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8/2/2019 Loyalty Myths-truth 1 (PPT)
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Presented byDept. of Business Administration
National Dong Hwa University
610032004 Lin, Kuan-hsin
69933029 Dashdeleg Altan-Uya
2011/12/06
Keiningham, T. L., Vavra, T. G., Aksoy, L., & Wallard, H. (2005).
Loyalty myths: hyped strategies that will put you out of
business
and proven tactics that really work: Wiley.
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Myth 1Myth 2
Myth 3
Myth 4
Myth 5
Myth 6
Myth 7
Myth 8
Myth 9
Myth 10
Myth 11
Truth 1
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The organization must learn to think of itself not as
producing goods or services but as buying customers, as
doing the things that will make people want to dobusiness with it.
Theodore Levitt
Myth
Customer loyalty is number one goal of any
firm.
Fact
Loyalty customers but no profits (dot-com)
Fundamental purpose of any business is to identify
and satisfy customer needs at a profit.
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s The trade-off between the costs of acquiring new
customers and the costs of maintaining current ones.
Like a broken clock it is correct at some times of the day.
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Ex: Apple (before 1990s)
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s All customers are or can be made to be profitable for a
firm.
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Desired customers
(20%)150%-300% of profits
Break-even customers
(60%-70%)Break even
Costly customers
(10%-20%)
50%-200% loss of
total profits
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Myth
All customers are or can be made to be
profitable for a firm.
Fact Target your loyalty efforts to right customers.
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In a heterogeneous markets, market share leadership
will not be associated with the largest level of loyalty.
The niche player who address the unique needs of
smaller segments will naturally enjoy a more loyal
following at the expense of being less attractive to the
total market.
May the force of operating system be with you
Macintosh devotion as implicit religion.
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If customer loyalty drives profitability, then maximizing
profit comes from making all customer loyal.
Different customer types derive value from their
shopping experience for different reasons.
Myth 3
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Variety seekers are motivated by curiosity about andthe desire for new experiences in product types and
brands.
Deal seekers are primarily motivated by price.
The customers in this groups are who they are; they
are unlikely to change.
Many firms offer sales promotion, and overuse this
tactic.Customers
Deal
seekersVariety
seekers
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Customer-centric
Make an effort to improve customers perception of
their experience with a firms products or services,
or with the firm itself.
Brand-centric
Manipulating the elements of marketing mix to
improve brand equity.
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Firms need to find a
way to manage both
of Brand-centric andCustomer-centric
measures
simultaneously.
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sFlaws of the promise
The firm need to be generating small profits. (And
other assumptions.)
There will be diminishing return.
5% wont make money unless they are right customers.
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Flaws of the promise
The fundamental financial underpinnings of the
argument are not adequate.
The assertion ignores the life cycle of products,
services, and institutions.
It ignores the fact that customers vary in cost to
acquire and to retain.
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For many product categories, share-
of-wallet is the most relevant
behavioral loyalty metric.Myth
Sometimes share for the customer is
entirely driven by their propensity to
seek deal.
Fact
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Without question companies should ensure that theirprofitable customers are cherished.
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Directing loyalty efforts to those customers who has past
good record is not the best economic decision.
Focusing on volume of past purchasing activity doesntnecessarily help us to understand the underlying
purchase pattern. (RFM)
There are also some life-changing factors. (Ex: Better-
paying job)
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There is no such thing as a pure product company.
Product
companiesElimination of
variation
Service companies Maximizingvariation
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Dont manage for customer retention
before you manage for customer selection.
You probably dont want to keep all of your
customers; create apply loyalty strategies and
tactics selectively. Make sure your loyalty
efforts are directed primarily to those who wish
to keep, and make offers that are relevant tothese desired customers.
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Customer loyalty maybe meaningful corporate goal, but
only under the proper circumstances and only when
directed at a group of customers known to be profitable,
and therefore desirable to be retained.
Do loyalty when you are in declining cycle.
Dont try to change customers. Customers are who they
are.
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