Loyalty and CRM + TB Chapter 12

Question 1

Lifetime value (LTV)

Answer 1

Measures the total value a customer brings to a firm
Loyal customers have higher LTV

Question 2

Assessing LTV

Answer 2

Determine costs and revenues for customers from different market segments
Predict future profitability

Question 3

Measuring LTV

Answer 3

Revenues = application fee + initial purchase
Costs = marketing + credit check + account set up

Question 4

Value of referrals

Answer 4

% of customers influenced by other customers

Question 5

Net present value

Answer 5

Sum of anticipated annual values discounted each year into the future

Question 6

Reasons for customer loyalty

Answer 6

Confidence benefits
Correct performance
Trust in provider
Lower purchase anxiety
Confirmed expectations
Social benefits
Friendship relationship with service provider
Special treatment
Better price
Exclusive promotions
Extra services
High priority

Question 7

3 types of loyalty bonds

Answer 7

Cross-selling and bundling of services
Creating loyalty rewards
Higher levels of loyalty bonds

Question 8

Wheel of loyalty (3 steps)

Answer 8

Build a foundation of loyalty
Create loyalty bonds
Reduce churn drivers

Question 9

Building a foundation of loyalty

Answer 9

Segment the market to match customer needs and firm capabilities
Acquire customers who fit core value proposition

Question 10

Cross-selling and bundling services

Answer 10

Makes switching a major effort that a customer is unwilling to go through unless extremely dissatisfied
Customers benefit from buying various services from the same provider
eg: shaw

Question 11

Creating loyalty rewards

Answer 11

Reward based bonds (can be both financial or nonfinancial or a combination of both)
Intangible rewards for special recognition and appreciation

Question 12

Building higher-level bonds

Answer 12

Social bonds - based on personal relationships
Customization bonds - customized service for loyal customers
Structural bonds (b2b) - align customers way of doing things with supplier’s own processes

Question 13

Ways to reduce churn drivers

Answer 13

Deliver quality service
Reduce inconvenience and non-monetary costs (time, effort)
Have fair and transparent pricing
Save teams - specially trained call center staff to deal with customers who want to end business with firm
Implement effective complaint handling and service recovery procedures
Increase switching costs

Question 14

Common objs of CRM systems (customer POV)

Answer 14

Unified customer interface that delivers customization and personalization
Vast service improvement and increase customer value

Question 15

Common objs of CRM systems (customer POV)

Answer 15

Unified customer interface that delivers customization and personalization
Vast service improvement and increase customer value

Question 16

Common objs of CRM systems (company POV)

Answer 16

Better segment, tier customer base and target promotion
Implement churn alert systems if customers are in danger of defecting

Question 17

5 parts of CRM systems

Answer 17

Strategy development process
Value creation process
Multi channel integration process
Performance assessment process
Information management process

Question 18

Strategy development

Answer 18

Assessment of business strategy
Guides development of consumer strategy

Question 19

Value creation process

Answer 19

Translates business and customer strategies into specific value propositions for both customers and firm
Dual creation of value - customers need to participate in CRM to receive value from firm CRM initiatives

Question 20

Multichannel integration process

Answer 20

Serve customers well across many interfaces
Offer unified interface that delivers customization

Question 21

Information management

Answer 21

Collect customer information from all channels
Integrate it with other relevant information
Make useful information available to the frontline
Create and manage data repository, IT systems, etc

Question 22

Performance assessment process

Answer 22

Is CRM system creating value for key stakeholders?
Are marketing and service standard objs being achieved?

Question 23

Common failures in CRM

Answer 23

Viewing CRM as a technology initiative
Lack of customer focus
Insufficient appreciation of customer LTV
inadequate support from top management
Failing to re-engineer business processes
Underestimating data integration challenges