In the last module, we discussed about the Wheel of Loyalty.
Under its first strategy of appreciating why it is essential to target the “right” customers, we covered two sub-themes, viz target the right customers and search for value, not just volume.
Today, we’ll start with the next sub-theme; manage the customer base through effective tiering of service.
MANAGE THE CUSTOMER BASE THROUGH EFFECTIVE TIERING OF SERVICE
Customer profitability and return on sales can be increased by focusing a firm’s resources on top-tier customers.
Furthermore, different customer tiers often have quite different service expectations and needs.
It’s critical for service firms to understand the needs of customers within different profitability tiers adjust their service levels accordingly.
PRINCIPLES OF SERVICE TIERS
Platinum: Are heavy users and tend to contribute large share of profits
Gold: Tend to be slightly more price sensitive and less committed to the firm
Iron: Provide the bulk of the customer base and they are only marginally profitable on their own
Lead: Tend to generate low revenues for a firm
CUSTOMER- SATISFACTION AND- SERVICE QUALITY ARE PREREQUISITES FOR LOYALTY
The foundation for building true loyalty lies in customer satisfaction.
Highly satisfied or even delighted customers are more likely to consolidate their buying with one supplier, so read positive word-of-mouth, and become loyal apostles of a firm.
In contrast, dissatisfaction drives customers away and is a key factor in switching behavior.
STRATEGIES FOR DEVELOPING LOYALTY BONDS WITH CUSTOMERS
Firms can “bond” more closely with their customers using a variety of strategies, including:
deepening the relationship through cross-selling and bundling,
creating loyalty rewards, and
building higher-level bonds such as social, customization, and Structural bonds.
Today, we learnt about using service tiering to manage the customer base and build loyalty.
Next, we tried to understand the relationship between customer Satisfaction and loyalty.
We also uncovered how to deepen the relationship through cross-selling and bundling.
Finally, we discussed the role of financial and non-financial loyalty rewards in enhancing customer loyalty.
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