SU 9: Building Customer Relationships And Loyalty Flashcards
Define a relationship
A relationship exists when two preconditions are met:
- both parties must believe that a relationship exists
- the contact between them is more than just occasional
Customers that regularly visit the service organization and become familiar with it, the service organization recognizes the customer.
What are the two components of relationships
Trust - is defined as the belief in the reliability and integrity of the other party
Commitment - commitment to the relationship between people is important as without it the relationship will not continue. It is defined as an ongoing relationship with another party that requires maximum effort at retaining it
What are the types of relationships
True relationships: a long-term relationship that is characterized by positive behaviors between organization and the client
Spurious relationship: is on the opposite end, this occurs when a customer has little trust in the organization or when there is no strong bond with the organization
What are the benefits of customer retention
> profitability - loyal customers spend more with the organization and are often willing to pay higher prices which contributes to profitability
> cost issues - it is cheaper to retain existing customers than it is to continually attract new customers. Existing customers cost less as they are already aware of the processes of the organization
> the sales effect of loyal customers - loyal customers tend to spend more money on the organizations products and brands than those who are not loyal
> increase the brand equity - brand equity refers to the customers subjective and intangible evaluation of the brand. Loyal customers are likely to view the brand positively because they have had more opportunities to experience the services and the range of benefits offered
What are the 2 components of customer retention
> component 1: customer satisfaction and loyalty
- satisfaction is the meeting of customer expectations and delivering on the promises made in the actual service delivery process
- loyalty can be defined as the willingness of a customer to keep buying from a specific service provider in the long term. Customers will only stay loyal for as long as they believe that they are receiving value that they would not be getting elsewhere
> component 2: customer relationships
- changing customer needs also means that customers want to interact with organizations in different ways and customers may want to connect with multiple organizations to set aside their needs such as banking with multiple banks
Discuss customer retention tactics
> providing excellent customer service and, as a result, delighting the customer. Delighting the customer implies exceeding customer expectations, which will reduce the defection rate of customers
> knowing and measuring the current defection rate as well as conducting research into the reasons for customer defections (customer complaints on websites can be used to understand customer defection)
> listening to customers is the best way to reduce customer defection, when an organization listens to its customers it will know what the customer is thinking and feeling about the organization and what they need to do to change it’s current actions, organizations can listen to customers through social media
What are the five strategies to improve customer retention
- engage with customers
- reduce friction in the purchase process
- improve customer support
- create a community
- start a loyalty program
What are the objectives of a loyalty program
It includes sales increase as well as increases in the range of products purchased.
What is the most popular strategy used to enhance customer retention
loyalty programs or loyalty cards
What are the benefits of loyalty programmes
Customers benefit from these loyalty programs because they’re able to receive rewards for their purchases while providing information to the organization regarding themselves and their behavior.
The organization benefits as customers continue to spend with organization over a longer period of time which impacts profitability it also benefits from the data collected from its customers
What are the disadvantages of loyalty programmes
> loyalty schemes reward people for their behavior they do not generate or contribute to increasing loyalty
> loyalty programs affect sales levels but do not contribute to genuine relationship building with customers
> customers are driven by the rewards, not loyalty
> loyalty programs are short-term in nature
> privacy concerns
