard of entry thereby beating Competitors like Guaranty Trust and Diamond Bank. Guaranty Trust and Diamond Bank.

EKOCORPEKOCORP Redefined health care delivery in Nigeria by being the Redefined health care delivery in Nigeria by being the

first publicly quoted Hospital. Through its access to first publicly quoted Hospital. Through its access to funds from the capital market, it was able to raise funds from the capital market, it was able to raise enough funds to procure state of the art medical enough funds to procure state of the art medical equipment and hire experienced personnel thereby equipment and hire experienced personnel thereby raising the bar in private health care delivery.raising the bar in private health care delivery.

How to Get ThereHow to Get There

It is proven that innovation based on It is proven that innovation based on technology or efficiency in production not technology or efficiency in production not targeted at the customer do not positively targeted at the customer do not positively affect the bottom-line.affect the bottom-line.

Most profitable innovation therefore are built Most profitable innovation therefore are built around the Customer.around the Customer.

This is because the Customer is at the core of This is because the Customer is at the core of Value Delivery and Profit Maximization.Value Delivery and Profit Maximization.

It is therefore essential to build a Customer It is therefore essential to build a Customer centric value delivery process in order to centric value delivery process in order to engender loyalty.engender loyalty.

What Does it Take?What Does it Take?

1.1. UNDERSTAND WHAT YOUR CUSTOMER UNDERSTAND WHAT YOUR CUSTOMER REALLY VALUEREALLY VALUE

You may find that product cost is a small You may find that product cost is a small component of the customer’s total cost and component of the customer’s total cost and that price is only one of the many variables that price is only one of the many variables that customers consider. To build loyalty you that customers consider. To build loyalty you most understand the Customer’s Life Time most understand the Customer’s Life Time Value (LTV) and align this with your Product’s Value (LTV) and align this with your Product’s Lifecycle.Lifecycle.

What Does it Take?What Does it Take?2.2. DEVELOP FLEXIBLE MARKET DEVELOP FLEXIBLE MARKET

OFFERINGSOFFERINGS No Company can satisfy all Customer segments No Company can satisfy all Customer segments

with the same offering. Companies need to with the same offering. Companies need to create flexible market offerings. These are create flexible market offerings. These are bundles of products, service and information that bundles of products, service and information that Customers can configure and customize to suit Customers can configure and customize to suit their priorities. Companies sometimes bundle their priorities. Companies sometimes bundle services with their product, but the truth is that services with their product, but the truth is that not all Customers value these services. Allow not all Customers value these services. Allow Customers to choose the service they value and Customers to choose the service they value and pay for only what they use. pay for only what they use.

What Does it Take?What Does it Take?

3.3. COMMUNICATE YOUR VALUE COMMUNICATE YOUR VALUE PROPOSITIONPROPOSITION

You need to educate Customers about the You need to educate Customers about the elements of your value proposition in order for elements of your value proposition in order for them to fit these into their equation. Without them to fit these into their equation. Without this, your sales force will only use price as its this, your sales force will only use price as its competitive weapon. There is therefore the competitive weapon. There is therefore the need to educate your customers on the need to educate your customers on the economic benefits of the Non-Price-Variables economic benefits of the Non-Price-Variables embedded in your offering.embedded in your offering.

What Does it Take?What Does it Take?

4. 4. BE OPEN AND HONESTBE OPEN AND HONEST A lot of People believe that transparency is an enemy of profit. They reason that A lot of People believe that transparency is an enemy of profit. They reason that

Customers will take advantage of better information to drive down prices and Customers will take advantage of better information to drive down prices and profit, but the truth is that there can be no loyalty where there is no trust and trust profit, but the truth is that there can be no loyalty where there is no trust and trust is better built in an open and honest relationship.is better built in an open and honest relationship.

TRANSPARENCY: TRANSPARENCY: THE CALL CENTRE PROFITABLE INFORMATIONTHE CALL CENTRE PROFITABLE INFORMATION

What Does it Take?What Does it Take?

5.5. DEVELOP A CUSTOMER DATA-DEVELOP A CUSTOMER DATA-MINING PROCESSMINING PROCESS

Customer data and models based on this data Customer data and models based on this data can help inform you of customers most likely to can help inform you of customers most likely to respond and become loyal, no matter what respond and become loyal, no matter what kind of front-end marketing program you are kind of front-end marketing program you are running or how you "wrap it up" and present it running or how you "wrap it up" and present it to the customer.  The data will tell you who to  to the customer.  The data will tell you who to  promote to, and how to save precious promote to, and how to save precious marketing naira in the process of creating marketing naira in the process of creating customers who are loyal to you.customers who are loyal to you.

Parting Shot!Parting Shot!

“ “ It is much less costly to generate It is much less costly to generate Customer Loyalty and retain Customer Loyalty and retain Customers, than to deploy marketing Customers, than to deploy marketing money in the quest at attracting new money in the quest at attracting new Customers”Customers”

Thank You.Thank You.