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Marketing Exam Study!

  • -

    A framework for thinking about how to build customer loyalty

  • -

    Comprises 3 sequential strategies:

    • 1)

      Build a foundation for loyalty:

      • a.

        Segment the market

      • b.

        Be selective- acquire customers who fit the core value proposition

      • c.

        Manage the customer base via effective tiering of services

      • d.

        Deliver quality service

    • 2)

      Create Loyalty Bonds:

      • a.

        Build higher level bonds: social, customization, structural

      • b.

        Give loyalty rewards

      • c.

        Deepen the relationship via: cross-selling, bundling

    • 3)

      Reduce churn drivers (see REDUSING CUSTOMER DEFECTIONS section)

FIGURE 22.1: The wheel of loyalty Pg. 483

Reducing customer defections

Reducing customer defection (also called customer churn):

  • The first step is to understand the reasons for customer switching-

    • o

      These include: core service failure (greatest reason); dissatisfactory service encounters; high, deceptive, or unfair pricing; inconvenience in terms of time, location or delays; and poor response to service failure.

  • address key churn drivers:

      • o

        after understanding some generic churn drivers, you should address these problems by delivering quality service, minimizing inconvenience and other non-monetary costs, and fair and transparent pricing.

  • Implement effective complaint handling and service-recovery procedures

      • o

        Effective complaint handling crucial in persuading unhappy customers not to switch providers

  • increase switching costs

      • o

        many services have natural switching costs (time consuming to switch major bank account etc.)

      • o

        you can increase or create new switching costs by instituting penalties through contracts

5 different perspectives of service quality

There are 5 different perspective one can view the word quality according to the context:

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