Hello, we are discussing about developing
long term relationship with service customers
and the importance of the journey from service
loyalty to customer advocacy.
.
This particular diagram which is in front
of you puts together all the points that we
discussed in the last couple of sessions.
So, let us go through this diagram stage by
stage.
So, this is called the wheel of loyalty, this
is also taken from the text book and in the
text book, this is at page number 355 and
we will, it is described in much more detail
there and you must read.
But, at the moment let us look at the different
parts.
First is building a foundation for loyalty,
this is an important point I think I might
not have discussed it in the previous session
that when you are developing a loyalty strategy,
you have to go hand in hand with your Segmentation,
Targeting and your value proposition strategy,
which we call the STP of services marketing.
Because, particularly if you remember I had
also discussed that the relationship is very
important for companies at the early stage.
So, for startups, for at the begging of the
life cycle of organization, these relationships
are highly, highly valuable much more valuable
than at the declining stage or at the saturation
stage and it is difficult to create relationship
with a large variety of customers.
You can only do that when your organization
is also grown to a size, where different types
of customers can be handled with different
levels of service.
So, initially it is very important to have
a clear cut segmentation strategy.
So, segment the market to match the customer
needs and organizational capability.
Later on when you have the, you know number
of different departments and so on, at that
time you can handle a much larger customer
base with different tiers of service.
So, some authors have talked about this tiering
has platinum, gold, silver, iron and so on.
But, today I would say that instead of looking
at it in that fashion you can have a much
simpler division of, like it happens on flight
sometimes.
So, you can have an economy, economy prime
and business and first class type of three
tier segregation will be good.
But, before the three tier segregation comes
much later, when you have different types
of offerings and different segments of market
that you are serving, initially it is important
to focus on one segment and very clear cut
offering, matching the requirement of that
particular segment that is the foundation,
where you start building loyalty.
Then, in the next stage you try to create
loyalty bonds, this bonds as we are discussing
can be different types, it can be social,
it can be customization, it can be structural
and we will discuss it a little bit more later
in this session.
Obviously, there must be rewards, there must
be given take therefore, as you are continuously
getting their business, you must also develop,
give more and more facilities rewards to the
customer.
So, it can be financial, usually this is not
the case, but of course, there are some cash
backs or coupons, etc.
So, normally you actually as you develop the
relationship as you have a longer term relationship,
you move the customer to a higher tier of
service level.
So, if you have a gold card and if you have
a silver card, then you go to a gold card,
if you have a gold card, then you go to a
platinum card and the same thing has happened
in credit card or banks quite successfully.
And I wish now other service providers like
say mobile, telephony companies, etce will
adopt a way to reward their long term customers
and bringing those tiering processes and possibly
that will be a way to reduce their churn and
deepen the relationship via cross selling
and bundling.
This happens in mobile services in developed
countries, already an India it is yet to come
in a big way, but I am sure it will be soon
in appearing.
.
So, target the right customers and focus on
number of customers served in value of each
customer and this right customer is important
to know that the right customers are not always
the high spenders.
For example, a travel agency servings IIT,
Kanpur has to know that the student customers
who are big in number, they are not high spenders,
but they can be regular customers, similarly
if the faculty and so on.
Therefore, instead of looking at individual
ticket value, such customer should be evaluated
on the basis of their long term life time
value.
So, a student customer who is staying here
for 4 years, 5 years can bring in a lot of
business if the relationship is good and he
is not the customer, he is not going away
and start using some web based service.
So, there is a travel agent on the campus
and it is when that person that company recognizes
the kind of requirements of the student customers
and create value packages, matching that kind
of requirement, then even a low per transaction
value customer can become a very high value
customer cumulatively.
So, therefore, it is important to know that
the right customer is not always the high
spender, can be a large group of people also
that no other supplier is serving well.
So, this is what, is this whole strategy about
services at the bottom of the pyramid that
is another important one.
Recognize the nature of your customer, recognize
that they are frequency spenders rather than
one time large spender and accordingly create
your value proposition.
So, this is the issue about targeting.
.
This is an interesting research that I again
share with you from 1995 which is from HBR
and this research shows that the customers
can be put across this zone.
So, there are if this is the loyalty and retention,
so at the 100 percent retention level you
have this apostles are your advocates and
at the zero loyalty level, this is not may
be a right terminology today, I mean you have,
customers who are not at all important to
you.
Obviously, the customers who have no relationship
you want to move them to this relation, this
is the same diagram that I showed you in a
little while earlier by my pyramid approach,
where from here I want to go to this level.
That is the same diagram shown here in a different
manner that understanding that customers who
are between the very dissatisfied to neither
satisfied, nor dissatisfied this is the zone
where the customer may switch, so this is
called the zone of defection.
It is only when we have crossed the zone of
defection, we are still to cross the zone
of indifference.
So, there is a this pink thing that you have
in front of you, which is the block between
satisfied and very satisfied.
This is the domain from where we may be able
to develop some customer relationships to
the level of advocacy.
So, obviously, therefore, this the three things
that you should notice here, one is that it
is a journey and it is a continuous process
by which the relationship needs to be upgraded,
it does not automatically happen, it has to
be managed.
And particularly as you go towards the right
side of this diagram, it becomes tougher and
tougher to create the bonds of different types.
So, that the customer goes from this point
to this point.
.
So, the relationship deepening can be done
in various ways by bundling different other
services.
So, many mobile companies abroad in developed
economies and I think soon it will happen
in India too, they actually provide you handsets
along with a subscriptions.
So, handset you get almost free as long as
you take a 5 years subscription and so on
and they often reward the customer who are
more higher users by voluntarily upgrading
their handset, the mobile set.
And then therefore, if you are a heavy user
of course, the price of the handset is build
into the monthly bill that you are getting.
But, it gives a good feel that when a customer
automatically gets the next higher model of
the phone, because of the personage that he
or she is providing by regularly using the
service.
So, this kind of bundling, cross selling of
services, it makes a switching from that customer
that service provider to another service provider
a difficult task and therefore, as I discussed
once before that loyalty often starts with
inconvenience of switching.
So, you have to create these structural bonds
by which you are able to make the customers
life easier and switching more difficult.
And of course, the customers also have some
benefits, because they have one stop shop.
So, now a days there are many other services
like video content delivery, different kind
of news and other content delivery, some of
the mobile companies are now already experimenting
with a bundling in content delivery services.
And as we go from 2G to 3G to 4G types of
mobile telephony services and the equivalence
in many other type of services, where technology
allows you to provide a much higher bandwidth
of service, we will see a more and more bundling
happening.
So, that a service provider once they have
a customer, they will focus not only on retention
of that customer, but they will try to see
how they can increase their customer share
rather than focusing on market share.
So, focusing on market share is expensive
today, because acquisition cost of a new customer
is much higher.
So, if you have a customer and you can build
in other services, associated services provided
to the same customer or upgrade that service
to a level, where it brings in more revenue
and on the other hand more advantages to the
customer, you will both sides will be in a
win-win model.
And you will see this kind of processes developing
much faster in a mobile telephony type of
services, where the communication service,
voice communication service the different
types of data services, the different type
of content delivery services will get interwoven
and will increase the overall package that
are being delivered to the same customer.
.
The bonds that I was talking about there...
So, therefore there are financial bonds and
there can be some kind of intangible rewards
under the category of non financial rewards.
So, intangible rewards are special recognition
and appreciation like for example, if you
have a platinum card then you can use certain
lounge services at airports free of cost,
these are part of the reward package.
.
And then of course, you can create social
bonds which we discussed you know birth day
greetings and anniversary greetings, the more
personal relationship between the service
provider and the customer that often happens
in case of insurance and other types of services
or banking services.
And these are actually the best type of relationship,
the costliest to create and it takes more
effort and genuine effort to build it.
But, once you have such an effort, such a
relationship then the opportunity for creating
advocacy is much higher.
So, this whole relationship banking for high
net worth individuals which are now being
created almost in a every banking, even public
sector banks are creating this they are sometimes
called private banking facility, sometimes
they are called relationship banking facility
etc.
But, ultimately there the objective is to
know the customer, the customer investment
appetite, the customers risk profile or risk
aversion profile well and based on that create
a relationship, where the customer as the
customer gets more better and better result,
customer builds more and more confidence and
based on that there is a retention that becomes
a long term and this is the kind of best structure,
best way to create long time loyalty.
And otherwise, you have services which for
example, allow because of certain technical
facilities and people capabilities.
Star bucks can customize their morning coffee
or afternoon coffee for people in very different
ways, somebody takes less sugar, somebody
takes more sugar, somebody takes it with milk,
somebody takes it without milk, somebody likes
Arabia bean, somebody like some other flavor
of coffee and so on and they have a mechanism
of keeping track.
So, the recognize the person and say you are
usual and the deliver the same coffee and
they know that this person takes two cups,
one for himself and one for another person
and all these things the facilities are created
by combining human competence with machine
based data and data interpretation capabilities
and machine based capabilities to create variety
of product varieties right at the point of
delivery, service variety right at the point
of delivery.
And so the social bond creation which basically
is based on knowing the customer indepth as
a individual and then combining that with
technology assisted ways of customization
can create really the most powerful bond.
.
So, structural bonds of course, are very common
in B2B setting.
So, a car manufacturer will have different
types of services which are locked in with
their ERP system.
So, the vender ERP system and the main OEM
say Maruti ERP system will be locked in with
the ERP system of their different service
and product venders and that will allow much
more effective transaction.
And, but; obviously, that short of lock in
ICT system means are there is a structural
bond and that is created, it also happens
in B2C like when you have airlines who have
who provide SMS checking SMS, E-mail alerts.
So, this is they have the data base of your
telephone numbers, they know your E-mail id
and it is all part of on your regular traveler.
So, it is tied in with your frequent flyer
number and so delays are inform to you and
these; obviously, will appreciate that you
are not going to the airport, flight is delayed
and you are unnecessary wasting your time,
you get an E-mail or an SMS early enough.
So, you delay the departure from your home
or work place and you really appreciate these
little gestures.
As I said earlier and I repeat that in building
loyalty and in building customer relationships
he have to take small steps with a on a plan
small steps with big plan with the big objective
to go from this has we showed in the diagram
that where you have no relationship to where
you have a relationship with the customer
is your co-marketer, customer is your advocate
of your service.
This journey you have to have a plan for this
journey, you have to know that this is a long
terms process and you have to take small definite
steps to verses, this is the key to loyalty
building, relationship building, long term
advantage building.
.
And in spite of that if you lose the customer
then also have a good mechanism to find out,
so this is what we call churn diagnostics.
So, please try to find out just as we have
an a somebody leaves a company, we have this
exit interviews try to have exit interviews
with if you have by chance lost a good customer,
a long term customer you must have really
good in depth understanding of the situation
and see corrective actions are taken.
Sometimes it may be beyond the if the customer
is very much liking the new 4G service and
your service is 2G then it is beyond your
system, you cannot satisfied that customer.
But, at least you might must know that the
customer has migrated as churned out of your
system, because of 4G versus 2G and not because
somebody on your billing department behave
very badly with the customer.
So, this is you must have, but we call a churn
alert system, this is what if this journey
during this journey therefore, there is a
positive approach and wherever there is a
failure you must have therefore, and analysis
of that failure mechanism that is are both
are very important.
.
So, ultimately all end with particular diagram
that you have to have good understanding that
what makes customer switch.
So, service failure and recovery all of these
things if we are not worked; that means, it
has failed your recovery did not work then
you have loss the customer, all your value
proposition; that means, your customers selection
itself was wrong.
So, customer needs 4G and you have do not
have 4G then; obviously, customer will switch.
So, it could be due to value proposition miss
match that is sometimes beyond your control,
what is most important is to focus here that
why service field and why recovery failed.
.
To conclude our whole discussion of this week
is to focus on the five dimensions of service
quality and to understand that loyalty building
is a long term process retention is much more
important than acquisition and only retention
is not give good enough we have to create
your system in your service business that
you are able to win customer advocacy.
Thank you.
