Relationships and Building Loyalty Andrew Sikula Bus 550

Customer Loyalty and Profitability Profit from increased purchases Profit from reduced operating costs Profit from referrals to other customers Profit from price premium 2

Customer Loyalty and Profitability 3

Why are Customers Loyal? Relationships – Greater Confidence – Social Benefits – Special Treatment 4

Foundation for Loyalty Target the Right Customer Value over Volume Manage Customer Base – Platinum, Gold, Iron, and Lead Customer Satisfaction and Service Quality 5

Reducing Customer Defections Analyze Customer Defections Address Key Churn Factors Complaint Handling and Service Recovery Increase Switching Costs 6

Customer Relationship Management Customization and Personalization Development and Management of Relationships Common CRM Failures Getting CRM Right 7

Discussion How can PSI address its “lead” customers without jeopardizing its reputation? 8

Question Customer loyalty is an important driver of a service firm’s profitability. The profits derived from loyal customers come from which of the following: a)Increased purchases b)Reduced operation costs c)Referral to other customers d)Price premiums e)All of the above 9

Thank you 10