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Customer Loyalty And Retention Notes

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Lecture 9: Customer Loyalty and Retention o Recap of Lecture and Class Slides Transactional marketing o Customer acquisition o FMCGs, 4 Ps, Philip Kotler, etc o Offensive approach Relational Marketing o Customer retention o Defensive approach Barnes (1994) classifies four advantages of CRM: o Barriers to exit (customer lock-in) o Repeat buying through customer retention o Can market based on detailed customer data o Partnering between buyer and seller Consumer Lifecycle o Can capture consumer in early years (e.g. as graduate) loss-fully, only to profit over his lifecycle (till retirement) A loyal customer is (i) committed, (ii) buys repeatedly and (iii) recommends. Clubcards provide: Customer Data ? Customer Insights ? Customer Marketing ?
Customer Loyalty

o Kumar and Reinartz: Designing Loyalty Programmes SPC - Satisfaction-Loyalty-Profit chain. o Despite being almost self-evident, empirical evidence provides little support o There is an optimum satisfaction level for any firm, beyond which increasing satisfaction doesn't pay. o Relation between satisfaction and retention is asymmetric: dissatisfaction has a greater impact than satisfaction o Relation between satisfaction and retention is non-linear: non-extreme levels of satisfaction fall under a zone of indifference How the competitive environment affects the satisfaction-loyalty relationship Non-Competitive

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Highly Competitive Monopoly/ few substitutes

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Commoditization/ low differentiation Dominant brand equity

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Consumer indifference High cost of switching

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Many substitutes Powerful loyalty program

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Low costs of switching Proprietary technology

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Frederick F. Reichfield Long term customers spend more, cost less, generate word-of-mouth, pay a premium price Versus Reinartz and Kumar No. there is a segment of consumers who are loyal but not profitable (excess resource allocation), and a segment that are very profitable but short-lived. Hence, loyalty might not be the only path to profitability. 2 types of loyalty Behavioural - refers to the observed action consumers have demonstrated Attitudinal - refers to the perceptions the consumers have about the brand Key objectives of loyalty programs

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